“Skin in the game.” That’s a key to human behavior. If people don’t have skin in the game, they take extra risks. If you’re gambling in a casino with “House money,” you’ll roll the dice more recklessly. If you rent a car, you might stomp on the accelerator. Have you ever driven a rental car to a car wash or stood in the sun waxing it? Of course not. You don’t care how grimy it gets!
I’m a fan of Health Savings Accounts because they give people incentives to monitor their spending. With a typical HSA you can choose a health insurance plan with a high deductible and then put the premium savings into an account that you own. The accounts grow tax-free. You get to keep unspent funds. HSA’s give health consumers “skin in the game.” The National Bureau of Economic Research just published a very important study of 13 million individuals showing that when people adopt HSAs, they reduce their health spending during the first three years by about 15 percent. When I’ve praised HSAs in speeches and in books such as Bringing the Jobs Home, critics often counter-attack by arguing that those individuals who shave their spending endanger their own health. Yet this study, led by Amelia Haviland at Carnegie Mellon and researchers from Harvard and the University of Minnesota, showed no evidence that HSAs led to more emergency room visits, inpatient care, or other signs that patients had gambled with their well-being.
Unfortunately, Obamacare does not seem to like HSAs very much. The Affordable Care Act ends up cutting back the amount that HSA users can put into their tax-free savings account. Second, Obamacare raises penalties on anyone who withdraws money from their HSAs, including for over-the-counter medicines.
Still, HSAs offer a glimmer of hope for creating a more sensible healthcare system. No wonder more corporations are signing up. The Devenir Research group in Minneapolis reports a 29 percent jump in the number of accounts during 2014. “Clients are asking us to help save for…today and in retirement, and an HSA can go a long way toward meeting that goal,” says Eric Dowley a senior vice president at Fidelity, which reports a 34 percent jump in the number of clients offering HSAs to employees.
Every once in awhile a good idea manages to squeeze through ruthless hostile forces like inertia and government bureaucrats.