Friday, May 16, 2014
HSAs -- an initiative from the George Bush years -- are reining in health costs while Obamacare is increasing them
Last quarter, spending on health care grew an astounding 9.9%. That’s the biggest percent change in healthcare spending since 1980.
What’s the reason? Many people blame it on the Affordable Care Act (ACA), more popularly known as Obamacare.
But this assessment contrasts markedly with the picture the president painted for us only a few months back when he said that “health care costs are growing at the slowest rate in 50 years.” He and members of his administration attributed that to the ACA.
So which view is correct? Probably neither. It’s too soon for Obamacare to have resulted in a big boost in spending. And the previous slowdown was underway over a decade.
Over the longer period, what does track the slowdown very closely are three other developments: the growth of Health Savings Accounts (HSAs), the growth of Health Reimbursement Accounts (HRAs), and the general trend toward higher deductibles. All three changes mean that patients are paying more medical bills out of their own pockets. And that has produced profound changes — both on the demand and the supply side of the market.
HSA plans have a high deductible, in the range of $2,000 to $6,000 a year or more. High deductible plans have lower premiums, and the premium savings help fund the HSA, which pays for health care costs below the deductible. These amounts roll over tax free from year to year and are available for future health care or other expenses in retirement.
The opportunity to have an HSA plan was created by legislation in 2003. Participation in HSAs has been growing by double digits every year since then. They grew by 22% in 2012, with total HSA assets soaring to nearly $15.5 billion. There has been parallel growth in HRA plans, a similar arrangement commonly offered by large employers. Today, close to 30 million Americans are covered by consumer-directed health plans.
In fact, enrollment in consumer-driven health plans probably now exceeds enrollment in HMOs. The 2013 annual Kaiser Family Foundation survey reported that one-fifth of all workers are now enrolled in these plans, up from 8% in 2008. And as individual accounts have grown, national health spending growth slowed.
What about Obamacare? Over the past three years almost all the significant features of the new legislation have increased, rather than reduced, health costs — providing risk pool insurance to the uninsurable, forcing private plans to cover more benefits, and adding such extras to Medicare as free “wellness exams” and closing the prescription drug “donut hole.” Serious people expect Obamacare to increase costs even more in future years. Medicare’s actuaries project that Obamacare will add $625 billion to total health care spending over the next decade. The RAND Corporation predicts that Obamacare will increase health insurance costs by almost $2,000 by 2016.
HSA accounts give people the opportunity to manage some of their own health care dollars. And when people are spending their own money in the medical marketplace, they are usually more careful shoppers than when they are spending money that comes from a third-party payer — an employer, an insurance company, or government. That is why a 2012 Rand Corporation study found that people in HSA plans spend 21% less on average on health care in the first year.
The emergence of so many people paying for care with their own money is also changing the supply side of the market. Nationally, 1,300 walk-in clinics post their prices and provide timely care. Free-standing emergency-care clinics and Doc-in-the-Box outlets have now arisen to complement them. The first mail-order prescription drug organization, RX.com, was also driven by cash patients saving time and money. Walmart now offers $4 generic drugs financed by cash, not costly insurance. Phone and email consultation services are another development.
HSAs are advantageous for vulnerable populations, particularly the sick and the poor. Because they have complete control over their HSA funds, the sick become empowered consumers in the medical marketplace. Because they can pay for care themselves out of their HSA account, the poor have ready access to a wide range of providers.
HSAs and their incentives have proven very effective in controlling costs in the real world. Total HSA costs have run about 25% less than costs for traditional health insurance. Annual cost increases for HSA/high-deductible plans have run more than 50% less than conventional health care coverage, sometimes with zero premium increases.
As HSAs and similar plans have soared in the private market, health-spending growth has plummeted. That reflects the success of market competition and incentives.
The Raw-Milk Crackdown on the Most Peaceful among Us
A Mother Speaks in Defense of an Amish Farmer, Her Trusted Supplier
When even the Amish are subject to aggressive raids by federal agents, you know the law has run amok. These communities of individuals, known for their peaceful and modest lifestyles, have found themselves criminalized for the unthinkable act of selling fresh, unprocessed milk to people who travel from afar for the precious commodity.
As blogger Liz Reitzig of Nourishing Liberty explains in this video for the Farm-to-Consumer Defense Fund, this battle has become personal to her. She was one of the customers who sought raw milk for her children, only to see agents target the Amish farmer she frequented.
Fortunately, with peaceful noncompliance so widespread and no noticeable medical problems — not to mention legal consumption throughout Europe — pressure has been building for a change. Representative Thomas Massie (R-KY) has introduced legislation to do away with this prohibition nonsense, “to improve consumer food choices and to protect local farmers from federal interference.”
As someone who grew up on organic, raw milk — thanks to our house cow and the labor of my father — I can confidently attest to its value. However, as Reitzig explains, “you don’t need to drink raw milk to support others’ right to peacefully procure the foods of their choice, from the producer of their choice.”
Economic Freedom Versus Big Government
Do you think there would be more jobs, less poverty and higher real incomes if government was 60 percent or 18 percent of gross domestic product? Fortunately, a global economic-growth experiment has been underway for more than a half-century. Some countries have opted for the big-government model, others for the small-government model. Based on the data, the small-government crowd wins.
Periodically, as new data becomes available, I revisit the topic of how big or small government should be. Many on the left in the United States want a big government like they have in France, which they think will be fairer and provide better services. There are success metrics, such as real per-capita incomes, economic growth, job-creation rates and life expectancy to give us a good indication of what works and does not work.
The accompanying table gives us recent data about how well 10 rich countries are doing. Outside of small oil-rich economies, such as Qatar and Norway, and a few small financial centers, the four richest real and diverse economies are Singapore, Switzerland, the United States and Hong Kong (which is not a country, but a special economic and political zone of China).
Fifty years ago, Singapore and Hong Kong were very poor Asian city-states, without natural resources. Yet now, their millions of citizens enjoy the highest living standards and life spans on the planet — Singapore being No. 3 and Hong Kong No. 4 in terms of longevity. They did not achieve success from foreign aid or by government spending (which is well under 20 percent of GDP in both places). They achieved this by having a great deal of economic freedom — Hong Kong being No. 1 and Singapore at No. 2 out of the 159 countries ranked.
Other countries that are not yet as rich as Singapore and Hong Kong but that have opted for the smaller government model, such as Taiwan and South Korea, and developing countries, such as Chile, have been growing more rapidly than their more statist competitors — which results in the vast majority of their citizens having a much higher quality of life.
According to the World Bank, Switzerland now has a higher GDP per capita, both in nominal terms and in purchasing power parity (PPP), than the United States. France and Switzerland are neighbors, and France has many more natural resources than Switzerland, as well as numerous ports, of which Switzerland has none. Yet, the Swiss have a per-capita income one-third larger than the French, and an unemployment rate one-third of the French.
What the French have that the Swiss do not is big government (65 percent larger as a percentage of GDP). By virtually any positive measure of well-being, the Swiss are well ahead of the French, including life expectancy. Whereas the French pride themselves on having a high-tax, high-spending government with extensive regulations, the Swiss have a constitutional spending cap. Unlike most, the Swiss government is not getting larger as a percentage of GDP.
It is worth remembering that the rich, big-government countries became rich before they instituted their big-government welfare states — and they have been slipping in the rankings ever since.
As can be seen in the table, rising per-capita incomes, economic growth and low levels of unemployment are more often associated with smaller, not larger, government and economic freedom.
Numerous studies show that as government grows as a percentage of GDP (above about 25 percent), economic growth and job creation slow, not rise. The same thing is true at the state level in America. The big-spending states, such as California, Illinois and New York, are losing population and economic share to lower-tax and lower-spending states, such as Texas and Florida (neither of which has a state income tax).
None of this is rocket science and has been well known to serious economic scholars for decades. The facts are routinely ignored, though, by those in the political class who have a vested interest in the power of big government.
More tyranny from local government
I live in Rudd's Trailer Park on Jefferson Davis Highway in south Richmond. It has been a trailer park for over 50 years. Many of the older trailers here are not very nice, but the owners who live in them have made them livable. For reasons that aren't clear, the City of Richmond seems to be determined to shut this place down and displace the residents.
A large number of Hispanic people live here, many with young children. The children are beautiful and well-behaved. My experience is that they are friendly, polite and respectful. The parents often have trouble speaking English, but the children are fluent. There are a few African-Americans and a good number of older white people, many of whom are not in good health. None of these people are wealthy, but they do own their own trailer and perhaps a vehicle. Many of the vehicles are worth as much or more than the trailers.
Should the City close down Rudd's Trailer Park, there will be little notice given and because it can cost $2,000 or more to move a trailer, many people may have to abandon their trailers. In some cases, it might cost more to move the trailer than the trailer is worth - if a place can be found to move it to. Either way, this is quite a hardship to people who are already struggling to get by and may have health and family issues to deal with also.
The City contends that many of the trailers in the park have code violations, and this may be true. The City generally demands that code violations be dealt within 30 days. Sometimes extensions are granted, but this is up to the City's discretion. These code enforcement inspections have taken place before, but this time the City seems more determined to shut down the trailer park rather than promote public safety.
For example, some trailers don't have working furnaces or baseboard heating. The City insists there must be working heat in these trailers within 30 days - as if heat will be needed in May. Systems can cost hundreds of dollars, yet the City feels it can't extend this requirement. The City also claims that the electrical pedestals for each trailer, housing the Virginia Power meter, are all defective and must be replaced or repaired immediately, or else all power will be cut off. Yet, these electrical pedestals have never been a problem in past inspections and the meter readers for Virginia Power apparently haven't had any issues with them.
This time the code enforcement dragnet included what amounted to warrantless searches, with police present, of the trailers to inspect inside for various code violations. Apparently, no violation was too trivial to write up. A huge stack of letters went out to residents with copies going to the the manager of the trailer park. The residents, some of which are baffled by the entire process, and the manager of the park have been overwhelmed by the entire ordeal. City inspectors have even told residents that the park will be shut down, so they didn't have to comply or even pay rent.
The way the code enforcement inspections have been handled combined with the behavior of the City workers makes it impossible not to wonder what is behind all this. The City has increased the assessment of the land in recent years to twice what the property is worth, according to an actual appraisal made by an independent professional appraiser. When confronted with this appraisal, the City refused to budge on the assessment. There have also been claims that the trailer park is a high crime area, but I can attest that there is little crime here and what crime occurs is often committed by non-residents that come in and steal. Compared to RRHA public housing murder zones, the park is rather tranquil.
One thing is certain, the City of Richmond isn't concerned about the welfare of the residents of the park and they aren't acting in good faith. While the park may not please the anyone's sense of aesthetics, and there may indeed be some code violations or safety hazards. Threats of displacing dozens of families for failure to immediately install furnaces in May or install new electric pedestals that already seem to meet the approval of Virginia Power is a rather radical way to help the residents, which is what they initially claimed to be doing. Perhaps this about some kind of land grab. Maybe this is about racism against Hispanics. Maybe it's about overzealous bureaucrats. It sure doesn't seem to be about helping people that are struggling to get by in the first place.
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Posted by JR at 12:33 AM