Why Healthcare Reform May Not Be Dead Yet

Healthcare reform may not be dead yet in this country. Late last month, the U.S. House of Representatives green-lit three bills that would put money back in the pockets of patients.

Now it’s up to the Senate to act. What better way to close out the summer than to correct some of Obamacare’s biggest faults?

Two of the measures approved by the House in July expanded the power of Health Savings Accounts or HSAs.

These savings’ vehicles allow people with high-deductible health plans to set aside money for out-of-pocket medical expenses, such as co-insurance payments, deductibles and prescriptions. The accounts are triple tax-advantaged — the money is untaxed going in and going out and dividends, interest, and capital gains all accrue tax-free.

The popularity of HSAs is growing. Last year, there were 22 million accounts with over $45 billion in assets. That’s an 11 percent increase in the number of accounts and a 22 percent increase in assets year over year.

The millions of Americans using HSAs have tried to deploy their resources wisely. Account holders are 23 percent more likely to factor cost into their healthcare decisions and 46 percent more likely to compare the costs of different options, according to a survey conducted by HSA provider Alegeus.

That kind of cost-consciousness can yield significant savings to both patients and the broader healthcare system. One study published by the National Bureau of Economic Research found that total healthcare spending at firms offering HSA-compatible plans declined 5 percent per year in the three years after the plans were introduced, compared to firms that did not offer them.

Given that HSAs have proven effective at actually reining in health costs, it’s no wonder Congress is eager to bolster their impact — and make them accessible to many more Americans.

One of the House bills increases the amount of money that people can put away in their HSAs next year from $3,500 to $6,650 for individuals and $7,000 to $13,300 for families.

The new proposed limits are equal to the legal out-of-pocket maximum plus deductible for someone with an HSA-compatible plan. Consequently, the bill would allow people to set aside tax-free the most that they could pay for health care in a given year.

A second House bill would permit HSA holders to use funds for additional healthcare services, including over-the-counter medications, gym memberships, and fees for direct primary care. The measure would also allow high-deductible plans to pay for things like chronic-disease management and telemedicine before a patient reaches his deductible.

And it would authorize people whose spouses have flexible spending accounts, or FSAs, to contribute to HSAs themselves. They’re currently forbidden from doing so.

These changes would make the accounts even more appealing — and thus encourage even more people to open them.

The third House-passed bill would permanently repeal a federal 2.3 percent excise tax on medical devices designed to help cover the cost of Obamacare. The levy took effect in 2013 but was put on hiatus by Congress in 2016. From 2013 to 2015, it extracted billions of dollars from device manufacturers.

That money didn’t materialize out of thin air. Manufacturers sought to pass the tax along to consumers in the form of higher prices when they could. When competition rendered that difficult or impossible, they cut costs. The tax destroyed more than 20,000 device-industry jobs between 2013 and 2015, according to one analysis from the American Action Forum.

And then there are the unseen consequences of the tax — namely, the innovative devices that aren’t invented because companies direct spending that would have gone to research and development to the government instead. According to a study from Daeyong Lee at Iowa State University, research and development spending declined by $34 million in 2013 alone.

By advancing HSA reform and voting to repeal the medical device tax, the House is clearly taking Americans’ concerns about the rising cost of health care seriously. Over the next few weeks, the Senate has the chance to show that it takes those concerns seriously, too.

Read more . . .

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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