tv American Enterprise Institute Discussion on Health Savings Accounts CSPAN July 14, 2017 3:56am-5:59am EDT
hssa is our tax free accounts can be used to pay for medical expenses. this is two hours. >> good afternoon, everyone. welcome to the american enterprise institute. i'm resident fellow at aei. we're at a bit of a low week where things are not moving as they've pretended to move for the last couple of months. the efforts in the senate for repeal and replace ened up in delay and depart for a recess week and perhaps more to come. what it first brought to me to -- and let me just tell you today's forum is called broughtening inbenefit for health and health savings accounts. but in light of the senate efforts what i was thinking of a competition that used to be held for young athletes between the ages of 6 to 15 to show their
skills in the nfl. it was called the bunt, pass, and kick competition. it appears that that's actually being discontinued. the announcement came in may after 55, 56 years of it. but it looks like the senate is up to the task in terms of punting, passing, or kicking approach. and we'll see how much more thaf that competition renews when the senate is back next week and perhaps for the balance of the month as well. got to be a little careful with this because the nfl is rather aggressive on its trade name protection. so this is a news shot as opposed to the violating the nfl ordinance on pass, bunt, and kick. we're starting today a different series of health policy events.
everybody's been caught up in the politics of what's been going on, and i thought i'd try something different cl is flesh out some things people are doing in real research as opposed to moving the dollars around from one place to another and some of the articles that have appeared in some interesting journals. so what we want to talk about is no matter what you're spending, we could do a better job in the health care and hlgt we deliver by perhaps taking apart what is conventionally considered the current benefit and maybe reassemblying it in somewhat more creative way and pay attention to those people receiving the benefits and might have some voice in saying what works for them. so today's version of unbundling the benefit talks about how health savings accounts can be yeezed. but we're going to have some other events perhaps later this fall that talk about re-engineering and reinstructturing primary care.
but also in some cases certain types of patients or individuals with high risk conditions, giving them a little bit more of an intensive care approach. that's probably coming up on september 5th. we're also take a look at how to move around the dollars and perhaps retarget and prioritize them in a different way to get ideally some different results. and also look at what is said to be equal benefits, everything the same for everybody as opposed to what might be more equitable benefits in order to think about what it produces. today, though, we're looking at some new ways to deal with health savings accounts. now, at the end of the day health savings accounts and we'll hear from our speakers on that, are essentially tax
advantaged health benefits. in fact some people have talked about using hsa in so many ways, you could say it's almost like a swiss army guy. of course, if you don't have any money in your health savings account, it might be a hypothetical tool. i think that vigter rehp nard is the only manufacturer of the swiss army knife or mugiver, perhaps with some chewing gum could also take care of our entire health care system. so the idea is move around those tax care dollars so they produce more bang for the buck integrated with more health insurance. you will hear from our speakers there are some current proposals and also creative and more
thoughtful ways. we have three speakers today. our first speaker is going to talk about how to have a more precisioned approach to hsa. it's an early way to think about this. and i'll introduce the three speakers separately. warn roth has just begun a new appointment at teaching health law and legal writing of law, o known as the redmen because that became unfashionable. now they're the red storm. but lauren is also served as associate director of the lawyering program and assistant professor at nyu school of law, ph.d. from columbia university, a law degree in harvard, clerked, done real research and writing work. at seton hall. and has a hometown connection i suppose because she graduated from george washington university. i ran across a fascinating
article by lauren thinking about a different way to think about health. had some of those thoughts in the past but usually they calm me down. it's a combination of how we can produce better health with a broader array of tools including investments in some of the social services and ways to improve social determinants of health in order to get the results we want as opposed to just paying people along the way with health care bills. so lauren's article will be appearing in the cornell journal of law and public policy date to be determined as they always say. but let's have lauren talk about a different way to look at hsas and a number of layered approaches to getting there. >> thank you. and thank you for having me here because i will say that typically, i'm talking only to academics. it's nice to have a broader audience to talk about hsas. i wrote this article immediately following the election thinking what are some areas where
there's potential bipartisan support and hsas seemed to me to be an obvious one. i think the conversation is even more urgently needed right now given what's going on. so i will give a little bit of background information on the hsas, hopefully not stepping on the toes of the other presentations. and i expanded the amount of background information i was going to give because last night i was at dinner with a friend of college. he said to me, i think i might have a health savings account. and after you know one question from me, it turned out he did not in fact have a health savings account. he had a flexible savings account. soapy think for this person is one of the smartest people i know. he's a lawyer in d.c. i think if people like him don't understand very much about hsas, my guess is a lot of other people have no idea and don't really understand how to use them if they do have them. so there's been a lot of talk
about hsas in the media, you know, following the politicians. health savings accounts or hsas are part of the movement for consumer directed health plans, cdhps. there's a whole lot of acronyms involved in the movement, fsa, msa, hra. maybe that's why people can't distinguish, have trouble distinguishing between them because they get lost in the alphabet soup. it's part of the general shift that started with pensions from a defined benefit paradigm for employee benefits to a defined contribution paradigm. what do i mean by that? with the defined benefit paradigm, your flurry basically promises you a benefit now or in the future. you will get $2,000 a month for retirement income. i will pay for all of your health care expenses minus maybe some copaints. to a shift where the employer already place some amount of money if you're lucky in into an
account and you will really have the control and the freedom to figure out what to do with that, what are your benefit priorities. now of course, the problem as we talked about is if there's not enough money in that account, which i'll return to again throughout my presentation, it's not all that much help to you. if you don't have the money to purchase benefits and to provide for your needs, those accounts which have a lot of potential are not that useful. so there's a big divide, a political divide about these individual accounts. so republicans including president bush who enacted the legislation for hsas, tend to really love the individual accounts. it goes along with the american ethos of individuality and control and ownership. the idea that people can decide for themselves what their needs are. and act on those needs, that you don't have this paternalistic employer telling you what to do and providing for your benefits in the way they think is
appropriate. democrats on the other hand, tend to think that individual accounts shift the risk to the people who are least able to bear it. right? so democrats are focused on the fact there's not enough money in the accounts, right? maybe the accounts in theory would be a good idea if they were fully funded. but they're not. right? so democrats see it as a way of cutting back on benefits. so talking a little bit about the basics of hsas, so the way it works is that hsas must be combined with a high deductible health plan or an hdhp, not to add to our alphabet soup. instead of traditional private health insurance that covers all of your medical care and needs with exception for copayments, maybe some coinsurance but covers your needs starting from day one with an hdhp, your traditional health insurance coverage doesn't start till you reach a pretty high threshold.
before that time, either our responsible for paying out of pocket or you can use your hsa if it has money in it to cover those costs. i remember when i graduated from law school in 2004, i spent my first year working with employers to put in place he's hsas and hdhps. at the time, people were up in arms about the hsas and thinking, you know, this won't be good enough. people won't have enough of their expenses covered. today people are lucky if they have the hsa rz because whether they want to nor not, most people have been shifted toward higher deductible health insurance plans and frequently they just, they would love to be have an hsa that had money in it. i'll talk about -- so the high deductible health plans don't kick in till the threshold except for exception for preventive care. the aca requires they cover some pretentative care. beyond that there's a hole before your insurance kicks in.
on the next slide, i'll talk about the numbers. but professor ye is going to talk about the tax advantages of hsas. it's an incredible savings vehicle, triple tax savings, right? so the -- your contributions to the hsa are deductible from income, the earnings grow tax free, and withdrawals from the account are not taxed if they're used for qualified medical expenses. and that's really the focus of the article i've written is what account, what are account holders allowed to spend their money on and how i think it should be different. money can only be used for medical care as defined under section 213d of the internal revenue code. this is a definition that originally applied to a keyduction in the tax code for people who have excessively high health care expenses. right now the threshold is 10% of income which is an extraordinarily high amount before the deduction kicks in,
but when the whole cdhp, consumer driven health plan movement kicked in, this definition was expanded to apply to the whole alphabet soup. all of these individual accounts right now are using that definition which is pretty out of date. we'll talk about how scholars are focused on other things beyond ra additional medical care. what you see now, these are the 2017 numbers for hsas and hdhps. you know, hdhps have to have an annual deductible of at least $1300 for single coverage or $2600 for family coverage. there's a maximum for annual out of pocket expenses, deductibles copayments. it's a pretty high maximum. right? 13,000 forever a family is for most people, you know, they would start rationing their health care far before they got it the that point. employers and employees can contribute up to the maximum aggregate limit, which is you
know, the congressional proposals work on expanding this limit, but right now it's $3400 for single coverage, 6750 for family and a catchup contribution for people 55 and over. so right now, roughly 19% of employees are enrolled in an hsa qualified hdhp. that's very careful language. that doesn't necessarily mean they have opened up an hsa. that doesn't mean there's any money in the hsa if they have opened it up. so it makes it you know, you can see from the numbers below that 25% receive no employer contributions at all. right? and the average employer contribution of $1200 for a family needs to be balanced against the current average annual deductible for a family of over $4300. so there's about a $3,000 gap
between what the average employer is contributing to the hsa and you know, the deductible where the insurance really kicks in. there are as people have discussed and continue discussing, there are a lot of drawbacks to hsas. obviously i don't think they're insurmountable or i wouldn't have written the paper i wrote, but you know, the biggest drawback which we've mentioned before is that you need to have money to fund them. sarah rosenbaum, a professor at gw said it's a nonstarter for people with low incomes. i think that's true right now, right? in terms of the amount of money going into hsas. i don't think it needs to be true. it's another vehicle for getting money allocated for health care to people, right? that's really all these accounts are. so it has great potential in my view. the great risk shift which i talked about before jacob packer
at yale has done a lot of research on this. employees now are paying, if they get switched from a traditional health insurance plan to an hdhp, they're paying more of their medical expenses than they used to. right? professor, this is where professor ye's work will come in. not everyone is being switched. some people are gaining new conch. but obviously, employees are bearing more of the cost than they did before. and the idea is that it may not be such a bad thing. health care expenditures are pretty tremendous. we want to find ways to limit them. we want people to think more carefully. are they using unnecessary services? are there ways that this could force people to think more carefully about their medical needs. but the problem with that is that you know, studies have shown that consumers are not fully rational when it comes to health spend tours.
there are a lot of reasons for this. first of all, it's unlike other goods that you might do some shopping around, it's pretty hard to shop around and look for competitive prices when you're sick. obviously, if you're in the hospital and you need emergency services, this is difficult but even if you're just not feeling well, the idea of calling five pharmacies to find the best price on a medication is pretty unappealing to most people. you can imagine that this would add burdens to the system that are not currently there if the pharmacies then and the insurance companies and everyone had to be there answering individual questions all day long about the prices of services. the other problem is services may not be comparable. how do you value cancer treatments at sloan-kettering versus the same treatments at a local hospital? how do you deal with the fact that people have a very subjective attachment to their doctors, right? and maybe willing to pay more than they should to see a
particular doctor. and you know, a couple other reasons, hard to know if the services are even necessary. so forgetting that it may be hard to compare prices, people are relying on their doctors and on expert who's know more about medical care than they do to understand if they even need these treatments. so it's a little bit hard for individuals without a medical degreeing to second-guess the doctors and help to ration their own health care. the final point i wanted to make is that studies are showing and i list a couple here, that people are rationing their own health care and avoiding needed medical treatment because the they don't have enough money in their accounts. you know, the idea is that you want people to feel the cost, right, with traditional health insurance, people have no skin in the game. so they have no incentive at all
to limit their services that they consume. but you know, here maybe now there's a little too much skin in the game. maybe people are choosing to spend the money on other things which is where my research comes in. in terms of it being complicated this comes back to my friend. if you're not sure if you have an hsa, the learning curve involved in making contributions making sure you have enough money to meet your needs and getting reimbursed, it's all pretty difficult. okay. current legislative proposal, i won't say too much here because it's in such a state of flux. but beyond the most it is proposal i heard from senator cruz, the ahca and the senate bill, the last version of it that i knew about were focused on doubling the contribution limits to hsas, to 5,000 for ingle coverage and 10,000 for family coverage. and again, this is a nice idea,
but if -- if a lot of people don't have money in the account, upping the contribution limit which people are not reaching anyway doesn't help that much. focused on giving people more flexibility, you know, some of the things i mention there had, i think the most important one is reducing the tax penalty when money is not used for qualified medical care. and the reason for that is you may have some people avoiding putting money into savings accounts because it's unpredictable. you may hear some figures like in retirement you'll need $200,000 for your medical care. but you don't know that. and if people are going to have a really large penalty if they pull the money out and use it for something else, they may be reluctant to save using these vehicles. now to my proposal which i'll spend the rest of my presentation talking about. my proposal is for something i'm calling precision hsas. these are hsas funded by
employers, employees, but also the government. and they can be used for a broader array of goods and services depending on the account holder's family income level. and i list, i'll go back in detail in a minute. i list the steps and you'll notice that step one is to fund the accounts. because it's hard to experiment and use the money for interesting things if only the wealthiest americans can afford to fund their accounts. step two to allow physicians or other health workers because there are huge costs to the system from having physicians prescribing better housing for you, let's say, to prescribe a broader array of goods and services. this is where the catch phrase social determinants of health comes in. i'll explain more about that in a minute. step three, i really don't believe my proposal requires amending the definition of medical care under the tax code. i think it's more about you know, having agencies and courts reinterpret this phrase given
the changing state of medical care. the changing research on the impact that the social determinants of health have on health outcomes. okay. so the current definition of medical care is that you're allowed to -- you're allowed to get a tax dedukction or to use your hsa money for expenses that are for the diagnosis, cure, mitigation or prevention of disease or for the purpose of affecting any structure or function of the body. it's a pretty broad definition, but the definition is the same for everyone. and it's focused on traditional medical treatments instead of other things that might improve health. here we're thinking about housing and education, things that are being linked in research that's being done to health outcomes and better population health. the u.s. spends an enormous amount of money on health care.
and i say health care even though we really spend most of our money on medical care. we spend over 17% of gdp on health care. yet, we have much worse health outcomes than comparable countries spending much less. the time has come to spend on different things. i'll give a few examples of what the current definition does. the current definition of medical care includes what you might expect, doctors visits, hospital services, lab services, cost of medications, transportation to and from medical treatment. and you know, the cost of some improvements in your home that are made for medical reasons but it's fairly limited. it excludes things that are "and this is in the regulations, no in the statute, merely beneficial to the general health of an individual such as a vacation. i have a few slides that give some examples. so, and this is how finely we're parsing it. so what's an example of something that's okay to use
your hsa funds for? an air-conditioner which is detachable from the property and purchased only for the use of a sick person. what's not okay, purchasing apparently purchasing an air-conditioner that prevents everyone in the house from overheating during the heat wave including members who are in their 90s let's say. this is again from the regulations. a doctor suggested that a taxpayer install an elevator in his residence so that the taxpayer's wife afflicted with heart disease will not be required to climb stairs. also the cost of installing swimming pools is frequently a deductible where you can use your individual accounts for it. what's not okay, paying for pest control services to prevent roaches from you know, making the asthma of children worse. and this is another extreme one from a case. taxpayers were allowed to deduct the cost of enrolling their son in a school, a college prep school as a result of drug and
behavioral problems and the costs they were allowed to deduct including tuition, room and board, airfare and rental to and from the school for therapy and allowance account for the child. what's not okay, you can't use those funds for ordinary education expenses for the poor that are strongly correlated with improving incomes and also improved future health. one of the things that got me started thinking about changing the definition and personalizing the definition of medical care are recent changes to medical care itself. the movement for precision medicine which is also called personalized medicine is focused on using agindividual's genetic code to predict future illness and tailor treatments for current illnesses there aren't many presentations like give where angelina jolie's name appear among the slides. but this is one. >> that will improve the internet search results.
>> there you go. now everyone will find our talk and be more interested. people testing positive for certain genes related, for example, in this case to increased risk of breast and oh carian cancer resolution having surgery. these are just some ways in which medical care is becoming more personalized. and it made me think if we're personalizing medical care, why hasn't the interpretation of the term medical care under the tax code changed at all? and why should the definition be the same for everyone? what if people need different treatment to prevent the disease? what if different things are affecting their bodies under the definition because they live in different environments? so what i think we should be spending more on is or focusing more on on the social determinants of health. scott burris, health law professor defines the determinants of health as the con it e-in which people live,
learn, work and play. the basic idea is that those hose have higher levels of income live longer. okay? now, the causal relationship for this is not entirely understood yet. but then again, a lot of medical treatments that we pay for and believe in in this country also have no scientific studies that prove that they're effective. so why are we not spending money on things that clearly seem to be showing improvement in population health? and as a little extra incentive, i put in there, i don't know if i have that. in a more unequal society, apparently the rich don't live as long as they do in the more equal society. it's interesting. it's not just affecting the people who can afford these services. there's something an exhibiting population health overall. okay. and i'll fast forward a little just to make sure i stick to my time. but my proposed definition is that we spend more on health care which i define as any
attempt to improve the health of a person including both increasing longevity and quality of life and i think of medical care as something that takes place more often in a hospital or in a physician's office. even though that's changing a little bit now days. but health care frequently starts at home with a change in lifestyle. small changes can have a big impact. and example that we're thinking of here include a baby-sitter to help you recover more quickly from surgery if you can't otherwise afford one. after school programs for your chin so they can get exercise and not become obese, not have diabetes. fresh fruit, vegetables. okay. and so the idea for me is that if there are things that are as important or more important than medical care, then we should be paying for those things or allowing people to do so. so funding the accounts directly or through grants to the states
where the states are funding the accounts, you know, more and more of the middle class and working poor have access to hsas and hdsps but it's very importanting that government tax expenditures focused on impro improving health care not indicator only to the middle class and upper class, the people who can already afford to put money in niece accounts. and to me, this could be about sort of changing the default rules, right? people in different income brackets can spend on different things, right? so maybe people in the higher levels of income would pay for these things regardless, but a lot of people can't afford to. it's also a way for the government to incentivize certain types of spending that will improve population health. okay? and i think i will stop there. >> all right. thank you very much, lauren. you can think of this as
outsourcing the welfare state to the people who are supposed to benefit from it where they make the decisions rather than get whatever's on the card in some limited categories. now, that's we're going to park that for just a moment in terms of a different way to think about how to extend or restructure tax advantages for health care and better health. we're going to now look at the possible coverage effects in some surprising results that our next speaker found with regard to the combination of these hsas and the higher deductible policies related to it as to what that effect might have in terms of some portions of the population as whether or not it makes coverage more accessible to them and some subsets on that. our speaker is jink ye, assistant professor of economics at wa song university. i was told to say that fast. the university of science and
technology in china. she did receive her ph.d. in economics from sewer accuse in 2006. i came across an excellent article of hers in the journal much health economics which was december of 2015 on this subject. our primary research fields are public economics are the particular focus on examining the health care on insurance coverage and working behaviors. in addition to this ashl, the health of group savings accounts on group health insurance coverage, she has another paper, the spillover effects of health insurance benefit mandates on public insurance coverage evidence from veterans. jinqi? >> okay. good afternoon, everybody. and first of all, i would like to thank ai for inveet me go to here discuss my previous research. i think i feel great pleasure to present my research work on the health savings account today.
i believe that because we have a lot of experts about this policy today. i think our discussion will definitely help me to improve my future research. and my presentation today will be the effect -- so my presentation today will be the effect of health savings accounts on group insurance coverage. i would like to thank my ph.d. adviser who is also sitting here. his previous research inspired me to look at these specific policies. when i was a third year student, had no idea how to start a research project, he definitely helped me to have a hint to looking at this interesting policy. i find this health savings account very interesting because it is a combination of health care reform and tax reform. so i would like to spend time to research -- to do some research on this specific policy and to try to find some empirical evidence on whatever outcomes i would like to look. so thanks for lauren, she has
already give us a like specific details about these policies and i think can help me a lot to save some time and also she presents some update information about these policy, since this work is about publishing two years ago. so some of the data members here are just like 2010 or something but i think you guys can observe a trend of the change of the policies such as the contribution change or the deductible change. and i think i can start from the motivation of why i want to look at this policy on group insurance coverage. according to my understanding, when we think about the health care market or health reform, a lot of researchers and policymakers will focus on two fundamental issues. the first one is whether the policy or reform can improve the health insurance coverage. so to obtain this goal, the government has already made a lot of efforts. so as for the group insurance
health or esi, the government has already have some -- have a lot income tax subsidies to the premium part of our health plan. and also, as far as a public health insurance, we also have a lot eligibility expansions especially under the acs setup and for individual health insurance, we also got marketplaces to expand the market. and during the process that we would like to expand, the housing it coverage, the second fundamental issue we would like to concern is about during the process to expand the health insurance coverage how can we improve the efficiency of health care spending. so i think while i'm doing my research on health savings account, i would like to feature the policy design of health savings account into those fundamental issues. i find that even though we already have a lot income tax subsidies to the premium part of health plans, actually we don't have the any subsidies for the out of porkt expenditures before
medical savings account or health savings account. also the i think the major function for design, the health savings account is to help us improve efficiency of health care spending because health savings accounts establishment is just to help the individuals save for their futures and also want to help people to be more sensitive to their heflt spending since they have more self-control for those monieses in that account. i find that health savings account is perfectly fitting in those fundamental issues. i think researching on this project will be very worth to do that. and as for the definition of health savings accounts, it is tax free health care expenditures savings account. and it will allow individuals or families to contribute to this account and they are totally tax free. and, of course, it can help them to save for their future out of pocket health spendings and the
criteria for being eligible for holding the accounts is the purchase eligible high deductible health plans. and according to my understanding, if as long as the people should purchase the health plans to be eligible getting those health savings account, i think it is a behavior to shift the premium components tax subsidies into the out of pocket component. so i think it is totally interesting tax reform just using the transfer of the tax subsidies. as mentioned by lauren, lauren also said the triple exemptions if you have the tax savings accounts the first is deposit not subject to the personal tax income and the second one is if your withdrawals are used for the tax expenses they are totally tax free. the third tax advantages is that with join funds in health savings account can be accumulated and used in the
future. that means so you can totally save when are you young and you can use the money when you're old. also the interest earnings on this defendants are totally tax free. compared to other tax preferred accounts such as i.r.a.s and 401(k)s or even physical savings account, i think health savings account has more tax advantages compared to others. i ran into the same situation with lauren and my friends called me to ask me my firm things liking to provide the health savings account. can you explain what are they? and at that moment, i feel like my research is very useful because i can help people to make their choice about health plans. i'm so glad i'm researching on this field. and okay, so i will very quickly skip this one is the old numbers, i did an update the numbers but you can still observe a trend compared to lauren's presentations. so i also show some criteria for
the high deductible health plan which can make you qualified for health savings accounts. when the year is in 2012, the deductible level is a little bit higher or lower. can you tell the $1,000250. it's like the same. >> and the maximum contribution is also you can either contribute the high deductible health plan deductible or $3,100 for individual plan whichever is lower and for the family, you can contribute high deductible health plan deductibles or are $6,000250 for a family plan whichever is lower. and also there's one specific rule for health savings account which i was using in my empirical analysis is that the hsas holders between age 55 to 64, they can make additional catchup contributions can of $700 in 2006 and rises by $100 annually until it freezes to
1,000 in 2010. so i will use information to do my empirical evidence later. also, here comes the important part. health savings account establishing federal law in 2003 and the state law passes in '03 to '11 plays a role in the use of health savings account by providing state exemptions. so before i run into the empirical studies, i want to show some facts about the people taking out the health savings accounts, eligible high deductible health plans. the panel a figures show increasing trend of the number of people with hsa health plans from 2004, there are like 0.44 millions, inincreases to 13.5 millions in 2012. we can observe there is dramatically increasing number
of people having these kind of plans. panel b to show us there is still increasing trend for firms who are offering these plans for employees who are taking out these plans. we can both observe increasing trend for each side. and under my understanding about this policy, i think health -- insurance coverage from employer side and employee side. for employers, i think they would be more likely to provide the hdhps for better consumer engagement and cost controls through hsas legislations especially for those small employers who haven't to provide any plans to their employees and relatively a high risk to the composition cost. after we have the health savings accounts, the health savings
accounts can eligible high deductible health plans may be a good choice for those firms. also for employees, they have the incentives since the lower premium of hdhps paired with the tax break of the health savings accounts may be attractive to those who got access to group insurance but haven't taken up any of it. so my research question turns to does the establishment of hsas income tax subsidies expands group insurance coverage? and my identification strategy is actually using the policy by state and year. remember i introduced the federal law and the state law so i would like to explore the variation of the state hsa implementation actually. so the federal law implement the federal income tax exemptions for contributions to health savings accounts and at the same time, the state governments can
choose to mirror federal tax treatment by after youing the state income exemptions or not. so i would like to use this variation in state legislation in several years because i think they -- it provides an excellent laboratory for learning the causal effect of providing hsa state income subsidies and probability of the work of -- group insurance coverage. so to do that, i first using the existence of the policy. that means i just use the policy to identify the effect. and the second step i'm doing this project is using the state tax price. state tax price to measure the actual effect of the tax subsidy level so it will be a more accurate effect. and this table will show us the time of state housing the account, legislation between
2003 to 2011 which is my research period. i show each state have their ear of housing account implementation and also i show the state without any state tax subsidies or the state have no state income tax. and so the creation here is mainly my identifications. it is a very simple equation. i followed the classic empirical specificfications using those state policies the y is just the binary -- so if the worker i is covered by insurance group insurance, i will give them a 1 and otherwise it's zero. and my key variable here will be the hsa. so first of all, put it down here so hsa equals to 1 if the state has health savings account income exemptions in year one, one year to let the people have the reaction time and zero
otherwise. for the specification i also control for a lot of individual characteristics, just marital status, age or educational level and occupations, et cetera. i also control for state fix effect and year fix effect. the date i'm using here is very common source. the cps data stat, the march supplement from this 2004 tore 2011. and i limit my example to age 55 to 64 workers with no medicaid coverage. so this table i would like to show the statistics of my whole samples. the main takeaway for this table i want to show the comparison of the individual level characteristics for the health savings account. and for each type of states, i sample to the whole sample, the older age group, and the small
specific -- this table shows the results which i separate the able group. so from column one to column 4, so you can observe the pattern of the fact for the younger -- youngest group to the oldest group. as we can see the column four will give us a positive and negative kind of result. my interpretation about this coefficient is that when you are a worker between 55 to 64, the health savings accountses subsidies will increase the group insurance coverage by 2.6 percentage points at 5% significance level. so my hype thesis is that the younger group can be very sensitive since they may be tracked by the low premium but at the same time, the older group by also be sensitive, since they have a better idea to
save for their health, they have the opinion. also the older people may have higher incomes and their tax incentive may be much better than the younger ones. anyway, the column four testify my second hype thesis for the age group. and i also trying to use the linear and i find the result is very consistent. and the second i would like to check is the -- things i have already mentioned that in my pirp thesis, the firm that doesn't provide nel insurance to their employees previously may be more sensitive to those health savings accounts eligible health plans. i'm adding one term of the policy dummy and the indicator of small firms. i'm trying to use different cutoff to test my sensitivity of the results and i find it's not
very significant difference. so if i'm using the 25 employees as the cutoff of small firms, i find a positive and significant resul result. so that means when we have health subsidies, the small firm's workers will be increase their group insurance plans 2.4%ing and points more than other employees. so it's consistent with hypothesis. i would like to track whether they are sensitive to health savings account is less educated people. since according to some previous literature, looking at the effects of -- not effects. the plan choice of those consumer-driven health plans, they have different opinions
about whether the high educational people or low educational people will be more likely to be affected. so i'm trying to look at whether my conclusion is consistent with theirs so i still am adding one in terms with policy and the less educated indicator. so i using high school here. i find that the term also give me the positive and significant coefficient. that means accounts increasing people with lower educational level, 2.5 percentage points more than the other workers. and after iing the policy dummy to determine the effects of health account, the dummy can only -- the existence of the policy. if i want off go one step further to looking at the effect of the level of tax subsidies, i need to find a more accurate
more accurate variable to identify the effect of subsidy level. i'm trying to using the price of health savings accounts contributions since the definition of a tax price is the cost of a dollar of tax item in terms of current after tax consumption. so to help us to understand that, i give you an example. so if the tax rate is 0.2, that means the tax price of this tax favored item will be 1 minus 0.2 equal to.8 dollars. so the tax price of hsa contributions can just replicate the definition to here it's the cost of a dollar of such contributions in terms of current after tax consumption. and because health savings account will involve the federal tax rate and state tax rate, so
that means if i want to find the tax price of the computations, i need to find out what is the state tax rate and the federal tax rate. so i'm trying to include the top marginal federal rate and state rate to calculate the tax price for each state and year and i'm using the taxing model of the nbr and to put every number for every state and every year. so the variation in tax laws across state and here can be assumed as indodge news to an individual's decision. i think the maximum income tax price of very nice independent variable to using in my regressions. and taking minnesota in 2006, for example, i used the marginal federal income tax rate for the top rate is 32.9 for minnesota in 2006 and the marginal state income tax rate is 8.01%.
so my health savings account tax price now will be 1 minus those two numbers and we can have the answer here. so for each state and each year, calculate their tax price and i justjust replace the previous d using this tax price to redo all the analysis i've just shown you, and this table is just organized all the results here. and as we can see, the tax price, the single variable here can still give us insignificant coefficient but when icing in term of the tax price and the interesting cohort i have already shown they have more sensitive behaviors. so we find that connective 1. -- 0.185 can give us a conclusion that when you decrease the tax price by 10 cents or in other words, we increase the tax
subsidies to those accounts, ten cents, you can have nearly 2 percentage point increase in your insurance coverage. that's the way i interpret this number. and also, we can also observe significant results by just using the term of tax price and lower educational level. so that's most of my empirical results and because of the time limit, i will escape all the check after the empirical studies. if you are interested in about the later process of this project so you can just go there and check the paper. so finally, we come to my conclusion and policy implications. so according to my empirical evidence, i find that the hsa state expands group insurance coverage for certain important subgroup of population. for example, the older workers
who are aged 55 to 64 and the small firm workers and the less educated workers. and the magnitude of the effects are around 2 to 3 percentage points. and as for the policy emt implementations according to some previous works about the consumer driven health plans, they have already found some evidence that they have the ability to control the increase. so i think the positive effect i found in the paper can tell us, assuming -- the health savings accounts subsidies can help the -- can help increase the coverage of hdhps and then they will increase the total number of group insurance coverage. even though i cannot chat directly about the channels since the data limits doesn't
allow me to observe the specific choice of every worker, but i'm still trying to find a new data center to do that project. but i still think the health savings account subsidies pacird with 0 those health plans have the function to moderate the cost increases and they can also promote the health -- through those policy settings. and i feel like i'm so lucky by looking at the new rules of the aca, things the aca is more likely to promote a comprehensive health plan. so i'm trying to find the health savings account can still be effective under these settings. i find that it's very qualified for the aca civil health plans so i think under those circumstance of the aca, the existence of those plans can
help the mandatory coverage more achievable for the employer who are facing increasing health care costs in the future. butly, i think the aca will be soon be replaced by something else and i think the health savings accounts eligible hdsps will play more important role in the future health reform. appreciate tom giving me a lot of new reform rules about aca just like the increasing the maximum amount of contributions and also the catch up contribution to the account. so i think it's kind of consistent with what i'm finding here. so i think that the empirical results can be still have some implementations for the future reform and i will will be pursuing to see the future impact of those reforms on the
health plan choices and cost savings or even -- i think it will be very interesting field. >> thank you very much. we know health policy researchers only need two things, another data set and some policy variation. that keeps them in business. actually, i want to pass over, over simplify, we always knew these worked in theory. now you're actually providing evidence for it, as well which is a bonus. for the political implications of this, i want to run back to something earlier in terms of some of your sub cohorts. yeah. the effects on the less educated. i slid over this before. in terms of the real political implications on this you need to go back to, we've got a ways to go that way. given who is currently in the white house, you might want to recall the nevada caucuses or primaries in february of 2016. and the comments of the
successful candidate at that time, there we go. donald trump loves the poorly educated. so hsa should be a winner on that one. if you want to, because i have copyright restrictions you can find that on youtube for the verbatim of results of that. we love a lot of other people who voted for him. that's a bit of a correlation and convergence in terms of let's favor this policy because it helps the base. our final speaker is roy ram thun who could have given you a five-hour discussion on hsas because you does know just about anything whether he's mr. hsa or other names along those ways. roy is a nationally recognized expert on health savings accounts and consumer directed health care issues. he was there if not at the birth certainly at the time of delivery. he's both an obstetrician and pediatrician when it came to hsas. other people claim to be the
godfather. roy did the hard work in terms of keeping things alive and moving them on to maturity. he was at the treasure department when they were enaced into law in their full form in 2003. and then he worked for president george w. bush as health policy adviser at the white house. carried on that work and also developed the implementation of the medicare prescription drug benefit and he's been involved for a number of years and is back doing it again at president again of hsa consulting services with all kinds of useful information and advice on how these operate and speaks about it. long experience in health policy including on capitol hill. senate committee on finance. he's worked in the administrative agencies at the health care financing administration, went into witness protection now known as the center for medicare and medicaid services, new name, sam
rap sheet i believe. he has worked in private industry and i won't hold it against him that he went to north carolina, but we'll take that outside later on. and also at the university of michigan. roy, i asked roy to both comment on the two presentations and then elaborate a little bit further because he has his slews on policy and what's evolving beyond that. >> thank you, tom. thanks for including me today. i think it's important to kind of keep the historical context of hsas in mind in all of this. they kind of take on and use the existing tax preferences for medical care, to my none, we haven't changed the definition to health care yet. it is still medical care for a reason. >> i'm lobbying for that one. >> i understand that. >> a lot of people in this business in business. >> that's quite all right. you know, hmos were at their heyday when hsas really started
to be created back in the medical savings accounts day, and there are i guess with your criticisms of the definition of medical care, maybe we should be calling them medical savings accounts because of that reason. but regardless, the name has been changed to health savings accounts. and i would argue that you know, they've made a lot of positive impact on a lot of people as dr. y ep mentioned not only on the coverage side but also addressing some of dr. roth's concerns about the uses of our health care dollars and what they can be done with. we have to recognize that insurance is complicated. and for the all the things that we say negatively about the name high deductible health plan because that usually sends people running to the exits,
there are actually simpler health care plans to understand than many traditional plans where you have to know the copay or coinsurance rate for every service. under high deductible health plan, if it's not preventive care which is free, it's subject to the deductible. so whatever your deductible is, that's how much you're going to pay. after that, the insurance is going to pay the lion's share, maybe 100% even depending on how the plan is designed up to a final limit on out of pocket expenses for that year which many of us have forgotten about because we're so focused on the deductibles and how high they are. insurance is also use it or lose it. when you pay your premium, most of us kind of hope that we don't have to use it. because that might mean that we're really hit by a bus or some other horrible thing
happening to us. and others of us think of it as a gift card and we just go as much as we want because somebody else is paying the bill. so we don't care. but insurance doesn't cover everything. and what they do cover is more medical care i would argue than health. and we call it health insurance but it really is medical care insurance and there's been many criticisms of our whole system of health care financing being more of a sick care model than really a health promotion model which is what hmos were designed to do is try to change that focus to maintaining and improving health rather than just taking care of people when they are sick. but during their heyday in the mid '90s, they also came with a lot of restrictions. you couldn't get a second opinion or you couldn't go out
of network and get something covered because those kinds of restrictions were put in place. and hsas were partly a response to those restrictions where if you have your own money to spend, you literally can go see any medical professional that you want. and pay for it with your own dollars. and so i think the real innovation that hsas brought to the table was to give the same level of tax treatment to the out of pocket expenses as to the insurance. so our tax code since the world war ii days has been heavily biased in favor of employer based insurance. and also medical care purchased through insurance. so if you don't have access to those twos things, you don't get tax benefits that other people do. and hsas really come and give
those tax benefits to people who cannot get those tax benefits through their employment, don't have access to them or may be self-employed. and also then the out of pocket expenses that all of us have which insurance does not always cover everything, and employers have provided other options before hsas came along, known as flexible spending accounts, health reimbursement arrangements at a later date, all of which predated hsas and have similar concepts and tax treatments for these types of services, although i would argue fsas and hras are more grounded in 213b in terms of their lack of flexibility and types of services that they can cover. so with this change and having tax parities for the
out-of-pocket expenses it is no longer in my interest to spend all of my tax preferred dollars on insurance that covers everything with little out-of-pocket expense because i can literally get the same tax treatment for my out-of-pocket expenses through the hsa. even better, the money that i put in the hsa is not use it or lose it as my insurance is, as my fsa, as typically the hra alternative also is. and so the hsa can cover many more "non-medical things" that are health related, not as far as the broccoli and kale caucus would like us to go at this point, but steps in those directions, which i think is a positive thing when we're looking at health. most of us do not measure our health care spending based on what it does to improve our
health. another criticism that came from the hmos was it is the hmo administrators or your employer who was rationing your care, now it is you, and who would you rather have ration your care, somebody you don't know or somebody that you do with the financial choice that goes with it. we also found that a lot of things that afflict us and affect our health actually get better on their own without any medical care. so for all of the studies that i read about people use less services, people didn't go get this, people didn't go get that, okay, i understand that. that's one way to measure this, but did their health suffer as a result? that's what we need to be measuring, and i think that's one of the things that you're trying to suggest with your paper, is that we need to be looking at a broader determination of what is health and does utilization of all of these health care services have such an impact on their health.
i'm happy to see hsas be part of the health reform discussion, and i thank dr. yay for looking at what those impacts were during those early days when data was a little bit harder to come by and often got a little complicated to really understand. i do think that the data is suggesting that one of the main tenets of hsas was right on point, that is making coverage more affordable, which would lead to increased coverage. we definitely are glad to see confirmation of that. i also remain hopeful that the analysis of the state hsa subsidies, using your terms, will finally convince the three holdout states, california, alabama and new jersey, to finally conform their laws to the federal tax law. i remain skeptical that they will actually do so, but i can always remain hopeful.
i also think that the paper is very useful in understanding kind of the world of hsas before the aca came along. your research on what conveniently stopped about the time of the aca comes into play, so we need to keep watching these trends, looking at during the aca and if we get to such a point where we're post-aca or whatever comes next, that we continue to monitor these trends and look for what does the data suggest, because i think it is fascinating to look at the subpopulations of individuals and their individual coverage choices. we know that employers are driven primarily by the bottom line, and when they can save money on premiums they will do so. thankfully, the bulk of them it appears are sharing those
savings -- maybe not all of them -- with their employees in the form of hsa contributions, and one of the things that i try to work with employers on is making sure that the lower paid employees who need the most help, who have the greatest risk with their deductibles, that the employer focuses their contribution strategy on those lower-paid workers as you suggest. those of us who have greater means are likely to be able to fund those accounts with our own dollars. probably don't need the hsa subsidies as much as the lower paid workers. so maybe that's another area to look into over time as to what is the impact of the employer contribution strategies, not only on employee participation but also their adoption and utilization of these programs. to dr. roth's paper i generally support the notion of making
hsas more flexible, and i'm glad that congress is now involved in so many of our tax policy decisions, has seen fit to introduce some legislation that would go -- take some steps down this road. most notably, a bill introduce willed by senator oren hatch, the chair of the senate finance committee from utah, and congressman eric paulson, who is a member of the house ways and means committee, and this bill would really go a long way i think in taking some of those incremental steps at least -- maybe not as far as you would like us to go at this point, but not only to allow more americans to have hsas but to raise the contribution limits and provide more flexible uses for the hsa funds. it gets into things that are more along the health spectrum such as allowing individuals to
use their funds tax free to pay for certain exercise equipment and physical fitness programs, which i would argue also needs to be on our list. some diet and nutrition supplements, again, things that could be helping us maintain our health. and so we need to look at those ideas and maybe be combining them with the broader concept of health and not just limiting it to medical care. i suspect that in the short term the irs and those who are budget scorekeepers will tell us that this will bust our budget and will lead to a dramatic increase in tax expenditures. until we figure out a better way to capture the impact on our health in the longer term pay-offs, goodness knows we've had lots of discussions at the congressional budget office also about the value of preventive care and does it pay off in the long run for the short-term cost
that it incurs in the meantime. i think your paper also raising interest possibilities for social policy where we might want to be looking at hsas and other social benefit programs and how those concept also of the accounts could be combined in ways where food subsidies, housing subsidies, health care subsidies could be combined in ways that are much more flexible to be used. right now they're very siloed, based on which department created the program and the rules that go with it. congress sometimes has something to do with that as well, and maybe they could be used in a much more holistic manner. the challenge that we have though with those things are at the end of the day is there a slippery slope that we end up falling off of completely because we don't know where to
set the end. and should anyone be enforcing, if you will, at the end what some of those rules or limitations might be. i do remember my days at the treasury department when hsas were being created, when we were trying to do the same thing for defining preventive care which would not be subject to the deductible. believe me, we were lobbied by pretty much everyone saying that everything they did was preventive. it prevented something, and if it wasn't it would become it, absolutely. so not everything can be preventive. not everything can be prevented either. we sometimes go back and forth a little bit about whether or not we actually trust americans to spend their own money appropriately. a recent example of that is some conservative republicans who
don't want hsa funds to be used to pay for elective abortions. so on all sides of the spectrum there are views on what people should be allowed to spend their money on, whether it is your favorite vegetables or yoga classes or what have you. i'm in favor of things that promote health, but we need to understand where there are limitations, and do we really want the irs or somebody who is not trained in health policy to be making those decisions at the taxpayer level? absent that, we may have to accept some limitations on the subsidies as a trade-off for that flexibility. so with that, let me stop so that we can engage in broader discussion. >> thank you. you certainly did mention the dreaded magic word at the end,
trade-offs. you know, these accounts would work perfectly if they were 100% funded for everything, because we may be trusted to spend our own money, but some people don't trust you to spend someone else's money, which is the public/private. so let's talk a little bit about those gradations and those trade--offs. one thing that was implicitly in there, if are you spending the funds in the hsa or other things that don't fall into the category of traditional insurance, you are then going to have a trade-off in terms of filling that gap before you reach 100% coverage insurance plan. and given where that would tend to create larger out-of-pocket requirements before you get into that insurance, we might be better off by diverting it, but there's going to be a gap. there's less gas in the tank and your mileage may vary. so work through that, because if
the money is no infinite it means a choice. hopefully it is a choice that pays off better. >> that's right. this is tom being nice to me because i talk too much and letting me kind of finish which i left off at the end there, which is great. absolutely that's true. if people can spend hsa funds on other things, there are two things that come with that. a, they may be left without money to pay for traditional medical expenses, because one of the things was that you're bearing the risk. maybe you think housing is more important today but tomorrow you get hit by that bus, right? so i think a lot of it is that, first of all, you know, obviously again not to harp on the point, but if we're talking about the fact that currently there's not enough funding in those accounts anyway, they're facing the choice anyway. so step one is to put money in the account. then the question is what did we do about the fact that they can spend it on other things, there might not be money left over. i think this may be where we get
to the point, you know, of having some different, you know -- where there may be some different pools depending on income levels for insurance. just because insurance, you know, all types of insurance besides health insurance are typically used to cover those catastrophic expenses, whereas in this country we rely on it for pretty basic care as well although we're shifting the cost now to individuals. so i think there are still ways to make sure that even if there is a gap, you know, we can lower deductibles and have different deductibles depending on income classes. there are different ways that we can do this, you know, requiring the government to bring down some of those costs. the other issue is just that it is individuals, the impact on the providers of these. so if people get to the deductible sooner because they're spending both on traditional medical care and on other things with the hsas, then this will mean that they're using the expenses for these
insurance companies, will of course go up because more people get to the deductible and require services provided through the insurance plan. i think there's no way around this if we're going to give people more money and they will get to that deductible sooner, it is going to require some kind of subsidies to the insurance companies. i don't view this as a bad thing. you know, like tom was saying, the trade-off needs to be made. i just think we've been making them in the wrong direction in particular for certain income levels. i think that we need to be focused on things beyond just traditional medical care. >> if i could just add that, you know, sometimes when people go out and use their insurance for things that have no value or low value and some would even encourage us to not get some of those services. >> right. >> but then we argue over whether or not people should be allowed to spend their own money on other things. so it is kind of interesting to engage in that conversation. >> probably a little differently, you know, i was given a swiss army knife analogy
before. maybe there were six or seven blades in it, but in terms of the pro-advocacy arguments here, it seems like you have -- and you have more if you want -- three distinct potential things you're trying to accomplish through more hsa-account based flexibility as opposed to maybe one side fits none insurance wrapper. and warren is talking at times about the distributional benefits, which is maybe we can resort this money so it goes to people who need it, and we have to be a little more reverse income because the tax code works the exact opposite. the progressive tax code structure means the benefits are regressive, it is the way it is wired. it is simple math. you have the distributional arm over here, then you have in the middle flexibility. i want to be able to move this stuff that i want to, and then occasionally we hear, well, you will get to have a different time horizon. well, it is hard to save this
money for the future and being able to use it on what you want right now. so it is a straddle. you know, how do we create an opportunity for not the single answer, that in fact there are different settings and different places, and we want to do all of those things but we can't do 100% of each one of them at the same time. >> and the problem is also that, you know, everybody -- they're trying to give a benefit to each group just to get these things passed, right. so like you said, traditionally if we're using tax expenditures then the people getting the most reward are the people in the higher tax bracket. if you have a higher tax rate, you are getting more of a benefit if you get to deduct this money from your income. i think that's why the hsas have become such a savings vehicle for people in the upper middle class, the upper class groups. people we're seeing increasingly
high account balances whereas, you know, the legislation that's aimed at increasing contribution levels is only going to accelerate that trend. we have this huge gap that people at the lower end have no money in their accounts, and then a lot of people rare using it to save for health care, medical care expenses 20 years down the line. i think that that's part of where the trade-offs need to be made. i would not be increasing the contribution limits to be honest because i think too many of the benefits then are going to people who already have high account balances. so i think if we're going to take those dollars -- and i forget, you know, what the figure was, 19 billion, whatever the figure is for what the current proposal to expand the contribution limits, how much that would cost. you know, i think we need to focus on using these accounts to redistribute money. you know, think that's why to
some extent hsa still has a bad rap on the left, is because we're not talking enough about distribution. >> sounds like we could think to do everything at once and pay attention -- >> it doesn't seem to be working so well. >> got to jump in on the contribution limits. so they're designed to achieve parity at the out-of-pocket under these plans, and that's the protection i would argue we need. i'm going to spend these expenses out of pocket, would i prefer to do it on the tax basis? absolutely. the nice thing about hsa is i can do it after the year is over between now and april 15th. i don't have to worry about predicting -- sure, some people will take advantage of it just because they're thinking about the future. many of us need to start thinking about the future because every study i have seen
shows our health care expenses in retirement will be more than most of us are thinking of, and that's av-mfter medicare and it typically doesn't cover long-term care. >> i looked at a survey and they had the image of a piggy back on the cover. yeah, that says something about what people view on that. we all know our childhood savings and some people keep it in there and other people don't put any in. we want to do many things, pay for our insurance premiums with all of this money we have accumulated in the bank. where are we in terms of -- and there are averages and there are mediums, and then there are, you know, subsets in terms of how much can really be parked effectively without already being spent along the way. let's say you are a dill jenige person, you are careful with your health care, how much can you accumulate over a longer period of time without something happening and you need to, you
know, get up there. the idea at age 65, how much have you actually got in the hsa? what we know right now about how much is saved looking ahead as opposed to needs to be spent anyway. >> yeah, unfortunately most people think of hsas just like a new and improved fsa where it is money in, money out. so the s part of hsa still means spending to them, not savings. that's something that the industry has been working on trying to get people to understand, there is a strong savings component for this account. the data, the average contributions are going up every year but very slightly. we are still only at about an average of $2,400 a year, which is nowhere near close to where the maximums are. obviously there's great distributions within that and you have some that end up with zero balances at the end of every year because they don't
understand -- you know, i've had the same experiences others have. oh, yes, i have an hsa and so they tell me that you have to use it or lose it. no, it is not. so that happens. there are people on the other end of the spectrum who are looking at this as simply a supplement to their retirement savings. so you get every walk of life in here, and i think as hsas grow and become more mainstream we're going to get more walks of life in there than we've had before. so the new group of people who have to understand what hsas are, what the potential are for them and how it can help them meet their particular needs. >> i just think of moving the -- by analogy, because you worked on medicare drug benefits as well. the doughnut hole is going to be somewhere. do we let people move it around to where it matters to them more practically? in other words they can have it at the front end. in the drug benefit we
temporarily put it in the middle although that's been negated over time. or you can do the more limited benefits, and i have had people lobby me on that one to say give people what they need right away and don't worry about -- i don't have any assets so i don't care about that catastrophic expense. is the default to basically say there's a lot of places but you're going to have to come up short somewhere, or do we think that we can pretend that everybody's fully insulated from having some risk without a prefunded benefit? >> i mean, you know, i really an erring on the side of focusing on immediate needs. i think that if people believe that these funds are better spent elsewhere, then that's where they should be spent. also, i think there's this, you know, fundamental misunderstanding of what we really need to be spending on to improve health.
yes, i know the fit access i think it is called paying for gym memberships and things like that, and that's, you know, something else that could be helpful. but i think people living in dilapidated housing conditions, you know, it is very hard for them to focus on the, you know, tiny percentage chance that a bus could hit them when there is, you know, a bus hitting them every single day of the week essentially. i think it is the immediate need. i like the idea of integrating some of the other -- you know, the funding through other agencies and sort of having a more overarching approach because obviously we're putting things -- i'm putting things into hsas that traditionally are going other places. i think it is also hard because you don't always, you know -- if we were to customize things, then you also make for some great data so that we can have
studies about what is working best and improve the health savings, right. because the problem is now all anyone wants to talk about are the dollars going out the door. my next project that i'm working on is actually a study dealing with some policies that might save costs in the pre-medicare population because it is very rare you can actually say to people, "if you do this in the ten years leading up to medicare, you will save x number of dollars," where wouldn't you spend on that? unfortunately, it is harder to do when people -- you have such long time horizons, people have so many different needs. but i think we do need to start thinking a little more creatively than we have been thinking. >> i want to ask you a little bit more about your research, and i tried to go through every footnote and every, you know, manifestation, but you miss something along the way. a couple of threshold questions came to mind, although i know you're trying to show the incremental effects of the way
in which state tax policy gives you a natural variation. you've got not just the holdout states that roy was talking about, but you have some states -- and some big ones, i'm thinking florida and texas -- that don't have an income tax. >> yes. >> were you able to separately say what is going on in those states over the years, did they have a different growth pattern because they weren't enhanced by additional state tax advantages? did that work to basically throw them out of the pile the way i understand you did this? >> i think that's a very good question. i think the i deal situation to get rid of those states, the fact is to maybe don't let them incidental and to do -- redo the task, what happens. but i think there is only a few states that didn't apply the state savings account tax
subsidy. throw out the states of no tax income. i'm a little afraid of the variation issue. and to help me do more checks but i'm trying to control every state level characteristic especially for the health insurance plans. so in my robust checks i controlled for the state level for year, their premium level for individual and single because i think the state have no income tax, they should have something related to the premium. the premium is also like tax exempted. so i am controlled for that type of thing but still keep, say, like california and florida in my example. >> you were getting about 2.5%, which gains are good. the question is compared to what, what you do instead. that's raises the issue of threshold level of tax advantage which accomplishes most of what you want to do. >> yes. >> and there's an incremental effect beyond that and what the variation is on that, although we do love the poorly educated.
>> i really want to look at the other data to tax whether the choice, because that the key mechanism in my -- in this paper. i'm trying to use other data little bit, but that come from like some large firms, like using some employee's record but i think the federal government is a very special, like, company to say. so i cannot find any significant fact on the -- condition of various law, but i haven't more about that. but my sense is that this paper -- if i am looking at federal employees i don't think i can find something there. so but if there are any more comprehensive data that's including all times of firms i think that will be very interesting looking at. i think also very interesting to looking at some extended patterns for those people. i notice that the account can
cover like some dental and vision care. for some traditional health care you need to buy some actual dental coverage, some other plan. >> which is usually dollar for dollar trading. that's true. >> so i think maybe it is also very interesting looking at the patterns also for expenditures for health. preventive care is covered by health savings account money. >> yes, preventive care, just like the affordable care act makes it all free for everybody. >> yeah. >> preventive -- and you may have seen some proposals that focus value-base. basically you need to think about not just prevention in the pure sense that you never got anything, but given that you may have a chronic condition how can you prevent it from getting worse. that's an interesting redefinition of what is prevention, which is true, but it flies further down that scale
and eventually there's not a full tank of gas. the question is who should be -- and then to get to your point, who should be making that decision, someone at a distance or someone actually affect by it. >> and i think it is interesting because people always, you know, balk at the idea that anyone other than the individual should be making these decisions, but then they have a million caveats, right. but we don't want them to spend on having abortions. there are a million things they want to add to that. the question is if we don't want the government doing it, you know, are we going to have divisions, you know, deciding, you know, what should be -- what is really important as far as health care and what people should be spending this money on. you can see the slippery slope there and how you get into all sorts of issues with different people from one to the next being able to use this money for different things, which realistically is not pragmatic,
right? so you have to have someone in the government making a decision within bounds, you know, if we believe people at different income levels won't spend for certain things unless it is with tax advantaged money, then, you know, we have to -- you know, i understand the slippery slope argument, but dow hayou do havet off somewhere. if you don't make those decisions, you never have any funding at all beyond hospital services and doctor's visits. >> we're going to go to your audience questions in just another minute or two. i want to go back to roy because roy actually had to deal with people at the irs. they're difficult. >> they're nice people. >> that's right. once they leave the job, they have neighbors and families and i'm sure they're very nice people, but it is a different role. so, you know, the extreme version of this is the old aflac commercial, yoga berra, you can give them cash as good as money, but eventually people say that money going fort.
so we're at substantiation. we backed off on that, all of this nuisance paperwork and maybe some day in the future they will ask you to say, do you have evidence of this. generally speaking there's not a lot of backup for how people use the account. if we expand the parameters further, should we just say, h e think these people should get a certain amount of money, and i hope they do some good with it because we're not really tracking it," or you're safe guarding the taxpayers money to use for other programs? >> it is a real challenge. those with siciliac disease are going to be much more successful in getting a gluten-free diet and the things they have to eat to maintain their health as opposed to somebody like me who has a shell fish allergy and i'm looking for subsidy for steak. probably not going to happen.
in my case or where it might in the case for others, this becomes the conundrum we have to decide how far can we go because i don't think the irs even wants to be put in position of having to make those decisions taxpayer by taxpayer. so can we provide clear enough guidance for people and expect them to follow it with the efforts to not violate and sort of trust but verify as needed through random audits, which is our current process of doing it. i do think that that's probably going to be a reasonable approach. we could go as far as professor herzlinger suggested at harvard, looking at the system where we measure people's health when they join their insurance, and five years later we measure it again and see if it is the same, better or worse, and then decide whether or not we need to assess them accordingly.
so, you know, maybe there's some objective ways we can measure everyone's health, and what you do to keep it there or make it better is okay with us. if it gets worse, then there's going to be somebody to pay at the end of the process and we won't quibble about the details in between. i'm not sure what the right answer is, but, you know, we do have to look at the broader context of health well beyond medical carry think, and dr. roth has got a good point in that regard. >> you've been a very patient audience, and mostly attentive i think. we've got some microphones if anyone has any questions or disguised editorials in the form of a swing in your voice at the very end. limit it to a minute or so. identify yourself, please let me know. otherwise you have to listen to my questions, and you don't really want to do that.
>> hi, thanks. steve davis with deloitte. we recently produced a paper on hsas in the individual market and we found there were surprisingly few hsa qualified plans in that market. so, first i would like to get roy's thoughts on why they're so scarce. then for dr. roth and the scenario you discussed where the government, the employer and employee would contribute, how might that work in the individual market? >> so as to the question of why aren't there more hsa-qualified policies in the individual market, i don't think it was a priority as the aca was being rolled out. plans would have to meet not only the bonds or silver, in some cases gold requirements under the aca, but also be hsa qualified as well. over time it has gotten more challenging, partly because some of the regulatory requirements
as to what types of coverage those plans have to offer. for example, for 2017 the requirements began to be added of covering things below the deductible that were not preventive care. let me just say qualified policy just cannot do that, it is prohibited under the law. thankfully there was enough kicking and screaming that there's been a specifically identified hsa qualified bronze plan that can be offered for 2018, but it is hard to distinguish these policies from other plans in those categories that also have high deductibles, and you can't really tell which ones make you eligible for an hsa versus not. so as to why people would choose one over the other, i don't know. i think there's a lot of confusion in the marketplace,
and until people understand the value that an hsa brings to the table along with their high deductible health plan they may not decide to choose that. >> so i should confess first that my preference, you know, when the obama administration did away and said, "we're not going to let employers give employees the tax subsidized money they would have used to purchase the health insurance and let them go off through hras and buy plans on the exchanges" i thought it was a big mistake because i thought the exchanges wouldn't be robust enough to survive. and i think, you know, without propping up they're having trouble now. you know, i had envisioned, you know, that -- so we want to allow as many people as possible who don't have access to these tax subsidized funds to use them for the sorts of things that people lucky enough to have these funds are using them for. so i envisioned really a lot of it would be that these
government contributions, all would be used to find converging, you know, exchanges where you would be able to purchase the plan and then allocate between, you know, expenses for the health care plan and the hsa money, having that slush fund to apply to other things. so i think it is still possible to have those contributions and define the plans, you know, on the individual markets hopefully that will allow you to use the money for other things. >> so i'm choosing where i'm looking as group insurance or individual markets. i find as individual markets, the health is kind of pure invested. seems the people in the individual markets, they should have a lot of plans so is that not true in your case? so there is not so many qualified plans in individual market for the health savings account, is that what you find? so what kind of plans in the
individual markets they offer, like very low premiums, high premium but low deductible? [ inaudible ]. >> there don't appear to be many hsa qualified [ inaudible ]. >> i know, i had a hard time finding them when i was looking for them. i couldn't often tell by the name. i think a lot more after it was put into the silver cost sharing eligible plans to provide those individuals with the subsidies in addition to the premium subsidies, and i have actually done some modelling as to what individuals might be able to receive in lieu of a cautionary subsidy in the form of an hsa contribution that would produce the same actuarial value that
the cautionary reductions would produce. in some cases it can be several thousand dollars. so one has to wonder why not give the individual at least the choice of choosing their cost sharing subsidy in one form or the other. >> yeah, cut out the middle man. right there, i believe you have a question? >> hi. my name is mary twitty from the health resources and services administration. i have a two-part question. you had mentioned msas. one thing i found on the senate bill was it mentioned in multiple places [ inaudible ]. and if you could just clarify how you think that comes into play. and also sort of the giving states flexibility when it comes to essential health benefits. you know, we talked a lot about how hsa is currently under the aca preventive coverage, no cost, even if you have an thp. when you start tampering with
thp, what is your opinion on how it is going to affect population health out comes? >> i will start on the archer msas. they were the precursors to hsas as we know them, started in 1997 after enactment in 1996 in the hipaa law. no new archer msas can be created as of december 31st, 2007. there are still archer msas out there. we tried to get them all converted over to hsas. the advantages are clearly better under the hsa, but some still exist and you will find them. some of these references in the bill are still artifacts of the legacy of the archer msas. on the ehbs, essential health benefit requirements, you have a choice on whether to allow the states to defin them or you have
a uniform federal standard. hsas don't care which ones you use, but whichever preventive benefits are required to be provided below the deductible would essentially be exempt from the application of the deductible under either scenario. from an hsa perspective i don't necessarily care who defines it or how it is defined, but just be consistent across the board and don't have a different standard from hsa qualified plans from other plans. >> other questions? going once, and joe. >> joe [ inaudible ] cei. with combat on hsa's connection to fee for service, you have to come up with a receipt for proof of service in order to get money out of the hsa. do you consider that to be a
barrier to further reform? >> i personally have been growing in my concern of that fee for service linkage and hsa being tied to a receipt as you say. i do think that medical care is evolving and we're seeing much more bundling of services, packaging of services, which sounds like insurance but in a lot of cases is not. it is just a package of services that maybe a diabetic needs a whole bunch of different fee for service things but it is bought and told in a package with one price. we don't always know how much of each of those pieces you actually get under that price, and i am concerned that the irs at this point is not clear on
how it would handle those types of situations. fee for service is a very easy thing to gauge. you have a service, there is a receipt, we know what you got, how much you paid for it, and therefore how much comes out of your hsa tax free. when i start putting other pieces together i'm less certain about what you actually bought and what did you actually get. and should the tax code turn a blind eye to that so to speak and say, it is all good or, worst case in my opinion, saying none of it is good because it has all been bundled and we don't know whether you actually got any medical care or health care or what have you or not. so i think it is a future issue that we're going to have to grapple with. i don't think we have a good idea at this point how it would come out.
>> glen. >> another related question which i think is just an informational question, but when msas were first being promoted the idea was you could go to the doctor because you were paying the money out of your own pocket you can negotiate a really low price. i thought that probably worked, a few people did it. probably didn't work if a lot of people did. i'm sure bluecross can do a better job negotiating prices than i can. so under current hsas, you actually go to your doctor, get a receipt and you submit it for reimbursement, or do you get to negotiate a price through your insurer? i would prefer the latter option, and i think probably most people would. >> fortunately it is the latter option in most cases. if you are going to a network provider under your insurance, you generally will get the negotiated rate. it is really up to that doctor's office how to collect the
payment from you. most of the ones i've gone to wait and submit it all to insurance and then bill me. they could be collecting what used to look like a co-pay so at least they get some money out of me while i'm standing there in front of them because i have seen some studies suggesting that people are not paying their bills when it comes to the pay-and-chase method. so if you are in network, you do get the benefit of the negotiated rate as opposed to the full billed charges. that is a huge benefit to staying in network. regardless of whether you stay in network or not, you could use your hsa funds tax free to pay an out of network doctor just like an in network doctor although the amount would be different. >> and the secondary concern is with hsa when you are out of network that the insurance may pay at the contracted rate and you may pay the entire amount
out of pocket. when you get into public programs you have disputes as to whether it is fully legal or not. another hand back there. >> it is all medical care. thanks for an excellent panel. andrew mcpherson, i serve at the smarter health care coalition based here in washington. it is made up of a variety of organizations and consumers, like national coalition of health care providers and others. we are focused on the issues tom brought up related to value-based insurance design. my question for roy or anybody that wants to comment is legislation, bipartisan legislation on the hill that is looking at expanding the current preventive safe harbor to include services and drugs related to one's chronic condition. it is a limiting factor, just a chronic condition. there's a variety of definitions
used by cdc, cns and others for what a chronic illness is. so there is a limiting factor to it. if the panel could comment on just expanding it to include -- to allow health plans to offer those services on a predeductible basis. >> so i unfortunately don't know as much about the issue as i would like, but i think this goes again to the fact that like with a lot of my proposals to expand the definition of preventive care, obviously you're increasing the cost of the policy. so then the question is, you know, is that where we want to put the funds. is there another way to help these people. i don't know what your experience has been with it. >> well, i actually had a lot of experience with this issue. generally i'm in favor of giving plans the flexibility to be able to do that. i know there are plenty of employers out there who are
resistant to the specific hsa plan designs because they're concerned about individual employees who won't take their blood pressure medications, their insulin for their diabetes, et cetera, and they worry without sort of compliance with those types of treatment options that they will, in fact, face a significantly higher cost down the road. so i do think that it makes sense to give health plans the opportunity to do that. it will cost a little bit more because it is greater coverage available under the plan, but the hope is that in the long term that that will pay off in terms of controlling costs down the road. so i've generally been supportive of the approach. >> and i just want to add one thing. so studies are actually showing that these services are designed to increase adherents, cost free don't actually improve adherence
all that much, which is why, you know, the next project i'm working on is looking at going even further than your proposal and really paying, designing tax incentives to make them give a negative cost. because, you know, studies are showing that to get the cost savings, improving at year-end, you have to go beyond just adding them to the preventive care definition. >> one follow up just to respond to that last point. you can do it two ways. you can stay in the current safe harbor or create a new safe harbor, which is what diane black, republican from tennessee, and earl from oregon would do, they create a new safe harbor. it is cautionary but would create a deductibility for those services. it is not clear if it will be confirmed and the doctor from
michigan has done a tremendous amount of research on this issue. they showed it would only impact premiums between 2% and 3%. as long as there's a way to do it, but i think there's a core issue. a lot of places are going to the market as you said. a lot of these folks have chronic conditions and it creates a barrier for them getting care. as roy was saying, ultimately they may end up in the emergency room and cost more down the road. thank you. >> you're very welcome. we're nearing our time of closure and departure. health care is pretty simple to solve i think as long as you have infinite resources. i'm reminded of a different comedy routine by steve martin about three or four decades ago. used to say, steve, how do i become a millionaire. first get a million dollars, and it is simple after that. we're not in that world and, in fact, we're limited. what think today's panel is saying to you is there aren't perfect answers, but the more that there's some flexibility
and we can try to focus more on what this produces rather than what goes into it and begin to align and integrate because it is usually not just one person or one single individual or someone paying the bill, it is a commodity, a mixture rather. they're all pulling in the same direction, want the same thing, we might get a little better align and get some more efficiency. with that epitaph, please thank our panel for opening our eyes to some other ways to think about this. thank you very much. [ applause ] friday on c-span3 a discussion about the annual
medicare trustees report and the fiscal health of medicare with remarks by the chief actuary at the center for medicare and medicaid services. live coverage starts at 9:15 eastern time. and at noon eastern, a look at the foreign intelligence surveillance act, also known as fisa. the congressional international caucus advisory committee is considering amending the law to restrict surveillance of online communications by u.s. intelligence agencies. watch it live here on c-span3 at c-span.org, or listen live with the c-span radio app. this weekend on book tv on c-span 2. saturday at 7:00 p.m. eastern, former chess champion derek kasparov talks about his book, "deep thinking," on artificial intelligence and its impact on society. >> machines for centuries have
been taking overall forms of manual labor. now, when machines will take over jobs from you name it, manufacturing jobs, that's natural. now machines coming off people with college degrees, political. >> and at 9:15 p.m. "wall street journal" columnist jason riley discusses his book "false black pow wresh. >> most african americans and elsewhere who have risen economically have done so with little or no political insurance. in groups that have enjoyed success tended to rise more slowly. so it is not that you can't take the political route, you can. but chances are you're going to rise more slowly than you would taking other routes. >> for more of this weekend's schedule go to booktv.org.
this weekend on american history tv on c-span3, saturday at 8:00 p.m. eastern on lectures in history, appalachian state university professor browning discusses union general george mcclelland's failed attempt to take the confederate capital in richmond. >> mcclelland and his army haven't done a lot of research about what this peninsula looks like and what marching along it would be like, but he's so dead set on making sure he doesn't concede anything to lincoln he basically puts his army on the virginia peninsula in the spring of '62. it is going to turn out to be perhaps the worst possible place to launch his campaign. >> sunday at 6:30 p.m., on the 325 little anniversary of the salem witch trials, historian margo burns talks about the primary sources from the trials compiled in the book "records of the sail 'em witch-hunt." zbles that's one reason we know
so much about sail 'em village, why we know so much about the pleas of innocence because samuel harris took it all down. there's a reason arthur miller poached from him, is that he writes a play. she says this, he says that. oh, this town over here, he couldn't hear, the girls were flailing around. all of those descriptions come from samuel harris because he is constituting it from his shorthand. >> and at 8:00 p.m. eastern on the presidency, former boston globe journalist curtis will ki on their book "the road to cam lot, inside jfk's five-year campaign." >> i was a junior in college in 1960 and it was the first time i ever heard the word charisma, and it was called he had charisma. richard nixon didn't have charisma. lbj didn't have charisma, but jack kennedy had charisma. i think that could have possibly tipped the balance in some
people's minds. >> for our complete american history tv schedule, go to c-span.org. recently cia director mike pompeo spoke about his agency's counterterrorism work on threat including isis, north korea and iran. he gave his talk at a dinner hosted by the intelligence and national security alliance in northern virginia. this is just under an hour. >> tonight i'm pleased to introduce cia director mike pompeo. as director he leads the cia's intelligence collection, analysis, covert actions, counterintelligence and liaison relationship with foreign intelligence services. before assuming this role director pompeo was serving in