How Health Savings Accounts save more than money. Entry 7 – 2009


Health Savings Accounts remain an underappreciated (and sometimes distrusted) tool. When we at the Health as Human Capital Foundation express our support for HSAs as critical to solving the healthcare cost problem, people often assume—incorrectly—that the primary intent is “cost sharing” or “cost shifting.” Make people pay, so they assume responsibility for the expense. Although paying directly for services does encourage people to spend money more carefully, that is NOT our primary reason for supporting HSAs. In fact, when a well-designed HSA approach is funded to cover the full deductible as we recommend, individuals have no additional cost at all!

Really, the main reason to put money in the hands of consumers is to change the dynamic of their interactions with the healthcare system. In becoming the purchaser, one shifts from asking permission of someone else, to conducting a direct transaction for services. In a system where someone else pays, we do not own the exchange, and have less interest in the outcome. When we purchase directly, we naturally take more ownership. The most important ‘shift’ is the one where buyers go from trying simply to get MORE from the third-party payer, to wanting value from our own money. We ask more questions, and make more active decisions. THAT is the purpose of HSAs.

From an economic perspective, if a person pays for a service out of his own pocket at his own discretion, he will compare the value of that service to what the funds would have been worth to him for the best alternative purchase. If someone else pays, he cannot make this tradeoff because the funds are not available to him for anything EXCEPT healthcare! So, there is an inherent incentive to spend more. Saying it another way: paying directly makes us smarter purchasers.

For those decision-makers who have been resisting health savings accounts for employees because you don’t want to subject individuals to the hassles of asking questions or handling billing, consider whether HSAs might actually protect them by facilitating their active involvement in critical health decisions.

How can HSAs protect people? By encouraging us to make informed decisions, and become more aware of both the value and the risk of medical interventions.

We are a nation of doers and action-takers. We want things solved and fixed. It almost seems we prefer INCORRECT CERTAINTY to honest ambiguity. And because patients want THE ANSWER, providers learn to give one. It’s much quicker and easier to say “get surgery to solve the problem” than it is to explain the likelihood that the symptom is one of several problems, AND the chances that various options (including nothing) will help, AND the risks and benefits of each possible intervention.

So, patients continue to ask doctors for the wrong thing—a single, swift, concrete answer—rather than what they need most: good information to make an informed decision. When we own the problem and pay for services, our demand for accurate information will be much greater.

A recent study about the potential harms of seeking fast answers.
In recent weeks a major study reported on the questionable value of doing PSA blood tests, which screen men for prostate cancer (1). The scientists who review such things (U.S. Preventive Services Task Force) have cautioned that there may be more risk than benefit to getting this test, however many organizations still recommend it (2).

The study calculated that because of the high false positive rate, preventing one cancer requires 1,068 men to be screened, and, of those, 48 would need intervention to validate the finding. The risks of biopsy and prostate removal include impotence and incontinence. Thus, we essentially subject 50 men to risk for the opportunity to find and remove one cancer. Most prostate cancers are slow growing and non-aggressive, so there are definitely pros and cons to consider when a man decides whether PSA screening is desirable.

Many, many more examples exist including the ever-more-popular full-body scans that can detect problems before they become symptomatic. These include gallstones (which may never become painful), possible brain aneurysms (which may never burst), and calcium deposits in heart arteries (which may never grow to block blood flow). Once found, what should one do? Is action always the best course? In our system—where someone else pays—the bias is toward more testing and more treatment.

Whose job is it to inform us? If you don’t ask, no one will…

We are a nation uncomfortable with such statements as:
· “We don’t know,”
· “Even if we test, the answer may not be accurate,”
· “Sometimes if we wait, it will get better by itself,” or
· “Actually, the more aggressive treatment has substantial risks.”

We SHOULD be asking:
· “How much do we know about this problem and what happens over time?”
· “What are my options—and the benefits and risk of those options?”
· “If we do more testing, how will that change our course of action?”
· “How much do the various options cost?”

Instead we ask:
· “Can you fix me?” and
· “Will insurance pay?”

Are health savings accounts the only tool we can use to encourage information gathering?
No, but it is the only tool that would immediately increase every consumer’s level of interest in value. Even if motivation starts because of purse strings, account-holders are more likely to ask whether care is necessary, and what other options there are. Those questions can result in better safety and quality, while also helping us become more informed. And, because it is our money to spend, we feel we have more rights to ask those questions.

Plus, as a reminder, evidence shows that people become more discriminating about their care, rather than forgoing necessary care. Perhaps the term health “savings” account has broader meaning. Rather than simply a mechanism for increasing financial assets, such an account may actually “save” us from unnecessary risk, “save” us from searching for reassuring answers when there are none, “save” us from repeated testing to rule out unlikely problems, “save” us from intervention we might avoid. All of these “savings” come from the incentives HSAs create for better information.

Why this matters: As health reform looms, suggested solutions focus primarily on which third-party should pay the bill and how best to divvy up the dollars. Little attention is being given to the active role consumers can play in improving the efficacy and quality of care. No other mechanism can as instantly or dramatically alter the cost and quality of healthcare than the widespread use of health savings accounts. We all must reconsider their adoption for reasons much more important than cost-management.


1. Consumer Reports Health Blog. Prostate-cancer screening:
New research, but still no easy answers. Consumer Reports; 2009. Acessed March 27, 2009.

2. U.S. Department of Health & Human Services . Screening for Prostate Cancer, 2008. Accessed March 27, 2009.


2 Responses to How Health Savings Accounts save more than money. Entry 7 – 2009

  1. >Wendy,
    Extremely well stated and well informed commentary on the benefits of HSAs. Their detractors say they are not the answer and should go away, and their supporters agree they are not “THE” answer, but a great tool to provide motivation to education and coverage from really rainy days.

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