Wall Street Journal Sends Shockwaves Through the Health Insurance Markets With the Headline "Health Savings Plans Start to Falter"

It's the kind of headline I would have expected to see in the New York Times instead of the Wall Street Journal but there it was in Tuesday's edition.

Vanessa Fuhrmans' article seems to have unleashed some pent-up frustration in the health benefits market on the subject of health savings accounts (HSAs) specifically and consumer-driven care generally. It is as if it represents a turning point for how health savings accounts (HSAs) and consumer-driven care are going to be seen by the benefits market from this point forward.

The article points out that HSA growth may have stalled--the number of workers enrolled in HSAs through work grew only slightly, from 2.4 million in 2005 to 2.7 million in 2006. When employees had a choice of plan type, only 19% picked an HSA. The surveys also show low satisfaction rates for these plans. The managing director of Towers Perrin's health care practice: "If I were a product manager in any other industry and saw the scores this low in customer satisfaction and understanding, I'd be thinking of pulling that product from the shelves and retooling it."

Just to get my own bias on this issue out in the open, I have never believed that consumer-driven health care was any kind of silver bullet for solving America's health care problems. That said, I don't see much harm in making these plans available--particularly to consumers who can afford the extra financial risks they can create. These plans enjoy better consumer acceptance in the individual health market--particularly among higher paid consumers because they are a fantastic tax preference and a great way to fund the high deductible plans this higher-earning market tends to want anyway.

But HSAs as a health policy tool to fix the American health care system? Give me a break.

Consumer-driven care is a concept built on a free market foundation. And that foundation is turning out to be one that is pretty weak.

• First, for people to act in an efficient way, they have to have information. They have to know their options and be able to assess the options. The medical directors of the leading health plans can hardly manage care optimally. How did we ever expect regular folks to figure it out. The information just doesn't exist--beyond some marketing brochures.
• Second, the consumer-driven movement assumed that patients would want to take more control of their health care challenges if there was a financial incentive for them to do it. We are finding that the opposite is true. The health care delivery system is a hugely complex tangle and consumers are more interested in finding providers and/or insurers they can trust to guide them through it than thinking this needs to be their preoccupation. Ask anyone who has had a serious illness, or managed one for a close relative, and they will recount one nightmare after another about trying to get the best care and their frustration in trying to untangle bills and insurance documents. Who would actually want to do this?
• Third, and you have all heard this a million times but we have to keep it on the list, 75% of all health care costs are incurred by the 15% sickest people. Look at all the consumer-driven financial incentives and you will find they are first-dollar oriented. Those people with all the high health care claims, and most of the costs, blow through those corridors very quickly and into full-pay areas where they no longer have financial incentives to better manage care--if they wanted to and could.

More information, price transparency, incentives to be better health care consumers, are all great ideas. Clearly, these concepts are responsible for the much better take-up rate for generic drugs and the huge savings there. The $5 co-pay and $100 deductible were around way too long. But the consumer's ability to be buy serious health care like he would buy a set of tires was a silly idea in the first place. This idea was pushed by the same "geniuses" who today write books about how we will save the U.S. health care system with new technology as the next "silver-bullet." All true to some extent but far more a sign of just how naive they are about the down-to-earth challenges we face.

We are at an interesting place in the national health policy debate.

One Democrat after another--so far Obama and Edwards--is proposing comprehensive health reform built around the Massachusetts health reform plan. That plan now has its challenges in getting off the ground and proving-out its proponents' ideas.

On the Republican side, we already have two candidates--Giuliani and McCain--who have said they want to work toward a more market-driven health care system with the consumer-driven concepts and HSAs at its core. But now even the Wall Street Journal is challenging the bottom line in that health care philosophy.

We have two big competing health reform ideas--one Democratic and one Republican--facing off in the upcoming national election just as real life results from both of these models are becoming available.

The candidates had better be careful to connect their rhetoric to the reality.