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. Im resident fellow at aei. Were at a bit of a low week where things are not moving as theyve 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 todays 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 thats 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 well 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. Were starting today a different series of Health Policy events. Everybodys been caught up in the politics of whats been going on, and i thought id 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 youre 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 todays version of unbundling the benefit talks about how Health Savings accounts can be yeezed. But were going to have some other events perhaps later this fall that talk about reengineering 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. Thats probably coming up on september 5th. Were 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, were looking at some new ways to deal with Health Savings accounts. Now, at the end of the day Health Savings accounts and well 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 its almost like a swiss army guy. Of course, if you dont 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. Its an early way to think about this. And ill 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 theyre 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. Its 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 laurens article will be appearing in the cornell journal of law and Public Policy date to be determined as they always say. But lets 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, im talking only to academics. Its nice to have a broader audience to talk about hsas. I wrote this article immediately following the election thinking what are some areas where theres 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 whats 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. Hes a lawyer in d. C. I think if people like him dont understand very much about hsas, my guess is a lot of other people have no idea and dont really understand how to use them if they do have them. So theres 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. Theres a whole lot of acronyms involved in the movement, fsa, msa, hra. Maybe thats why people cant distinguish, have trouble distinguishing between them because they get lost in the alphabet soup. Its 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 youre 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 theres not enough money in that account, which ill return to again throughout my presentation, its not all that much help to you. If you dont 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 theres 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 dont 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 theres not enough money in the accounts, right . Maybe the accounts in theory would be a good idea if they were fully funded. But theyre 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 doesnt 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 hes hsas and hdhps. At the time, people were up in arms about the hsas and thinking, you know, this wont be good enough. People wont 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. Ill talk about so the High Deductible Health plans dont kick in till the threshold except for exception for Preventive Care. The aca requires they cover some pretentative care. Beyond that theres a hole before your insurance kicks in. On the next slide, ill talk about the numbers. But professor ye is going to talk about the Tax Advantages of hsas. Its 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 theyre used for qualified medical expenses. And thats really the focus of the article ive 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 HealthPlan 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. Well 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. Theres a maximum for annual out of pocket expenses, deductibles copayments. Its 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 its 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. Thats very careful language. That doesnt necessarily mean they have opened up an hsa. That doesnt mean theres 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 theres 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 dont think theyre insurmountable or i wouldnt have written the paper i wrote, but you know, the biggest drawback which weve mentioned before is that you need to have money to fund them. Sarah rosenbaum, a professor at gw said its a nonstarter for people with low incomes. I think thats true right now, right . In terms of the amount of money going into hsas. I dont think it needs to be true. Its another vehicle for getting money allocated for health care to people, right . Thats 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, theyre paying more of their medical expenses than they used to. Right . Professor, this is where professor yes 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, its unlike other goods that you might do some shopping around, its pretty hard to shop around and look for competitive prices when youre sick. Obviously, if youre in the hospital and you need emergency services, this is difficult but even if youre 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 sloankettering 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 whos know more about medical care than they do to understand if they even need these treatments. So its a little bit hard for individuals without a medical degreeing to secondguess 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 dont 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 theres 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 youre 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, its all pretty difficult. Okay. Current legislative proposal, i wont say too much here because its 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 dont have money in the account, upping the contribution limit which people are not reaching anyway doesnt 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 its unpredictable. You may hear some figures like in retirement youll need 200,000 for your medical care. But