Health savings accounts

A few readers have written me or asked in the comments why I am not so crazy about HSAs.  From the past, read here and here, and here, or here is an index of previous MR posts on the topic; in any case my take is relatively straightforward:

1. I favor tax-free savings (albeit with some fiscal qualifications), so you can make a case for HSAs on this ground, noting that we do already have other tax-free savings vehicles.

2. HSAs take one market segment — usually a relatively wealthy and health care-satisfied segment — and introduce one marginal improvement of incentives.  This doesn’t seem to help much in terms of lowering aggregate costs.

3. HSAs introduce greater care into any single medical expenditure by creating a direct private opportunity cost for the spender.  I am less sure it will limit medical expenditures in general; that depends on how people frame withdrawals, once funds are committed to an HSA account, and to what extent they use HSAs for what would have been cash payments anyway.

4. As Paul Krugman says, "too much health insurance" is not the fundamental problem in the health care market.  (Unlike Krugman, I don’t see single-payer plans as the solution; I see the incentives of producers, combined with the fear and unreasonableness of buyers, as the key problem on the cost side.)

5. Re Bryan Caplan on Singapore, HSAs might work much better in another setting, noting that the other features of Singapore also might account the difference in performance in health care systems. 

6. Given #1 and #2, it is easy for me to believe that HSAs bring net social benefit.  It is much harder for me to see HSAs as "the one health care idea we would promote if we had one shot at health care reform."  The main beneficiaries are the healthy and the wealthy, and, while I am all for helping those people, surely that is odd, no?

7. I will profess my agnosticism on many health care policy issues, but one of the better plans is Jason Furman’s and/or spending more on medical R&D and some public health programs and lots of cost-lowering deregulation while in the meantime getting expenditures and costs under control.  I also recommend Arnold Kling’s work.


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