[Joint House and Senate Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 115-326
THE POTENTIAL FOR HEALTH CARE SAVINGS ACCOUNTS TO ENGAGE PATIENTS AND
BEND THE HEALTH CARE COST CURVE
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
JUNE 7, 2018
__________
Printed for the use of the Joint Economic Committee
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PUBLISHING OFFICE
30-658 WASHINGTON : 2018
JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
HOUSE OF REPRESENTATIVES SENATE
Erik Paulsen, Minnesota, Chairman Mike Lee, Utah, Vice Chairman
David Schweikert, Arizona Tom Cotton, Arkansas
Barbara Comstock, Virginia Ben Sasse, Nebraska
Darin LaHood, Illinois Rob Portman, Ohio
Francis Rooney, Florida Ted Cruz, Texas
Karen Handel, Georgia Bill Cassidy, M.D., Louisiana
Carolyn B. Maloney, New York Martin Heinrich, New Mexico,
John Delaney, Maryland Ranking
Alma S. Adams, Ph.D., North Amy Klobuchar, Minnesota
Carolina Gary C. Peters, Michigan
Donald S. Beyer, Jr., Virginia Margaret Wood Hassan, New
Hampshire
Colin Brainard, Executive Director
Kimberly S. Corbin, Democratic Staff Director
C O N T E N T S
----------
Opening Statements of Members
Hon. Erik Paulsen, Chairman, a U.S. Representative from Minnesota 1
Hon. Martin Heinrich, Ranking Member, a U.S. Senator from New
Mexico......................................................... 3
Witnesses
Scott W. Atlas, M.D., David and Joan Traitel Senior Fellow,
Hoover Institution, Stanford University, Stanford, CA.......... 5
Mr. J. Kevin McKechnie, Executive Director, HSA Council and
Senior Vice President, American Bankers Association,
Washington, DC................................................. 8
Ms. Tracy Watts, Senior Partner, Mercer and Board of Directors,
American Benefits Council, Washington, DC...................... 10
Kavita Patel, M.D., M.S., Primary Care Physician, Johns Hopkins
Medicine and Fellow, Brookings Institution, Washington, DC..... 11
Submissions for the Record
Prepared statement of Hon. Erik Paulsen, Chairman, a U.S.
Representative from Minnesota.................................. 26
Prepared statement of Hon. Martin Heinrich, Ranking Member, a
U.S. Senator from New Mexico................................... 27
Prepared statement of Scott W. Atlas, M.D., David and Joan
Traitel Senior Fellow, Hoover Institution, Stanford University,
Stanford, CA................................................... 29
Prepared statement of Mr. J. Kevin McKechnie, Executive Director,
HSA Council and Senior Vice President, American Bankers
Association, Washington, DC.................................... 42
Prepared statement of Ms. Tracy Watts, Senior Partner, Mercer and
Board of Directors, American Benefits Council, Washington, DC.. 75
Prepared statement of Kavita Patel, M.D., M.S., Primary Care
Physician, Johns Hopkins Medicine and Fellow, Brookings
Institution, Washington, DC.................................... 100
Letter dated April 18, 2018, from Representative Maloney to
Chairman Paulsen............................................... 107
Response from Dr. Atlas to Questions for the Record Submitted by
Senator Sasse.................................................. 110
Response from Dr. Atlas to Questions for the Record Submitted by
Representative Maloney......................................... 117
Response from Mr. McKechnie to Questions for the Record Submitted
by Senator Sasse............................................... 121
Response from Mr. Kevin McKechnie to Questions for the Record
Submitted by Representative Maloney............................ 125
Response from Ms. Watts to Questions for the Record Submitted by
Senator Sasse.................................................. 127
Response from Dr. Patel to Questions for the Record Submitted by
Senator Sasse.................................................. 134
Response from Dr. Patel to Questions for the Record Submitted by
Representative Maloney......................................... 135
THE POTENTIAL FOR HEALTH CARE SAVINGS ACCOUNTS TO ENGAGE PATIENTS
AND BEND THE HEALTH CARE COST CURVE
----------
THURSDAY JUNE 7, 2018
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The Committee met, pursuant to call, at 3:00 p.m., in Room
216, Hart Senate Office Building, the Honorable Erik Paulsen,
Chairman, presiding.
Representatives present: Paulsen, Handel, and Maloney.
Senators present: Heinrich, Klobuchar, and Hassan.
Staff present: Ted Boll, Colin Brainard, Kim Corbin,
Gabrielle Elul, Alaina Flannigan, Connie Foster, Colleen Healy,
Alice Lin, and Russ Rhine.
OPENING STATEMENT OF HON. ERIK PAULSEN, CHAIRMAN, A U.S.
REPRESENTATIVE FROM MINNESOTA
Chairman Paulsen. We will call the hearing to order. Thanks
everyone for being here.
All Americans deserve access to affordable patient-centered
health care. Unfortunately, the fight to achieve this worthy
goal has become politicized to the point where it is perilous
to even acknowledge the shortcomings of our current Byzantine
system.
There are bipartisan solutions to this problem, and today
we will be discussing one of those. That is why I am excited to
convene today's hearing titled ``The Potential For Health Care
Savings Accounts To Engage Patients and Bend the Health Care
Cost Curve.''
When does a patient decide that a common cold is not worth
the expense of a doctor's visit? Or whether it would be worth
saving dollars by going to a general practitioner who could
easily treat an ailment rather than a pricey specialist?
Patients would have a hard time answering these questions,
because the actual cost of care remains obscured until long
after services are rendered. Even after patients receive an
explanation of benefits, the true cost is obscured by what
providers charged and what the government or insurers decided
they would pay for a service.
This lack of transparency has contributed to rising health
costs, which ultimately leads to more unaffordable insurance
and even less satisfaction with the health care system.
Yet in the current environment consumers and providers
alike are divorced from the true cost of care. As the economist
Milton Friedman once said, ``Nobody spends somebody else's
money as wisely or as frugally as he spends his own.''
Americans are excellent comparison shoppers--television, direct
mail marketing, billboards, and storefronts all appeal to
consumers' senses of value for price when making important
choices for themselves and their families.
An important part of everyday life is making decisions
based on personal preferences, needs, and of course cost. And
it is for this reason that competition thrives among auto
manufacturers, food producers, and home builders to deliver
safe, healthy, and long-lasting products that people can
afford.
We all acknowledge that American health care and health
insurance are very expensive. And in today's hearing we will
investigate how health savings accounts, or HSAs, allow
Americans to lower the cost of health care by drawing on an
important idea, an area of their expertise, and that's
themselves.
HSAs have delivered great benefits, and there may be even
more to come if lawmakers strengthen HSAs' hold in the
marketplace. I believe they can broaden access to quality
medical care, increase patient choice, and improve health for
all Americans.
It is for this reason that I joined with the Senate Finance
Committee Chairman, Orrin Hatch, to enhance both health savings
accounts and flexible spending accounts to give hard-working
Americans more choice and control when it comes to their health
care decisions.
According to one estimate, if half of employer-sponsored
insurance incorporated HSAs, national savings and health care
spending could total $57 billion annually. So how do they work?
An HSA is a tax-exempt account that is set up to pay or
reimburse certain medical expenses incurred while covering--
while covered by the kinds of high-deductive health care plans
many Americans have today. Employees and employers contribute
these funds pre-tax, and the money that has gone unused can
roll over year to year, and consumers continue to have access
to the money even if they change employers or leave the
workforce. So it is portable.
And since the creation of HSAs in 2003, the number of
people who have an HSA has risen dramatically. In 2005, roughly
1 million people were enrolled, and today 22 million people
have HSAs. Americans clearly see the benefit of directing their
own health dollars towards their own health care needs and
expenses.
My own home State of Minnesota has the third-highest
enrollment in HSAs in the country, with nearly 1.2 million
enrollees. And a 2016 study of large employers that offered
consumer-directed health plans, CDHPs, in the form of a high-
deductible health plan with HSAs, found significant long-term
cost reduction and no evidence of worse health outcomes.
In recent years, the State of Indiana implemented an HSA
structure both in its Medicaid program and in insurance offered
to State employees. Then-Governor Daniels noted that this
consumer-driven approach resulted in savings and customer
satisfaction. In 2010, state employees who enrolled were
expected to save more than $8 million, compared to their co-
workers in the traditional health care alternative.
Ultimately, the HSA is a vital tool that helps improve our
health care system even for those who do not have an HSA. By
putting consumers directly in charge of their health care, the
health care sector becomes more consumer-conscious.
As in many areas of our economy, the answer usually lies in
the wisdom of the American people. I look forward to hearing
from our distinguished panel of witnesses today how HSAs and
the idea of consumer-driven health care can help improve the
affordability of health care.
But before I introduce them, I now recognize the Ranking
Member, Senator Heinrich, for his opening statement.
[The prepared statement of Chairman Paulsen appears in the
Submissions for the Record on page 26.]
OPENING STATEMENT OF HON. MARTIN HEINRICH, RANKING MEMBER, A
U.S. SENATOR FROM NEW MEXICO
Senator Heinrich. Thank you, Chairman Paulsen. I am looking
forward to today's discussion on health savings accounts. These
tax-free accounts play a constructive role for some consumers
to cover health care costs. HSAs are particularly helpful for
those earning more than $100,000 who are already saving for
retirement and have less trouble covering their monthly bills
and student loan payments.
But HSAs do little to bend the so-called ``Health Care Cost
Curve.'' This is the fundamental problem that we must focus on:
How do we provide top-quality care while reducing our overall
national health care spending, and lowering consumers' out-of-
pocket costs?
But HSAs seem to generate the most savings through cost
shifting, not cost savings. Here employers pay less by offering
skimpier plans, coupled with an HSA. But employees shoulder a
greater share of costs: the financial risks of getting sick, as
well as yet another obstacle to navigate between themselves and
their actual health care.
And this is happening at the exact time when wages remain
stubbornly stagnant, and more and more families are struggling
to get ahead. But my chief concern is this:
Part of the reason that we are here today is that our
Republican colleagues seem to be gearing up for yet another
attempt to repeal the ACA. If the new proposal is anything like
the last, we can expect it to gut Medicaid, drop millions from
coverage, take away comprehensive coverage, and further hike
premiums.
Central to the Republican vision has been to move more and
more consumers to high-deductible plans which have lower
premiums but ask consumers to pay more for doctor visits and
services before the health plan covers care.
If paired with an HSA, a family can put aside up to $6,900
tax-free to use for qualified health expenditures. The
investments in the HSAs grow tax-free. The thinking behind the
HSAs is that if people put aside their money for their health
care, they will spend it more wisely and, on average, spend
less.
They will have, as they say, ``skin in the game.'' The
problem, though, is that without knowing what we're paying for
and how much we're paying, without transparency, consumers
simply do not have the tools that they need to make rational
decisions about costs. And HSAs are unable to help with this
problem.
What we do know is that HSAs sometimes encourage people to
forego needed care, which is the main way that they save money.
If you need chemotherapy to treat your breast cancer but you've
under-funded your HSA and have a $2,700 deductible, what
happens?
If your child gets sick, will you take her to the doctor,
or keep her at home, based on how much of your deductible
you've paid down?
If you or a loved one is grappling with an opioid
addiction, a reality for far too many across the country and in
New Mexico, will an HSA cover your treatment?
Can someone battling addiction, or managing a serious
mental health issue, make enough money to save into an HSA in
the first place?
These are important questions. No matter where you live,
what you do for a living, or what party you belong to, these
questions are at the heart of our health care conversation.
I am worried that HSAs, an idea that has merit for some
well-off consumers, are being twisted into a quick fix that
will only exacerbate the challenges in New Mexico such as our
ongoing fight against the opioid epidemic.
I am all for working together on real solutions to making
needed improvements in our health care system, improvements
that will reduce costs on consumers, increase price
transparency, so that consumers can make informed decisions and
prevent surprise medical bills, as well as reduce the overall
cost of health care in our country.
But focusing on HSAs while avoiding an honest conversation
about the key drivers of health care costs could have real
negative impacts on real people who are simply trying to manage
an illness or care for a sick loved one.
We must focus on actions that can actually bend the cost
curve, like investing in preventive care, using the
government's purchasing power to lower drug prices, and paying
for quality of care rather than quantity. And we have to focus
on making things simpler for families.
I look forward to our witnesses' testimony today, and to
hearing their perspectives on how we can bring down health care
costs for families. Thank you.
[The prepared statement of Senator Heinrich appears in the
Submissions for the Record on page 27.]
Chairman Paulsen. Thank you, Senator Heinrich.
And with that, we will begin by introducing our witnesses.
First we have Dr. Scott W. Atlas, who is the David and Joan
Traitel Senior Fellow at Stanford University's Hoover. Dr.
Atlas has published more than 120 journal articles. Two recent
books include ``Restoring Quality Health Care: A Six Point Plan
for Comprehensive Reform at Lower Costs.'' And also ``In
Excellent Health: Setting the Record Straight on America's
Health Care System.'' Dr. Atlas has been published or
interviewed by The Wall Street Journal, Forbes Magazine, CNN,
Fox News, the PBS Newshour, and many others. As Professor in
Chief of Neuroradiology at Stanford University Medical Center,
he has trained more than 100 neuroradiology fellows. Dr. Atlas
received a B.S. degree in Biology from the University of
Illinois in Urbana-Champaign, and an M.D. from the University
of Chicago School of Medicine.
Also with us is Kevin McKechnie, who joined American
Bankers Association back in 2001. He is currently the Executive
Director of the HSA Council, and a Senior Vice President. Mr.
McKechnie is also a principal in HSA Holdings, which provides
health care financing expertise to several governments around
the world. Previously he served for four years as government
relations representative for Marsh & McClennan. Mr. McKechnie
also served as Director of Government Relations for
International Financial Services, and Legislative Assistant for
former Representative William Dannemeier of California. Mr.
McKechnie has a B.A. in History and Political Science from York
University in Toronto, Canada, and pursued graduate studies in
American History at American University.
Tracy Watts is a Senior Partner in Mercer's Washington,
D.C., office and is on the Policy Board of Directors for the
American Benefits Council. A consultant with Mercer for 30
years, Ms. Watts specializes in health care cost management,
assisting employers in the design, evaluation, and ongoing
management of health and group benefit plans for active and
retired employees. As a spokesperson for Mercer she has been
quoted in The Wall Street Journal, The New York Times, The
Washington Post, Money Magazine, USA Today, and many others.
Ms. Watts is a graduate of Texas Christian University.
And also with us today is Dr. Kavita Patel, who is a non-
resident Fellow at the Brookings Institution, as well as a
practicing primary care internist at Johns Hopkins Medicine.
Dr. Patel served in the Obama Administration as Director of
Policy for the Office of Intergovernmental Affairs and Public
Engagement. As a senior aide to Valerie Jarrett, Dr. Patel
played a critical role in policy development and evaluation of
policy initiatives connected to health reform, financial
regulatory reform, and economic recovery issues. Dr. Patel also
served and worked as a Deputy Staff Director on Health for the
late-Senator Edward Kennedy. Being in this room, as she
mentioned to me a little earlier. She earned her medical degree
from the University of Texas Health Sciences Center and her
Masters in Public Health from the University of California, Los
Angeles.
And with that, we will welcome each of you to the hearing
today, and we will begin by recognizing you, Dr. Atlas, for
five minutes.
STATEMENT OF SCOTT W. ATLAS, M.D., DAVID AND JOAN TRAITEL
SENIOR FELLOW, HOOVER INSTITUTION, STANFORD UNIVERSITY,
STANFORD, CA
Dr. Atlas. Thank you, Chairman Paulsen, Ranking Member
Heinrich, and Members of the Committee. Thank you for the
invitation and opportunity to speak today about health care
reform, and specifically about the role of health savings
accounts.
It is in the context of overall health care reform that I
will discuss the importance of HSAs, including the rationale
for incentivizing their use, and for strategically reforming
them to leverage their impact on broadening access to quality
medical care, increasing patient choice, and improving health
for all Americans.
The critical concept here is that reducing the cost of
medical care itself is the most effective pathway to broader
access to quality care and lower insurance premiums, and
ultimately of course better health.
Instead, the Affordable Care Act, and most post-ACA ideas,
continue to stress making insurance more affordable, mainly
through refundable tax credits or other subsidies. But
insurance premiums are secondary, and historically chiefly
reflect two factors: Mainly the cost of medical care accounting
for the majority and the regulatory environment. Therefore,
strategies that subsidize premiums artificially prop up
insurance coverage that typically has minimized out-of-pocket
payment. This is directly counter productive because it shields
medical care providers from competing on price.
Two key points are essential to clarify from the start:
Number one, the HSA is a vital and highly effective proven
tool to broaden access to affordable high-quality health care
for all Americans, even those without HSAs. It does so by
putting consumers directly in charge of buying their own health
care, and better than tax deductions HSAs uniquely incentivize
savings. The fundamental purpose of an HSA is not simply to
provide a tax-sheltered benefit for individuals in order to
cushion the blow of high health care expenses.
Two, the HSA is not an isolated, independent component of
the health care system. Reforms to maximize their positive
impact for consumers are tied to other reforms. To broaden
access to affordable high quality health care for all
Americans, there are three fundamental steps that must occur,
and all directly relate to HSA reforms.
One, patients must be strongly incentivized to consider
medical care prices and simultaneously equipped with the tools
to do so. This is accomplished through universally available
large, liberalized and transferable HSAs in conjunction with
lower-cost, higher-deductible insurance. The key question is:
Is it realistic to suggest that patients could even consider
price?
Among privately insured adults under 65, almost 60 percent
of all health expenditures is for elective outpatient care.
Even in the elderly, almost 40 percent of expenses are for
outpatient care. Outpatient services dominate America's health
care spending, and these are amenable to price-conscious
purchasing. To fully leverage the impact of HSAs, it is
important to position more patients as paying directly. Despite
the ACA's regulatory attempt to shift consumers to more
comprehensive, what I call ``bloated coverage,'' a shift toward
high-deductible plans with HSAs has continued. Indeed, by
increasingly choosing HSAs when given the opportunity,
Americans are approving their value.
HSAs with high-deductible coverage have proven to reduce
health care prices. Spending reductions average 15 percent per
year and increase with the level of deductible and when paired
with HSAs. Adding HSAs to high-deductible plans correlates to
50 percent to double the savings of high-deductible plans
alone.
Downward pressure on health care prices from doctors
competing for patients who pay directly for care has been
demonstrated by procedures originally not covered by insurance,
like Lasik Corrective Eye Surgery, or MRNCT and CT screening.
Data from MRI and outpatient surgery-covered care confirms
that, when patients are motivated to compare prices, prices
come down significantly. And this reduces prices for all health
care consumers, not just HSA holders.
The issue is not whether HSAs are effective in making
health care more affordable, it is how to maximize their
adoption and fully leverage them.
All HSAs should be fully owned and controlled by
individuals. Restrictions on full HSA participation by seniors
on Medicare should be abolished. Given that seniors are the
biggest users of health care, it is critical to have them
exerting downward pressure on health care prices.
HSA limits should be expanded and uses should be eased,
including for the expenses of the HSA account holder's elderly
parents. And the list of allowable services and products should
be expanded. They should be delinked from specific insurance
deductibles. HSAs have also been a valuable vehicle for
effective wellness programs. The ACA limited the financial
incentives from employers, including deposits into HSAs. That
should be abolished.
The second big point is introduce the right incentives into
the Tax Code to maximize the use and benefit of HSAs. And my
belief is the Tax Code should cap the amounts of deductions or
income exclusions if they're maintained, but it should limit
those deductions or exclusions to two categories of expenses:
HSA contributions and the amount of premiums for catastrophic
coverage. To have tax deductions for all health care expending
is counterproductive. It gives an incentive to spend more on
health care.
Three, strategically increase the supply of medical care to
stimulate competition and increase choices. In large part, this
means removing archaic, anti-consumer barriers to competition
among doctors, other medical care providers, health care
technology, and drugs.
In conclusion, in other countries governments hold down
health care costs mainly by limiting the use of medical care,
drugs, and technology through its power over patients and
doctors often as single payer. And those countries get the
expected results when looking at the actual data: long waits
and worse medical outcomes than the United States, particularly
for their poor citizens who are the only ones unable to
circumvent those systems.
We should consider a different approach: creating
appropriate incentives, and eliminating harmful regulations so
that prices of care come down and high-quality care is
affordable for everyone. Thank you.
[The prepared statement of Dr. Atlas appears in the
Submissions for the Record on page 29.]
Chairman Paulsen. Thank you. Mr. McKechnie, you are
recognized for five minutes.
STATEMENT OF MR. J. KEVIN McKECHNIE, EXECUTIVE DIRECTOR, HSA
COUNCIL AND SENIOR VICE PRESIDENT, AMERICAN BANKERS
ASSOCIATION, WASHINGTON, DC
Mr. McKechnie. Thank you, Mr. Chairman, Ranking Member
Heinrich, Members of the Committee:
I appreciate you having this hearing today. Mr. Chairman, I
would like to request that my written testimony appear in the
record as if read, if that's alright?
I founded the Council in 2004 with the hope of accelerating
adoption velocity of HSAs and the qualified insurance that goes
with them, and we've succeeded. According to Devenir Research
of Minneapolis, there are now more than 22 million accounts
containing about $54 billion to pay for the future health care
needs of about 30 million Americans. We think that is the
number as of about January of this year in 2018. And that is an
extrapolation, to be entirely candid.
Let me start with an observation from some of your former
colleagues. So far, most of the proposals before Congress
attempt to deal with access but do not adequately address the
more important factor, cost control.
``We have introduced legislation that would give consumers
an incentive to monitor spending carefully because to do
otherwise would be wasting their own money.'' So says United
States Senators Sam Nunn, John Breaux, Tom Daschel, David
Boren, Richard Lugar, and Dan Coates on September 18th, 1992. A
bipartisan group, they were obviously ahead of their time and I
suggest onto something. HSAs are the only health insurance
plans in America that allow their owners to save for the
future. Every other plan, even the ones a lot of health
advocates call ``good insurance'' start their participants off
at the beginning of the year with nothing in the bank to
satisfy out-of-pocket expenses.
HSAs allow their owners to pay for routine care with tax-
exempt dollars, rather than after-tax dollars. And the Kaiser
Family Foundation says the average deductible for single
coverage in a small firm last year was $2,120. An important
consumer question is how to satisfy that deductible. With pre-
tax dollars from your HSA? Or after-tax dollars from your
wallet?
Fidelity Investments reports that a 65-year-old couple
would need $275,000 just to pay for the health expenses
Medicare doesn't cover in retirement. I'm quite sure none of
you are under the impression that our pension system is over-
funded. HSAs can be a useful public policy tool to address that
problem, too.
My good friend Jody Dietel, Chief Compliance Officer for
Wage Works, testified yesterday before your colleagues on the
House Ways and Means Committee that the median household income
for an HSA account holder, according to their data, is only
$57,060. Our anecdotal data of six companies just like Wage
Works lowers that to $53,000.
Additionally, most HSA owners, 77 percent in fact, were
born after 1965. Only 22 percent are Baby Boomers, which is to
say people at the height of their income potential. Devenir
says the average HSA balance is a little more than $2,000, and
that 78 percent of account holders have less than that in their
account.
Accordingly, I conclude these accounts are used for their
intended purpose, which is paying for routine health care
expenses by Americans of mostly modest income, comprised mostly
of the three generations that followed the Baby Boomers,
Generation Z, Millenials, and Gen Xers.
I am here today on their behalf to ask for your help. While
HSAs are one important tool for managing costs, they need
improvement. You can't have an HSA and be enrolled in Medicare
or a traditional health plan, and you can't take Social
Security benefits because that automatically enrolls you in
Part A. You can't have access to Tricare, or Indian Health
Services, or Veterans Administration benefits. You can't be
covered by a medical FSA, and you can't have access to retail
medical clinics or telemedicine at no cost.
Accordingly, HSA owners would like more flexibility. HSAs
should be able to cover more value-based services like direct
primary care, expenses associated with chronic disease
management, and telemedicine services.
There are bipartisan bills in both Houses of Congress,
several supported by you and your colleagues, Mr. Chairman,
that would allow these services in a HSA, and the H3A Council
strongly supports all of them.
We also support allowing plans with an actuarial value of
up to 80 percent to be considered HSA-qualified, so we don't
have to come and petition Congress or the IRS to achieve plan
flexibility. As long as you had a plan that was below 80
percent, you'd be able to offer whatever services made that
bucket full.
We agree that HSAs should be more flexible. We further
suggest allowing an increase in allowable contributions, up to
the out-of-pocket maximum, in order to help people pay for
these additional services, or at least have the potential to
cover their entire out-of-pocket risk with tax-exempt funds.
We also want to allow seniors who choose to keep working
and are covered by an employer-sponsored HSA plan to enroll in
Medicare and still be HSA-eligible. The President has gone
further and proposed allowing HSAs in the Medicare Advantage
Program. We agree with him. We agree with him and in any event
know that this subject merits further discussion. Medicaid
should be broadened so that the example of Indiana's HIP2.0
program can be expanded if a State so chooses. Vice President
Pence, then Governor Pence, accomplished by Federal waiver what
we think states should have a right to do if they want. Now I
don't think HSAs can solve every problem--to your point,
Ranking Member Heinrich--but at least they have all the
incentives in the right place. They let people save for the
future. It's very important. They promote transparency in
pricing, exerting downward pressure on costs, and they respect
well-known and proven insurance principles.
I think more Americans should have access to HSAs, and
recommend that legislative proposals pending before Congress be
quickly enacted.
Mr. Chairman, thank you for holding this hearing, and I
look forward to any questions.
[The prepared statement of Mr. McKechnie appears in the
Submissions for the Record on page 42.]
Chairman Paulsen. Thank you. Ms. Watts, you are recognized
for five minutes, as well.
STATEMENT OF MS. TRACY WATTS, SENIOR PARTNER, MERCER; AND
POLICY BOARD OF DIRECTORS, AMERICAN BENEFITS COUNCIL,
WASHINGTON, DC
Ms. Watts. Chairman Paulsen, Ranking Member Heinrich, and
Members of the Committee:
Thank you for this opportunity to meet with you to discuss
the critical role of health savings accounts and making health
care more affordable.
My name is Tracy Watts. I'm a Senior Partner at Mercer, and
I am testifying today on behalf of Mercer and the American
Benefits Council where I serve on their Policy Board of
Directors.
I have more than 30 years of experience helping Fortune 500
employers develop innovative strategies to control their health
care costs.
Mercer is a business unit of Marsh & McClennan Companies.
The businesses of MMC include Mercer, Oliver Wyman, and Marsha
& McClennan Agency. We employ 25,000 colleagues in the U.S.,
including more than 350 in your District, Chairman Paulsen.
The American Benefits Council is a public policy
organization that represents Fortune 500 companies and
collectively the Council's members either sponsor directly or
provide services to retirement and health plans covering more
than 100 million Americans.
So I would like to begin my testimony by highlighting some
relevant findings from Mercer's National Survey of Employer-
Sponsored Health Plans. The survey includes responses from
2,500 employers, and it is the oldest, longest, and most
comprehensive survey of its kind. The results can be projected
to any size employer population in the U.S.
Our survey shows that an increasing number of American
workers and their families enrolled in consumer-directed plans,
or CDHPs. And on page 3 of the PowerPoint attachment to my
written testimony you will see about 34 percent of American
workers employed by large companies, those with 500 or more
employees, enrolled in a CDHP.
Since 2009, the enrollment in CDHP plans has increased an
astounding 325 percent. In addition to increased reliance on
consumer-directed plans by American workers, if you turn to
page 4 you will see that HSA-eligible plans cost 20 percent
less than PPO plans in general, and they are 6 percent less
costly than PPO plans with deductibles over $1,000. It is
important to note that the success of HSA-eligible plans in
reducing plan costs is one of the few strategies proven to help
bend the curve, and in turn help manage premium costs for
employees.
A driving force behind growth into HSA-eligible plans is
the threat of the 40 percent Cadillac tax, now delayed to 2022,
and we thank you for that. And thank you, Senator Heinrich, for
your leadership in working to repeal the tax.
Next I would like to share an example of how we help
clients analyze and evaluate their health plan performance.
This particular example shows the positive impact of HSA-
eligible plans on both cost and health risk.
In this example, the employer has sponsored an HSA-eligible
CDHP plan alongside a PPO plan for more than three years. And
on page 8 you will see that we matched enrollees in the PPO
plan to enrollees in the CDHP option who shared the same
demographic and risk profiles at the start of the three-year
comparative period.
There were approximately 13,000 plan members in each of the
comparison groups. So it is a good sample size. When we looked
at how the participants in each plan option used their medical
services over the three-year period, it was quite similar
across the two groups. There was basically no difference in the
use of preventive screenings and annual physicals.
The CDHP plan did have lower utilization of the emergency
room, of office visits, and prescriptions. However, the day
supply for the prescriptions was actually higher for CDHP
members, which could mean better utilization of mail-order
benefits, and better compliance with their prescribed
therapies.
The most interesting finding, though, from this study is
shown on page 12, where we look at health risks over the three-
year period. The PPO plan had a significant decline in the low-
risk category, and an increase in the high-risk category while
the risk structure for the CDHP plan was virtually unchanged.
We valued the change in the PPO risk at approximately an 8
percent increase in the risk of the PPO members. This suggests
that the CDHP plan may have been more effective at helping
participants manage existing or new medical conditions or
health risks.
As for costs, the data were clear that the HSA-eligible
plan ended up costing on average 15 percent less per capita
than the PPO plan over the three-year period. We've performed
this analysis for other employer clients with very similar
results.
We thank you for holding this hearing today to highlight
how HSAs can indeed engage patients and bend the cost curve. I
appreciate the opportunity to share these findings with the
Committee, and I am pleased to answer your questions.
[The prepared statement of Ms. Watts appears in the
Submissions for the Record on page 75.]
Chairman Paulsen. Thank you, Ms. Watts.
Dr. Patel, you are recognized for five minutes.
STATEMENT OF KAVITA PATEL, M.D., M.S., PRIMARY CARE PHYSICIAN,
JOHNS HOPKINS MEDICINE, AND FELLOW, BROOKINGS INSTITUTION,
WASHINGTON, DC
Dr. Patel. Thank you very much. Thank you, Chairman
Paulsen, Ranking Member Heinrich, and other Members of the
Committee:
This is a great honor for me to be here on this side of the
dais. I am a former Senate staffer and career in health policy,
but I am coming here today kind of bringing all of those worlds
together, and perhaps most importantly as someone who delivers
care to over 1,000 patients as part of a regular community-
based primary care practice. And so that is actually where I
start from.
The one thing I would ask you on this very important topic
about bending the cost curve is to really consider what I would
say should be all of our north star. That is, how do we make
care better and less costly for all Americans? So that is where
I come from.
The majority of my patients are primarily insured by either
Medicare or Medicaid, and do have commercial insurance as well.
So I take care of kind of all gamuts. And I want to tell you
about one specific patient, just because she will ring true
probably to all of you on some level.
A 47-year-old female--I did get her permission, not her
name, but I am going to share her story--a 47-year-old female
who actually works for the Federal Government, has a high-
deductible health plan, and a health savings account, three
children. Average income is about $63,000. And so she is right
in that ballpark. She was unfortunately diagnosed with a very
complex kidney cancer that fortunately has a very advanced
immunotherapy that can actually target her cells, but costs
about $150,000 per treatment.
No question that this is something that I think American
innovation has brought to her doorstep, but she will regularly
use this very advanced medical device with me, one of her 14
doctors, to try to understand what tests does she really need?
What is it that she can actually get on a weekly basis in order
to make sure she can afford the very expensive drug that she
absolutely must take. But then she will sit and bargain with me
over which lab test does she need? Which doctor's visits does
she need to go to? And these questions are exacerbated at the
end of the month when she is looking to next month to think
about paying for her rent, thinking about putting food on the
table. And this is something with a health savings account.
When I asked her, when I talked to her in preparing for
this hearing, how does that HSA help you? And she said probably
the most profound thing that I want all of you to take home.
She said:
It really doesn't matter whether I have an HSA or not. She
said, I have to think about the money that I have to spend in
that moment, and what I have to do or not do in order to make
that work for my finances.
So I want everybody to kind of take a broader view and
think about the growing cost of care, and also what people do.
They don't hear ``HSA'' or a pre-deductible, they just think
about the money that is being asked of them when they get the
call from their pharmacy, or when the person in my front office
desk asks them for their payment at the time of service. And
all of us have been to the doctor where we see that sign that
says ``payment requested at the time of service.''
And that $20 adds up when you're dealing with these types
of illnesses. So I come to you in that context. And I think
that the conversation around bending the cost curve is
absolutely the right one to have. I just want to make three
points about the drivers of those costs:
Number one, hospitals. Hospitals, one of whom I work for,
hospitals have, year-over-year, had double-digit cost
increases. And these increases have been held constant, no
matter who your payer is.
Number two, ambulatory services. Costs in ambulatory
services, physician offices, have increased 71 percent. As a
primary care doctor, I would tell you that's a good thing. We
should be spending way more money in high-value services, but
we're not. We're spending them across the board.
The third is prescription drugs. Prescription drugs from a
recent Office of the Inspector General Report have grown out of
proportion--and I'll just give one statistic that I'll actually
read to you because it's startling--total reimbursement for all
brand name drugs in Part D increased 77 percent from 2011 to
2015, despite a 17 percent decrease in the number of
prescriptions for these drugs.
So less actual prescriptions; higher actual reimbursement
in Part D. These are not facts to be ignored. So these are
three huge cost drivers. I have included some--Senator
Kennedy's time taught me that graphs are always wonderful to
have, so I've got some graphs in my written testimony that
illustrate some of this in I hope a very clear way.
Those are three huge cost drivers. That is not to say that
health savings accounts can't play an important role.
Absolutely. Innovative services like direct primary care,
having access to chronic management services, pre-deductibles
so that you don't even have to think about whether you need to
spend an HSA on kind of higher value services, work that the
University of Michigan has done to identify what's high value.
Opioid treatment, for example, should not apply to your
deductible. I don't care what you're doing. These are things
that just make sense for everyday Americans, and we need to do
more of that.
We started some of that by making preventive services
covered before deductibles in the Affordable Care Act. That was
not enough.
So in closing, I just want to--I know that we will get
into, hopefully, an extensive kind of debate about health
savings accounts and what fixes. Think about all of this as
kind of a large balloon, and think about the real people and
the real voices, particularly of patients as well as the
doctors who are taking care of those patients, who are just as
frustrated. And I hope that we can have a more productive
conversation. Thank you.
[The prepared statement of Dr. Patel appears in the
Submissions for the Record on page 100.]
Chairman Paulsen. Thank you, Dr. Patel, and thanks for
sharing the perspective of a physician and an actual patient
that you deal with.
I remind all members we will keep our questioning period
time to five minutes, and I will just begin. We have really
enjoyed the testimony. And I certainly by no means would
recommend or say that health care savings accounts would be a
silver bullet or an answer to these challenging problems that
we have across the board for the health care spending here in
the United States, or for a lot of patients.
But it is being proven to be widely utilized and widely
appreciated when you have the average income of folks that use
these health care savings accounts of about $57,000, and they
are becoming more popular. But I am more interested in how they
actually affect bending the cost curve a little bit.
I know that one of the challenges we have in health care
today is that health care payments are ending up being made
essentially by a third party and not by the patients. So often
physicians, often patients don't know what the cost is when
they're not able to compare, or they're not aware in terms of
utilizing what health care services to use.
So you have got somebody spending other--somebody else
spending money, and they may not spend it as wisely as they
would spend their own, for instance. So these consumer-directed
health care accounts have successfully addressed some of those
challenges.
So maybe, Dr. Atlas, I will just start with you. Can you
elaborate maybe a little bit on how--or maybe explain to us
some of the ways in which these consumer-directed health care
plans have allowed consumers with their own skin in the game
essentially a little bit to help put more in the driver's seat
and make the right informed consumer choices? And how has that
helped to bend the cost curve a little bit?
Dr. Atlas. Yeah, I mean I think you can look at--we at
Hoover, and I am trying to be part of what the person who down
the hall from me had his office, which was Milton Friedman,
spoke quite a bit from evidence. And when you look at the
evidence in the published literature on people who have the
information necessary to make decisions, and have a health
savings account and a high-deductible type plan, the price of
care comes down significantly.
When you look at published studies, I mentioned them very
quickly on MRI, and on Outpatient Ambulatory Surgery, these are
in the literature. And we see that the prices came down 18, 19
percent per year. Of course it is very true what Ranking
Minority Member Mr. Heinrich said, which is that the
information has to be there. And so in these studies, patients
had visibility of price.
The question really is, is there legislation necessary to
do that because we really don't do that in other goods and
services? You don't have to say to the computer store, you
know, you better show your prices.
The fact is that the most compelling reason for doctors and
hospitals to post their prices would be knowing that they're
competing for patients' money. When patients care what they're
spending, they are going to save money. And this is not an
assertion that's proven in the literature.
We can also look back at things that weren't covered at all
by insurance. So here I'm talking about MRI, whole-body CT,
whole-body MRI screening. And I'm a neuroradiologist, so I am
very familiar with what happened. When that came out, it was
$1,500 to $2,000 in the shopping mall. And within a year or
two, the prices came down to $300.
Now that is not the only reason that prices came down, but
that's a critical part. There's a value-seeking behavior that
is completely missing from the equation here.
So it is factually proven that, when the prices are visible
and when signs of quality are visible--which they would be,
once you have a competitive environment--the prices come down
significantly.
And the key point here is, it's not just the prices for the
people who have the health savings accounts. We want health
savings accounts as a vehicle to reduce the prices of medical
care for everyone, while avoiding the way other countries do
this, which is by limiting access to care. This way it is
really ``consumer driven,'' to use the phrase that you're
using, and that is the way to get prices down without impacting
quality negatively.
Chairman Paulsen. Maybe, Ms. Watts, you can explain a
little bit, or follow up on that from the employer's side of
the equation, who have a lot of employees who may utilize these
accounts. I mean, what have you seen in terms of employers
benefiting from these types of consumer-driven plans themselves
in terms of costs.
Ms. Watts. Access to tools and resources is key to the
success of these programs, and even the one that I talked
about. So you've got your design and the incentive, if you
will, to have the skin in the game. But it is true, consumers
feel very ill-equipped to be able to shop for their health
care.
And so, tools exist that provide transparency information.
But the truth is, right now only about 30 percent of your
medical care that you would be seeking is ``shoppable,'' where
you could find out the price, do comparative research for what
the prices are.
For everything else, it's too complex. There's too many
parties involved to be able to know exactly what something is
going to cost. And so one of the things that employers have
done is to add advocates for the consumer. The advocate might
be within the health plan, or it may be a third party that
helps that patient navigate the health care delivery system.
Someone gets this diagnosis and they are a little scared
and asking themselves, should I be getting another opinion
somewhere else? Is this the type of thing that maybe we want to
send this off to a panel of doctors to take a look at, because
it's a little bit more complicated?
And, because there's this challenge of knowing what the
price is, and shopping based on price, but also knowing, what
is the quality of the provider that you're going to be going
to? Are they best equipped to be able to help you get the
outcome that you're looking for the fastest?
Chairman Paulsen. Thank you. Alright, Senator Heinrich, you
are recognized for five minutes.
Senator Heinrich. Thank you, Chairman.
Dr. Patel, it is evident from this hearing, and I have
experienced this in the past, that policymakers love high-
deductible insurance plans. I can assure you, my constituents
do not.
The other feedback I get from them is that high-deductible
plans cause them to forego treatment at times. Is that
something you've seen in your practice?
Dr. Patel. Yes, Senator. So it's very routine. Go to any
kind of community-based, or even hospital-based practice where
you have a high volume of patients. We all know the phenomenon
of having people try to seek care, or plan out their year to
try to understand when and how they will hit their deductible.
And it is a very common phenomenon to have patients actually
space out services that they need. And many of my patients, I
can tell when the fall cycle hits, or when we get into the new
year and they're more susceptible to that annual deductible,
they will not come in.
And so there is a very conscious decision. And I think it
speaks to something that I have seen over a decade of
practicing. We talk about wage growth? I have not seen, and I
can say I have now treated--I tried to tally--I've taken care
of about 22,000 patients of all types, and I have yet to hear
somebody say, you know, I got into a high-deductible health
plan, and I'm making more money as a result of it.
Senator Heinrich. Yeah, I am waiting for that constituent.
Dr. Patel. I am, too. I am waiting for that patient to tell
me that. Now that is not to say that that is happening, but my
experience has been that--and in the data that we are seeing,
is showing that people are foregoing that care.
My former employer, the Rand Corporation, ran something
called The Rand Health Insurance Experiment, which actually
illustrated that, depending on where you put that deductible,
people will forego necessary care. And that is exactly where I
think, as stewards of the American economy, we need to be
careful.
Senator Heinrich. Absolutely. We do not want people running
to the doctor every time they have a cold, but we sure want
them running to the doctor when they have indications of
serious illness.
The first chart in your written testimony shows the cost of
prescription drugs growing dramatically faster than other
health care costs. The very steep line here in your chart. And
frankly I hear more about that than anything else in health
care, no questions asked.
What policy should Congress be looking at to lower the
skyrocketing costs of prescription drugs?
Dr. Patel. Absolutely. And it is certainly not simple. I
was in the Senate when we were launching and designing the Part
D Program. I would argue that the Part D Program in 2006 did
not reflect the innovation in American medicine that can be
made available in the Part D Program in 2018.
So one essential--and I would hope that it is a bipartisan,
this is not a partisan issue, it is a bipartisan issue--is to
modernize the Medicare Part D Program in order to bring the
very innovations that we have in Medicare Parts A and Parts B,
to actually do that in Part D.
Right now we have no ability for plans to bring any of the
innovative tools, or things that we've done to manage services
in other parts of the program. That's one.
Number two, better access to generics and biosimilars. You
are hearing that not only does the Trump Administration kind of
agree with that, but many health policy experts also feel like
that is doable.
Number three is a very direct conversation. It's what Dr.
Atlas had referred to about kind of a direct conversation about
transparency. And that is transparency in all the levels
between the manufacturer, the pharmaceutical benefit manager,
the pharmacy, and the person who it really impacts, the
consumer at the end.
Senator Heinrich. I think that is an area of commonality
here, that I hear, that transparency is key to people making
good decisions.
And, Dr. Atlas, you said this very eloquently. You said
when the prices are visible. And it seems to me that is one of
the challenges here. And we seem to agree that transparency is
a good thing. And when people are given more information, they
make better choices. It is really hard--myself included, and
almost anyone I talk to--that is not the lay of the land in our
health care system today.
Dr. Atlas, how do we make that change and require more
transparency in the system?
Dr. Atlas. I think this is really a critical point, and I
think we do all agree that this transparency is necessary.
First I want to talk about drugs and price transparency
because this is the biggest offender of all. Because, you know,
recent data shows that there were $179 billion in these very
complicated arrangements with pharmacy benefit managers.
Patients have no idea what the real price of their drug is.
But the real reason they have no idea is because, just like
me when I get my high cholesterol drug, I personally pay $2. I
don't care what the price is if I'm only paying $2. And this is
the problem--when you have an insurance model, or any program
that minimizes to near zero, or to relatively speaking near
zero, what you, the patient, pays out-of-pocket for something.
In fact I'm sure that everybody here is aware of the study
that came out very recently that in over 20 percent of patient
co-pays for drugs, when they're using insurance, their co-pay
is larger than if they paid for the entire drug out of pocket
because there are contractual agreements that muzzle
pharmacists from revealing to patients the prices of the drug
if patients would pay out of their pocket.
This is unconscionable and scandalous, but this is an
example of the perversion of the system when patients don't
know what things cost. So the question really is: How do you
get that to occur, and have them care what it costs? It's not
just the visibility. Because if the prices were visible but
they really didn't care--they didn't get a reward for paying
less, okay, fine, I know the price. So they need to be able to
get a positive incentive to pay less, because it's not
necessarily the same.
When you say someone foregoes medical care, the question
isn't that. The more relevant question is about necessary
medical care. And when you really look at the data in the
literature, and Haviland is the author of one of the studies,
she showed that the patients did forego medical care, but they
did not get harmful health effects by foregoing that medical
care.
So you have to look at the data and be careful not to mix
up the kind of activity here. It's a very difficult problem,
particularly with drugs, because it's so complicated to get
prices there. But as one of my colleagues told me, if you just
mandate and legislate that prices have to be posted, it could
be like hotel rooms where on the back of the door you see the
price, and the price is meaningless. No one even looks at it,
no one cares. You have to be far more thoughtful about how you
get the prices visible, and I think it's by demand from
patients who care what they spend.
Chairman Paulsen. Representative Handel, you are recognized
for five minutes.
Representative Handel. Thank you very much, Mr. Chairman,
and thank you to all of our witnesses today. I appreciate it.
It has been a very good dialogue.
I want to stay on the topic of transparency and come to
you, Mr. McKechnie. The HSAs are designed to encourage
consumers, patients, to shop around for health services. And we
have heard a lot of conversation about whether that is easy to
do, or hard to do. There are some new services companies out
there, Meta-bids, Vendi-Health, Health Care Blue Book, that are
working very hard to make it easier. In fact, I have availed
myself of one of those--I will not say which one, obviously--to
check the prices of a mammogram. And it is stunning, the broad
array of pricing on it. But no one would know that unless they
actually picked up the phone and called each of those and said,
``If I come in and pay cash, how much would it be?''
So can you speak to the services that these companies
offer, and whether you think that is a good way to go? Or do we
need legislation to really drive and foster transparency?
Mr. McKechnie. We think, obviously--thank you for your
question, first of all. We think, obviously, the reason there
is a request for legislation is because perhaps some of the
other methodologies have yet to work. And they will be working
whether or not legislation is passed in the first place. That
is the nature of consumerism.
They tend to work best, as Ms. Watts said, in that 30
percent where visibility tends to be around nonemergency
services, which is why the companies you described can tell you
where and when you can get an MRI, and for how much money. They
are very good at that kind of diagnostic centric price
transparency function.
And when you look at a bank's HSA platform and their web
representation of that service, you can see that all of those
things are plugged in to help people do exactly what we have
been describing here today, which is to take their dollars,
find their treatment choice or the one that has been prescribed
to them by their doctor, and then where is the most efficient
way to spend their scarce resources in the time that is
important to them. And I think that is one of those qualitative
questions that you miss frequently, which is not just that you
need a service or it has been insured and therefore it is
inefficient, which is very important and I agree with, but also
it needs to be available to you, the essence of consumerism.
When do you want to do it? And with whom do you want to do it?
And that choice is yours to make. And the services you describe
make them easier.
Transparency would be achievable more easily with
legislation, since you would have to do it. And so we support
that. It is a shame, though, because the point of the story is
everything should be transparent and it is not.
Representative Handel. That is right. Thank you very much.
Dr. Atlas, you mentioned briefly in your testimony that
policy priorities over the past few years have really been
focused more on, I think you called it, the insurance model, or
lowering the cost of health insurance, rather than focusing
more on lowering the actual cost of health care.
Can you just expand on that a little bit more? Because I
think that is a very important differentiation there, and a
very important point.
Dr. Atlas. Right. Thank you. When you subsidize insurance
premiums, which is what the Affordable Care Act essentially
did, or when you give refundable tax credits, which is
essentially cash to people like a lot of the Republican
proposals were proposing, all you are doing is literally
propping up the price of the good. In this case, the good is
insurance. And when you do that, you are forgetting about the
fact that the driver of the cost of insurance, the main driver,
is the payout for medical services. At least historically it's
been roughly 80/20, 20 being administrative or other things.
And there are some good actuarial estimates that say that
the price, as you know, of an insurance premium has went
significantly higher under the Affordable Care Act. And it is
estimated that about 90 percent of the increase is due to
regulations, not the cost of medical care.
So that is sort of an outlier in this. So the key here is
to understand what is really the driver of insurance premiums.
It is the cost of care. That is the root problem. And the way
to solve that, as we are all discussing--or at least I think
the gist of this is--is to have exposure in, I don't like to
use ``skin in the game,'' but I just like to say ``caring about
the cost of what you are buying.'' Medical care is the only
good or service that you don't know what it costs until after
you've used it. Okay? And even when you get the bill, it is
indecipherable, particularly in Medicare.
I want to make one additional point about the idea about
the idea that higher deductibles and HSAs--first of all, it is
not a panacea. It is not for everyone. And I don't think anyone
is saying that. But the reality is that everyone benefits from
other people having them, even the people who don't have HSAs
themselves.
And if you look at what happened--which I have a chart in
what I submitted in my written document here--under the
Affordable Care Act it is true that all insurance prices went
up. But the fact is that high-deductible premiums selectively
went up faster than everything else, even though people still
buy them more than they did in the past. And so the economist
friends of mine at Hoover said, well how could that be? If your
data shows that the prices selectively went up faster for high-
deductible care--premiums, why would more people buy? It's
because it is still cheaper, okay?
But the problem is that it was selectively punished. It's
the exact opposite outcome of what you would want to legislate.
People are voting by their actions for the value of HSAs and
high-deductible plans.
You look at the curves. There are record numbers, 22 to 30
some million, depending upon what estimate, of people who have
HSAs, and increasingly employers are offering them, and people
want them. Even in the models where there are multiple
companies that have formed so-called exchanges, people when
they were given a defined amount of money to use on health
benefits, they opted more for high-deductible plans and HSAs.
It is not true that people don't want them, they do.
Representative Handel. Sorry to interrupt. I'm out of time.
Thank you so much. I yield back.
Chairman Paulsen. Thank you. And, Mr. McKechnie, let me ask
you this question, because Indiana has been cited as a model in
many respects, particularly because of their State employees.
But can you talk a little bit more about the success we've seen
in Indiana, or what changes, if any, there have been in
Indiana's success since 2010? Can you comment on any lessons
that have been learned from other states' approaches in
implementing HSAs?
Mr. McKechnie. Sure. I think it is important to understand
the landscape here, which is that in 2008 in that Presidential
election Medicaid covered slightly more than 50 million people.
And by the time we got to election 2016, Medicaid covered
slightly less than 75 million people, 74 million people.
And so the Affordable Care Act is largely responsible for
that growth, but of course it left the states with the question
of how do you want to expand? And Indiana took up the
Affordable Care Act's challenge and said, yes, we want to
expand but we want to expand by having an account-based system
where it made sense to do so.
And so their system had traditional Medicaid of course, but
it also allowed for what they call Indiana Power Accounts,
which is called the HIP2.0 Program. And of course most of your
current officials at CMS were former Indiana officials, so they
know exactly what they are talking about and can enhance
whatever answer you might need on this question. But it goes
like this:
The marketing for Medicaid 2.0 was--HIP2.0, was so
successful the program had to be closed. And that enrollment
shut down in that first year because people, it turns out, at
the lower end of the economic spectrum aren't illiterate when
it comes to finance, did want to have money in an account, did
want to see portability, were happy to trade preventative care
services for getting $1,100 in their account again next year.
And we think that's a very salutary benefit for teaching
people how to use financial instruments. We spent a lot of
money at the American Bankers Association trying to promote
financial literacy. The Governor actually did it in Medicaid
and should be congratulated for it. It doesn't exist too many
places.
So it is going well. There are some problems, however.
Obviously nothing is perfect. And one of the imperfections is
that as people move in and out of jobs, and in and out of
Medicaid, that is a very significant complexity to have to
manage. This is not Medicare where you age into it and you're
there forever.
This is the kind of thing where you earn out of Medicaid
eligibility, and you may fall back into the program. And there
are integration problems with what happens at that moment.
So they're working on it, trying to make that more
seamless, but that is one of the issues, sir.
Chairman Paulsen. Okay. Let me ask a question, and anyone
can answer it, but, you know, you have got a lot of different
consumer-directed health plans. You have got HSAs. You have got
Flexible Spending Accounts. You have got Health Reimbursement
Accounts. I mean, any thoughts on which of those might be best
that are showing track record of actually helping lower costs,
or what might be best for average Americans? I mean it is
always individualized for individual folks, but any thoughts?
Ms. Watts. I will share one of Mercer's survey data points
with you. Of the consumer-directed plans, the account-based
plans, about 77 percent of them are HSA plans. The remaining
are HRA plans. And those HRA plans are really more legacy
plans, because that is what we had first. Employers put in
consumer-directed plans to begin with an HRA, and then we got
the Health Savings Accounts. And so for most employers today,
their consumer-directed plan is an HSA-based plan.
Chairman Paulsen. Got it.
Dr. Atlas. I would just add, I think it is very important
that all of these accounts are shifted into ones that people
actually own, rather than are dependent on their employer, and
that they don't have this use-it-or-lose-it phenomenon at the
end, which of course HSAs do not. This is really critical. In
fact, it should be easier--and I have this chart----
Chairman Paulsen. Flexible Spending Accounts would, right?
Dr. Atlas. Yes, but the reality is I'm not sure why there
is a need for different types, because they all should be
liberalized in their uses, and rules, and things like that. And
I think that really there are certain incentives necessary to
institute for all HSAs. There is incentive to save if you do
not lose it. There is also an incentive to save if you are
going to be able to pass it on in a tax-sheltered way, as
opposed to just your spouse, which is now one of the rules. Or,
use it for your elderly parents, or someone else, even if it is
an individual account. There's a lot of things to be done that
make HSAs more attractive and more valuable to you.
Chairman Paulsen. Dr. Patel, have you seen other patients
experience, you know, they have to use it or lose it, on a
Flexible Spending Account versus maybe an HSA?
Dr. Patel. Oh, absolutely, yes. And I do think that the
everyday American does not actually understand HSAs and FSAs as
well. I think they are offered these choices during the
enrollment period, and then they just kind of pick. And they
are not necessarily at the time of enrollment kind of savvy
about what they are doing.
And I would add one more category, Mr. Chairman: Pre-
deductible coverage. Think about how much we spend on tax
dollars to allow employers to offer kind of these benefits.
Think about just really kind of honing in on kind of what's,
you know, necessary care and thinking about pre-deductible
coverage.
And I'll just make one little comment about the healthy
Indiana plan, because I think it is important to level set. I
go back to my days as a health services researcher. There were
over 500,000 people that were eligible; 55 percent of the
people for the Power Accounts either missed a payment, or never
made the first payment; and 14 percent of those eligible never
enrolled; 9 in 10 of those people that were actually in those
Power Accounts actually ended up falling to that lower tier.
So while people talk about it as a success, and some might
say it's a failure, the truth is that there's a lot more work
to be done before you think about HSAs and Medicaid.
Chairman Paulsen. Senator Heinrich, you are recognized for
five minutes.
Senator Heinrich. For every time I hear about HSAs, I hear
ten times about premium inflation, obviously, and premiums are
projected to increase by about 15 percent next year, at least
according to CBO.
Dr. Patel, do you have an opinion on how the Trump
Administration's actions with regard to undermining the
individual markets affect those premiums over time?
Dr. Patel. Well I think the critical--yes, I do have an
opinion. I think that premium costs, unfortunately, in the
current Administration there has been an interpretation that
this is all just benefit inflation that's driving the premium
costs, and therefore if we release people from kind of these
requirements around kind of essential health benefits, et
cetera, that somehow magically we'll offer these better value
plans, and therefore they will be cheaper, and that will bring
down premiums.
Unfortunately, by changing some of the rules around what
plans must, or the way they can offer benefits, you are
actually creating kind of a two-tiered system where if people
know that they are going to have to deal with chronic illnesses
like the patient I talked about, there is no universe where she
is going to try to get one of these less generous plans. That
is just simple math.
So the critical question is: How are we, without getting
into--I realize the word ``mandate,'' and all these things are
just toxic politically--but what we really need to do is have
an honest conversation about what are the services and valuable
benefits within the care delivery system that we must have
coverage for? And then, what are the things that we really need
to have people drive away from?
And that is the places where you--I know that she had to
leave, but when you talk about the cost of mammograms, I can go
within one mile and find a mammogram that is ten times the
cost, and I can find something that is a couple hundred
dollars.
So how do we get at that issue? And that is certainly not
being addressed in the current Administration.
Senator Heinrich. HSAs are premised on a consumer's ability
to shop around for the best value. And certainly, you know, I
have found that for my upper-income constituents in New Mexico,
who tend to be on the lower end of the overall curve, but for
people making over $100,000 a year, they have a lot of value.
But my rural constituents oftentimes do not have any ability to
shop around. I mean, they are really captive of whatever
infrastructure is left in rural America.
Is there--what is the HSA value for them? Is it just
primarily the fact that you might receive the tax benefit? But
do you lose the ability to impact the overall system when you
cannot choose between providers, really for any of you?
Mr. McKechnie.
Mr. McKechnie. I would be happy to try and answer. I am not
sure that is a HSA-specific question. I know the country is
going through a discussion about the availability of providers
by county, and insurers by county, and so leaving aside the
question of HSAs for a moment, I can understand, and I have had
the privilege of working with some of the members of the New
Mexico State Legislature, Carol Lovell particularly, in this
topic area. As we come to the HSA question, a gentleman
actually responded I believe to--from our Board, addressing
that exact issue, which is not necessarily where you live in
the State, but where are you on the economic spectrum?
Because the question of how do you satisfy that first
thousand dollars of obligation is a very important one, and not
everybody has a thousand dollars, and we recognize that, too.
But if you are going to pay a thousand dollars, and the tax
rates vary between 15 and 40 percent for income, is it $1,150
that you owe? Is it $1,400 that you owe? And how are those any
better than owing simply $1,000?
And so on that issue I imagine we can just leave that aside
now, the point having been made. But I think you are right. If
there is nobody around the corner from you to go and get
treated, I am not sure that is an insurance question. I think
that is probably something much more difficult to answer.
Ms. Watts. Could I comment?
Senator Heinrich. Ms. Watts.
Ms. Watts. We co-authored a paper, Mercer, with the
American Benefits Council on employer innovations in health
care. And I believe one of the case studies in there is one of
our ABC member companies that is a rural company in the coal
industry. And they have access issues for their employees. And
they have actually done direct contracting with some providers,
and some of the care that they provide is virtual health care
because people don't have access. And somebody previously said
this isn't just an HSA issue. The HSA is really just more of a
funding vehicle, and it does get people to have skin in the
game.
The question you are asking about is access. But thanks to
technology we are on the verge of having much more of an open
door to access, no matter where you are. And having people
understand the value and being able to make better decisions--
--
Senator Heinrich. I would agree with you wholeheartedly,
with the exception of one issue. To have that world exist, we
actually have to have the infrastructure to be able to access
telemedicine and virtual medicine in those rural areas. And I
will tell you that there are vast areas in this country where
the broadband access, the infrastructure to make that happen,
which I think you would find Republicans and Democrats both
agree, is a great change to our health care system, does not
actually exist.
Dr. Atlas. Could I add one quick comment on telemedicine,
which is there is another anticompetitive problem in the M.D.
world, which is that states have their own licensure of
doctors, and that prevents, in addition to other rules,
prevents active telemedicine, and actually limits competition.
And this is a problem.
Chairman Paulsen. I want to thank everyone for taking the
time to testify today. This has been great. We unfortunately
had some Members who were confined to some other important
hearings and issues, particularly on the House side.
So we will--I want to make sure that we know that Members
who wish to submit questions for the record, the hearing record
will remain open for three business days. And you may
anticipate some opportunity to respond in writing, as well,
from some of those Members who were unable to attend.
Thank you, again. And with that, the Committee is
adjourned.
[Whereupon, at 4:14 p.m., Thursday, June 7, 2018, the
hearing in the above-entitled matter was adjourned.]
SUBMISSIONS FOR THE RECORD
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
I call this hearing to order.
All Americans deserve access to affordable, patient-centered health
care.
Unfortunately, the fight to achieve this worthy goal has become
politicized to the point where it's perilous to even acknowledge the
shortcomings of our current Byzantine system.
There are bipartisan solutions to this problem, and today we will
be discussing one.
That is why I am excited to convene today's hearing, titled ``The
Potential for Health Care Savings Accounts to Engage Patients and Bend
the Health Care Cost Curve.''
When does a patient decide that a common cold isn't worth the
expense of a doctor's visit? Or whether it would be worth saving
dollars by going to a general practitioner who could easily treat an
ailment rather than a pricey specialist?
Patients would have a hard time answering these questions, because
the actual cost of care remains obscured until long after services are
rendered.
Even after patients receive an explanation of benefits, the true
cost is obscured by what providers charged and what the government or
insurers decided they would pay for a service.
This lack of transparency has contributed to rising health costs,
which ultimately leads to more unaffordable insurance and even less
satisfaction with the health care system.
Yet, in the current environment, consumers and providers alike are
divorced from the true cost of care.
As the economist Milton Friedman once said, nobody spends somebody
else's money as wisely or as frugally as he spends his own.
Americans are excellent comparison shoppers--television, direct
mail marketing, billboards, and storefronts all appeal to consumers'
senses of value for price when making important choices for themselves
and their families.
An important part of everyday life is making decisions based on
personal preferences, needs, and, of course, cost, and it is for this
reason that competition thrives among auto manufacturers, food
producers, and home builders to deliver safe, healthy, and long-lasting
products that people can afford.
We all acknowledge that American health care and health insurance
are very expensive. In today's hearing, we will investigate how health
savings accounts, or HSAs, allow Americans to lower the cost of health
care by drawing on an important area of their expertise: themselves.
HSAs have delivered great benefits, and there may be even more to
come if lawmakers strengthen HSA's hold in the marketplace.
I believe they can broaden access to quality medical care, increase
patient choice, and improve health for all Americans.
It is for this reason that I joined with Senate Finance Committee
Chairman Orrin Hatch to enhance both Health Savings Accounts and
Flexible Spending Accounts to give hard-working Americans more choice
and control when it comes to their health care decisions.
According to one estimate, if half of employer-sponsored insurance
incorporated HSAs, national savings in health care spending could total
$57 billion annually.
So how do they work? An HSA is a tax-exempt account set up to pay
or reimburse certain medical expenses incurred while covered by the
kinds of high-deductible health care plans many Americans have today.
Employees and employers contribute funds pre-tax. Money that has
gone unused can roll over year to year, and consumers continue to have
access to the money even if they change employers or leave the
workforce.
Since the creation of HSAs in 2003, the number of people who have
an HSA has risen dramatically.
In 2005, roughly one million people were enrolled.
Today, 22 million people have HSAs. Americans clearly see the
benefit of directing their own health dollars towards their own health
care needs and expenses.
My own thrifty State of Minnesota has the third-highest enrollment
in HSAs in the country, with nearly 1.2 million enrollees.
A 2016 study of large employers that offered consumer-directed
health plans (CDHPs) in the form of high-deductible health plans with
HSAs found significant long-term cost reduction and no evidence of
worse health outcomes.
In recent years, the State of Indiana implemented an HSA structure
both in its Medicaid program and in insurance offered to State
employees. Then-Governor Daniels noted that this consumer-driven
approach resulted in savings and customer satisfaction.
In 2010, State employees who enrolled were expected to save more
than $8 million compared to their coworkers in the traditional health
care alternative.
Ultimately, the HSA is a vital tool that helps improve our health
care system, even for those who don't have an HSA. By putting consumers
directly in charge of their health care, the health care sector becomes
more consumer conscious.
As in many areas of our economy, the answer usually lies in the
wisdom of the American people.
I look forward to hearing from our distinguished panel of witnesses
today how HSAs and the idea of consumer-driven health care can improve
the affordability of health care.
Before I introduce them, I now recognize our Ranking Member,
Senator Heinrich, for his opening statement.
__________
Prepared Statement of Hon. Martin Heinrich, Ranking Member, Joint
Economic Committee
Thank you Mr. Chairman.
I'm looking forward to today's discussion on Health Savings
Accounts.
These tax-free savings accounts play a role for some consumers to
cover health care costs.
HSAs are particularly helpful for those earning more than $100,000
who are already saving for retirement, and have less trouble covering
their monthly bills and student loan payments.
But HSAs do little to bend the so-called health care cost curve.
This is the problem we must focus on--how do we provide top-quality
care while reducing our overall national health care spending AND
lowering consumers' out of pocket costs.
But HSAs seem to generate the most savings through cost shifting,
not cost saving.
Here, employers pay less by offering skimpier plans coupled with an
HSA.
But, employees shoulder a greater share of costs, the financial
risks of getting sick, as well as yet another obstacle to navigate
between themselves and their health care.
And this is happening at the exact time when wages remain
stubbornly stagnant, and more and more families are struggling to get
ahead.
But my chief concern is this: part of the reason we are here today
is that our Republican colleagues seem to be gearing up for yet another
attempt to repeal the ACA.
If the new proposal is anything like the last, we can expect it to
gut Medicaid, drop millions from coverage, take away comprehensive
coverage, and further hike premiums.
Central to the Republican vision has been to move more and more
consumers to high-deductible plans, which have lower premiums but ask
consumers to pay more for doctor visits and services before the health
plan covers care.
If paired with an HSA, a family can put aside up to $6,900 tax free
to use for qualified health expenditures. The investments in the HSAs
grow tax free.
The thinking behind HSAs is that if people set aside money for
their health care, they will spend it more wisely, and, on average,
spend less. They will have some ``skin in the game.''
The problem, though, is that without knowing what we're paying for
and how much we're paying, consumers simply do not have the tools they
need to make rational decisions about cost.
And HSAs are unable to help with this problem.
What we do know is that HSAs sometimes encourage people to forego
needed care, which is the main way they save money.
If you need chemotherapy to treat your breast cancer, but you've
underfunded your HSA and have a $2,700 deductible, what happens?
If your child gets sick, will you take her to the doctor or keep
her at home based on how much of your deductible you've paid down?
If you or a loved one is grappling with an opioid addiction--a
reality for far too many across the country and in New Mexico--will an
HSA cover your treatment?
Can someone battling addiction or managing a serious mental health
issue make enough money to save into an HSA?
These are important questions.
No matter where you live, what you do for a living, or what party
you belong to, these questions are at the heart of our health care
conversation.
I'm worried that HSAs--an idea that I agree works for some
consumers--are being twisted into a quick-fix that will only exacerbate
the challenges in New Mexico, such as our ongoing fight against the
opioid epidemic.
I am all for working together on real solutions to make needed
improvements to our health care system.
Improvements that will reduce costs on consumers, increase price
transparency so consumers can make informed decisions, prevent surprise
medical bills, as well as reduce the overall cost of health care in
America.
But focusing on HSAs, while avoiding an honest conversation about
the key drivers of health care costs, could have real negative impacts
on real people who are simply trying to manage an illness or care for a
sick loved one.
We must focus on actions that can bend the cost curve, like
investing in preventive care, using the government's purchasing power
to lower drug prices, and paying for quality of care, rather than
quantity.
And we have to focus on making things simpler for families.
I look forward to our witnesses' testimony and to hearing their
perspectives on how we can bring down health care costs for families.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]