I am not a fan of HSA’s. They are a good tax shelter to healthy people with high incomes. They can be used to cushion a one-off shock of catastrophic medical events but they are useless in reducing the cost burden of either repeated catastrophic events or chronic conditions. At best, in those cases, it is a back door subsidy through the tax code to slightly reduce out of pocket costs where the people who get the most help need it the least.
But there is a coherent theory of change with the use of HSA in both a single year and over a lifetime. The single year theory of change is that high first dollar expenses will lead to lower utilization with minimal real health consequences. The lifetime theory of change is that an HSA can be built up while an individual is young and healthy and spent when an individual is old and sick. It prefunds some of the expected health cost obligations on an individual level.
In the original version of the AHCA, the subsidies were set up so that they could be split. If a person found a policy that cost less than the subsidy, the remaining portion of the subsidy would be deposited into an HSA. This makes a decent amount of mechanical sense. The young and healthy people would buy dirt cheap policies and deposit a significant amount of the subsidy into an HSA. Over time, the HSA would grow until the cohort of people who were once young, healthy and cheap to cover are no longer young, no longer healthy and no longer cheap to cover. At that point, the savings they had accumulated in their HSA would be available to pay for either care or premiums.
There is a major issue of founder’s debt in this scheme but if we handwave away the problem that killed Social Security privatization in 2005,it is mechanically coherent.
The Monday Manager’s amendment took away the ability of a subsidy to be split between a premium and the HSA. This was done to get more anti-abortion votes on board. It will have two effects. It will limit choice as insurers have no reason to price their products underneath the subsidy point. The second is that it completely destroys the mechanical theory of change for an HSA system. People can’t use tax advantaged dollars to pay part of their first dollar expenses in the current year. And more importantly, the young can not partially prefund their health care expenses when they become old as they can’t rollover a partial subsidy into their HSA.
There is no coherent policy thought here. It is an absurdity