New GAO study exposes significant problems with Health Savings Accounts

The Center for Budget and Policy Pririties has a write-up on a recent Government Accountability Office study that dispels the notion that the working poor or even middle class Americans would benefit from implementation of Health Savings Accounts (HSAs) that were established by the Republican-led Congress' 2003 Medicare drug law. As you can already probably guess, given that the GOP pushed so hard for the bill, the independent government agency found that affluent Americans benefitted the most from it.

Not only that, the GAO findings also strongly suggest that HSAs are being used extensively as tax shelters (as opposed to being used as savings accounts). Finally, the GAO data suggest that HSAs can be beneficial to healthy individuals with relatively few health care costs, but not to people who have medical conditions and incur higher costs. Oops.

According to the GAO study, as reported by CBPP: "51% of tax filers making HSA contributions in tax year 2004 had adjusted gross income of $75,000 or more. This represents a decisive skewing toward higher-income individuals, since only 18 percent of all tax filers under age 65 had incomes of $75,000 or more in 2004. The average adjusted gross income of tax filers reporting HSA contributions in 2004 was $133,000, as compared to $51,000 for all tax filers under age 65 in 2004."

Nice. So much for health insurance reform for those who need it the most. But there's more. . .

"About 55 percent of tax filers reporting HSA contributions in 2004 did not withdraw any funds from their accounts and “appeared to use their HSA as a savings vehicle.”"

and. . .

The GAO reported that when individuals are given a choice between HSA plans and more traditional health insurance plans, HSA plans are attracting “higher-income individuals with the means to pay higher deductibles and the desire to accrue tax-free savings.”

It also turns out that HSAs also have "higher out of pocket costs for the less healthy:" due to adverse selection, inevitably leading to an increased risk of these individuals becoming either uninsured or underinsured.

Go read the whole report here. Unlike Social Security, Medicare really is a crisis that needs to be dealt with, and independent analysis shows that so-called "market-based" approaches like HSAs are exactly the wrong way to go.