Are health savings accounts good medicine?

Dr. William J. West, Jr., an obstetrician/gynecologist in Reading, Pa., says he used to be a part of the nation’s mushrooming health-care problem.

Like other physicians of his generation, West was in the habit of practicing so-called defensive medicine -- using a lot of extra tests and treatments to safeguard against possible malpractice liabilities. He also would prescribe treatments for his patients without knowing if they could afford them, or if a cheaper alternative was available.

“I wasn’t trained to think about health-care costs when I was a medical student,” says West, 44, who graduated from medical school in 1986. “I was not taught to think about how much a treatment will cost a patient, or whether it is the best course of treatment from a cost perspective, and as things are set up now in the health-care system I’m not required to know anything about it.”

These days, thanks to the advent of the health savings account, West says he’s working to become a part of the solution to the nation’s health-care woes. As co-founder of First HSA, a nationwide health savings account administration company, West is involved in dispensing advice on how to save and invest to pay for often costly drugs and procedures. But not everyone is convinced health savings accounts, or HSAs, are good medicine.

Championed by Bush
HSAs were created by the Medicare reform legislation signed by President Bush in 2003. Put simply, an HSA is another way to pay for health-care costs. Instead of relying on health insurance coverage alone, an individual buys a high-deductible insurance policy to cover major health-care needs, and then sets aside money each year in a tax-free personal account, the HSA, to pay for smaller health expenditures.

Account balances can be used for a wide variety of medical expenses, and money not used one year can be carried over to the next, as well as from job to job. Like an individual retirement account, or IRA, at retirement the funds can be used for any purpose.

The Bush administration has proposed expanding HSAs to deal with a health-care industry burdened by uncontrolled spending, the rising cost of health-care premiums and prescription drugs, and the swelling ranks of the uninsured.

Government data show that spending on health care is growing faster than the economy as a whole and accounts for 15 percent of the nation's output. The issue is likely to receive attention in President Bush’s State of the Union address on Wednesday. As part of his “ownership society” philosophy, Bush has championed HSAs as a way for Americans to control health-care expenditures.

Physician advocates say HSAs have enabled them to forge a new partnership with patients, minimizing their health-care costs and fostering a productive dialogue about treatments.

“When I deal with a patient who has a health savings account, we make decisions about treatments together and we discuss costs,” West says. “This is likely to mean doctors practice less defensive medicine, because if you have discussed a treatment with a patient they have agreed to it, it’s harder for them to sue you over it.”

Dr. James G. Knight, a urologist in San Diego who is also president of the San Diego Medical Society, says dealing with patients using HSAs has transformed the patient-doctor relationship. He is more solicitous when people are spending their own money, he says, and so he is more honest and discriminating about when tests and treatments are needed.

Sicker patients -- and higher costs?
But not everyone is sold on HSAs.

Critics include health-care experts like Howard Berliner, a health policy professor at the New School University in New York City, who questions whether HSAs might lead to sicker patients and higher health costs.

Berliner says forcing individuals to make payment choices about their health coverage will mean many poorer individuals put off a trip to the doctor, or skimp on important surgeries or check-ups to avoid depleting the funds in their accounts.

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