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Health Savings Accounts: A Healthcare Solution if Someone Could Explain Them


The other day I tweeted something about Sen. Cruz's strategy to defund Obamacare and a friend tweeted back, saying that Republicans need to do more than oppose Obamacare -- they need to propose alternatives. Of course, this is true, though it's not a completely fair criticism. It's not that Republicans haven't proposed any solutions, rather, they have communicated their ideas poorly. Instead of succinctly communicating the benefits of free-market, consumer driven solutions to the individual and the family, Republicans often focus more on how their ideas will reduce costs or make the market more competitive -- as if they are more concerned with helping the market or the national debt than the individual.

One example is the concept of Health Savings Accounts (HSA), which are tax-advantaged savings plans available to individuals enrolled in low-premium, high-deductible health insurance plans. Employers love them because they help to rein in costs and many families find that they cost less than traditional insurance plans.

But they're hard to explain.

Sometime during the long night of Sen. Ted Cruz's speechibuster®, Sen. Rand Paul made some remarks (in the form of a question, as required by the Senate rules) about HSAs:

Why are the health savings accounts important? Because you can save money tax-free, you can carry it over from year to year, and then you can buy higher deductibles. So contrary to what people think, it may be counter-intuitive to some people, the way to fix health insurance is to have higher deductibles, because what does that mean? Cheaper insurance. You want cheaper and cheaper insurance. As you have higher deductibles, you have cheaper insurance. When you have cheaper insurance, you have all this extra money that you can use to pay for day-to-day health care. When you do that, what happens? You drive the price of health care down. I know that is exactly right. As you increase deductibles, as you get the consumer involved in health care, your prices go down.

May I suggest that when you're trying to promote an idea or market a policy, you generally want the reaction to be something along the lines of, "It sounds good on paper, but what's the catch?" or "That sounds too good to be true!"