otentials will be realized; that is, HSA/HDHP’s will encourage better prevention and adherence to therapeutic regimens since patients will be forced to realize and cope with their unhealthy choices and the expensive negative consequences of preventable problems.[37] The fact remains, though, that many people expect consumer driven health care to decrease patient desires for expensive therapies even if such therapies are medically necessary.[38]

HSA/HDHP’s are truly revolutionary because the US health care system is not currently like other free market, consumer driven industries; health care, however, may simply not be suitable for such market models.  Health consumers have imperfect medical knowledge and non-medical, non-financial, sometimes non-rational motivations for health-related decisions.  Nonetheless, the flow of information to both providers and consumers of health care will be crucial aspects of a successfully functioning health market.[39] Physicians and hospitals, though, may be hesitant to publish such performance data for fear of litigation or other undesirable consequences.[40] Also, productive access to the internet, which varies according to both income and education, is likely to provide further barriers to necessary information for certain demographics of the population.[41] As such, government regulations may be necessary to maintain the freedom and transparency of the medical market.  These concerns are of central importance as the success and popularity of a consumer-driven US health care market will ultimately determine the success and popularity of HSA/HDHP’s over time.


VI. The Rand Insurance Trial

Perhaps the most pertinent of any economic analysis into the effects of cost sharing on health care cost and consumption is the Rand Insurance Trial.  President Nixon requested such an experiment from the Rand Corporation in order to quantify the effects of cost sharing in the early 1970’s.  This was truly a randomized, controlled, economic experiment in which over 5,000 families were randomly assigned to receive health insurance plans with levels of 0, 25, 50, or 95 percent cost sharing.  All plans had the same maximum out of pocket spending limits which were adjusted according to pre-set standards based on income for poor participants.  The families were followed for three to five years.[42]

            The study revealed that the impact of cost sharing is likely to be a mix of desirable and undesirable outcomes.  Among the most harmful to the ideals of the HSA/HDHP’s is that cost sharing did not seem to succeed at reducing the efficiency of the health care market.  The cost per episode of health care utilization was no different among the groups, nor was the incidence of inappropriate hospitalization or antibiotic usage.[43] Instead of increasing efficiency, cost sharing served to decrease the frequency and quantity of health care utilization.  Screenings were more common among the group receiving free care, and both mental health and well visits were negatively correlated with cost sharing.  The end result of the study was that cost sharing led to worse control of hypertension, worse vision care, and worse oral health.[44]

            Potentially providing support to HSA/HDHP’s is that health care spending was undeniably reduced through cost sharing plans.[45] Surely reducing spending is not desirable if it means sacrificing health; it is not clear that this was the case in the Rand Insurance Trial, however.  Cost sharing had less affect on acute and chronic care than on other areas of health care, and the value of the increased care that was sought with free plans may have been only marginal.  It is notable that free care recipients had more self-reported diseases and increased anxiety levels.  This may indicate that the increased health utilization of this group served largely to decrease anxiety and perhaps alleviate symptoms, but had little impact on more meaningful health outcomes.  In fact, participants in the study reported no difference in self-assessed measures of health.[46] Also, it seems that the differences reported for hypertension management were actually the result of detection, not care.  Once the disease was diagnoses, management and follow-up were similar among all groups.  In sum, the study reported that cost sharing resulted in no overall difference in provider choices or the quality of care received.[47]

            It is important to factor in both the good and bad implications this study has on the future of HSA’s.  The HDHP’s of the study included no such savings accounts and no associated tax incentives, and exactly how such accounts and incentives may have affected the results cannot be reliably extrapolated.  Additionally, the study brings to bear the issue of whether subjective, self-reported indicators or more objective, pre-determined measures are of greater importance when evaluating the success of any given health plan.  Furthermore, on a more gestalt level, it is crucial to consider that the differences in spending habits and health outcomes between the groups with various levels of cost sharing are smaller than those between insured and uninsured groups;[48] consequently, increasing access to insurance through increased cost sharing is likely to be beneficial to society as a whole.  Thus, while certainly demonstrating areas of weakness and the need for improvement from HDHP’s alone, the Rand Insurance Trial may give some backing for the ideals motivating HSA’s as well as the combination of HSA/HDHP’s.


VI. Recommendations and Summary Conclusions

            HSA/HDHP’s are a new reality in the American health care system, and should be addressed as such.  In the relatively near future, these plans will function in conjunction with other empowerment shifts to potentially transform the appearance of health care in the US.[49] While they will surely not gain universal support or participation, a shift as small as 10-15 percent of patients to personal, market-based health care may be sufficient industry-wide changes.[50] According to one survey study, enrollment in HSA-compatible plans tripled in a ten month time period from just over one million in March 2005 to well over three million in January of 2006.[51] Consequently, participation levels may quickly reach levels adequate to necessitate industry-wide and societal modifications in health care.

Given the apparent potential popularity of HSA/HDHP’s, the policies regulating these plans may need to be modified to better articulate the goals of increasing the overall efficiency of the health care industry.  One possible modification would be to mandate that all first dollar spending for screenings and preventions be covered with all HDHP’s.  This could side-step many of the negative health-related potential outcomes of HSA/HDHP’s as well as increasing the value of added health care for individuals enrolled in the plans.  Even without modification, though, many people stand to benefit greatly from HSA/HDHP’s, as is evidenced in the previously-described growth in participation.  The introduction of a consumer-driven, market approach to health care while still maintaining privatization may prove more likely to be embraced in the US than many other schemes.  Additionally, market dynamics may, in fact, achieve the needed improvements in health administration.  As with all new ideas, though, time is needed to measure the popularity and success of this fledgling system and to evaluate its impact on the American health care system.


Further Reading:

Information concerning the American health care setting:

The Kaiser Commission on Medicaid and the Uninsured.  “The Uninsured: A Primer, Key Facts about Americans without Health Insurrance.  Henry J. Kaiser Family Foundation, 2006.  Available online at: http://www.kff.org/uninsured/upload/7451.pdf


Links to multiple HSA related resources:

Grace-Marie Turner.  “Health Savings Accounts: A Survey of the Literature.” (Galen Institute, 2006).  Available online at: http://www.galen.org/ccbdocs.asp?docID=862


Links to multiple resources for insurance information concerning HSA/HDHP’s:

Center for Health Transformation: Better Health, Lower Costs.  Health Savings Accounts homepage.  Available online at: http://www.healthtransformation.net/news/cht_articles_and_op_eds/#oHSA


Summary of conclusions from the Rand Insurance Trial:

Emmitt B. Keeler, “Effects of Cost Sharing on Use of Medical Services and Health.” Available online at: http://rand.org/pubs/reprints/2005/RP1114.pdf




Works Cited


[1] Rosemarie Sweeney. “Health Care Coverage for All.” American Family Physicians, 2004; 69(6): 1365-1377.

[2] The Kaiser Commission on Medicaid and the Uninsured. “The Uninsured: A Primer, Key Facts about Americans without Health Insurance.” Henry J. Kaiser Family Foundation, 2006: 1-5. Available online at: http://www.kff.org/uninsured/upload/7451.pdf

[3] Ibid.

[4] Ibid.

[5] HealthPollReport. “Public Opinion of consumer-Driven Plans, 11/01/04.” Available online at: http://www.kff.org/healthpollreport/Oct_2004/loader/cfm?url=/commonspot/security/getfile.cfm&PageID=48477

[6] Chris Farrell. “It’s Time to Cure Health Care.” BusinessWeek online, January 23, 2006. Available online at: http://www.buisnessweek.com/print/bwdaily/dnflash/jan2006,nf20060123_1965_db013.html

[7] The Kaiser Commission on Medicaid and the Uninsured.

[8] America’s Health Insurance Plans, “HAS’s Triple in 10 Months.” Available onile at: http://www.healthdecisions.org/HSA

[9] United States Department of Treasury, “Frequently Asked Questions.” Available online throug: http://www.treas.gov/offices/public-affairs/hsa/

[10] Britt Westgard.  “Health Savings Accounts and High-Deductible Health Plans: A Primer.” Available online at: http://www.amsa.org/uhc/HSAPrimer.pdf

[11] United States Department of Treasury.

[12] Britt Westgard.

[13] United States Department of Treasury.

[14] Ibid.

[15] Ibid.

[16] America’s Health Insurance Plans.

[17] United States Department of Treasury.

[18] Britt Westgard.

[19] United States Department of Treasury.

[20] Britt Westgard.

[21] Greg Scandlen. “HSA Tsunami.” Consumer Choice Matters, (Galen Institute) 2003; 41. Available online at: http://www.galen.org/printfriendly/asp?DocID=569&DocType=19

[22] Greg Scandlen.

[23] Britt Westgard.

[24] Grace-Marie Turner. “New studies show consumer-directed care reduces costs and improves access.” Health Issues (Galen Institute), 2004.

[25] Ibid.

[26] J.B. Silvers. “HSAs: The Good, the Bad and the Ugly.” Unpublished.

[27] Center for Health Transformation: Better Health, Lower Cost. “Health Savings Accounts.” Available online through: http://www.healthtransformation.net/news/cht_articles_and_op_eds/#oHSA

[28] Ibid.

[29] Duncan Neuhauser. “The coming Third Health Care Revolution: Personal Empowerment.” Q Manage Health Care (Lippincott Williams & Wilkins), 2003; 12 (3): 171-184.

[30] Center for Health Transformation: Better Health, Lower Cost. “Health Savings Accounts.” Available online through: http://www.healthtransformation.net/news/cht_articles_and_op_eds/#oHSA.

[31] J.B. Silvers.

[32] Ibid.

[33] Britt Westgard.

[34] United States Department of Treasury.

[35] Britt Westgard.

[36] Paul Fronstin and Sara R. Collins.  “Early Experience with High-Deductible Consumer-Driven Health Plans: Findings from the EBRI/Commonwealth Fund Consumerism in Health Care Survey.” Employee Benefit Research Institute Issue Brief No. 288 (EBRI 2005).

[37] Duncan Neuhauser.

[38] Ibid.

[39] Duncan Neuhauser.

[40] Britt Westgard.

[41] Ibid.

[42] Emmitt B. Keeler, “Effects of Cost Sharing on Use of Medical Services and Health.” Available online at: http://rand.org/pubs/reprints/2005/RP1114.pdf

[43] Ibid.

[44] Ibid.

[45] Ibid.

[46] Ibid.

[47] Ibid.

[48] Ibid.

[49] Duncan Neuhauser.

[50] J.B. Silvers.

[51] America’s Health Insurance Plans, “HAS’s Triple in 10 Months.” Available onile at: http://www.healthdecisions.org/HSA