Policy Memo
Topline
Lawmakers should enact health care reforms that give consumers more agency over their health care choices, moving away from one-size-fits-all plans controlled by the government and employers in favor of Health Savings Accounts.
Affordability 101 · Chapter 1: Consumer Choice
Institute for Statistical Policy Analysis
Lawmakers should enact health care reforms that give consumers more agency over their health care choices, moving away from one-size-fits-all plans controlled by the government and employers in favor of Health Savings Accounts.
Health care has among the highest levels of government involvement of any U.S. industry. Health expenditures now make up 18% of U.S. GDP, almost half of which is directly spent by the government. Private health care providers and insurers are subject to numerous regulations, mandates, and other interventions that make health care more expensive with little benefit. Correspondingly, prices for medical care have generally risen faster than overall inflation since 1949, leading to rapidly rising health care costs, with the trend slowing only after the COVID-19 pandemic. But the pattern is not universal. Prices of some health services that have minimal government involvement have fallen. Procedures that are not covered by insurance, such as LASIK or cosmetic surgery, have generally gotten cheaper relative to inflation while improving in quality and patient outcomes. The lesson is clear: the solution to health care affordability is more choice in the market.
Health Savings Accounts (HSAs) are a growing market-based option that can counter skyrocketing health costs by giving individuals ownership and choice over their health spending. With an HSA, an individual covered by a high-deductible health plan (HDHP) can make (or receive from their employer) tax-advantaged contributions to accounts that they own and can use for health-related spending of their choice.
Like HSAs, employer-provided health insurance (ESI) is tax-advantaged, but ESI is plagued by problematic incentives: employers gain a tax advantage by compensating employees with pricey insurance instead of higher wages. This artificially inflates health care demand and reduces cost controls, leading to higher health spending.
Congress should stop perpetuating rising health care costs and allow people more freedom to choose how to spend on their health needs.
This memo is part of Affordability 101, Advancing American Freedom’s playbook of 101 policy solutions to make life more affordable.