Commentary: Defined Contribution Health Plans: Attracting the Healthy and Well-Off

Commentary——Defined Contribution Health Plans: Attracting the Healthy and Well-Off

Gail Shearer
Driven by a philosophy that favors unbridled faith in the free marketplace, the year 2003 may well go down in healthcare history as the year that the healthcare system officially abandoned the premise that the community has a responsibility to care for each member, replacing it with the philosophy that individuals should each look after themselves.
The most visible change that nudges the system toward self-insurance is the provision in the Medicare bill that expands and makes permanent ‘‘health savings accounts’’ (HSAs) (formerly known as ‘‘medical savings accounts’’ or MSAs). This provision allows most Americans to set up tax-advantaged savings accounts (no tax is paid when money is paid in or when paid out, an unprecedented new tax loophole), when they also have a high-deductible health insurance policy. These new accounts are likely to favor the healthy (who stand to benefit financially from a new tax shelter since their accounts
need not be depleted on healthcare expenses) and the wealthy (the higher tax brackets mean higher tax benefits).1 In his State of the Union address, President George W. Bush’s proposal for a new tax deduction for premiums for high-deductible policies introduced the possibility that health savings accounts’ penetration of the marketplace——and the demise of the employerbased healthcare system——will be accelerated.
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