Republicans Want to Change How You Buy Health Care

Dan Gorenstein (DG): These days, Republicans are serving up an alphabet soup of health policies — HSAs, HFAs, QSEHRAs, ICHRAs…

The unifying idea behind them all: Put more cash in patients’ hands. Then, let them — not the government, not their employer — decide how to best spend it. 

President Donald Trump: It goes to you and then you take the money and buy your own health care.

DG: The hope, with more skin in the game, patients become savvier shoppers. Find the cheaper hospital for that hip replacement. Think twice about the extra generous insurance plan.

Avik Roy (AR): The more connected you are to what you’re spending, the more likely you are to care about the cost and the price and the value that you’re getting. 

DG: Today, we break down the pros, the cons and the evidence behind this big idea from conservative policymakers. 

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein. This is Tradeoffs.

*****

DG: To help us explore putting more cash and more control in the hands of America’s health care consumers, we tapped senior reporter Leslie Walker.

Hello, Leslie.

Leslie Walker (LW): Hey, Gorenstein. Could you just go ahead and hit the Wu-Tang?

Music: Cash Rules Everything Around Me

DG: What?

LW: You know, cash rules everything around me. That’s how I’ve felt the past couple weeks reporting on this story.

DG: So did any of the economists you interviewed for this story drop Wu-Tang on you or that’s all you?

LW: Take a wild guess. It’s me. The economists dropped a Henry Ford quote, a Nobel Laureate name drop, but definitely no Wu-Tang Clan.

DG: Shocking. So Leslie, look, these ideas we’re talking about today, this is the kind of stuff Republicans have loved for years.

We’ve asked you though to take a fresh look at these policies because the GOP has the political power right now to push them forward.

LW: That’s right. So I talked with a few of the country’s leading conservative health wonks, checked out some recently proposed bills and a handful of policies that have actually passed, and they basically boil down to different ways to get people to do more shopping.

DG: My kind of story. You know I love nothing more than spending a Saturday afternoon at a consignment shop looking for the perfect navy blue sweater.

LW: Absolutely. As I was writing this I was thinking you are kind of straight out of Republican central casting when it comes to consumers. You love shopping and you love hunting for a good deal.

When it comes to health care, though, conservatives are looking for people to do two kinds of shopping.

One, for services: Your MRIs, your blood lab, your physical therapist.

DG: The day-to-day health care costs that we all rack up.

LW: Yes. And second, insurance: Which plan do you choose for you and your family? How generous is that coverage?

So I figured we could start with the day-to-day health stuff — the services. The most popular policy here is actually one that’s been around for more than 20 years.

President George W. Bush: A health savings account is a good deal and all Americans should consider it.

LW: That’s then-President George W. Bush touting health savings accounts, or HSAs, back in 2003 when they were first created.

Bush: This will help more American families get the health care they need at a price they can afford.

DG: Leslie, real quick here — can you explain how these health savings accounts work?

LW: Sure, so it’s basically a place to park pre-tax money. You can add to it. Some people’s employers chip in.

And Republicans lately — including a proposal from Louisiana Senator Bill Cassidy — are floating this idea of dropping federal Obamacare dollars into people’s HSAs instead of sending those dollars to insurance companies as subsidies like the government had been doing.

And you can spend this HSA money, Dan, on most health costs except for insurance premiums.

DG: Okay, so if a too-high insurance premium is your problem, this cash is not going to help. But for lab work, MRIs, a doctor’s visit, PT — like I need some PT right now — you can tap this fund.

LW: Right, but you don’t have to spend the money and that’s key here. You can also save it, even invest it tax-free and let it grow into this, like, nest egg that you can use to cover future medical bills or even help fund your retirement which, as an aside, is how nearly every economist I interviewed for this story told me they use their HSA.

DG: Amazing. So that ability to save this money adds this extra incentive — at least in theory — to use it wisely and makes HSAs different from other accounts that people might be thinking of where you scramble at the end of the year to spend them down and buy that really sweet pair of glasses or whatever.

LW: Yes, the Warby Parker special. One other big thing about HSAs, Dan: You can only get one of these accounts, by law, if you also enroll in a plan with a high deductible. That means consumers would be on the hook for at least a couple thousand bucks out of their own pockets before any insurance kicks in.

DG: By exposing people to the full cost of this day-to-day medical stuff, you incentivize them to search for the best deal — do a little price shopping between that blood lab down the street and the one across town.

LW: Exactly, and if you get enough people searching harder for better deals eventually, the idea is, the market will respond to that. Those blood labs lower their prices.

DG: A health policy wonk’s dream — this virtuous, money-saving, price-lowering cycle, Leslie.

LW: A virtuous cycle indeed. Here’s the thing: The environment is pretty ripe right now in that this high-deductible-HSA combo has grown a lot in the last two decades. 

Around 40 million people now have a health plan with an HSA option. And thanks to a provision that Republicans tucked into their Big Beautiful Bill, Dan, even more Obamacare plans are now HSA eligible. And we’re seeing consumers flock to them as premiums keep climbing.

DG: So look, Leslie, we’ve got more people moving into this type of arrangement. We’ve got Republicans pushing policies to expand them. 

And these accounts have been around for 20-plus years, right? So I’m thinking there’s some good evidence here to talk about what we’ve got. 

LW: Yeah, so, I will say the evidence here is tricky because it’s hard to separate out the effect of the HSA — this pot of pre-tax money — from the effect of the high-deductible health plan.

They’re like this inseparable duo, like Bonnie and Clyde.

DG: I think you mean Jordan and Pippen.

LW: Oh, okay! If that makes you feel better about the Chicago Bulls missing the playoffs, I will roll with it. 

DG: I’ll take what I can get. It’s been lean times.

LW: The topline here Dan is that the high-deductible half of this duo does make people more cost conscious. The evidence is clear: They do cut their health spending.

By how much, that can vary a lot from as low as 5% to as high as 20%. 

And Tony Lo Sasso, an economist at University of Wisconsin-Madison told me there’s another thing that makes it hard to gauge the impact of these high deductibles.

Tony Lo Sasso (TLS): They’re a blunt instrument and people are not good judges of valuable healthcare services.

LW: I gotta tell you, Dan, Tony is your kind of guy.

TLS:  I like consumerism. I like all shopping.

LW: He’s like a diehard believer in this idea but even Tony admits that people are just not great health care shoppers. 

TLS: The evidence is not with me thus far. 

When Tony says ‘thus far’ there, he does hold out some hope that greater price transparency, AI could one day make us better health care shoppers.

But as of right now, the research is pretty clear. The savings we see tend to come from people just skipping care altogether. They’re not carefully shopping around and choosing the cheaper blood lab, comparing prices. Instead, they’re just cutting whole swaths of care. Some of that care is fine — maybe even good to lose — like lower back MRIs, but some of it is really important stuff, like colonoscopies.

And, based on the evidence, because sick people use more care, they’re also the ones that tend to skip more care when they end up in one of these high-deductible plans. 

DG: Okay, so there is some real potential downside to these higher deductibles. People have been talking about this concern for years. Plus, lots of people don’t have thousands of dollars lying around that they can pony up if they get hit with a medical emergency on the spot.

LW: Well, this is where Pippen comes in to assist Jordan.

So this idea that some Republicans like is for people in Obamacare plans, padding their HSAs with some starter cash from the federal government, like one or two thousand bucks. 

Because without that kind of help, data shows a big chunk of people just leave their HSA empty.

DG: I see. So the pitch is if you’ve got a high deductible and that emergency hits or it’s just time to get that bum knee fixed, there’s at least some money in the bank. The goal, obviously, is to make it less likely people skimp on the high-value care. 

LW: That is the thinking, and there is research that shows when employers chip in more to workers’ HSAs, those workers do tend to spend more on their care.

But here’s the thing. Just like people struggle to know what to cut back on, researchers also find that people struggle to know what to do when they get extra cash in their HSA. 

The rational thing, Berkeley economist Adam Leive told me, is you save some of it. Earn interest so you’re ready for that big bill down the road.

But Adam’s research found that when an employer put more money into the HSAs of their lower income workers, nearly all of that money was gone in a year. 

Adam Leive (AL):  The HSA requires really people to behave the way that we might hope they would in like an Econ 101 textbook. But when faced with many other constraints, we often don’t see people behaving that way.

LW: When it comes to a lot of financial products, Dan, behavioral research makes clear that we often fail to use them wisely, like not refinancing mortgages when we should or failing to pay off the highest interest credit card first.

DG: Across the board, this is just tough stuff for your average person to really optimize.

LW: Exactly. And there’s this one other reason, Dan, that some wonks warned me HSAs might be less cost-effective than conservatives hope.

So, you know, one big appeal of HSAs especially in the MAHA crowd is that they let people use tax-free dollars on stuff that health insurance doesn’t typically cover. 

Now that can be common sense stuff like dental care or glasses, but that can also be this ever-growing list of health-related stuff, says Jason Levitis, a Treasury official under President Obama.

Jason Levitis (JL): Your Peloton or your high-end health club or your fancy food…

LW: Or a $6,000 cold plunge tub or $2,000 luxury mattress.

JL:  People don’t like health insurers, but there is an important role to play to say like, yes, this is medically necessary, and that sort of control just doesn’t exist at all in an HSA. 

DG: So just to close the book on HSAs here, Leslie, it sounds like these accounts do put people more in control of their health care money and that checks a big box for conservatives. 

But what people actually do with that control is a real mixed bag and might not produce the kind of savings that Republicans, ideally, are hoping for.

LW: I think that’s right and you know, to be fair, some folks like Tony LoSasso — ever the shopping optimist — they have some ideas about how to nudge consumers to shop better.

They’re still holding out hope. They have this core belief that people shop for all kinds of stuff outside of health care. They can do this. They just need the right tools, the right incentives.

But other wonks — like Avik Roy, here — have decided to focus more on a different kind of shopping where they see a bigger potential for impact.

Avik Roy (AR):  The most important thing that we have to shop for, that we don’t shop for today, is not your mammogram or your primary care physician. It’s your insurance policy.

DG: When we come back, we’ll grab our shopping bags and head for the health insurance market.

BREAK

DG: Welcome back. 

Before the break, we looked at health savings accounts as one way that Republicans want to put patients more in command of their health care spending.

But the money put into most HSAs, by law, cannot cover one of the biggest health care purchases of them all — the thing many of us buy each year — our health insurance.

Let’s bring back Tradeoffs reporter Leslie Walker to talk about Republican plans to rethink that purchase. Leslie, what’s the gist?

LW: Okay, so similar to HSAs, the big idea here is to give cash to people — instead of middlemen — and they’ll do a better job finding the health insurance plan that best fits their needs.

DG: Time to cue up the Wu-Tang again?

LW: Appreciate the offer, but I’m good for now. But you know, Dan, some conservatives are real jazzed about this approach, in part, because of the limitations that they see on that other approach we covered before the break: shopping for every single service you need, every scan, every doctor’s visit.

Avik Roy, who has advised multiple Republican presidential candidates on health policy, told me a better solution is to put all that hard shopping work on the insurer, not the consumer.

AR:  Then the insurer is rewarded for doing all those negotiations on the backend and saying, “Hey, I found the, the surgeon who’s gonna charge you the lowest possible price for the knee replacement. I found the MRI company that’s gonna do the MRI test at the lowest price,” and all that’s going to flow through to you in the form of a lower insurance premium.

LW: Instead of giving consumers cash to shop for MRIs, conservatives like Roy want to focus on making it easier for people to shop for the insurance plan that they think offers the best deal.

DG: Got it. This does sound kind of like the way things work today in some markets like Obamacare and Medicare Advantage, where people get to pick from a variety of plans. So what exactly is it that Republicans who favor shopping for insurance want to do here? 

LW: Right so, the corner of health care where conservatives have the greatest hope for this idea is among the some 150 million Americans who get their health insurance through work.

DG: The employer market. 

LW: Yes, now you call it a market but the reality is that, according to a survey by the research nonprofit KFF, a whopping 93 percent of all businesses offer just one or two types of insurance plans.

And to narrow things down to those one or two plan offerings, employers make a lot of assumptions about their workers, right? What kind of care they want, how big a chunk of their wages do they want their employer going and spending on health insurance?

It’s all pretty weird if you stop and think about it, says Brian Blase, who worked in the first Trump administration and now heads up the Paragon Health Institute.

Brian Blase (BB):  Why is an employer in charge of people’s health insurance? They should be focused on running their business and meeting their customers’ needs, not on navigating America’s very complex health care sector. 

LW: Of course, as you know Dan, a big reason employers are in this game is for the tax break. 

DG: Indeed. Because the health benefits that employers offer are not taxed but wages are, so health insurance is a cheaper way for employers to basically pad workers’ compensation.

LW: That’s right, and as a result, some employers offer more generous — and therefore expensive — plans than workers actually need or want. And that can eat into people’s wages.

So, for wonks who want to get employers out of this insurance business, here’s one idea that’s caught some bipartisan buzz.

But we should warn our listeners, Dan, it has a truly horrible name.

The Individual Coverage Health Reimbursement Arrangement or ICHRA.

DG: The ick factor is high!

LW: It’s a bad name but that joke is worse. 

DG: Not sure who writes these for me. In a nutshell, how do these accounts work, Leslie?

LW: So your employer picks the amount they want to contribute to your health insurance, let’s say $1,000 bucks a month, still tax free, to keep everyone happy. 

Then you, the worker, go shopping with that ‘allowance’ for plans available either on the Obamacare exchange or directly from insurance companies.

DG: The employee — instead of their employer’s HR department — is much more in the driver seat than before.

So, what about the evidence on this idea, Leslie? I know it’s much newer than those health savings accounts, but what do we know so far?

LW: Almost nothing. There’s basically no public data on ICHRAs but perhaps the most telling number we do have is one million. That’s the rosiest industry estimate out there for how many folks do have an ICHRA.

DG: One million people, Leslie, is not so many people.

LW: It is not. And Brian Blase agrees with you, Dan. 

BB:  It is not performing as well as expected. 

LW: Brian actually helped launch ICHRAs back in 2019 during the first Trump administration.

BB:  I led the initial meeting where the concept got floated and basically that initial meeting led me to get very excited about it, and we put it in an executive order that the president signed, directing the government to open up this pathway.

LW: Brian himself has had an ICHRA for the past four and a half years and he says he’s experienced firsthand one of the biggest reasons he believes the idea has failed to catch on: The plans available for people to spend that ‘allowance’ on can leave a lot to be desired.

BB: Where I live in northeast Florida, I think the Obamacare plans are awful. They have very high deductibles, and they have very few doctors and hospitals that accept them.

LW: Of course, as you know, Dan, Obamacare options and prices vary widely across the country.

DG: And I’m guessing, Leslie, that some people on the left would point out right here that the same conservatives who champion these ICHRAs have — through other policies — helped to undermine the very Obamacare market that the ICHRAs are relying on.

LW: Yes that’s true, but even if that market did get better, New York University professor Sherry Glied told me she sees a bigger barrier to ICHRAs catching on. 

Most people just have no interest in shopping for health insurance. 

Sherry Glied (SG):  Shopping for dresses is fun. Shopping for health insurance is not fun. 

LW: Sherry then clarified that she actually doesn’t even find shopping for dresses fun — just for the record. Then she suggested one thing to keep in mind when people start getting amped about ICHRAs.

SG:  This is not our first whack at this idea by any means. 

LW: America’s employers, Sherry told me, have tried and failed to make similar plans happen before. And, if you look at other countries that have built up robust private insurance markets and then let people shop on them, what you see, Sherry says, is a lotta people just sticking with what they have.

SG:  If you look at the Swiss, the Dutch, the Israeli health care systems, where people can go to marketplaces and choose, like, people don’t want to choose. This is not a thing people want to spend their lives doing. 

DG: I mean we see the same thing here in the U.S. right? Like with Medicare where people can shop plans every year, I think the stat is something like 7 in 10 stay put.

LW: That’s right and among people who do shop, the research once again finds that consumers can struggle. They often fail to pick the plan that’s in their best interest. 

DG: So I guess given all of these headwinds, Leslie, where does that leave folks like Brian Blase — champions of this?

LW: Yeah, I mean for Brian, and a lotta conservatives like him, they’re doubling down.

BB:  ICHRAs have tremendous potential to give workers more choice and control over their health insurance. 

LW: To fulfill that potential, Brian says, the policy could use a few technical tweaks and more plans for people to choose from.

Now the Trump administration is doing some work there with a focus on giving people cheaper, skimpier options than what you find on Obamacare exchanges today.

Outside of Washington, Indiana and Mississippi are giving tax breaks to businesses that offer ICHRAs and a handful of red and blue states are considering following suit.

DG: More cash, more control to more consumers — that, it sounds like, is the name of this game.

LW: That’s right, Dan. And as we wrap up, I guess there’s one last thing I wanted to say, which is that for all the attention conservatives have given shopping — and we’ve given it today on our show — this is not their only hope.

We’re seeing Republicans address affordability — the buzzword of the moment — in other ways that could help. The President’s dragging pharma CEOs to the negotiating table. There was a recent hearing where members of Congress slammed hospital executives over their prices.

DG: Certainly with the midterms coming up, politicians are sensitive to all this. Like KFF had a recent poll where more than half the people said health care costs will have a ‘major impact’ on their vote. 

LW: I agree the pressure is on. But based on my reporting, some of this action is a clear sign that many conservatives believe ‘shopping’ is just one part of the solution. I mean, more shopping can only get you so far if everything in the store still costs too much.

DG: Leslie, thanks for your reporting on this.

LW: You’re welcome Dan.

DG: I’m Dan Gorenstein. This is Tradeoffs.