Dare to Compete

My beautiful and brilliant wife was kind enough to write a guest post about Health Savings Account.

Far too often, people get caught up in the Republican vs. Democrat, Liberal vs. Conservative argument. Forget that flummery.

What we should be focusing on is Clear Thinking vs. Muddled Thinking, Facts vs. Emotions, Good Ideas vs. Bad Ideas, Freedom vs. Government Control. The guest post below is a perfect example of a clear and rational thought process:

Have you ever shopped for a car? Whether you intended to lease or purchase, buy new or used, your process probably looked something like this: conduct Internet research on the price, features, warranties, mileage, safety ratings, reliability ratings, etc.; visit car lots for test drives; weigh the costs and benefits of various trim packages; consider your financing or payment options, your budget, and how much you want to deposit or spend; negotiate with a salesman; and, finally, drive your car off the lot.

Why do we engage, time and again, in this intensive process? Every one of us wants to make sure we get a good deal, and because cars are expensive and important to our livelihoods, and there are so many options to choose from, we’re willing to roll up our sleeves and shop around.

Car companies are forced to respond to this price elasticity of demand by competing with one another on price and quality, and the end result benefits the consumer: better quality cars at lower prices!

Health Savings Accounts (HSAs) can make this benefit a reality in the healthcare industry.

An HSA is a tax-deductible savings account that can be used to cover medical expenses. In order to open an HSA, a consumer must have a high-deductible health plan (HDHP). HDHPs offer low monthly premiums because consumers pay out of pocket for routine medical care up to their deductible. Once the deductible is met, most HDHPs pay anywhere from 80–100 percent of covered expenses. Money contributed to HSAs is tax deferred, rolls over year after year, and can be withdrawn to cover medical expenses tax free. Best of all, your HSA contribution is an annual above-the-line deduction on your income taxes, and, like an IRA, it can be withdrawn for any reason penalty-free after you reach the age of 65.

So, how exactly do HSAs give us better health coverage at a lower cost? Simple: by creating competition. HSAs make consumers “consume” healthcare intelligently. When you have to pay all medical expenses out of pocket until you meet your deductible, you become price sensitive. You start to pay attention to how much everything costs. You shop around for doctors, hospitals, and surgery centers. You become selective about which tests and procedures you really need.

And when you become selective with your dollar, healthcare companies—from pharmaceutical giants to hospitals to physicians—start to compete for that dollar. Just like automakers, healthcare providers are forced to respond to consumers’ elasticity of demand by offering better quality services at lower prices. And isn’t that exactly what we all want? If only every consumer would take charge of their healthcare consumption like they do their consumption of just about everything else.

It all comes down to the very basic, very simple principles of capitalism. Reduce government regulation, increase price transparency, and increase competition, and the consumer benefits.

It’s frightening that our country’s leaders seemed to have abandoned all principles of capitalism. I’m hanging onto my HSA for dear life.