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"Can
Health Savings Accounts Bring Down High Healthcare
Costs?"
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More
and more people now have the opportunity to choose
Health Savings Accounts (HSAs) over other, more
traditional, health insurance coverage – more
companies and financial institutions offer this option
than ever before. For the healthcare consumer, this is
good news. When the community as a whole is given more
choice when it comes to healthcare options, everyone
benefits. HSAs let you decide how to manage your own
medical needs and work out a financial plan that works
best for your specific circumstances.
An added advantage of
Health Savings Accounts is the prospect of lowering the
nation’s rising healthcare costs, and making the price
of medical care more affordable for everyone. But how
can revamping the current health insurance system affect
healthcare from a financial standpoint? More to the
point, how can a different kind of health insurance make
it easier for most people to pay for required medical
expenses?
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In
2003 the Medicare Modernization Act introduced
the concept of HSAs to the American public for
the first time. A Health Savings Account is
meant to encourage people to invest in their own
healthcare through personal savings, and reduce
health care costs at the same time; a
revolutionary idea that has the potential to be
the starting point for positive changes in
healthcare. Health Savings Accounts have sparked
a lot of debate amongst those who believe in the
idea and those who are wary of its ability to
change the face of healthcare as we know it.
When you get down to the fundamentals, HSAs are
truly designed to improve healthcare and make it
accessible to the vast majority of people. For
the individual, HSAs make it easier to pay for
medical expenses when they arise. Coupled with a
high-deductible health insurance policy, a
Health Savings Account allows you to save
pre-tax money and earn interest tax-free. This
allows you to have money set aside to cover a
whole host of medical bills, including items
that aren’t necessarily covered by traditional
insurance plans, such as dental expenses or
alternative treatments. Individuals and
employers can deposit up to $2700 per person and
up to $5450 for a family, and any time you need
to withdraw any amount to pay for qualified
healthcare costs, you can do so tax-free. In
addition, premiums for high-deductible insurance
policies can be as little as half the amount of
traditional PPO policies.
And because a
Health Savings Account is tied to an insurance
policy, more expensive treatments are covered,
usually 100%, after you’ve met your
deductible. When you turn 65, any savings
remaining in the account can be withdrawn
tax-free to be used for medical expenses you
incur in your senior years. In addition, the
savings you accumulate in a HSA work like a
retirement fund. The money grows tax-deferred
like an IRA, and you can withdraw the money
after age 65 to pay for non-medical expenses
without penalty, although you will be required
to pay taxes. It is important to note, however,
that amounts withdrawn prior to age 65 are
subject to penalties and taxes.
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Giving the
individual more consumer power when making
healthcare decisions not only helps you and your
family save money, but also creates an
environment in which healthcare costs in general
become more reasonably priced. Essentially, the
price of healthcare is so high because free
market forces have little sway in the realm of
healthcare products and services. Insurance
coverage causes a disconnection between the
consumer and the item purchased. When you visit
the doctor or purchase a prescription from the
pharmacist, you don’t know the real price tag.
All you see is your insurance payment and the
price you pay at the cash register, after your
insurance company pays the balance.
This lack of price transparency has led to less
competition within the marketplace. People have
traditionally chosen their doctors, health
products, and other medical items based on
location, convenience, or other factors not
related to price. When people have the choice to
compare different health care providers based on
quality of service and price, soon overpriced
healthcare will become a thing of the past.
People will shop around and force providers to
price healthcare more competitively.
As more and more people turn to Health Savings
Accounts, medical providers will feel the
pressure to post their prices and compete for
the consumer's business. Armed with the
knowledge of what healthcare actually costs,
individuals and families will be less willing to
overuse the system, which also drives up prices.
(When healthcare appears to cost little or
nothing, most people are prone to make use of
services even though it may be unnecessary).
At the same time, HSAs naturally promote the use
of preventive care. When people understand the
true costs associated with healthcare, they will
be willing to pay a little more up front to keep
their engine running smoothly rather than pay a
lot more at a later date to fix a problem they
could have avoided.
Health Savings Accounts have also put affordable
healthcare within reach for more people, who
were previously paying medical expenses
out-of-pocket due to inadequate or non-existent
insurance coverage. The low premiums of a
high-deductible HSA plan together with the
option of putting your money in a savings
account that earns interest has already
encouraged large numbers of people who
previously went without coverage to purchase a
health insurance plan.
Only time will tell whether or not Health
Savings Accounts can drive down skyrocketing
healthcare costs, but the system created by such
accounts, which affords the individual more
freedom to control his or her own financial and
medical destiny, bodes well for the future of
healthcare in America.
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About the
Author:
Article was written by Wiley Long, President of
HSA for America http://www.health--savings--accounts.com/.
HSA for America makes it easy for people to
learn about and set up health savings accounts
that best meet their needs at the lowest
premiums available. Reproductions of this
article must a link to http://www.health--savings--accounts.com/.
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