A 2003 law blunts the worst of Obamacare

As we come out of the first quarter of the first year in which Obamacare has been fully unleashed on anxious Americans of every age and station, the so-called “reform” has never been less popular. In our own lives and workplaces, we have suffered (or soon will suffer) cancelled health-insurance policies, dramatic hikes in health-insurance premiums, and disruptions in our medical care as doctors and hospitals are dropped from insurers’ networks.

In a failed last-minute attempt to rescue Obamacare, the president has delayed some of the most immediately painful aspects of the law. But these executive actions, some illegal, have not slowed the train wreck. We are going to have to suffer under Obamacare until at least January 2017.

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Although it’s hard to believe, Obamacare could have been worse. Fortunately, we still have tools that result from a 2003 law, which now benefit over 26 million Americans. These tools bent the curve of health spending and gave more choices and control of health-care dollars to patients. These tools are called Consumer-Driven Health Plans and Health Savings Accounts.

A new survey from the Employee Benefit Research Institute (EBRI) reports that 21 million adults have health plans that qualify them to open a Health Savings Account or a Health Reimbursement Arrangement (a somewhat different tool with similar characteristics).

We refer to these plans as Consumer-Driven Health Plans because they offer lower premiums in return for higher deductibles than traditional plans. Although the groundwork for these plans was laid as early as 1978, they really took off in 2004, as a result of the 2003 Medicare Modernization Act, which allowed any working American to sign up for such a health plan.

An added benefit is the Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA). These accounts enable individuals to avoid paying taxes on income used to pay medical bills. Last year, 12 million adults were enrolled in a plan with an HSA or HRA, and 9 million more were enrolled in a plan compatible with an HSA or HRA but hadn’t opened one of these tax-advantaged accounts. Including children, 26 million people, 15 percent of the population with private insurance, had such a health plan.

The point of Consumer-Driven Health Plans is to make patients more sensitive to prices.  It has worked. According to the survey, patients with these plans are more likely to ask physicians for less expensive treatment options or use online cost-tracking tools to manage medical expenses.

All Americans should celebrate the ten-year anniversary of these plans. A number of sources confirm that these plans have succeeded in bending the cost curve of medical care. By 2009, insurers WellPoint and CIGNA reported that these plans were cut the rate of cost growth by half. In some markets, premiums did not go up for two years.

According to the Kaiser Family Foundation, health spending increased by 8.8 percent annually from 2001 to 2003. Of course, the financial crisis of 2008 and subsequent recession caused a significant reduction in the rate of growth of health spending. However, the rate of growth started to drop in 2004. From an increase of almost 10 percent in 2003, annual spending growth on health care dropped to about 5 percent in 2007, as consumers took more control of their health spending.

It has not been an easy decade for consumer-driven health care. Because doctors, hospitals, and other providers still operate within a paradigm of control by government and insurers, many resist patients’ need to know the prices of medical care before treatment.

In a 2011 survey, seven out of ten hospitals reported that they collected less than one third of fees due from patients at the time of service. As a result, many hospitals are suffering increasing bad debts from patients’ accounts-receivable. This is causing them to change, although too slow for many patient advocates.

President Obama and his supporters believe that government, not patients, should control health spending. If the 2003 law had not given millions of us more control of our health-care dollars, they would have been in a stronger position to impose a more complete government take-over than they did.

Obamacare is driving health-insurance premiums up ruthlessly. But it shall pass. Until then, we can be grateful that Consumer-Driven Health Plans, Health Savings Accounts, and Health Reimbursement Arrangements have not been crushed by its regulatory onslaught.

Graham is senior fellow at The Independent Institute (www.independent.org), Oakland, California.