NCPA - National Center for Policy Analysis


January 24, 2005

Health Savings Accounts (HSAs) will help eliminate high administrative costs and lack of consumer incentives to use health care economically, says Andy Laperriere, managing director of the ISI Group's policy research team in Washington.

High administrative costs are associated with having insurance companies scrutinize and reimburse routine expenses:

  • Doctors who want to avoid insurance industry red tape pay, on average, 8 percent of revenue to outsource this function to a billing company.
  • Even if insurance companies spend only a quarter of the amount doctors do on their reimbursement bureaucracies, more than 10 percent of the cost of a visit to the doctor -- $40 billion per year -- is wasted on paperwork.
  • Most of these costs would disappear if patients paid for their doctor visits directly (with a debit card, for example), which would be the case for most consumers who choose high-deductible plans with an HSA.

Even more importantly, HSAs will save money by presenting patients with a completely different set of incentives, says Laperriere. If a consumer has, say, a $3,000 deductible and can keep what he doesn't spend, he will shop around for a less expensive pharmacy, move more quickly to generic or lower priced brand-name drugs, question whether lab tests are necessary and avoid costly emergency room visits for relatively minor ailments. In short, wherever possible, the consumer will demand to know how much things cost, look for the best value, and avoid unnecessary expenses.

Source: Andy Laperriere, "HSAs Are A-OK," Wall Street Journal, January 24, 2005.

For WSJ text (subscription required):,,SB110651981023433479,00.html


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