Improving Incentives in Health Care Spending |
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Authors: | Katherine Baicker |
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Institution: | (1) Council of Economic Advisers, Executive Office of the President, Washington, DC 20502, USA |
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Abstract: | Although U.S. economic growth is likely to continue to
be robust, the growth of private and public spending on
health care presents long-run public policy challenges.
To meet these challenges health care resources must be
used more efficiently. Currently, there are few incentives
to put health care dollars to the highest value use. This
is true in both public and private spending. An important
element of the problem lies in the tax-preferred
treatment given to employer-provided insurance but not
to out-of-pocket spending. The resulting bias towards
first-dollar insurance coverage means that consumers are insulated from the real costs of the health care that
they consume and have little reason to evaluate whether
the benefits are greater than those costs. Moreover, they
seldom have sufficient price and quality information to
make informed decisions. Health Savings Accounts
(HSAs) are a promising way to remove the tax-penalty
for enrolling in catastrophic insurance and paying for
routine care out of pocket. Given the information that
they need, consumers would then have more choices and
more control, strengthening their role in reducing waste,
improving efficiency, and promoting competition.
Coupled with other policies, HSAs can be a critical component
in moving toward an efficient and equitable
health care system.
JEL Classification I11 |
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Keywords: | health HSA spending incentives productivity |
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