HSAs are intended to encourage more cost-conscious spending by placing more of the health care financing burden on out-of-pocket spending by the users of services, as opposed to having the costs of those services incorporated in payments shared over a wider group of plan enrollees regardless of service use. H/T Blumberg and Cope. HSAs are a legislative response to a problem in health care economics that occurs when “consumer demand for health care responds to the reduced marginal cost of care to the individual”. As clarified by Mark Pauly in 1968: when the cost of the individual’s excess usage is spread over all payer-members of a group, the individual is not prompted to restrain her usage.
In direct primary care subscription medicine, there is a marginal cost of zero for every medical service the individual consumes. All demanded units of DPC covered medical services are paid by monthly fees collected from each member, regardless of that members service use.
That’s precisely opposite to the reason for HSAs.
The HSA tax break exists to get patient-consumers to commit to putting more “skin in the game” through a specified, high level of deductible; the legislative designers forbade participants from “taking skin out of the game”, i.e., from defeating the legislative purpose by taking a second “health plan” that reduces that commitment and the effective burden of that deductible. This is why it is perfectly clear that secondary coverage (e.g., as a dependent on a spouses plan) is HSA-disqualifying.
The undefined words “health plan that is not a high-deductible health plan” in the HSA legislation should be interpreted to include any health payment arrangement, including direct primary care, that lowers the burden of high deductibles and defeats the purpose of the legislation. IRS’s interpretive discretion does not extend to undermining the intent of HSA legislation.
DPC advocates’ brag about how “there’s never a deductible”, no how many covered primary care services a patient actually utilizes. That’s exactly why paying DPC fees is incompatible with the reason for HSAs.
A benefits attorney has opined that the IRS should allow DPC subscribers to use HSA because DPC “complements” high deductible insurance. But Congress seemingly intended a specific health care payment model for complementing the coverage provided by high deductible insurance coverage — high deductibles!