Philadelphia Reflections

The musings of a physician who has served the community for over six decades

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FRONT STUFF: Health Savings Accounts: Planning for Prosperity; SECTION ONE: HSA and its Competitor, in Brief
Editorial material for book construction.



This book, a series of expansions on the Health Savings Account idea, is written in 2015 by one of its 1980 originators. It has been revised and rewritten several times, only to have a development or Court decision force it into yet another revision. After the United States Supreme Court decision of King v. Burwell, I decided to make one hurried revision and then stop revising it. It had grown to five hundred pages, well past the length the public would tolerate without a total rewrite, so it was severely cut, with the plan to take the excised pieces and bring them out separately as Handbook of Health Savings Accounts. I hope to produce the latter book soon, but it cannot be promised. This one, with still a few ragged edges, is written for the public and the Congress in order to have the main issues become part of the coming debate. I hope some of its editorial defects from the cutting process can be overlooked.

The Difference Between the Two Plans Let's get started right away, with a short simple summary of the two plans. It's one that everyone would agree is a simplification. The Affordable Care Act, universally described as Obamacare, is essentially the same as the employer-based health insurance we had for a century, with the main difference, it is intended to be universal and mandatory. By making it mandatory, it has to be subsidized for poor people. To pay for the subsidy, it has to be mandatory, because mandatory premiums on healthy uninsured are mostly used to pay for poor sick people. So, in spite of its title, it was destined to be expensive from the start.

Health Savings Accounts, on the other hand, are owned by the individual, and any savings are his to keep. Only high-deductible ("Catastrophic") costs are insured, and small-cost health costs are included only to the extent the individual chooses to include them, so naturally they are inherently cheaper. If he is shrewd and overfunds them, however, he can collect interest income which will reduce costs in the long future,-- and if he doesn't spend the money on health, it is available to spend in his retirement. It has no mandatory links to the employer, so the problems caused by employer linkage are absent. That would include pre-existing conditions, job-lock, and gaps in coverage between employers. In thirty years, no one has successfully challenged the assertion they are cheaper. And by their design, it is hard to see why they wouldn't be cheaper. True, they don't cover the poor, but if the same government subsidy were to be applied to Health Savings Accounts as they are to Obamacare, the poor would be just as covered by HSA as by ACA. There you are, with a summary for late comers of the main differences between them. Two things were unexpected, however.

In the first place, no one really expected Obamacare, for all its claim of universal coverage, would leave thirty million people uninsured. They can be summarized as seven million prisoners in custody, eight million disabled, and eleven million illegal aliens.

And in the second place, no one really anticipated the investment income from Health Savings Accounts would compound to such large amounts. That comes from the greatly increased longevity, which allows compound interest to multiply mightily before the individual finally gets sick and uses the money. There are dozens of other small differences between the two plans, but this seems to me to be a fair summary for those who don't want to get down into the weeds, as politicians say. If you read the whole book, I feel most people would say this was a fair, rough, summary of its narrative. But as I went along, I added some new ideas. Most readers will find five or six really innovative ideas, which even I did not expect to discover.

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  • C HSA (Classical)
  • N HSA (New)
  • L HSA (Lifetime)
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Health Savings Accounts

Most of the Republican candidates for President have included classical HSA in their campaign platforms, but necessarily cannot endorse expanded versions without reading them. However, this is not a political book and fifteen million satisfied subscribers have already enrolled in the classical version. The Lifetime version requires serious legislation, suggested here in detail, but only as a goal.

Following two unexpected Supreme Court decisions, a third, revised, version called New Health Savings Accounts (N-HSA) was added, covering the 68% of healthcare costs not covered by the Affordable Care Act, but not particularly in conflict with it, either. If the two political parties could agree to compromise, pieces of these proposals might be useful in the debates. However, the economics of that proposal proved too precarious in the present vexed climate. The final version of N-HSA will however come as a surprise, consisting of pieces developing slowly as the book progressed, and centering on two entirely new concepts: the first year of life and the last year of life. Since they affect 100% of the population, they contribute much more to costs than any individual disease. Consequently, their main cost effect is implicit; taking them separately lowers the cost of other healthcare programs which overlap them. Most of the novel ideas in the book are folded into this single package. If I had the time, I would build them more gradually into the explanation. As it is, the reader may have to work backwards in the book to explore their construction.

We begin the book by outlining the proposed solution to problems which are described in later sections. The hope is to avoid the appearance of grievance, first presenting the proposal in general terms, before describing many of the reasons for it. The second section of the book, however, is a series of comments on the hidden economics of healthcare. It reflects the author's views after sixty years as a practicing physician in many roles. This section probably reflects most physicians' viewpoint on a number of features of healthcare which the public is seldom exposed to, but many of the details are unfamiliar even to physicians. The importance lies in leading to yet another main proposal, which is to make a deal with the employer community to repair the problems created in the past century of employer-based health insurance. In a sense, employers and unions act as though employer-based insurance is nobody else's business. But because they are heavily funded by tax deduction, nobody owns the concept, and it is fair game for anybody's comment.

The third section contains major working details of Health Savings Accounts, once a fuller theory has been set forth. In particular, investment and constitutional issues are expanded. It could expand on the details and requirements of adjusting employer-based insurance, except that is scarcely necessary, and in any event is beyond my control. I originally saw the employer-based proposal as incidental to Health Savings Accounts, but the employer community could well regard it as the only issue worth talking about.

At the end, a sixth section of this book extracts almost fifty specific legislative proposals which require attention before final Lifetime proposals could be completely operational. Lifetime viewpoints are the ultimate goals; we have too many one-viewpoint silos. The author is reluctantly brought to the conclusion that both employer-based health insurance and Medicare are solutions now outgrowing their former usefulness. Obamacare is regarded as not really a reform, but a nationalization of the finance system, with intended reforms remaining undeclared, just so long as Government decides them. Nobody owns this problem, or its solution. It is a public debate, and a continuing one.

And after all, this is a book, not a political speech. Marketing and administrative costs of HSA will be considerable; all details are expensive, take time to explain. Revenue sources vary, as do sickness costs. Only the HSA concept remains durable throughout, and its basic premise is, you should be in control of your own finances. Therefore, please understand where you might be going. Unfortunately, to do that requires re-examination of a system which served us fairly well for a century, but now causes considerable trouble itself.

Now to jump around, the Supreme Court decision of King v. Burwell seems to have assured the Affordable Care Act will be part of our system for some time. However at the same time, health insurance companies have suddenly raised their rates so much it becomes doubtful the nation can afford to continue the ACA approach. Or at least, without abandoning its major role in some other field, like international affairs. Therefore, I discarded any attempt to predict what will happen, and developed an interim plan for making choices.

It was to apply the Health Savings Account approach to everything else except age group 21-66 which apparently will be dominated by Obamacare until elections settle some issues. Everything else would cover at least as much healthcare cost as the ACA does; but without bipartisanship it would be a stretch to make it work. Adding the two together would considerably increase the savings for mathematical reasons I will explain, and perhaps be the basis for compromise. As I worked through the details however, I decided the thirty million President Obama decided to omit, were better suited to individually tailored solutions, and Medicare was too big to take on as part of a solution. That doesn't seem to leave anybody, but in fact it points straght at children, which I now see have been an invisible stumbling-block, all along. So that's New Health Savings Accounts (N-HSA), plus modified Obamacare, leading to Lifetime (L-HSA) by the back door. Combining two plans that almost work, into one plan that works much better, would be quite an achievement. Meanwhile, we certainly will have an interesting debate. If we could only stir employer-based insurance into the mixture, it might become very exciting, indeed.

George Ross Fisher, MD


October, 2015


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