Philadelphia Reflections

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

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SECTION FOUR: New Health Savings Accounts
The project combines several concepts developed in other chapters, but is ready to be considered as a whole.

Summary of N-HSA

In looking at what would be involved in launching full-scale New Health Savings Accounts (N-HSA) right away, we concluded there were too many obstacles to launching even a large-scale demonstration project with it as the centerpiece -- unless it had some additions. That's based on the assumption it would serve those who are younger than 21, or older than 65. The underlying theory is almost certainly correct: we will in time cure enough diseases to make retirement living a more pressing financial issue than paying for early death and disease. But we aren't even in sight of the crisis yet, and many people still remain unconvinced it is the face of the future. So based on these assumptions, unfortunately this step toward a longer goal cannot be stripped of its survival features, even in the name of compromise.

In fact, we have not yet shifted disease to the point where important health costs are substantially all located in the Medicare age group, as plenty of defenders of the Affordable Care Act will protest, but which I contend is the next stage. The doctors who have received large cohorts of uninsured, such as those who work at Kaiser Permanente, are often astonished at how little complaining these previously uninsured people do. They have accepted untreated elective surgery as part of their life, and glumly submit to it. In a few years, we will work off this backlog of self-neglect, and there will be a great fuss about how much costs have come down. At least, that's what happened after 1966, and then we found rent-seekers taught us what a new normal looks like. This time, it probably won't take so long or cost so much.

Nor before that situation confronts us, will we be ready to look for things for retirees to do, and money to support them while they do it. But it will come, and it probably won't go away unless we think harder about it. My rumination is we should start with architects, to redesign more one-floor homes with home offices. Working at home isn't popular, but commuting is worse. Unless the storage battery problem is solved, and Silicon Valley gives us driverless cars. Everybody ought to have some sort of electronic hobby, which can be turned into a working skill after retirement. Amazon and Federal Express must foresee old folks working at home along with their colleagues in a virtual workshop. One thing is obvious; we will probably need the money we now spend on Medicare to supplement a part-time income. Although transforming Medicare, piece by piece into Social Security, sounds like a simplistic idea, someone had better think of something better before we abandon it. The Health Savings Account automatically turns into an Individual Retirement Account at age 66. Until a multitude of similar transformations are devised, we should resist disturbing that forerunner.

We have not yet cured cancer, the common cold, Alzheimer's Disease, schizophrenia or Parkinson's Disorder, but when we do we must see a clear path toward pouring these savings into retirement income. And while we are about it, we must take what we learn and apply it to changing Social Security from defined benefit into defined contribution, with compound interest and passive investing working their magic on the idle money. But politicians have a different sense: not here, not now, when it would provoke hostility rather than appreciation. They won't change their minds until their constituents do.

The one concept which survives this revery is transferring surplus wealth from the grandparent generation to the grandchildren, with compound interest in the meantime. That's an idea which can be applied immediately, even though interest rates are at an all-time low. When they recover, bondholders will suffer, but stockholders should enjoy a nice ride. It has been restrained for various reasons for decades, so it might just unleash unexpected results in terms of the birth rate, or the value of the currency, or other totally unexpected ways. But it's ready, even though retail stockbrokers, banks, insurance companies and financial advisors are definitely not ready.


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