SECTION FOUR: New Health Savings Accounts
The project combines several concepts developed in other chapters, but is ready to be considered as a whole.
Explanations and arguments, later. Here's the skinny on N-HSA, the plan I believe is ready to put before Congress.
CATASTROPHIC HEALTH INSURANCE
1. Everybody is assumed to have a Classical Health Savings Account. If it isn't funded, it only exists in theory.
2. Everyone who has an HSA is now required to have high-deductible catastrophic healthcare insurance coverage. This should be changed to optional coverage, which becomes mandatory if the HSA is funded in its non-escrow partition.
3. Money deposited in the non-escrowed partition may be used to pay the premium of high-deductible catastrophic insurance, making the premium as effectively tax exempt as if an employer purchased it.
4. If employer-purchased health insurance loses its tax exemption, this feature may be re-examined.
(1. Everybody is assumed to have a Classical Health Savings Account. If it isn't funded, it is inactive.)
5. A newborn child is funded $50/yr privately, or at public expense if indigent. Payroll deductions are then added.
6. The money is passively invested in an escrowed portion of the child's HSA as a total domestic stockmarket index fund, becoming available for a Medicare buy-out at age 66 (together with accumulated payroll deductions), with the alternative of conversion into an IRA after payment of taxes. Assumed gross income rate: 11%; assumed net of inflation and transaction costs: 6.5%. Average duration: 66 years.
7. Assumed Medicare buyout price: $ 48,336 plus payroll deductions, of indeterminate amount, probably $37,000. Assumed public and private net cost: zero or near-zero (readjust #5. appropriately)..
FIRST AND LAST YEAR OF LIFE REIMBURSEMENT
8. A second escrow fund within the individual's HSA is designated to generate the funds to repay the original payer of the first and last years of life cost, using the average Medicare cost basis, thereby lowering the first-payer premiums and/or buy-out costs.
9. This has little net cost effect at first, but tends to spread the cost away from poorly financed age groups without matching increase for the working age group.
10. Estimated cost: $20/yr.
INFANTS AND CHILDREN
11. Everyone is assumed to have or is assigned one grandparent, and one grandchild. Mis-matches are pooled, or reassigned on request.
12. Grandparents are expected to bequeath the left-overs in their HSA to their grandchild's HSA, up to the limit of one child's average cost for the first 21 years of that child's life. This transfer is deemed to occur at simultaneous birth and death, and appropriate inter-fund loans or transfers are made to accomplish this.
13. This bequest does not take place to the generation who have already achieved age 21. Grandparent contributions in the first generation are pro-rated as of age 50.
14. The bequest is invested in an escrowed portion of the child's HSA as a total domestic stockmarket index fund, and transferred to his grandchild's HSA at birth for the purpose of funding. Assumed gross interest rate: 11%; assumed net of inflation and transaction costs: 6.5%. Average duration: 110 years..
INDIGENTS AND OTHER SPECIAL CASES
15. One of the great disappointments of the Obama plan is that it made health insurance mandatory, but left thirty million uninsured. It may well be true that prison inmates and mentally retarded are so different from each other, they would be better served with specialized programs than a one-size fits all.
16. Furthermore, most poor people are only poor for a portion of their lives, rising or falling with circumstances.
17. And finally treating poor people as an underclass with an attached funding source makes it impossible to have more than one program serve them. Therefore, it seems much better to have a separate agency which addresses their poverty based on their own demonstrated preferences, than to pick winners and losers among agencies to help them.