Philadelphia Reflections

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

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Health (and Retirement) Savings Accounts: Steps To Lifelong Health Insurance
If you are a fast reader, we begin with a five-minute summary of Health Savings Accounts.

Some Pages for a Book on HSA

Questions about Health Savings Accounts

Pertinent Questions: Three Current Tweaks to HSA.

1. Tax Equity. An alternative way to achieve more equitable taxation is to reduce corporate income tax rates, since the tax deductions for donated employee health insurance is a way of making health benefits cheaper for the employer than wages would be. And health benefits are a reason corporations pay so little of the published tax rate. Once benefits become equal they can be reduced, as eighty years have demonstrated. Tax equity first, then reduction, may be the best way to get corporate taxes reduced.

2. The transition-to-a-cheaper-system needs help, time, and more brackets for those who are already close to retirement. The private sector is inherently more flexible than the public sector in dealing with inflation, stock market volatility, and changing occupations. However, the public sector could readily be streamlined a great deal.

3. Longer durations for compound interest add flexibility and far greater returns without added cost to the government or client. In long durations, 6.5% returns rise far more rapidly than 3% inflation. This spread is an inherent feature of compound interest, and can be enhanced by lengthening the duration. The historic spread between the curves at 11%/3% underlined by Professor Ibbotson is astounding -- and so costless it long seemed unachievable to shift its benefit a percent or two by John Bogle.

Pertinent Questions: Four Future Deep-Rooted Changes For Health Care, using HSA.

1. Although the whole-life insurance industry managed to accomplish it, a 90-year transition period is very difficult to plan for. As they say, life insurance is not purchased, it is sold. The last-year of life proposal cuts the transition period to a manageable size, thus providing funding flexibility from the start. The first-year of life addresses the otherwise impossible task of pre-funding the year of your birth -- without help from somewhere. The present extended period of education before employment is being addressed by a declining birth rate, thus straining immigration policy. National defense alone argues this is an unwise policy to pursue in the present way. Luckily, the anti-perpetuity laws allow inheritance up to one life-span plus 21 years, an adequate period. The great danger in this is a revenue-starved government. Unfortunately, if public sector revenue became 100%, they would still claim to be starved, so their argument appears discredited. No strong argument is improved by exaggeration.

2. The public does not realize that Medicare is 50% subsidized, and therefore a single payer system aspires for the same treatment. We are already borrowing from the Chinese to pay for Medicare. As long as we have nation states, this is too dangerous to continue. Although Medicare is regarded as sacrosanct, anything which cannot continue will stop, one way or another.

3. The balance between the harmful effects of having a rentier class must be balanced against the harmful effect (of overtaxing them) on the incentives of elderly rich people. So the proper balance probably varies with the state of the economy. When two thirds of the population are to some degree rentiers, the situation must be approached with care. More retired people must be employed at home, while the finance industry must make more effort to prove its worth.

4. The business school and the law school are fast replacing the medical school as the preferred route to control medical care. The computer industry is not yet ready to join them. Controlling the hours and conditions of the workplace is not an acceptable route to control of a service industry, and in the long run is self-defeating. The only way to gain respect from a professional is to be able to do what the professional does, only better and overall cheaper. Just how you accomplish that without going to medical school has not yet been explained, and "price fixing" is not an adequate description of its essence. The Professional Standards Review Organization (PSRO) devised by Senator Wallace Bennett of Utah comes pretty close, and although the AMA narrowly rejected it, reconsideration is recommended.

 

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