Philadelphia Reflections

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

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SECTION THREE: Classical Health Savings Accounts: Many Surprises
One of the originators of Health Savings Accounts describes their advantages over existing health insurance. Improvements are suggested for the regular HSA. More dramatic cost improvement emerges from a lifetime HSA version, substituting whole-life approaches for pay-as-you-go. Most of this requires legislation, but could reduce health costs dramatically.

Right Angle Club: 2016
In progress.

(Second Edition)Exit Strategy, Health Savings Account Death Balances

A subscriber with both Medicare coverage and an HSA may die with a balance left in his HSA account. That's what we would like to see, since it suggests ample provision for two universal needs. But what is the most useful re-direction of the surplus? Having died he can no longer use it, and his will may or may not indicate his wishes. True, he originally deposited the money in the account, but escaped income tax, so the government retains some sort of ownership right to the principal and its income.

If the government follows my suggestion, it will have established a first and last-year of life re-insurance program. In that case, a thing likely to result to a surplus at grandpa's death would be to use it to reduce the cost of health insurance for the grandchild. As they say, possession is nine-tenths of the law. Here, it seems a valuable thing to encourage, since it reduces the reluctance to fund the health expenses of a vaguely-related or even unrelated grandchild. Society not only has an incentive to soften the burden of maintaining the population, it probably also has the incentive to diminish its frictions. The less it costs, the more it eases the friction of odd-ball relationships, making it less likely for divorces, gender-changes and unrelated hostilities to end up in court. It thus suggests a welcome candidate for a default use of the money. Everyone who considers these matters deeply should remember, the traditional judge of such matters once was the family unit.

Having considered such a contingency, the next question arises whether all surplus in the HSA of someone who dies should be treated the same way-- that is, adding it to a first and last year-of-life pool. It would thus assist a basic function of everyone, and leave the burden of proof on those who feel a particular family situation has a higher claim on the money than society as a whole. A somewhat different approach might be to recognize newly-deposited money in an HSA is mostly original fully-taxed money, but over time a growing proportion of it comes from investment interest on the tax deduction. That is, the funds of younger people are mostly their own, but toward the end of life the government tax exemption has a growing claim to ownership. It would not seem unreasonable to switch the ownership presumption at the age of retirement, or some other surrogate for advancing age and changing responsibilities. These things change with time; consider how many orphanages there were a century ago, and how few there are, today.

 

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