Philadelphia Reflections

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

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Introduction: Surviving Health Costs to Retire: Health (and Retirement) Savings Accounts
New topic 2016-03-08 22:42:53 description

Prologue and Epilogue

This is the second of several volumes on rearranging the pieces of lifetime healthcare financing. Without adding substantial sums of money, it begins to appear an entire lifetime of healthcare, plus the extended longevity it provides, might be paid for with rearrangements of what we already spend. It's a hope, not a promise.

One consideration is not ready for incorporation into the scheme, however. The working years of life, from age 25 to 65, are covered by disputed and undisputed portions of the Affordable Care Act, pending lawsuits before the federal courts, and the political positions of the two political parties about how they should be modified or repealed. Essentially, we have not decided how much working people should directly contribute to their own retirement, or what they must give up to do it.

This plan treats extended longevity and retirement costs as inherent costs of improved medical treatment, acknowledging the wide variety of opinions about defining a basic, a modest, or an overly generous retirement income. Without substantial resolution of these two gaps in the plans, it seems impractical to suggest lifetime financial coverages. Therefore, the Affordable Care Act is treated here as revenue neutral, and retirement income becomes whatever falls out of other plans, plus whatever the individual manages to accumulate, on his own. We all must continue to "plan" for our retirement by saving more than we think it will cost. That's the theory; the reality is, many or most Americans just "plan" to muddle through. That's only workable for a few more years. Eventually, we must decide whether to sacrifice retirement in order to preserve the Affordable Care Act, or the reverse.

The technical toolbox of alternative revenue sources for retirement is not exhausted, however. (1.-2.) We have not specified the direction of the remaining three quarters of the Medicare withholding tax, nor the Medicare premiums. (3.) Under this plan, working-age persons make minor direct contributions toward their own retirement, and shift the cost later, down the road. (4.) The last-years-of-life rearrangement would pay for half of Medicare's 20-year cost by expanding to the last four years of life (That's half of Medicare's 20-year cost in exchange for 20% of its revenue). (5.) Reduction of premiums for employer-based health insurance can actually be anticipated from shifting obstetrical costs to the baby, reducing childhood health costs from the employed parents. (6.) Similarly reduced Medicare deficits, now financed by bond sales to foreigners, should ease the government cost of healthcare. (7.) Even though group health insurance is heavily subsidized by employer tax deductions, the deductions are not entirely free, and employers should benefit. (8.) If savings of this sort are shifted to younger age groups and saved at compound interest, one could expect substantial contributions to retirement income to result. (9.) A rather small transfer of the foregoing savings to a contingency fund (begun at birth) should ease the competition for allocation of investment income between the public and its financial agents. There can be optimism, therefore, that the discord and unexpected reversals of such an elaborate scheme, can eventually be overcome by the basic axiom of compound interest. Start saving younger, in order to save for a longer time.


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