Philadelphia Reflections

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

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Pearls on a String:Further Extending Health (and Retirement) Savings Accounts
Pearls on a String: Further Extending Health (and Retirement) Savings Accounts. HSAs are the string. Retirement saving, Privatizing Medicare, and Shifting Childhood Costs-- are the Pearls. Other Pearls to follow.

Prologue: The Approaching Battle

Overview. To be brief about it, spending for healthcare now crowds toward the end of life, mostly after age 65, while the money to pay for it is generated well before 65. Disregarding the complicated history of how we got here, in effect we borrow from an interest-free account at Medicare to pay Medicare for Medicare, without earning interest on the money idled in the meantime, sometimes for as long as forty years. Potentially, the two age groups could unify their finances and get more or less dual savings. That's the dream advanced by the single payer advocates, but on examination the cost, politics, and complexities of actually unifying entire delivery systems would soon overwhelm total- merger enthusiasts. Unfortunately, the revenue has fallen too far behind the costs to make this completely possible. It is nevertheless contended here, only the financial transfers need to be unified, using Health Savings Accounts as a transfer vehicle, and allowing compound interest to extend beyond the boundaries of insurance programs. Such simplification, while not easy, would achieve most of the savings of unifying whole insurance programs, particularly the incentive to keep what you don't use, for your retirement. Among other things, it would solve most of the Constitutional problems, and avoids most of the delivery system obstacles. Indeed, a financial network is about all we could manage, but it is adequate for the need. Because of its towering cost components, even integrating the financial transfers might take longer than we anticipate.

But massive numbers are only part of the health financing problem. At the beginning of life, medical expenses concentrate forward, toward the very first day, leaving absolutely no way for the child's own income to pre-pay his expenses. No matter how it is rearranged, someone must give children some money. Indeed, this second issue seems so unsolvable, everyone has stopped trying to notice it. It only makes people uncomfortable to suggest that adding children to a new HSA system might add twenty-some years to the compound interest in Health Savings Accounts, if they only had some money. They don't, so be quiet.

But on the contrary, if someone always gives children the money for their healthcare, why not acknowledge it? Frank acknowledgement seems pre-destined, if you aspire to serve lifetime financing. You require two systems, roughly the opposite of each other. One delivery system faces toward the beginning and the other, faces toward the end of life. (Even this conception finds the working class in the middle, largely funded by employers who change frequently and have other concerns foremost in their minds.) If the realities of life will never change, then it is the payment system which must adjust, with the finances of each system facing in opposite ways. The reader is therefore urged to toy with the eventual outline of a circular system, far down the line. For now, existing programs would alter their interface to accommodate a new funds flow, while changing their program as little as possible. There's still a big gap left unfilled: Those working people aged 25-65 who largely support the whole system, unfortunately already have so many constraints on their financing it is not feasible even to discuss their needs until the politics subside a little. Connecting, yes; unifying, only as much as you can. Therefore, this book passes over single payer as fundamentally over-reaching and concentrates on lower-hanging fruit.

Essentially, it is proposed: The Health Savings Account to expand to be a unifying financial bridge between programs, one account per individual lifetime, serving many disparate programs. Designed to be implemented in phased-in pieces, it continues to aspire to minimize changes in the delivery system itself. The reader will probably be surprised at how simple some dilemmas are likely to become, once it is conceded the individual patient ought to decide what others now decide for him.

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Extended retirement costs are a predictable outcome cost of Medicare. {bottom quote}
Prepare yourself for one big rearrangement of thinking, however. Extended retirement costs are a direct consequence of superior healthcare. They could become five times as expensive as healthcare itself, and still be fairly described as a predictable outcome cost of Medicare. The only way budget shifts could be avoided is if science cures a few expensive diseases, quickly. That's not impossible, but it's unwise to depend on. It's also conceivable Medicare beneficiaries could be persuaded to allow HSAs to borrow from Medicare, but only after a titanic struggle, and only after Medicare revenues improve appreciably. New revenues for retirement must nevertheless be found, sooner rather than later, because of the ever-growing retirement crunch. It's a devastating realization, but the seed of solving the problem is contained in it. Where are the new revenues to come from?


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