Thursday, July 26, 2007

Health Savings Accounts

This is the first of a longer discussion about health care. It’s a technical topic, so I will spread it out with easier reads in between.
Recently there has been a lot of talk by Barack Obama and John Edwards about Universal Health Care. Hillary has not committed to a particular plan, but leans that way. Republican Candidate Mitt Romney helped pass Universal Health Insurance in Massachusetts. A massive new tax hike to cover this new program is definitely at odds with the ideals of small government. Experiences in other countries have shown that it is impossible to provide every citizen cheap and high quality medical care. Attempts to do so are very expensive or low quality, and sometimes both. Many voters, however, are moving in favor of a government run system that guarantees health insurance for all Americans.

My health insurance, including the portion that my employer pays, costs around $400/month for just me. There are 45 million Americans without health insurance and if it costs the same $4800/year this gives us a $216 Billion tax hike for one year. At a conservative 5% increase in premiums per year, this adds to $2.7 Trillion dollars over the next ten years.

On Barack Obama’s website, he discusses his plans for socialized medicine. He states that he “will create a new national health plan to allow individuals without access to affordable insurance coverage to buy coverage similar to that available to members of Congress”. My analysis above may be too simple, but Congress does not have a cheap or flimsy medical plan. The scale of what he is proposing is enormous. The reality is that being uninsured does not mean that people are not receiving medical care. There are scores of government and charity programs that help with medical costs and many young people simply choose not to go to the doctor. Unfortunately, reality and perception are not always the same. Uninformed sympathies portray conservatives as denying basic medical care to the poor and unemployed by being selfish and miserly. The difficulty is coming up with a strategy that breaks this negative image.
The Club for Growth, a limited-government political action committee sponsors a website called, which provides an in-depth analysis of the problems with government run medicine. They have some dramatic videos to watch about Canada’s government run system. They also advocate Health Savings Accounts (HSAs), which are the key to fixing our nation’s health care problems. What are HSAs? A Health Savings Account allows someone to put tax-free dollars into a bank account to use on medical expenses. These accounts are often combined with a high deductible health insurance policy. If you don’t spend all the money, you get to keep it for next year. If you don’t spend it by retirement, you get to keep it all to spend on whatever you like. HSAs are nice in that they would let you keep your money to cover medical expenses if you lose your job. A Health Plan Consultant named Michael Rodriguez recently related to me how they keep down medical costs much better than HMOs or PPOs. Their shortcoming in the debate is that they do not do much in regards to expanding health insurance to more Americans.At the end of a recent trip to the ER for my youngest son, I was thinking about this idea of expanding health care coverage without increasing taxes. My idea needs more details ironed out, but it’s a starting place. Right now, the Child Tax Credit gives all households who earn below a certain salary $1,000 per child off their taxes (We are one of these households). Money from the child tax credit could be directed into an HSA for your child instead of receiving this as a tax refund. This would mean $1,000 per year, per child, of medical coverage that would not cost taxpayers one extra cent. You read that right, not one extra cent. Virtually every child in America could have some medical coverage without increasing taxes at all. Call it a Health Savings Refund for Children. If the parent already has insurance for their child, they could fill out an extra form that shows evidence of coverage. This would let them continue to receive the child tax credit in cash. Most parents would likely put some money into this savings account regardless of existing coverage just to be safe. This option is available so that those with no need to put money away would not have to. How do you access your account? Every bank that offered HSAs would be required to have a special debit card that would work at doctors’ offices and certified medical facilities. Can they deny your claim? No, because it’s your money. Do you lose it when you lose your job? No, it’s your money. Can you have a preexisting condition that keeps you from receiving medical care? No, it’s your money. As long as there is money in the account for that child, nobody can take away this medical coverage. What happens if you don’t spend it all? It rolls over to next year, with interest. So, if you don’t have big bills for several years thousands of dollars will build up to cover a major emergency. Imagine being unemployed and finding out that your child needs surgery, but knowing that you already have most of the money in the account to help cover the costs. No paperwork hassles, no getting pre-qualified, no sitting on hold with customer service for hours, and no government bureaucrat arguing with your doctor about medical necessity. Just swipe your card and it’s already paid for.I have debated whether this is a hidden tax hike. I don’t like the idea of the government telling us how to spend our money, but we at least get to keep it. This isn’t perfect and I need to work out some more details, but I figured I would throw it out there and see what people had to say.

As always, tell me what you think. I had my first person disagree this past week, which is always healthy. Pass this on to anyone interested.

Brian Shelley

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