Philadelphia Reflections

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

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Health Savings Accounts, Regular, and Lifetime
We explain the distinction between Health Savings Accounts, Flexible Spending Accounts, and Lifetime Health Savings Accounts. Sometimes abbreviated as HSA, FSA, and L-HSA. Congress should make it easier to switch between them. All three are superior to "pay as you go", health insurance now in common use, only slightly modified by Obamacare. It's like term life insurance compared to whole-life. (

Shifting Money Backward in Time: Managing the Transition

We have got to the point where the individual subscriber has a well-funded HSA, and also has Medicare, both of whom could use the money to pay for terminal care, since everyone dies. If the money in the HSA is used to repay Medicare for medical expenses incurred during the last year of life, that comes close to being the same thing. How do we transfer this money around so that someone who is dead can use it? It would take Medicare's agreement, or Congress's, but meanwhile, as this money accumulates, more money is being deposited in Medicare by payroll taxes, Medicare premiums, and a 50% subsidy from the taxpayers.

Here's the deal: Medicare gets reimbursed for the average last-year-of-life costs (which it is obliged to pay) and agrees not to collect payroll taxes or premiums up to the present value of that amount. Furthermore, Medicare agrees that half of the proceeds go toward paying off the Medicare debt. For simplicity and promptness, nationwide average terminal care costs are used, rather than actual itemized ones.

True, it may take some time for transition to take place, during which some fair apportionment should be worked out. For example, some portion of the payroll tax etc. might go immediately into the HSA until there is enough to make a full transition. This latter amounts to a loan from Medicare, with suitable interest rate adjustments.

It is here suggested that the transfer be limited at first to the last year of life but expanded in time to a larger number of years of Medicare benefits, and eventually get into an "accordion-like" arrangement as the law of large numbers permits greater certainty of the cost/revenue balance. That's it. That's how you approach the goal of changing from a term to a whole-life approach, or insurance policies which promise healthcare coverage for the rest of a lifetime, rather than for just one year. By itself, this might absorb the pre-existing condition issue, but perhaps only part of it during the transition years.

Originally published: Monday, February 03, 2014; most-recently modified: Wednesday, June 05, 2019