SECTION FOUR: New Health Savings Accounts
The project combines several concepts developed in other chapters, but is ready to be considered as a whole.
During the Obamacare uproar, I was giving some speeches, and I can tell you that old folks didn't care a hoot, one way or the other. Obamacare wasn't going to affect their medical care at all, so they had only one passing concern. They were afraid Obamacare would cost so much, it would be necessary to raid Medicare to support the promises. As long as no one brought up that issue, retirees didn't care. But as soon as I tested them on the point, they uncoiled like a spring. Plenty of politicians saw the same phenomenon, and nick-named Medicare insurance reform "the Third Rail of Politics". Just touch it, and you're dead. The mathematics is already so strong, no mathematical argument is going to influence any opinion. Essentially, there's a way to make Medicare almost free, but it doesn't matter. What matters is if politics get ugly, political candidates will say almost anything. Right now, and for some time to come, nobody wants to listen to mathematical arguments. They want to know if a red-mouthed opponent can upset them at the polls, by using reckless attacks. They can, and will, and there isn't much that can be done about it. The consequence is, the easiest argument for using compound interest to pay for health insurance is to privatize Medicare, but it has the most political obstacles to overcome.
Whereas, using the same approach for younger people has difficult math because of the shorter time periods. But it has a much easier time of it politically, because young people often don't have insurance, or need insurance, and so they have very little to lose. Furthermore, the regulations issued for Obamacare were often selected for the purpose of hindering Heath Savings Accounts. Much of the coming battle in Congress will be fought over trenches and fences, seemingly erected for the purpose of making progress difficult. That will be true for more than Health Savings Accounts, but that fact is just another irrelevance.
Here's another unexpected twist which will influence future trends. When Medicare emerged from the sausage factory of legislative construction, the hospital part (Part A) was entirely funded by government subsidy, and therefore is an obvious target for adding revenue, based on the fairness argument. That tends to crowd this heavy expense into the category funded by something else and makes the pressure stronger. By another quirk of legislation, Medicare is a subchapter of the Social Security Act, which is now starting to need revenue. So the mechanism already exists to merge retirement income with Medicare surplus, if we ever get a Medicare surplus. The doctor reimbursement part of the Act (Part B) is what people nominally pay for when they pay their Medicare premiums. Now, add the DRG squeeze into the mixture.
Seeing hospital revenue for inpatients squeezed by the DRG, the hospitals have responded by enlarging their outpatient areas and hiring practicing doctors to join their staff on (somewhat above-market level) salary. Although hospitals pay higher salaries, there can be little doubt they would squeeze those inflated salaries if revenue got squeezed. Meanwhile, Medicare is confronted with a mass movement of doctors from Part B to Part A, and so it raises the premiums in extraordinary jumps, which only affects the premium still more. Unless things are changed, that means there will be less money for Social Security, and the hope of merging the two programs will be greatly injured. Meanwhile, if the hospitals squeeze the salaries, there will be a surge of physician returnees to private practice, ultimately raising Part B premiums, or else lowering physician incomes, leading to a doctor shortage unless reimbursement is raised, and new medical schools founded. Patchwork will be applied. The long-run consequence of single-payer would be to slow the merger of Medicare with Social Security. The latter merger would have some mutual advantages, whereas merging Medicare with private insurance would be an acrimonious take-over of one way of life by the other. What a tangled web we weave.
Originally published: Tuesday, December 30, 2014; most-recently modified: Sunday, July 21, 2019