Philadelphia Reflections

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

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The elderly consume a disproportionate share of total health expense. That soon forces Medicare, the "Third Rail of Politics", to get first attention in any lifetime health plan -- even Lifelong Health Savings Accounts, our central proposal.

Hospitals and their Future
New topic 2019-03-21 19:29:46 description

Health Savings Accounts: Synopsis

Ben Franklin felt medical care would pay for itself by putting sick people back to work. Not quite.

1. It works for some people, sometimes. That's the old system, which now needs a few tweaks.

2. To work for a whole nation, it needs more money -- a magnification system, which implies fewer options to choose between.

1. For individuals, it can be lifetime, which would be shunned by unsuitable clients.. There should be no age or other limits, so everyone can have one, at all times if he is able. If it has been unused (for medical payment) for a full year, it should still continue to generate income, but the premium for catastrophic insurance should be waived for the following year as an incentive to save it. It may accept additional deposits, however. This seems to be the administratively simplest way to keep it functioning as an investment while temporarily managing duplicate insurances (from employers or marriage difficulties, etc.)

HSA is the only health insurance where fund surplus becomes retirement income at age 65. That should remain an option until death, changing into a 21-year post-mortem trust fund which is permitted to use fund balances for medical debts and purposes, untaxed, with final surplus taxable in an estate as if an IRA). It probably should not accept additional deposits, however. (This option replaces the present mandatory exchange for an IRA upon acquiring Medicare coverage, and the mandatory Catastrophic feature should be dropped when Medicare coverage begins.)

The catastrophic system needs statements and limits about its regulation, fees, state coordination, what to do about abnormally low returns (using domestic total market indexes as a benchmark). It ought to address state vs. federal issues in a general way.

2. To serve the whole nation, rather than just the individually suitable subscriber, it needs a uniformly longer time horizon , more augmentation of income by compounding, more attention to security and long-term income, and more benefits to compensate for fewer options. In fact, it may need a consultation about passive investing of index funds. To preserve funds for long periods of time, audited escrows are absolutely required for protection against the imperfect agency. Starting small, this system could grow to enormous size. Because of longer time frames, the fund may need to allow flexibility for other investment strategies which at the moment are discouraged. I suggest the total stock market index as an audit benchmark with adequate penalties for failure to match it. The smaller investor needs rules, the bigger ones may not. If it has a good income return, it may require less attention to its format. Events will determine whether this is mostly a campaign document or a long-term strategy and whether it must be implemented in steps. Both Medicare and ACA took on too much all at once and stumbled. I suggest reforming Medicare first, children later, working people piecemeal.

The post-mortem trust fund needs to be checked out with estate lawyers. the last years of life reinsurance as an alternative. My sense is the trust fund is politically easier for the elderly to understand, but the elderly may want to plan ahead and so would prefer an insurance approach. Those who are fearful of outliving their income may have a preference. Lawyers have mixed incentives about closing estates early.

I don't see why due diligence hasn't appeared for every change of party, for all programs. Insurance salesmen may prefer to lock you into one program or another, and flexibility is not always in their interest.

Changing the legal responsibility for children's costs will be generally resisted, but the parents are young and fearful.

The elderly have most of the health costs, while working people have most of the revenue. The trick is to transfer the funds without so much resistance. There must be some sort of trade-off for employers to let go of their loophole. It took the Civil War to weaken states rights in the Constitution, and World War II to give employers their tax loophole. Making the public understand compound interest may require another 2007 crash. But as long as we have 3% inflation, it's about our only hope. Under no circumstances allow the government to own common stock. or socialists to control corporations.

I know the weaknesses of subsidized research. Somehow, subsides never get called or counted, as costs.

Originally published: Thursday, June 01, 2017; most-recently modified: Tuesday, May 21, 2019


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