Editore"s Note
Tilting at Windmills

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February 1, 2006
By: Kevin Drum

HSA WONKERY....President Bush was light on details when he talked about Health Savings Accounts in his State of the Union address, but the White House site has more. This is a little long, but here are all five of his proposals for expanding and improving HSAs:

  1. Giving Individuals That Purchase HSAs On Their Own The Same Tax Advantages As Those With Employer-Sponsored Insurance. The President proposes making premiums for HSA-compatible insurance policies deductible from income taxes when purchased by individuals outside of work. In addition, an income tax credit would offset payroll taxes paid on premiums paid for their HSA policies.

  2. Eliminating All Taxes On Out-Of-Pocket Spending Through HSAs. The President proposed allowing Americans with HSAs and their employers to make annual contributions to their accounts to cover all out-of-pocket costs under their HSA policy, not just their deductible as provided under current law.

  3. Enabling Portable HSA Insurance Policies. Employers would have the ability to offer workers a Portable HSA insurance policy that the employees would own, control, and be able to take wherever they went. Their premiums would be tax-free and would not increase based on their health status at the time that they changed jobs, left the labor force, or moved.

  4. The President Proposes Extending The Benefits Of HSAs To Low-Income Families And Individuals Through Refundable Tax Credits. A family of four making $25,000 or less will be able to get a refundable tax credit of $3,000 from the Federal government to help buy an HSA-compatible policy that covers them for major medical expenses.

  5. The President Supports Allowing Employers To Make Higher Contributions To The HSAs Of Chronically Ill Employees. Under current law, employers must contribute the same amount to each employee's HSA. This prevents employers from providing extra help to their chronically ill employees employees who are more likely to use their HSAs to pay for their higher-than-average out-of-pocket expenses. Permitting employers to make higher contributions to HSAs of chronically ill employees will help those workers fund their HSAs and pay their out-of-pocket expenses tax-free through their accounts.

I'll probably have more to say about this later, but for now I just wanted to put this on the table. My point from Tuesday stands: these proposals sound pretty good, don't they? Needless to say, I agree that this is a pitifully inadequate answer to a big problem, and I can already think of several good ways to make that point. Still, big picture arguments aside, these changes are going to appeal on their merits to a lot of people. Just sayin.

POSTSCRIPT: There's another point here too. These are incremental changes, and that's the main avenue of attack against them. But that only works if our proposals aren't incremental. If it's just their small wonky proposals against our small wonky proposals, everyone will fall asleep. So who out there is willing to step up to the plate and start arguing for something big?

Kevin Drum 12:25 AM Permalink | Trackbacks | Comments (122)

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Comments

#5 is a big step to screening out ill employees from receiving insurance. And is #4 the most useless thing ever imagined?

Posted by: Rob on February 1, 2006 at 12:38 AM | PERMALINK

ThinkProgress has more details: The Truth About Health Savings Accounts. Looks like the ol' SS scam of "placing more of the cost burden on individuals, while making the system more attractive to the wealthy but less effective for ordinary Americans who need health coverage most."

Posted by: Apollo 13 on February 1, 2006 at 12:38 AM | PERMALINK

These proposals make HSA's somewhat more attractive to those who already benefit by using them (i.e. the young, well and/or well-off). They don't turn HSA's into something that addresses the health care needs of anyone who wouldn't benefit from them (which is most people, if not now then eventually). For very large numbers of poeple with "pre-existing conditions," or employers who don't help out with health care, or who don't have the money to pay high deductibles, this stuff means squat.

Imagine you're on the Titanic, sinking. What you and your fellow passengers need are a large number of big old lifeboats. What's on offer are one or two little dingys. These proposals are like saying we'll upgrade the dingys with a new paint job and some extra oars. Nice, but it doesn't address the actual need in any significant way.

Posted by: jimBOB on February 1, 2006 at 12:41 AM | PERMALINK

I have to agree with Rob that #4 is the most useless thing ever imagined. Only households with money to spend can get the tax credit. If you can't afford to hand over $500, $1,000, whatever for something...how the heck are you going to get tax credit for it?

Posted by: WisDem on February 1, 2006 at 12:43 AM | PERMALINK

Something big? Alright,

Replace the National Security State with the National Health Care State. Every part of society oriented around health care and health maintenance, from education to retirement.

Create a thing like the Federal Reserve Board to manage health care and education and everything pertaining thereto.

Posted by: cld on February 1, 2006 at 12:45 AM | PERMALINK

Whenever I see HSA I fall asleep.

It sounds like a great idea, except...

...How it is supposed to work? I'm already paying several hundred dollars a month on medical bills; am I supposed to then find insurance, and pay these medical bills, and the insurance, and then save towards what I might need to pay next year?

It just doesn't add up. And as long as I'm looking a $2K-20K proceedures, these 'will cover a deductable' just seems... Dumb.

[b]You don't need an HSA to cover a deductable, you need it to cover when the insurance just won't step in - when you want the better medicine or the more experienced pharmacist or a doctor who's actually treated your condition before.[/b]

Not to cover suzie's deductable to get antibiotics for her ear infection. Argh.

Posted by: Crissa on February 1, 2006 at 12:52 AM | PERMALINK

A family of four making $25,000 or less will be able to get a refundable tax credit of $3,000 from the Federal government to help buy an HSA-compatible policy that covers them for major medical expenses.

Brilliant. So if Dad needs a quintuple bypass the family can go into bankruptcy. Oh wait a minute. That $3,000 saved up will pay for it, right?

Posted by: Elrod on February 1, 2006 at 12:55 AM | PERMALINK

Elrod,

As long as the surgery is performed either in Grenada or Tierra del Fuego.

Posted by: thethirdPaul on February 1, 2006 at 1:03 AM | PERMALINK

Yeah, I was just thinking about my own situation, in which I spend about $400 on medical needs every month for the rest of my life...

...And what about the family who can't afford insurance as is, how does an HSA help them afford it? How will they know how to do it? Who pays for the education?

And how does it help pay for the $100K-1mil pricetags on major heart surgery or rehabilitiation or any other catastrophic need?

Posted by: Crissa on February 1, 2006 at 1:03 AM | PERMALINK

Break up the risk pools. Just a little nudge at the right spot and the whole system goes into a tailspin.

Sounds great.

Where do I sign up?

Posted by: sleepy on February 1, 2006 at 1:09 AM | PERMALINK

If they really want to use the tax code to solve the health care problem, they should all health care costs deductible, and provide full reimbursement for health care for the families and individuals below certain levels. Why bother with the overhead cost of the HSA?

This simple solution will haave the disadvantage of not putting anything in the pockets of financial service industry.

Posted by: lib on February 1, 2006 at 1:13 AM | PERMALINK

Just send the sick people to get treated and to recuperate in India. You will save 50% of the health care costs.

Posted by: nut on February 1, 2006 at 1:15 AM | PERMALINK

Looks like somebody had a post about HSAs ready to roll out for the SOTU, the subject of much hype, only to see Bush skip over that to talk about "national security."

Needling aside, I think "health care reform" could be the "social security reform" of 2006. Why did Bush's Social Security reform fail? Well there's alot of reasons, obviously, but I think one is most Americans don't trust Bush on this one. Sort of the way people instinctively trust the "we're goin' get 'em" approach on national security. People don't trust a Republican who owned a baseball team and has his own vacation ranch to deal with retirement for middle-to-working-class folks. They might not be inclined to trust him to provide a new health care plan. Especially one that's nightmarishly complicated. Especially in the wake of Medicare Part D.

Just suggestin'.

Posted by: MikeS on February 1, 2006 at 1:15 AM | PERMALINK

Yeah, I would trust the folks who brought us Medicare Part D(isaster) to reform the rest of the health care system.

I'm sure this wouldn't be yet another way to give tax breaks to the wealthy (tax deductions are a LOT more useful if you're in the upper brackets) at the expense of everyone else.

Posted by: Jim in Chicago on February 1, 2006 at 1:30 AM | PERMALINK

Hey, it's better than his dad's solution. Wasn't it something like "Don't get sick"? - Ryan

Posted by: Ryan on February 1, 2006 at 1:34 AM | PERMALINK

We will never make any progress in this country until we do what the rest of the industrialized nations on the planet have all done and dump the health insurance companies. Less than half of every dollar you currently pay in health insurance premiums goes to providing medical care. It' s so wildly inefficient, it's like having health care run by defense contractors.
.

Posted by: VJ on February 1, 2006 at 1:35 AM | PERMALINK

Big ideas? What about Pete Stark's plan to expand Medicare to all children from birth through college (age 23) and lowering the age limit on the other end from 65 to 55? (See http://www.thenation.com/doc/20060206/stark for details). This should be the prelude to expanding Medicare to the entire population and replacing the broken Part D drug benefit with a Medicare-administered benefit with low deductibles and co-pays. We could make a good start at paying for this by uncapping the income limit on Medicare taxes so that CEOs get to pay on their entire 7- or 8-figure salary.

Posted by: kmarko on February 1, 2006 at 1:39 AM | PERMALINK

Expand the effective, efficient VA to cover all citizens. Take a fraction of the money this would save and use it to double military pay and pensions.

Posted by: ferd on February 1, 2006 at 1:43 AM | PERMALINK

It seems like a step towards making it more palatable for employers to drop health care altogether.

Which means individuals will have to shop for health care. Which means you no longer have employers as big risk pools. Individuals will have to pay a premium based on their individual risk profile. Meaning only young, healthy people will be able to afford it.

Sounds like a great plan.

Posted by: tinfoil on February 1, 2006 at 1:44 AM | PERMALINK

This may seem heretical, but I think the goal should be to find those proposals which do good rather than to find reasons to oppose them all. If any exist, then negotiate from their starting point toward our goal. For example, the goal on number 4 should be to have the government front the money for the following year instead of refunding the previous year's HSA plan expense.

Posted by: Craig Nelson on February 1, 2006 at 1:51 AM | PERMALINK

I think HSA is a Roveian trap. Dems are going laugh at it, bloggers will write endlessly about how it can never work, then Rove will use it's failure to beat the dems over the head as obsturctionisnts in Nov.

Posted by: the fake fake al on February 1, 2006 at 1:53 AM | PERMALINK

Thailand sounds like it was good enough for Don Ho....should be good enough for the rest of America and it's less than 1/3 the price of American hospitals. (And they might keep Bush for some re-education programs and help him with his drug problems). Tell me, does anybody really believe he's clean?

Posted by: murmeister on February 1, 2006 at 2:01 AM | PERMALINK

Anybody know of an employer who contributes to employee's HSAs? IBM sure doesn't. We didn't even bother setting up an account since at the present time you lose any of the $2,000 or less (of your own money) you don't use. What sort of scam is that? This whole HSA improvement is like putting a bandaid on a hemorraghe. We need a single-payer universal health care system now.

Posted by: nepeta on February 1, 2006 at 2:18 AM | PERMALINK

In case anyone else is as clueless as I am about single payer healthcare, take a look at this FAQ
site of Physicians For A National Health Program (PHNP). Lots of info about the current disastrous state of healthcare in the US and arguments for why such a system would provide better healthcare for ALL Americans and would not 'break the bank:'

FAQ - Single Payer Health Care

Posted by: nepeta on February 1, 2006 at 2:32 AM | PERMALINK

#5 is a total joke. How many employers are breathlessly waiting for the opportunity to contribute MORE to an individual, chronically ill employee's HSA?

Posted by: tinfoil on February 1, 2006 at 2:48 AM | PERMALINK

1. Abolish all federal programs: social security, medicaid, education, etc. This could be a bipartisan effort.
2. Let states increase taxes to establish their own programs, as driven by voter demand.
3. Watch white-collar workers flock to "civilized" states, gutting tax revenues of the red states.
4. Watch companies who need skilled labor flock to the blue states.
5. Watch red-staters suddenly change party affiliation.

Posted by: osama_been_forgotten on February 1, 2006 at 2:59 AM | PERMALINK

Just wondering -how many people making under 25K are going to be paying 3K in taxes to even get the tax credit? Is there absolutely anything I mean anything that this never-worked-a-day-in-his-life,alcohol-decayed brain dead,draft-dodging,silver spoon,teeth grinding bad grammar user, good fer nothing puppet ever proposed for the benefit of the simple working person who draws a modest weekly paycheck?

My name for this man from now on is King KakaTouch as opposed to Clinton who was a modern King Midas.

Posted by: ubu on February 1, 2006 at 3:59 AM | PERMALINK

Rove will use it's (HSA's) failure to beat the dems over the head as obsturctionisnts in Nov.

and I would love to see Dems embrace the obstructionist label as in something like:

"Obstructionist. Damn straight! And righly so! It would be the height of irresponsiblility not to try and obstruct an abomination like this. Just as it was the height of irresponsiblity to propose an abomination like this. This does absolutely nothing to reduce the burden on working... (and explain the fault of whatever proposal in 10 memorable words or less). It's about (and explain what it really does in 10 memorable words or less) This act screams out for obstruction."

Okay, just temporarily dreaming. But give me George Galbraith in the US Congress - or is that my Scottish heritage speaking?

Posted by: snicker-snack on February 1, 2006 at 4:22 AM | PERMALINK

these proposals sound pretty good, don't they?

Kevin Drum = Bush Republican?

No Kevin Dumb, these proposals don't sound "pretty good." They sound like "people have too much health insurance" and they sound like "we need to find a way to give another tax cut/loan to the well to do since we know that the working class and the poor can not afford it" give away to the rich.

Kev Dumb, as a liberal, you're just about useless. Get a clue.

Posted by: Roman Berry on February 1, 2006 at 4:42 AM | PERMALINK

Who trusts anyone in this regime to implement these? Leave well enough alone until Bush is out of office.

Posted by: pol on February 1, 2006 at 7:05 AM | PERMALINK

Kevin, maybe you're exhausted or perhaps you played a drinking game during SOTU. The only people who will benefit from these proposals are the heads of the banks who will hold these accounts. This is so typical of the Bush administration. We need universal single payer with various private add-ons. I am sick of American xenophobia about health care. We could learn much from France and Germany about health care for everyone. This is a critical step for the USA to take-I wish Democrats would put forth some far-reaching proposals-even if they fail it is worth making the effort.

Posted by: beth on February 1, 2006 at 7:28 AM | PERMALINK

This "sounds good?" Are you nuts.

Make all insurance portable, and all out of pocket costs for health care tax deductible.

HSAs are useless, a way to force people to pay for thousands of dollars of health care that most people don't have. It essentially transfers the burden of insurance from companies to individuals. While we should transfer that burden, it should be to our government and not individuals.

Posted by: NAR on February 1, 2006 at 7:32 AM | PERMALINK

I think these proposals will have a much greater effect than you believe, but it will be several years (probably over a decade) before we really see an effect.

This will expand the risk pool, which should lower rates in the long run. Paying out of pocket for preventative and non-emergency care should help keep prices from rising as fast. If people do move toward higher deductables, this will also make people more aware of medical costs. And, most important, if people do become more consious of their medical care and prices, it will provide us with information that will help us decide what should be covered by universal health care in the future.

Posted by: aaron on February 1, 2006 at 7:36 AM | PERMALINK

"Make all insurance portable, and all out of pocket costs for health care tax deductible."

Universal Health Care by attrition.

The ignorance in these last two threads is astounding.

Posted by: aaron on February 1, 2006 at 7:58 AM | PERMALINK

Sorry, last comment wasn't accurate. It would be Universal Health Insurance by attrition. Health Care is further down the road, first we need to get prices to reflect true consumer preferences. Health Care needs to become efficient before it can become universal.

Posted by: aaron on February 1, 2006 at 8:05 AM | PERMALINK

Kevin,
Thanks for the update on these proposals. The HSAs do in fact have merit to some individuals and some of us are currently enrolled in HSA plans.

There is nothing that I see that is unprogressive or unliberal about the idea that people need to assume more responsibility for their own health and health care costs and that they should not be so closely coupled with state or company control. Few of us can afford the risk of catastrophic care, but many of us can afford to be self insured for the deductible portions of catastrophic health care plans. Some of us look at this as part of the bargain we make in being independent and self employed. Part of that bargain is also something called the self employment tax that contributes to the welfare of all.

Posted by: lou on February 1, 2006 at 8:09 AM | PERMALINK

The HSA proposal can work but the policy has to be accompanied by a workable plan. The administration is throwing an idea on the table that will be examined in light of the implementation of Medicare Part D.It's the same problem they have in raising the specter of Iran with the same rhetoric used for Iraq.
Proposal #4 is an extension of the EIC. You don't have to earn anything,the government proposes to give out $3,000 to help fund an HSA for low earners.It has the same effect that the current income tax policy has.If you look at the CBO study of IRS data and Census data for 2003,40% of the country has a net negative income tax rate,they get money back without putting money in.

Posted by: TJM on February 1, 2006 at 8:41 AM | PERMALINK

There is one means of solving the healthcare crisis that everyone seems to be overlooking. Outsource healthcare to India. Many physicians in India are trained in the USA. They have (some) hospitals that are every bit as good as in the USA. So the US government simply pays for transportation to India and a portion of the heavily discounted medical fees being charged in India. Everybody gets healthcare! Of course I'm joking, but only about 50% joking.

Posted by: cq on February 1, 2006 at 8:51 AM | PERMALINK

Can I use my credit card?

Posted by: koreyel on February 1, 2006 at 9:03 AM | PERMALINK

Go look at the bluecrossca.com website and check your rates by age for a high deductible hsa plan versus another high deductible plan. The problem is ridiculous. If I have a client who has already had to go to a $2500/deductible because the premiums are too high, or a $4000/deductible, the hsa plan has a LOWER deductible and actually has MORE expensive premiums. The whole thing is a ridiculous scam.

Posted by: christine on February 1, 2006 at 9:08 AM | PERMALINK

Kevin,

Why are you opposed to pooling risk?

If you're a multi-billionaire, then of course you're going to oppose national health insurance, or indeed health insurance of any type, because your expected medical costs are lower when you don't join the risk pool. But the problem is that the cost distribution is highly skewed. Unless you're rich enough to comfortably cover any medical bill, you might want to have the feeling of being _insured_, which is what happens when you know you pay a small amount of money so that your medical bills will be covered, regardless of how large they become.

The HSA idea is just a scam to make every person pay for his or her own medical bills. I don't see why anybody to the left of Herbert Hoover would be interested in it.

Posted by: Rick on February 1, 2006 at 9:08 AM | PERMALINK

A lot of you guys have bought into Karl's frame haven't you. You are going to oppose the HSA reforms because Bush proposed them.

HSAs are not even a part of a solution for the healthcare crisis. They are, however, a increasingly more important part of the present "system." Many of you will soon be forced to use one. Trust me on this, your employers like high deductible plans because they are cheaper. As you get shoved into an HSA you will want some of Bush's "reforms."

Examine the HSA reforms on their own merits, fully aware that HSAs are not part of the long term solution. Support passage of HSA changes that help you and your constituents.

Point out the inherent problems with HSAs even after the reforms. Push for a bigger and better plan.

By buying into Karl's frame and opposing the HSA reforms you are insuring that you can be made to look like obstructionists and the reason any kind of health care reform (including HSAs) can be taken of the table.

Posted by: Ron Byers on February 1, 2006 at 9:14 AM | PERMALINK

It sounds more complicated than what we have now, won't actually help the health care crisis in the US and it increases individual risk. Why is that every time Republicans get involved things get complicated AND mediocre simulataneously.

We need a system in which all people have access to health care and incentives to take care of their health in the obvious ways--eat right, exercise regularly, wash your hands, don't drink to excess, don't smoke, buckle up, wear a helmet, practice safe sex, get your immunizations. We need to figure out less expensive ways of delivering health care (perhaps less emphasis on high-tech solutions after the damage is done or prolonging lives the quality of which is marginal at best.) And we need to pool the risk for crisis care and long term care.

I think employers and insurance companies should be out of the health care "business" and competent, non-Republican government (of the people, by the people, for the people) should be in. I think the biggest crisis in the US healthcare is the attitude of Americans that 1) life should be prolonged regardless of expense or quality; 2) everyone has a right to cadillac insurance; 3) the individual is a victim who doesn't have a responsibility to stay healthy but the right to be treated, whatever the cost; 4) any rationing is unfair, & 5) socialized medicine is evil.

It doesn't need to be complicated and it doesn't need to be more expensive than what we are doing now. We just need to be efficient and accept limits.

Posted by: PTate in MN on February 1, 2006 at 9:17 AM | PERMALINK

looks like idiot son is intent on doing to healthcare what congress has done to the tax code.

Posted by: linda on February 1, 2006 at 9:23 AM | PERMALINK

"Proposal #4 is an extension of the EIC. You don't have to earn anything,the government proposes to give out $3,000 to help fund an HSA for low earners.It has the same effect that the current income tax policy has.If you look at the CBO study of IRS data and Census data for 2003,40% of the country has a net negative income tax rate,they get money back without putting money in. "

Thanks, TJM, for beating me to that. Opponents of #4 don't seem to understand how a refundable tax credit works. This is even better than I had thought the plan to be, since I was thinking that a good many low income earners with and without children would be able to turn their already existing tax credits(often $1500-$6000 yearly) into a payment for high deductible insurance.

Now we need to see what the plans buy.

Posted by: Ron on February 1, 2006 at 9:29 AM | PERMALINK

Isn't the whole point of tax benefits for employment-based insurance to encourage employers to provide coverage?

Doesn't applying the same tax breaks to individuals end that incentive, and now just make it a quasi-federally-paid system?

Posted by: Marcus on February 1, 2006 at 9:32 AM | PERMALINK


It sounds more complicated than what we have now, won't actually help the health care crisis in the US and it increases individual risk. Why is that every time Republicans get involved things get complicated AND mediocre simulataneously.

My employer just offered us a choice between a traditional insurance plan and a combination of a HSA with a high deductible insurance plan and some employer contribution to the HSA.

After tinkering with spreadsheets for a week, the consensus around the office is that the HSA option is better if you have low medical expenses (employer contribution and tax benefits) or if you have very high medical expenses (the high deductible insurance kicks in) but, the HSA is worse if you have an ongoing condition and pay "middle of the road" expenses.

HSA's aren't neccesarily a bad thing, but without the additon of employer contribution and the high-deductible plan, you would be screwed.

HSA's could be part of the solution, not the whole solution.

Posted by: Stephen on February 1, 2006 at 9:33 AM | PERMALINK

Rove will use its failure to beat the Dems over the head as obstructionists in November.

I have no doubt that the Republicans could do this, I'm just awed by how they benefit electorally both from obstructing Democratic proposals when Democrats run the executive branch, and from having their proposals obstructed when they're running the executive branch. It's like magic.

I guess it's like necromancy: special black magic powers you can have that no other wizard has, providing you're evil enough to be willing to commit blasphemy over the dead bodies of sacrificial victims.

Posted by: derek on February 1, 2006 at 9:46 AM | PERMALINK

these proposals are garbage. as someone who already enjoys max tax deductions for all my health costs--i'm self employed, and deduct off scheds
a and c--this won't save anybody jack. it will only discourage people from seeking necessary care, thereby boosting expenses when their conditions become so acute/chronic that they have no choice but to see the doc.

Posted by: dr. bloor on February 1, 2006 at 9:49 AM | PERMALINK

I don't see that HSAs have much appeal, except insofar low premiums attract people who can't afford real insurance.

At root, HSAs are predicated on the assumption that people currently have too much medical coverage and an important public policy challenge is detering people from seeking unnecessary care. For this reason, they are expressly designed to discourage people from seeking medical care, which will have very deleterious conseuqences for society as a whole as people fail to get preventive and early treatment and end up needing much mmore pricy care later on. Ideas such as a refundable tax credit have appeal, but don't they amount to the govt subsidizing what is supposedly a private sector framework? Its outrageous that huge sums of public dollars should be directed to such a flawed policy, when they could be put into a system that actually achieves policy objectives such as ensuring that people have real medical coverage.

Posted by: Aidan on February 1, 2006 at 9:50 AM | PERMALINK

I don't see anything attractive about these proposals.

Now would be a good time to write your local paper, warning people that EITC-claiming tax returns are audited way more than anyone else. Sorry, I don't have a link right now.

Posted by: serial catowner on February 1, 2006 at 9:52 AM | PERMALINK

#5 is just a proposal to allow employers to make different contributions to the HSAs of different employees. They're spinning it as the chance to pay more for some employees, but it's really just the chance to pay less for some employees.

Posted by: derek on February 1, 2006 at 9:52 AM | PERMALINK

Are these HSAs like the one's I am offered through work, WHERE THE MONEY DISAPPEARS AT THE END OF THE YEAR IF I DON'T SPEND IT? Or are these HSA's actual money that I own, that I can rollover each year, that I can invest in?

If the former, than gosh, I am so lucky to be able to be given the chance to estimate my medical costs, gambling that those costs are greater than my actual HSA contents. And then to spend the HSA on anything, even over the net, I have a special ATM like card that I have to use. If I use a credit card, I am not reimbursed.

If the former, than gosh, not bad and we'll see how quickly this tax advanted HSA/IRA becomes eligible for use to replace SSA.

In both cases, it is mainly a pain in the ass for me to estimate and than to use.

Posted by: jerry on February 1, 2006 at 9:56 AM | PERMALINK

Seriously, no-one's going to see better health care just because the government is getting less tax revenue. America needs to wake up and do what every other country does: increase government tax revenue and use it to provide better health care for less money than the inefficient private insurance companies do.

It'll piss off the rich minority who'll see a modest increase in their taxes, but it will benefit everyone else in your country more than you can imagine, honest. The reduction in stress from knowing you won't face crippling medical costs if you or a loved one gets ill has to be seen to be believed.

Posted by: derek on February 1, 2006 at 9:59 AM | PERMALINK

aaron -- How exactly does taking people out of group insurance plans "expand" the risk pool?

Posted by: NAR on February 1, 2006 at 10:04 AM | PERMALINK

this is another instance of the "salesman-in-chief"

bush has consistently "sold" commercial initiatives as governemnt policies

aetna and other health insurance companies have developed these HSA products and are now the president (salesman-in-chief)is stepping up to do his part

the financial industry is excited about the potential new business handling HSA $

Posted by: jamzo on February 1, 2006 at 10:05 AM | PERMALINK

No Kevin, they don't sound "pretty good" or "appealing". In fact, my husband and I already have this "plan," and I'll tell you why. It's because when he and president of the company put together a new health care plan for the employees and presented it to the CEO, he turned it down.

So my husband and the other executives opted out in favor of savings accounts in order to get the rest of the employees covered. What this amounts to is nothing.

Jeebus

Posted by: tena on February 1, 2006 at 10:10 AM | PERMALINK

These proposals sound pretty good, don't they?

God, I hate this blog. No, they don't sound good, Kevin. Please do some research.

Posted by: sohei on February 1, 2006 at 10:12 AM | PERMALINK

Atrios makes a good point on HSAs:
"I have no idea why going to see medical personnel without the bargaining power of your insurance company behind you is appealing."
http://atrios.blogspot.com/

Most health plans negotiate a 25-50% PPO discount with many providers, It seems that the part paid by the indivdual from an HSA would be "full sticker price."

Posted by: jlewis on February 1, 2006 at 10:12 AM | PERMALINK

Most health plans negotiate a 25-50% PPO discount with many providers, It seems that the part paid by the indivdual from an HSA would be "full sticker price."

With the HSA plan I have been offered, we pay insurance companies' negotiated price, not the
retail price. The complication is that if you are charged the full price, it is up to you to argue with provider to get the negotiated price.

I think we should be careful not to have a knee-jerk reaction against HSA's. Once you understand the facts, HSA's aren't all bad. They aren't all good either.

Posted by: Stephen on February 1, 2006 at 10:24 AM | PERMALINK

So, uhhhh, Kevin,

Do you get your Republican talking points while you're on your knees? Or hands and knees?

Maybe you can change your first name to Joe so you can fit in better with Biden and Lieberman...

Posted by: aginghippie on February 1, 2006 at 10:26 AM | PERMALINK

Are these HSAs like the one's I am offered through work, WHERE THE MONEY DISAPPEARS AT THE END OF THE YEAR IF I DON'T SPEND IT? Or are these HSA's actual money that I own, that I can rollover each year, that I can invest in?

The HSA plan I have been offered allows you to roll the money over year after year and earns interest. If I leave my current job, I can roll the money into another account, just like a 401(k).

Posted by: Stephen on February 1, 2006 at 10:27 AM | PERMALINK

Answer to Kevin's question.....NO ONE!!!

Posted by: Dancer on February 1, 2006 at 10:29 AM | PERMALINK

serialcatowner,

Have to look it up also. Not only audited, but read very recently that many payments have been blocked.

So, it is the old smoke and mirrors from Twig - Once anything comes out of his mouth, his base considers it to be a done deal. They never check as to the results of his promises.

Posted by: thethirdPaul on February 1, 2006 at 10:30 AM | PERMALINK

NAR, giving tax benefits to more people for health insurance/healthcare means more people will get insurance. More people with insurance means larger risk pool. When you move from a group plan, you will buy insurance from a large insurance company (possibly even the same company of your group). You will be moving from the group to a universal pool.

Posted by: aaron on February 1, 2006 at 10:33 AM | PERMALINK

President Bush was light on details...

From his Iraq "plan" to now HSAs, Bush is always light on the details...that's what failures do.

Posted by: ckelly on February 1, 2006 at 10:37 AM | PERMALINK

'Now would be a good time to write your local paper, warning people that EITC-claiming tax returns are audited way more than anyone else. Sorry, I don't have a link right now.'

That's because the potential for fraud is high as it does result in a small windfall for the taxpayer. I have never been hassled about it after 4 years of receiving it.

As a caveat to #4, we are going to have to pay for it by rolling back the tax cuts that went to the upper class(put the damn marginal rates back where they were, there was no reason for those cuts), which is not particularly a bad thing. It will likely fall upon Bush's successor to do so. I've read a study that suggests that we should do so anyway to support the climbing tax credit value that Bush already put into place.

Posted by: Ron on February 1, 2006 at 10:40 AM | PERMALINK

OK you want a big huge proposal? Here is mine (a very rough overview). First we take all social goods (SS, healthcare, unemployment) and have these services administered thought non-profit corporations like credit unions. The people who are membership is required although you can select which one you want to join. Employers are required to contribute some fixed % to the CU where the employee is enrolled (not much different then now only the burden of administering all this stuff is out of their hands and the cost fixed). The government at the state and local level contributes as well.

These CUs pool the risk, invest money, and offers retirement and health benefits and generally negotiates with the various insurance companies, health care providers and securities firms, using the leverage of their constituents to get the best deals (the CUs would have to be quite large, I would envision either three or four of them or a lot of smaller ones that act in concert in order to get the pools big enough). All social goods are defined and delivered through these institutions are mandatory for all Americans and are chartered to act specifically on behalf of their members.

Oh and here is that kicker, they can also negotiate on behalf of their members with employers (making them more of a sort of "free market neo-labor union). While there would be a bunch of benefits to this idea, the problems are the same as with any big idea, namely how do you fund the transition. But this would pool large groups of Americans to save $$$ by pooling risk and leveraging huge memberships when dealing with insurance companies and it would counter the power and influence of corporations and insurance/investment companies against workers by creating institutions that acts specifically as advocates for their members.

Posted by: Rick DeMent on February 1, 2006 at 10:44 AM | PERMALINK

Parse it all you want.

This is not a solution. Before anything like this gets enacted it will go through several revisions and since it won't be a simple plan, and will contain subsidies for the any number of corporate donors, just look for the prescription drug plan repeat.

If they were serious about fixing health care, they would really do something. This is not it. They have not shown any ability to solve any real issues. Why, please tell me why I should give them the benefit of the doubt now?

Remember this administration is all about marketing and perception. I haven't seen proof of anyone who is really serious about effective public policy.

Posted by: Simp on February 1, 2006 at 10:53 AM | PERMALINK

I have an HSA in combination with a high deductible medical plan. This year, my employer contributed $3,000 to my HSA to cover most of my $4,000 deductible. Next year, who knows if the company will contribute anything.

So far, my experience is that the HSA creates a paperwork nightmare. I have to keep track of out-of-network expenditures, over-the-counter medications and other reimbursable expenditures, and out-of-pocket deductibles, both for reimbursement purposes and for income tax purposes. In my experience, the paperwork is even more confusing than it was years ago, prior to HMO's, when you had to deal with an insurance company to get your medical bills paid.

In addition, my drug benefit is now nightmarishly complicated. Previously, drugs fell into three tiers, for which I had a co-payment of either $10, $25, or $50.

Under the HSA plan, each drug has its own (discounted) price. For a month's supply, I now pay $75 to $150 per medication. What makes it frustrating is that I don't know what the prices are in advance. So, when my doctor prescribes a drug, I then go home and look up my medical plan's discounted price on the Internet. If it's too high, I call my doctor back to get the names of alternative medications. After looking up those prices, I call my doctor again to ask for a prescription for the least expensive alternative. Instead of one trip to the doctor, I need two additional contacts to get everything arranged. Total elapsed time between seeing the doctor and getting medication - about 2 days.

The day that my employer announced the HSA plan, I searched for HSA information on the Internet and found that these plans are modeled after a plan offered in Singapore. The article I read added that Singapore is considering abandoning HSA plans to go to a nationalized health care system.

Posted by: FS on February 1, 2006 at 10:55 AM | PERMALINK

SOTU speech--Blah Blah Blah

Bush is a known liar and has not proven otherwise. So how does one know when he is lying? When his lips are moving.

Same old Bush, lies about proposals to generate support but then fails to act.....all talk and no action.

Posted by: SweettP2063 on February 1, 2006 at 10:55 AM | PERMALINK

Before anything like this gets enacted it will go through several revisions and since it won't be a simple plan, and will contain subsidies for the any number of corporate donors, just look for the prescription drug plan repeat.

HSA's have already been enacted and have been in use for a couple of years.

Posted by: Stephen on February 1, 2006 at 10:56 AM | PERMALINK

I'm sorry Kevin, this HSA crap isn't wonkery, it's WANKERY.

No matter WHAT Bush or anyone actually competent in public policy proposes, HSAs miss the target completely as valuable health care insurance reform. They remain, despite proposals for "low income tax credits," yet another tax cut sop to the wealthy.

To simplify things, think of health care services as made up of, say, four components, each of which probably needs its own funding mechanism:

1) insurance for rare, "catastrophic" events, such as major hospitalizations in the under-65, healthy segment of the population. This is the ONLY segment of health care for which a private insurance model works, because private insurance only works when events are rare but predictable.

2) preventive care that everyone should get, such as childhood immunizations and screening tests for at-risk groups (mammograms for women over a certain age). Private insurance doesn't work to finance this stuff -- it's classic social insurance territory.

3) ongoing, mostly primary care management of people who already have signficant chronic illness and impairment (think type II diabetes). Again, private insurance has an economic incentive to dump these patients. only some form of social insurance will work.

4) "worried well" doctor visits and/or visits for non-chronic conditions (e.g., the flu, an ear infection). it's this kind of activity that an HSA could be used to fund. However, the HSA model is never going to work for lower income folks. better to have some form social insurance with a co-pay regime that discourages too frequent visits to the doctor.

Posted by: rdb on February 1, 2006 at 10:59 AM | PERMALINK

Just eliminate the tax free status of fringe benefits that started this who cares what it costs crap.

Posted by: Walter E. Wallis on February 1, 2006 at 11:08 AM | PERMALINK

I'll probably have more to say about this later, but for now I just wanted to put this on the table. My point from Tuesday stands: these proposals sound pretty good, don't they? Needless to say, I agree that this is a pitifully inadequate answer to a big problem, and I can already think of several good ways to make that point. Still, big picture arguments aside, these changes are going to appeal on their merits to a lot of people. Just sayin.

Kevin, why don't you give up politics and take up finger painting.

Just sayin.

Posted by: Thinker on February 1, 2006 at 11:08 AM | PERMALINK

Hey, those five are cool.

Now, one thing, is this the final text of the agreement with the insurance companies?

Just askin'

Posted by: Miro on February 1, 2006 at 11:09 AM | PERMALINK

Even if you assume that HSAs are a good idea now (which they aren't because nobody can save money), they are nothing more than the shortest of short term fixes. The idea is that your employer buys a policy with a huge deductible ($10,000) and you finance the deductible out of your HSA. Your employer's health insurance payments decline because instead of paying for a policy with a $500 deductible (which costs, say, $400/month) he gets one with a $10,000 dedeuctible (which costs say $150/month). But with health insurance premiums rising at 20% a year, your employer will be back to paying $400 a month in 3-4 years and you will still have a giant deductible. What then?

Posted by: Jose Padilla on February 1, 2006 at 11:13 AM | PERMALINK

Many if not most HSAs can now be used to cover other medical costs besides the deductible, so this is not a 'new' proposal. Nor is it a 'solution' to anything. People already pay out of pocket for medical costs not covered by their medical insurance and this is really just another way of doing so. Your deductible will still remain to be covered since non-plan-covered costs do not count toward the deductible, but you will have spent down your HSA before meeting your deductible. No wonder this administration wants to make all medical costs tax deductible. But only for those with HSAs.

HSAs will only function for those who can make an additional contribution to them from 'discretionary' dollars. This is assuming that your employer either makes a direct contribution into your HSA or takes some portion of your premium for your HDHP (high deductible health plan) and puts it back into an HSA for you. This is what is euphemistically called 'premium pass through'.

The idea that HDHPs and their associated HSAs will make people more 'responsible' for their health care is simply a complete misunderstanding of the patient's relationship to medical service. The greatest expenses people incur medically are not from elective procedures. They are from emergency crisis medicine and chronic diseases. Your relationship to the first sort of care is immediate and often out of your control. To the second, your ability to find the most cost-effective care *in terms of your insurance* is not necessarily the same as finding the most effective care for your disease.

It is interesting to me that about half of the existing HSAs and MSAs (a similar account discontinued in 2003) are empty. This is not a good sign, I think.

Posted by: Aunt Deb on February 1, 2006 at 11:16 AM | PERMALINK

From "The Top 10 State of the Union Highlights":

What Health Care Plan?

Leading up to the speech, analysts, commentators and pundits alike focused on health care reform as the centerpiece of Bush's domestic agenda, the Social Security privatization plan of 2006. Despite extensive coverage in the New York Times, the Los Angeles Times, Washington Post and other media outlets, the Bush speech contained little new about new tax incentives for health savings accounts and other measures designed to move risk and costs from employers to employees, young to old, healthy to sick, and rich to poor.

Bush's reticence may be linked to reports showing that consumer-driven health care schemes such as HSAs don't lower costs, but limit access to health care. Or it could be the disastrous start to his Medicare prescription drug plan or the devastating cuts to Medicaid now working their way through Congress.

The President, however, was cheered by his Republican colleagues with his call for malpractice reform:

And because lawsuits are driving many good doctors out of practice -- leaving women in nearly 1,500 American counties without a single OB/GYN -- I ask the Congress to pass medical liability reform this year.

On this point at least, Bush was consistent, echoing his words during campaign 2004:

Too many OB/GYNs aren't able to practice their love with women all across this country.

Posted by: AvengingAngel on February 1, 2006 at 11:19 AM | PERMALINK

So who out there is willing to step up to the plate and start arguing for something big?

Incrementalism is usually what works.


I'd say pass the president's proposals, and also work to improve the lot of those who are left behind. If your small wonky proposals appeal to the swing voters, then you can get them passed.

Medicare, Medicaid, and Social Security were big ideas, and they have big problems. But even they were never proposed as the whole solution to everything.

Posted by: contentious on February 1, 2006 at 11:19 AM | PERMALINK

Madness on stilts. Of course it sounds good. They had focus groups. The Republicans want a system where there is no shared risk. Not only will the American middle class pay for the wars, the street repairs, and cancer research (now that this burden has been lightened for the wealthy- Grover Norquist calls this making Republicans) they will also pay for college education for their kids and often for themselves, healthcare, pensions and speculate on the housing market for their retirement while carrying substantial consumer debt. Lets remember that values that have systematic risk, they are likely to hit the bottom when you need them, are worth less than there expected values. Americans already have a negative savings rate. There is simply no more money left besides the money loaned to the US by the British, Japanese, Saudi Arabians and the Chinese to compensate for all this risk or even to keep up with consumption. Stephen Roach Chief Economist of Morgan Stanley and others like him stay up late worrying about this situation.

Posted by: bellumregio on February 1, 2006 at 11:19 AM | PERMALINK

I didn't see this mentioned anywhere, but I scrolled through the comments pretty quickly, sorry if I'm repeating someone else's idea.

Has anyone considered the possibility that the real purpose of these HSA's might have nothing to do with healthcare at all? Look at #2 - it could be interpreted to mean that all the money you put into HSA's would be tax deductible. Another part of the plan which isn't mentioned on the list (but I'm sure I heard it somewhere) was the idea that after age 55, you can withdraw money from the plan for non-medical purposes. Can you say tax shelter for the super rich? I can. If Bush has a Republican Congress to work with, he could easily make small tweaks to the plan the White House laid out, changes that really don't sound big but would have the effect of ensuring that his oil buddies can just put all of their money into some account somewhere, tax free, as long as they're willing to wait a few years to have it.

Things are never as simple as the president wants you to believe.

Posted by: Gheby on February 1, 2006 at 11:19 AM | PERMALINK

I have an HSA and wrote about how it works for me here. It's a sweetheart deal for me, and a terrible policy for the country.

Posted by: Jane Bernstein on February 1, 2006 at 11:22 AM | PERMALINK

Health Care needs to become efficient before it can become universal.

Bwahahahahahahahaha. What a delightful little trap you set.

1. Our current healthcare system is grossly inefficient, meaning half the cost goes to 'overhead,' meaning insurance companies and those paid to negotiate with them.

2. Okay, let's eliminate the overhead by pooling all citizens into a 'universal' plan. Basically eliminate the insurance companies and make the US citizens self-insured as one huge group. This is possible and efficient once the pool gets big enough.

3. Your response? "No no no, we can't fix the problem until we fix the problem first."

Posted by: Tripp on February 1, 2006 at 11:28 AM | PERMALINK

Sure sign of Snake Oil: You ask for Healthcare and they give you a "tax credit".

Pathetic.

Posted by: LiberalMinded on February 1, 2006 at 11:33 AM | PERMALINK

Let's see, a proposal that won't solve the problem at all and only works to benefit Bush's contributor's and those who need tax breaks the least.
Classic, I expect nothing else from this idiot.

Posted by: Ringo on February 1, 2006 at 11:34 AM | PERMALINK

Sounds like Bush wants to wean Americans off their employee medical benefits.

Why should corporations have to foot most your medical insureance needs when instead, they could be making more profits if they no longer have to provide for employees medical health and life insurance as well as any pensions. SO when do government officials stop the taxpayer entitlement program funding their health care and pensions plans. HECK, I don't like paying for their health care and pension plans, not anymore than corportions like paying for ours. BTW corporations, the super fund is an entitlement program - Why isn't EXXONMobil paying for the war in Iraq - no more entitlement programs for corporations.

In a way this plan of Bush would eventually curb skyrocking heatlh care cost (eventually) but a lot of folks would have to file bankrupcy first and government couldn't bail the health care industry out like so many airline companies.
Call it the "break it in order to fix it" plan.

Mostly I think its a really bad idea. It's a good thing Bush can't lead his way out of a paperbag.

Posted by: Cheryl on February 1, 2006 at 11:39 AM | PERMALINK

Bush's Addiction Meme precisely encapsulates everything that is wrong with contemporary Republican moralizing. Bush wants to cast the essentially pragmatic problem of our dependence on middle-eastern oil as a moral issue, as if we're a bunch of crazed junkies. There's something to be said for this view, but you can't say it without taking the next step: a junky needs to be told to kick the habit. Recovery takes guts, and hard work, and sacrifice. Is that what Bush is asking of the country? Not at all. Should we increase gas taxes, improve fuel consumption, push for smaller cars? No way. Who then is going to solve our addiction problem? In a word: Government. We need a new drug, and government's going to invent it, and it'll be cheaper, all the high without the hangover. That's the miracle of government: it keeps you from having to be self-governing. This is such a neat inversion of everything conservatism is supposed to stand for it's a miracle the progressives didn't invent it.

Posted by: Chad on February 1, 2006 at 11:44 AM | PERMALINK

I'll probably have more to say about this later, but for now I just wanted to put this on the table.

There's been a lot of that "I don't have much to say now but I just want to through this out on the table" stuff recently. Maybe the time to blog about something is when you do have something to say.

My point from Tuesday stands: these proposals sound pretty good, don't they?

Not on more than the most superficial level. Particularly, they all are unnecessarily restrictive for no good policy reason. I'll tackle them one-by-one a little later.

Needless to say, I agree that this is a pitifully inadequate answer to a big problem, and I can already think of several good ways to make that point.

Its not that its "inadequate"; that implies that it heads in exactly the right general direction but doesn't go far enough. Really, this is a set of policies that heads off at an extreme angle (like, about 80 degrees, being generous) from the right one. Its almost entirely misdirected, though it might have some minor incidental benefits.

Still, big picture arguments aside, these changes are going to appeal on their merits to a lot of people.

No, their going to be easy to spin to lots of people, particularly if the pundits of the left act like you, Kevin, and don't address the problems on the merits in the details, but instead address everything at the sort of vague level you are working at now.

There's another point here too. These are incremental changes, and that's the main avenue of attack against them.

Er, no. The main avenue of attack is that, even given a preference for incremental changes, their the wrong

But that only works if our proposals aren't incremental. If it's just their small wonky proposals against our small wonky proposals, everyone will fall asleep.

Everyone falling asleep means, at worst the proposals Bush outlines pass but the Republicans get no political traction from them because no one cares. At best, it means they don't pass at all.

Posted by: cmdicely on February 1, 2006 at 11:51 AM | PERMALINK

Obviously Mr. Drum has never had a close family member go into the hospital and die. That's a cool $150K, if you get lucky and they check out within a couple of weeks. How long is it going to take you to pay that off with your "medical savings account"? And you can already write off major medical expenses on your taxes.

What a fucking tool.

Posted by: dave on February 1, 2006 at 11:52 AM | PERMALINK

That's a cool $150K, if you get lucky and they check out within a couple of weeks. How long is it going to take you to pay that off with your "medical savings account"?

HSA's are coupled with a high deductible insurance plan.

The deductible I get on my plan is $5000 (for family), after that everything is covered.

For the individual, the HSA is a pretty good deal
in most cases. As a policy to fix healthcare, its got a lot of weaknesses.

Posted by: Stephen on February 1, 2006 at 11:56 AM | PERMALINK

Say for the sake of argument that you want things to be a lot better in 25 years. One way is to make them better year by year for 25 years. 25 years looks like an unendurably long wait at the start, but not in retrospect. 25 years ago was the start of the personal computer revolution, which in the end also revolutionized mainframe computers as well.

One of the well-documented cognitive errors is to underestimate the value of sustained effort and to overestimate the value of Big Plans.

So I repeat: back the president's HSA improvements, which will appeal to swing voters. Then propose some enhancements to government-funded health care that will also appeal to swing voters.

Former gov. Warner and current gov. Kaine are Democratic governors of a red state. You can learn a lot from them about how to win elections, govern, and win elections again.

Posted by: contentious on February 1, 2006 at 11:56 AM | PERMALINK

Stephen,

For the individual, the HSA is a pretty good deal

I think you meant "For the individual with $5000 a year to spend on the deductible the HSA is a pretty good deal."

I can't argue with that.

I do wonder how many people, especially those currently un-employed, self-employed, or in jobs that do not provide health care coverage there are that can afford the $5000/year deductible?

Posted by: Tripp on February 1, 2006 at 12:05 PM | PERMALINK

Kevin, please explain how HSA's are supposed to make health care available to the 55% of uninsured 46 million U.S. citizens who pay no taxes. These poor souls (2 of them my children) don't need a tax break, they need health care insurance now!

Posted by: MurryMom on February 1, 2006 at 12:16 PM | PERMALINK

MurryMom,

I think that if they are minor children then *you* are expected to provide their health care insurance.

If they are adults then they are expected to take their first $5000 of earnings to pay the deductible and then on top of that pay for the insurance itself. Or do without.

That is what Bush's whole 'personal responsibility' thing is about.

As the preacher said to the Sherrif in "Blazing Saddles," "You're on your own, son!"

Posted by: Tripp on February 1, 2006 at 12:36 PM | PERMALINK

Just wondering -how many people making under 25K are going to be paying 3K in taxes to even get the tax credit?

I haven't read all the posts so I don't know if this was addressed, but --

a refundable tax credit is used to offset any taxes you paid, and if your credit exceeds your taxes, you get a refund of the difference.

Posted by: DCNative on February 1, 2006 at 12:41 PM | PERMALINK
Giving Individuals That Purchase HSAs On Their Own The Same Tax Advantages As Those With Employer-Sponsored Insurance. The President proposes making premiums for HSA-compatible insurance policies deductible from income taxes when purchased by individuals outside of work. In addition, an income tax credit would offset payroll taxes paid on premiums paid for their HSA policies.

Why HSA-compatible insurance policies? Particularly, why should any insurance policy be incompatible with an HSA? As long as there are possible medical expenses not covered by a policy, it is logically compatible with an HSA. So, really, the policy that should be proposed, if you want to do something like this, is to make all costs of health insurance deductible (perhaps to a certain maximum amount) -- or, better yet, make a tax credit available for them at a rate equal to the maximum marginal tax rate, which makes it so that the rich don't get a bigger subsidy on their costs than the poor.

If you were trying to improve healthcare access and choice, rather than help sell particular HSA/HDHP products, that is what you would propose. The President's failure to do so reveals the motive.

Eliminating All Taxes On Out-Of-Pocket Spending Through HSAs. The President proposed allowing Americans with HSAs and their employers to make annual contributions to their accounts to cover all out-of-pocket costs under their HSA policy, not just their deductible as provided under current law.

Instead of a special benefit for Americans with HSAs, if you wanted to promote health care access, affordability, and choice, you'd just make all out-of-pocket costs for healthcare services (regardless of what kind of insurance, if any, was involved) deductible -- or credited as above.

Again, the President's failure to do what is obvious giving the supposed goal and the kind of recommendation reveals his motives.


Enabling Portable HSA Insurance Policies. Employers would have the ability to offer workers a Portable HSA insurance policy that the employees would own, control, and be able to take wherever they went. Their premiums would be tax-free and would not increase based on their health status at the time that they changed jobs, left the labor force, or moved.

"Enabling" employers to do this won't do anything (even if you generalize it beyond HSA plans) since employers don't want it to be easier for their employees to switch jobs.

Making it mandatory by law that insurance is portable so long as premiums are paid might be a good idea, but you have to be careful not to discourage employers from providing insurance coverage in the first place by driving up the costs.

The President Proposes Extending The Benefits Of HSAs To Low-Income Families And Individuals Through Refundable Tax Credits. A family of four making $25,000 or less will be able to get a refundable tax credit of $3,000 from the Federal government to help buy an HSA-compatible policy that covers them for major medical expenses.

Again, if the motive is not to sell a particular product but to improve access, affordability, and choice, the clear policy here is not to limit this to "HSA-compatible policies."

And, really, you combine this with the first two and get a single basic policy: all personal costs of health insurance or healthcare expenditures (including HSA contributions) are tax deductible (or given a partial and refundable tax credit), except that, with certain income eligibility requirements, a certain amount per year can be covered by a full refundable tax credit.

The one problem, here, even with the more general policy is that tax credits and deductions are at the back, so you need a way to move the benefit up to the front to enable people to purchase insurance (or make HSA contributions). This is critical, otherwise, you end up only subsidizing costs for those who were able to pay them without the subsidy.

The President Supports Allowing Employers To Make Higher Contributions To The HSAs Of Chronically Ill Employees. Under current law, employers must contribute the same amount to each employee's HSA. This prevents employers from providing extra help to their chronically ill employees employees who are more likely to use their HSAs to pay for their higher-than-average out-of-pocket expenses. Permitting employers to make higher contributions to HSAs of chronically ill employees will help those workers fund their HSAs and pay their out-of-pocket expenses tax-free through their accounts.

This is perhaps somewhat sensible, in outline, though since this is to make contributions for people with higher current costs, the necessity to pass them through an HSA to benefit from the policy is ludicrous; any employer contribution to healthcare costs or health insurance premiums ought to be treated the same way, there is no reason to give preference to HSA products.

So, there's the outline of both a critique and an alternative proposal tightly bound to the critique -- abandon the restriction of all the proposals to HSA's and HSA-linked insurance, and broaden them to provide a choice of insurance plans or direct expenditures. Use government policy to improve access and affordability, not to dictate selection of a particular privately-offered product.

Posted by: cmdicely on February 1, 2006 at 12:44 PM | PERMALINK

Thanks Dr. Bernstein, for your input on the High Deductible Health Plan (HDHP) with Health Savings account (HSA).

You are right, HDHPs and HSAs serve only to divide the risk pool, and put more costs on those least able to afford it.

When I was your age, I had no health problems and paid health insurance premiums, which did not benefit me much. But, I realized that I was paying those insurance premiums because one day I would need health insurance. Now, that I am 20 years older, with chronic health problems, although my health care costs don't exceed my premiums, they come darn close. An HSA would do me no good, because I would use every penny of it each year.

Posted by: DCNative on February 1, 2006 at 1:11 PM | PERMALINK

As long as there are possible medical expenses not covered by a policy, it is logically compatible with an HSA.

A HSA compatible policy is a high deductible policy that doesn't offer copays.

If you are an individual who doesn't have the oppurtunity to pay your premiums through pre-tax
payroll deductions (self-employed, employer deosn't offer insurance), the ability to deduct
your premiums would be a pretty nice feature.

"Enabling" employers to do this won't do anything (even if you generalize it beyond HSA plans) since employers don't want it to be easier for their employees to switch jobs.

Employers are already able to do this, so I'm not sure what Dubya is talking about. My employer offered me a protable HSA, maybe he wants me to quit.

Posted by: Stephen on February 1, 2006 at 1:16 PM | PERMALINK

Maybe the democratic message on this ought to be "Well ok, that doesn't sound too bad. We'd like to change x and y (watch republicans refuse). Of course it won't really do anything to solve the real problem."

Could tie in with an overall message about how republicans never want to solve the real problem. "Tort reform" to fix healthcare, HSA's to fix healthcare, invading Iraq to stop terrorism, tax cuts for the rich to help the middle class... now for a wrath of khan quote (never pass up a wrath of khan quote) "like a poor marksman you just keep missing the target".

Posted by: jefff on February 1, 2006 at 1:18 PM | PERMALINK

Congrats to cmdicely for providing the first good bit of constructive criticism for ANYTHING in this blogs comments.

Posted by: aaron on February 1, 2006 at 1:33 PM | PERMALINK

Sorry, commented on wrong thread earlier.

So anyways, the National Taxpayers Union (aka, fat cats) reported that this SOTU proposed a mere $91 million in additional spending.

Bush's allegiance to tax cuts for the wealthy is costing us a chance at energy independence, healthcare, and education. When are people going to catch on to this?

Posted by: David on February 1, 2006 at 1:34 PM | PERMALINK

I agree with dr. bloor that HSAs "will only discourage people from seeking necessary care, thereby boosting expenses when their conditions become so acute/chronic that they have no choice but to see the doc."

More emergency room medicine. I think Kaiser proved a long time ago that preventative medicine was cost-effective. Bush doesn't seem to think so. I agree the new Demo mantra on the health care crisis should be "The Republicans think you have too much insurance. We think the insurance companies suck off too much of your health care dollars."

And, like Gheby, I was going to mention "Another part of the plan which isn't mentioned on the list (but I'm sure I heard it somewhere) was the idea that after age 55, you can withdraw money from the plan for non-medical purposes. Can you say tax shelter for the super rich?"

HSA's are Social Security privitaztion in a white lab coat. Bush's way of funneling money to Wall Street and giving more bucks back to his base, the "have-mores." Just wait to see how much CEO's sock away in their HSAs.

Posted by: Cal Gal on February 1, 2006 at 2:19 PM | PERMALINK

It is not just that Cal Gal. Tax breaks take money out of the redistributive scheme we call the government and privatize wealth in a way that undermines broad middle class security. Which is what the Revolution is really about.

Posted by: bellumregio on February 1, 2006 at 2:36 PM | PERMALINK
A HSA compatible policy is a high deductible policy that doesn't offer copays.

Yes, those are the existing restrictions. There is no good policy reason for such a restriction (there are reasons why many, though not all, people choosing HSA's might choose that type of insurance if given a choice, but that's not a justification for the restriction; there is no logical conflict between having an HSA and having a low-deductible plan, and/or one with copayments.)

Posted by: cmdicely on February 1, 2006 at 2:42 PM | PERMALINK

... these proposals sound pretty good, don't they?

The key word in that quote is, "sound." These are not good proposals. They are merely designed to sound like good proposals.

Max Sawicky explained why recently. He spake, you listen.

Posted by: Mathwiz on February 1, 2006 at 2:51 PM | PERMALINK

There is no good policy reason for such a restriction

Maybe, but I don't think it would make much sense for a consumer to pay the higher premiums of a low deductible plan and contribute to an HSA
unless you had a lot of extra cash and were looking for a tax shelter. It may be that they are trying to prevent people from using it as an investment vehicle.

In my case, the high deductible plan that goes
with my HSA is not much higher than the plan I was in before, but the premiums are only half of what I was paying before.

For a lot of people, an HSA is a good deal. As a solution for the problems with healthcare, it has a lot of holes.

Posted by: Stephen on February 1, 2006 at 3:21 PM | PERMALINK

"So who out there is willing to step up to the plate and start arguing for something big?"

Wes Clark, for one. See his superb speech to the New America Foundation (1/30/06).

Posted by: Ellen Dana Nagler on February 1, 2006 at 3:23 PM | PERMALINK

Health care should not be a class issue. The rich should get exactly the same benefit as the poor. It's just as likely that a rich person will have a heart attack as a poor one; perhaps even more likely.

If the lefty wonk rhetoric is that 'all Americans should have health insurance,' then all Americans should benefit from the policy.

What is needed for the poor is a vehicle for savings. I happen to think that treasury bills are the best way to accomplish that, for a number of reasons. So in addition to some tax break for insurance and/or health care costs, there should be a tax break for small-principle long-term investing. You can buy a series I bill starting at $25... Crank down the rate of taxation on these kinds of investments if the amount is below, say, the current per-capita income, or some other useful upper limit.

Democrats should encourage Americans to save while talking about the ridiculousness of a $5000 deductible. Republicans' DNA causes them to vote for tax breaks so it could easily happen, and more Americans will lend money to the government (even rich people who want to take advantage). Deficit goes down even though debt goes up.

Regardless of the specifics, the issues for Democrats have to be:

1) Everybody benefits, even if they make a lot of money, because the idea is that poor people will eventually be more wealthy. They can set up their health care pattern without being concerned about penalization once they're more down the path towards the American Dream(tm).

2) Encouraging Americans to save, especially those who have lower income, combined with the idea of buying government issue, be it treasury or local bonds. This would be part of the path towards the previously-mentioned American Dream(tm).

Posted by: Enoch Root on February 1, 2006 at 3:25 PM | PERMALINK

There are a couple reasons these plans are pathetically useless. First, what they are primarily designed to do is [1] make money for the financial industry and [2]shift the burden of healthcare from the employer to the employee.

The 'conservatives' [and god am I tired of that totally discredited term--please let's call them 'radical rightists' or something more accurate] are also really hostile to the insurance industry. They don't the idea of a risk pool that people contribute to, even that is too socialist for them. They want every transaction to cost as much as possible for the consumer, so that businesses will benefit more.That's what their brand of capitalism is all about.

But the fact is, most people will never, ever, be able to manage covering all their medical costs. I had one major, but not uncommon, illness and the bills were over $180,000. Insurance paid for all but $30,000 but that still took years to pay off. And at the time, I had a very good job. The average family income is below $50,000 a year.

These proposals are a cruel joke.

Posted by: drindl on February 1, 2006 at 4:12 PM | PERMALINK

"Another part of the plan which isn't mentioned on the list (but I'm sure I heard it somewhere) was the idea that after age 55, you can withdraw money from the plan for non-medical purposes. Can you say tax shelter for the super rich? I can."


Gheby's note deserves to be repeated.

Posted by: cld on February 1, 2006 at 4:20 PM | PERMALINK

Maybe, but I don't think it would make much sense for a consumer to pay the higher premiums of a low deductible plan and contribute to an HSA

It would make sense for anyone who has an FSA but doesn't fully use it to switch to an HSA, if permitted, no matter what kind of insurance they have.

An HSA is essentially tax-advantaged self-insurance. It makes sense for anyone whose third-party insurance doesn't cover 100% of their medical costs, i.e., everyone. The relation between amount and type of third party insurance and amount of HSA contribution that is right depends on personal risk tolerance and a number of other factors that very from person to person and situation to situation.

Posted by: cmdicely on February 1, 2006 at 4:39 PM | PERMALINK

It makes sense for anyone whose third-party insurance doesn't cover 100% of their medical costs, i.e., everyone.

See cld's comment above yours. If you don't place some limitations on the HSA, don't you run the risk of it becoming another tax shelter for the wealthy ?

I think that one of the intentions of the HSA program is to help those who don't have the option of a lower deductible plan, not to benefit those who are already covered.

I don't see HSA's as a solution for our healthcare problems, but I think you would get more mileage by focusing on the big picture and not the details.

Posted by: Stephen on February 1, 2006 at 5:12 PM | PERMALINK

'the fake fake al' posted:

"I think HSA is a Roveian trap. Dems are going laugh at it, bloggers will write endlessly about how it can never work, then Rove will use it's failure to beat the dems over the head as obsturctionisnts in Nov."

Rove tried that with their Social Security "reform". He sent the Boy Emperor Clown Criminal out to say the nasty Democrats were being obstructionists because they were against his "reform".

That tactic crashed and burned BIG TIME.
.

Posted by: VJ on February 1, 2006 at 5:16 PM | PERMALINK
If you don't place some limitations on the HSA, don't you run the risk of it becoming another tax shelter for the wealthy ?

Not if you can't take money out of them without a substantial tax penalty (treat them as current year income plus a penalty tax), ever, for non-healthcare purposes.

I think that one of the intentions of the HSA program is to help those who don't have the option of a lower deductible plan, not to benefit those who are already covered.

There is no reason to use HSA's to do this: HSA's don't make healthcare more affordable in and of themselves, they just amount to self-insurance instead of risk-pooling insurance, without affecting the total cost overall. The only part of the plan that affects affordability at all are the particular tax breaks, and there is no reason to restrict those to HSA's except for an ideological desire to discourage risk pooling via traditional insurance and to encourage self-insurance.

As far as access, affordability, and choice, the sensible plan, if you want to use tax incentives, is to apply the deductibility and credit provisions to private healthcare or health insurance expenses whether they are direct payments for services, self-insurance via an HSA, or traditional risk-pooling insurance, regardless of whether its a high-deductible or low-deductible plan, with or without copays.

There's no reason for a tax credit to give people $3,000 (for instance) toward an HSA rather than giving them the same credit and letting them spend it toward traditional insurance premiums. Unless, of course, your purpose is not to make healthcare affordable and accessible, and encourage consumer choice, but instead to promote a particular product (HSA/HDHPs) for the purpose of discouraging risk pooling by providing weighted tax incentives to encourage HSA/HDHP participation.


I don't see HSA's as a solution for our healthcare problems, but I think you would get more mileage by focusing on the big picture and not the details.

The "details" are relevant to the effect the policy will have on the "big picture". Here, the big picture is that this is a plan to discourage risk pooling, not a plan to promote choice, affordability, and accessibility of health care.

Posted by: cmdicely on February 1, 2006 at 5:34 PM | PERMALINK

There is no answer that is acceptable to the American people but to nationalize the health care insurance industry and remove all the graft and corruption inherent in this industry. The rest of the grown up planet does it this way so that their citizens don't fall through the floor, to protect the common public health (provide for the common defense and promote the general welfare? Hello GOP greedmongers!), and prevent the ascension of the medical profession into the mafioso practice it is becoming in the US. "Wanna live? Give us all your money, and a chunk of your kids. My Porsche dealer has needs."
If you want plastic surgery so your lips and whatever look bigger or smaller, that should be out of your pocket. If you are a goner you should get pain meds and maybe a trip to Hawaii, it's cheaper than watching you die in Bill Frist's hospital. If you just don't want to die from preventable illness, that should be something that doesn't cost an arm and a leg. If you don't want to die from bird flu, anthrax, SARS, AIDS, Ebola, and who knows what other communicable and potentially epidemic diseases, a national medical plan can ensure that people don't avoid getting care until they have coughed on everybody on the bus or subway.
Oh, and Republicans are too crooked to implement any programs. Obstructing a crime in progress should be rewarded, not excoriated.

Posted by: boing!!! on February 1, 2006 at 5:43 PM | PERMALINK

4 HSA argument... see: http://www.democracynow.org/article.pl?sid=06/01/31/1532249

Posted by: Craig on February 1, 2006 at 7:24 PM | PERMALINK

Excellent posts, cmdicely. Thanks so much for taking the time to do them.

Posted by: Aunt Deb on February 1, 2006 at 8:35 PM | PERMALINK

> This may seem heretical, but I think the goal
> should be to find those proposals which do good
> rather than to find reasons to oppose them all. If
> any exist, then negotiate from their starting
> point toward our goal.

Seriously, how many times do we have to go through this? Like Tommy Lee Jones in _The Fugitive_, the Radicals DON'T MAKE DEALS. They don't compromise. They don't work toward some mythical "center". EVER. The Radicals want the whole pie for themselves. Everything. Victory on every issue, and 95% or more of the dollars in their pockets. They not only work to achieve these goals, they work to betray, humiliate, and finally destroy any Democrats who try to "compromise" with them.

Got it now? Thanks.

Cranky

Posted by: Cranky Observer on February 1, 2006 at 8:59 PM | PERMALINK

cmdicely on February 1, 2006 at 12:44 PM,

that's an excellent start. if the Democrats rally around it and hammer on it all summer and fall, they can do well.

I don't say I agree, but it's provocative, and I might come to agree in the long run. Not as it is now, probably, but some modified form. If Democrats start proposing something like it, we'll come back to it.

Posted by: contentious on February 1, 2006 at 9:36 PM | PERMALINK

The problem is MEDICARE. It is going to be providing healthcare to a flood of new recipients over the next 15 years. Medicare reimbursements don't cover the cost of providing those services, so the private sector makes up the difference through ever rising charges and insurance premiums. The system is already in a death spiral.

Mr. Bush's proposal, like his others, is a bait and switch. The real beneficiaries will be businesses which will not be required to fund healthcare insurance for their employees. These costs are a big contributing factor to their lack of competativeness relative to foreign labor costs.

Of course, it's no answer to the problem, but it does serve his constituency and is another way to bleed the middle class into debtor servitude.

Posted by: brisa on February 1, 2006 at 10:28 PM | PERMALINK

Not if you can't take money out of them without a substantial tax penalty (treat them as current year income plus a penalty tax), ever, for non-healthcare purposes.

But then healthy people are stuck with accounts full of money that they can't access. Your idea would be a disinsentive to save. Currently, they can pull the money out (no penalty except for income tax) after they turn 65.

There is no reason to use HSA's to do this: HSA's don't make healthcare more affordable in and of themselves, they just amount to self-insurance instead of risk-pooling insurance, without affecting the total cost overall. The only part of the plan that affects affordability at all are the particular tax breaks, and there is no reason to restrict those to HSA's except for an ideological desire to discourage risk pooling via traditional insurance and to encourage self-insurance.

I would have saved $1000 on healthcare costs last year if I'd had an HSA (compared to the traditional plan I was offered). Sound more affordable ?

My traditional policy premiums have gone up signifigantly every year and my employer has been generous enough to keep offering inusrance. This year he offered us a choice and after a couple weeks of running the numbers, the HSA works out to be pretty good deal.

Here, the big picture is that this is a plan to discourage risk pooling, not a plan to promote choice, affordability, and accessibility of health care.

It does make it more affordable for alot of people and since its cheaper, it is more accessible. The plan I have actually adds more protection for high end expenses than my traditonal plan did. I have to bear a little more of the low end risk, but the tax break and the lower premiums help defray that cost.

I would love to see a single payer system and I agree that there are problems with HSA's. I don't agree that the points you are making are signifigant in the big picture.

Out of the myriad of problems with our healthcare system, the fact that people who have
low deductible plans paid for with pre-tax payroll deduction aren't getting the same tax breaks as people with high deductible plans,seems pretty minor. Also, see FSA's.

Don't cut of your nose to spite your face.


Posted by: Stephen on February 2, 2006 at 8:49 AM | PERMALINK




 

 

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