20 December, 2009

HSAs and health care reform

My family has, and uses, a Health Savings Account. I think they're one of the best health care reforms ever proposed. They were enacted during the Bush years, which is one reason I have a hard time believing the conventional wisdom that Republicans are dead set against any health care reforms. Then again, if your idea of health care reform involves demonizing insurance companies in public while dealing in private to exchange massive subsidies for rigid government control, I guess you wouldn't consider HSAs a reform, either.

My antipathy to the current proposals doesn't end there. According to several news sources, the Senate bill would extend Medicaid to families whose income is 300% above poverty level. My income and family size place me well below that level, which in 2007 was $72,000 for a family of 5. So I see this "reform" as another SCHIP fiasco, but now with a president who's all too happy to make our grandchildren debtors. Forgive me if I don't thank the government for classifying me a ward of the State.

I'm trying to figure out the future of HSAs in the bills under consideration, but if I read things correctly, the bills say nothing about them. The effects would all be indirect, which reminds me of the Law of Unintended Consequences.

Reading the to and fro, I'm really surprised at some of the criticisms. In particular, this misrepresentation of a statistic:

HSAs end up merely serving as a tax shelter for high-income individuals for the insurance plans they already have -- a charge bolstered by the GAO's finding that 41% of those who did make HSA contributions withdrew nothing for health expenses during the year.

(at the end of this otherwise excellent article)
Maybe I misunderstood, but that finding (which I don't dispute) bolsters all of two charges: Jack and squat.

Why? Imagine, for the sake of argument, that I had contributed to my HSA this year, and paid all my health expenses out of pocket. It would mean nothing more than that I had been able to pay my health expenses out-of-pocket, and didn't need to draw on the HSA. That's the entire point: to save money for the day when expenses are beyond what you can handle. That there are people who oppose this speaks volumes about what is meant by "health care reform".

Here's another statistic from the Wikipedia page:
One industry study matched HSA account holders to the neighborhood income ("neighborhood" was defined as their census tract from the 2000 Census) and found that 3% of account holders lived in "low-income" neighborhoods (median incomes below $25,000 in 1999 dollars), 46% lived in lower-middle-income neighborhoods (median incomes between $25,000 and $50,000), 34% lived in middle-income neighborhoods (median incomes between $50,000 and $75,000), 12% lived in upper-income neighborhoods (median incomes between $75,000 and $100,000) and 5% lived in higher income neighborhoods (median incomes above $100,000).
Never mind that this statistic contradicts the previous criticism. Rather, what's really weird is that this appears in the section on criticisms, even though it implies that the people most active in HSAs are middle income types. This appears as "support" for the criticism that,
Critics contend that low-income people who are more likely to be uninsured, do not earn enough to benefit from the tax-breaks offered by HSAs. These tax breaks are too modest—when compared to the actual cost of insurance—to persuade significant numbers to buy this coverage.
Now, the lowest income levels are (generally) supported by Medicaid, though not always. So apparently it's a bad thing that HSAs encourage middle income types to save money. With that attitude driving public policy, no wonder the housing market overinflated.

I agree that there are legitimate criticisms of HSAs, and they're not for everyone. (Certainly not for low-income individuals.) My biggest complaint regards the virtual conspiracy of silence surrounding them. Few employers offer plans, and few financial institutions offer accounts. I'm lucky that my employer offers a HSA-eligible plan, but when I attended the orientation, the HR representative made a big deal of the fact that they don't know anyone in the area who actually offers an HSA. She did play up the FSAs, but that's a classic scam in my book, inasmuch as unused expenses return to my employer.

One of the joys of my life is that I can take responsibility for myself and those God has entrusted to me. I know that I am lucky, and that not everyone has this opportunity. However, I do, and I will not support, but actively oppose, any health reform that tries to take this away from me.

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