II. President Bush's Health Savings Accounts

President Bush's plan sounds good in theory but it is impracticable in application. Bush aims to address the "root causes of rising health care costs" by establishing Health Savings Accounts (HSA), allowing small-businesses to establish Association Health Plans (AHP), allowing people and/or employers to shop across state lines for health insurance and tort reform.

In theory, a Health Savings Account (HSA) is supposed to allow individuals and/or small businesses to purchase low premium, high deductible health care plans while the individual and/or small-business contributes pre-tax dollars, up to the allowable limits (a per year limit of $2,600 for individual and $5,150 for families), in a HSA. The HSA is to be established early in one's life, when health care costs are minimal, thereby allowing the account to accumulate a large surplus due to the accumulation of tax-free interest and contributions. As one grows older, the account is supposed to have sufficient build-up to cover the high deductibles and the rising premiums of the plan.

The problem with HSA's is twofold: it assumes rational actors and it assumes that there is a point in one's life where health care costs are minimal, thereby allowing a surplus to accumulate. I will use myself as the prime example for this flaw. I am a 25-year-old male who eats fairly well, keeps in pretty good shape and have not been to a doctor in at least five years. I also have a large build-up of student loans and limited income. Though I consider myself a fairly rational actor, I also have a sort of youth induced "unbreakable" feeling. When I join the workforce, I will need substantial amounts of my income to start my life (i.e. purchase a home, car, furniture etc.), and the rest of my income will go towards paying off my student debt and maybe into a Roth 401K. Contributing money into an HSA will have a small priority on my list of income distribution. The money can be better spent in other areas since I do not foresee a medical crisis in my immediate future. Now, when I get married, health care will rank higher on my priority list. I will start making contributions to my HSA because of this life-altering event. The problem is that I will also be looking to start a family. By starting a family, I will incur a substantial amount of health care related debt, most likely exceeding the maximum contribution levels to the account. Therefore, I will never see any account accumulation. Thus, the problem is that most people will not contribute to their HSA until they reach a point in their life where substantial health care costs are foreseeable, thereby making the account's accumulation minimal.

It could be argued that the employer would contribute to my account as part of an employment perk. This is an irrational argument given the statistics that I stated at the outset of this series. The trend is for fewer employers to offer health insurance because of the rising premiums. If an employer contributes to my HSA along with providing high deductible health insurance, then the employer will be spending as much money (if not more) than they are currently paying in insurance premiums. The trends clearly show that employers are becoming less willing to shoulder this burden (also the fact that most employers require co-pay is more evidence of this).

I will be busy this entire weekend because my family is coming up for the Badger homecoming game. My next post will be up early Monday morning. Again, I would like to thank Gordon for this opportunity.

Health Care | Both Bush And Kerry Miss The Mark On Health Care (Post #2 of 9)&">Bookmark

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8345157d569e200d83543a0b869e2

Links to weblogs that reference Both Bush And Kerry Miss The Mark On Health Care (Post #2 of 9):