November 13, 2005

IT'S ABOUT SAVINGS, NOT MEDICINE:

Young, uninsured, and unconcerned: Citing the expense, some balk at health plan mandate (Scott S. Greenberger and Maria Cramer, November 13, 2005, Boston Globe)

East Boston realtor Ulises Rosa is 31 years old and healthy. He has a taste for fine wine, likes to host catered dinner parties, and travels often. But he bristles at the idea that the state may force him to buy health insurance, just as he must buy auto insurance.

''A car you can choose to own," said Rosa, who makes more than $60,000 a year. ''You can't force me to get insurance if I don't want to. It's my life."

Rhetoric surrounding the healthcare debate in Massachusetts has been largely shaped by plans to extend coverage to the poor. But two of the major initiatives under consideration by the Legislature would also, for the first time, require everyone who is able to afford it to buy private health insurance. Massachusetts would be the first state to impose such a requirement, a shift being hailed by many observers as forcing a new personal responsibility in the national debate over how people should get insurance.

But such a requirement, which would be aimed largely at the 200,000 or so people in the Commonwealth who are young, single, healthy, and without coverage, is setting off resentment among the uninsured.


The reality is that rather few young people need health care, which is why mandatory universal HSA's are such excellent clandestine ways of building their wealth.

Posted by Orrin Judd at November 13, 2005 9:51 AM
Comments

The minute that this guy discovers he has a heart condition, he'll expect some insurance company to pick up the tab. Good health is a temporary condition.

HSA's just set money aside for out of pocket expenses related to copays and deductibles. If you're not insured, you'll use up your account very quickly the minute you are admitted to a hospital.

Posted by: Robert Duquette at November 13, 2005 12:56 PM

Robert - my understanding is that the HSAs allow you to set aside money for all medical expenses. And that it can grow as you don't use it up and eventually be large enough to cover major items. And it allows you to cover routine costs so that you can live with a very high deductable and lower your overall insurance premiums.

Posted by: AWW at November 13, 2005 1:10 PM

Robert:

That's entirely wrong.

Posted by: oj at November 13, 2005 1:23 PM

Robert: If people truly understood HSA's they'd be lining up to get one. When it comes to an HSA, your heart condition patient above has 2 things to focus on: Deductible & Max-Out-of-Pocket (MOP). To make it as difficult as possible, we'll assume he's single and has a qualifying HDHP policy with the MAXIMUM ALLLOWABLE deductible & MOP. The deductible is assumed in the MOP. So MOP is the worst-case nut to cover because the HDHP pays 100% after that. Here's his challenge while he still has his potentially fleeting good health: PUT AT LEAST $5,100 PRE-TAX DOLLARS INTO THE HSA. Under the current limits, he can only put $2,650 in per year. But the HSA now operates on a similar tax calendar as the IRA. Conceivably, he could put in $2,650 today and $2,650 on 1/1/06 designating it as his 06 contribution.

To the extent something catastrophic happens sooner and/or our spendthrift friend can't seem to keep his account at the $5,100, he simply finances the difference with the hospital at 0% interest. (A "loan" which, by the way, he'll be repaying with TAX FREE dollars thru the HSA).

Sure, it's a neat fringe benefit that he can spend the TAX FREE HSA $ on all sorts qualified medical expenses that would otherwise be subject to a 7% of AGI threshold on Schedule A. Younger folks and lower income folks typically don't itemize, so this is an immediate benefit to them. (And yes, it works for the $200k AGI too since he can write off dollar number 1 instead of dollar number fourteen-thosand-and-one.)

Knowing that the first dollar into and out of my HSA for those types of expenses is completely Tax Free doesn't make one want to spend them more, it just hurts a little less when you do.

Properly used, HSA's allow you to follow a great basic rule of financial success: Only insure what you can't afford to lose.

Posted by: John Resnick at November 13, 2005 2:09 PM

1. As for the young, healthy uninsured, there are two issues. First, if they get sick, they're going to be given care even if they can't pay for it, which is an argument for making them pay. Second, the reason the state is so eager to make them pay is that, as a whole, they won't need much care and so will bring down the average premium. The alternative, as the discovered in New York a few years ago, is that only the sick take the state's plan, which starts it on a quick spiral towards bankruptcy.

2. We've looked at HSAs a couple of times, and haven't found them attractive. Here is Blue Cross/Blue Shield of Massachusetts' quote page. For us, a plain vanilla regular HMO plan would cost $1285/mo, or more than $15,000 a year. The cheapest HSA plan would still cost $809/mo or just under $10,000 annually. However, the deductible is $10,000 and no prescription benefit is available. (So even though there is a savings, there's no cash flow benefit, unless you don't fully fund your HSA, and then what's the point.) As even a healthy family will spend between $1000 to $2000 on health costs in a year, the upside just doesn't, to me at least, seem worth the downside risk.

Posted by: David Cohen at November 13, 2005 2:12 PM

How many single white males spend $1 a year on health care?

Posted by: oj at November 13, 2005 2:17 PM

You do buy toothpaste, don't you? Please say yes.

Posted by: joe shropshire at November 13, 2005 3:31 PM

joe - Now, or when he was single?

Posted by: pj at November 13, 2005 4:20 PM

With insurance money? No.

Posted by: oj at November 13, 2005 4:47 PM

I'm used to the HSA accounts through my employer, where I'm allowed to put aside a maximum of 2,500 a year tax free. But it's a use it or lose it plan, I can't roll over the balance of my account to next year. I wasn't aware that there were plans allowing you to build up your balance over time.

My point is still valid. Every person should at least have catastrophic health coverage. Healthy, young people do get in car accidents or break their necks skiing, and as David pointed out, we will treat them even if they can't pay. We have socialized medicine whether we want to call it that or not. So lets make sure everyone contributes their fair share to the common good.

One benefit to a government plan like Hillary-care is that we will take the burden for health insurance off employers, and make them more competitive in the global marketplace. GM and Ford would not be in the straits they find themselves in now if they didn't have healthcare obligations to their current and retired workforce.

Posted by: Robert Duquette at November 13, 2005 6:02 PM

That's not an HSA.

Posted by: oj at November 13, 2005 6:13 PM

Mr. Duquette is wrong with a capital R.

We live in NJ. The boys in Trenton very nicely ran nearly every insurer out of town and offered us "a choice" of insurers, some of whom were offering us plans that cost $24,000 annually! (That's not a typo.) Thanks, Trenton!

We moved back to NJ in 1993 (from CA), were insured until they "reformed" our health insurance industry here, then we went without. We've been without ever since. I dropped off a packet of info and a nasty letter to Rep. Bob Andrews (D...of course, it's Jersey! His office is a 60-second walk from my front door.) and got a weepy form letter back about "...the poor, the disadvantaged, etc...") He doesn't get it-- there are working folks who don't smoke, who run, who pay for doctor visits, prescriptions, minor surgeries, etc. out of pocket. We just want CATASTROPHIC, if we can get it.

When we heard Mitt (who is as empty a suit as they come) talking about his evil plan, we shuddered.

Offer us catastrophic, MSA's and encourage doctors and clinics who are CASH ONLY, and you'll see a revolution.

BTW: Wal-Mart is experimenting in FL with clinics...we assume they'll be cash-only...wait until that stool sample hits the fan.

Posted by: Brian McKim at November 13, 2005 8:09 PM

Robert:

Yeah, that's not a proper HSA; as I understand it, you're not eligable for a HSA if you have a HMO with low (normal) deductables.

Posted by: Mike Earl at November 13, 2005 10:02 PM

Brian: Except that in Massachusetts, catastrophic insurance (i.e., covering expenses of more than $10,000 in a year) still costs $10,000 and doesn't include a prescription benefit. As a rule of thumb, if you're going to have more than $10,000 worth of tests, hospital admissions and doctor's visits, you're also going to have at least that much in prescription costs.

Posted by: David Cohen at November 13, 2005 10:43 PM

Holy Smurf, you folks live in some expensive places.

My Humana family plan has a $ 1,000 deductible and costs $ 8,500/yr.

Posted by: Michael Herdegen at November 14, 2005 6:06 AM

Is hygiene considered health care now? The concept that Walmarts is testing in Jacksonville is something to keep an eye on.

Posted by: erp at November 14, 2005 7:01 AM
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