September 27, 2004


New Health Savings Accounts Only Favor Savers (John Wasik, 9/27/04, Bloomberg)

If you are relatively young, healthy and a disciplined saver, the new Health Savings Account is like a super-sized Individual Retirement Account.

On the other hand, if you are a poor saver and have chronic health
problems, the new account may be an expensive shell game that mocks the
claim of the White House and lawmakers who say it's the bright future of
U.S. health care.

Touted as an "ownership" solution to health care, the HSA shifts more
medical expenses to individuals in exchange for a tax-sheltered savings
or investment account.

The point of course is to start them at birth so that you have them during the years when almost all of us are relatively healthy. If you're unfortunate enough not to be so blessed it will obviously make sense for you to get a less attractive but more comprehensive form of coverage.

Meanwhile, an added benefit of the accounts is that they may tend to make people better savers generally. Even people who are not good savers will presumably prefer to keep money for themselves than squandering it on needless medical procedures and treatments, no?

At any rate, you don't design universal systems for the exceptions, but for the rule.

Posted by Orrin Judd at September 27, 2004 8:34 PM

HSAs aren't designed to be a silver bullet for containing health care costs, any more than IRAs are the sole vehicle for retirement savings.

However, like IRAs, HSAs make good sense and will prove valuable to a broad segment of the population. A thing need not be universally valuable, to have value. There's even a cliche that makes the same point.

Posted by: Michael Herdegen at September 27, 2004 9:44 PM

Well in fact, universal systems are often designed for the exceptions. They're the poor sob stories that either suck legislators in, or that legislators use as an excuse to lard a program up.

Posted by: jsmith at September 27, 2004 10:14 PM

I don't have any objections to these accounts in principle, though my experience with one was unedifying.

However, I doubt whether large amounts will accumulate during healthy, young years, unless women stop having babies.

Two or three kids in the mid- to late-20s will pretty much wreck any accumulated savings, unless the saver is so flush that he doesn't really need to worry about paying bills.

Posted by: Harry Eagar at September 28, 2004 2:03 PM

No wonder you're a socialist, you'll never understand compound interest.

Posted by: oj at September 28, 2004 4:00 PM

Let me guess. You didn't pick up the bill for your kids.

Do you know what they cost?

Posted by: Harry Eagar at September 29, 2004 5:39 PM

You could have our three kids for under $10,000 total. That's would barely dent a lifetime health savings account..

Posted by: oj at September 29, 2004 6:47 PM