One of my readers and a frequent contributor of information worth posting (Mr. Harvey Poppel) crafted the following suggestions with regard to Health Savings Accounts. I like nearly all of these suggestions. See what you think.
Avail all consumers of two tiers of portable insurance coverage:
- Basic-care policies (BCPs) with no annual or lifetime caps –which mainly cover prevention, diagnosis and treatment of serious/debilitating conditions and help assure survival.
- BCPs cannot be cancelled unless for reasons of fraud.
- Available to all regardless of pre-existing conditions or means
- Premium-care policies (PCPs)–cover any/all consumer health-care wants beyond basic-care needs.
Establish new tax-advantaged “Health-Care Accounts” (HCAs) as the principal means for consumers (whether employed or not) to manage their coverage and health-care. Features include:
- Two flavors analogous to conventional and Roth IRAs.
- Conventional HCAs (contribution limits means-tested) with the same investment and taxability rules as conventional IRAs.
- Roth HCAs (no means testing)–same investment and taxability rules as Roth IRAs.
- Current HSAs can be grandfathered or converted to HCAs
- Unlike HSAs, HCAs can be used to pay insurance premiums for BCPs and/or PCPs.
- More liberal limits than current HSAs on annual contributions with no lifetime cap.
- Modestly more liberalized spending than HSAs for products/services not normally covered by insurance (e.g. pre-paid physician services).
- Balances remaining in an HCA at death can be passed down to beneficiaries (like IRAs) motivating elderly consumers and their influencers not to spend excessively in the final years of life.
- Contributions to HCAs by employers, consumers and through transfers from IRAs encouraged as well as by direct deposits from the federal government as the principal means of paying consumer subsidies.
- Initially larger catch-up transfers beyond HCA annual contribution limits from IRAs, employers and/or employees to stake an HCA
- Means-tested larger contributions in case of catastrophic illness.
- Direct deposits of federally-funded Health Care Tax Credits (HCTC) for displaced workers
- For-profit HCA advisory services (analogous to financial advisors) encouraged to assist consumers to make informed choices
Phase-in the taxability to employees of employer-provided insurance policies.
- Encourage employers to get out of the health-insurance business by taking funds they were using to purchase and administer such insurance to fund employee HCAs instead.
- Don’t rush this process as it will take time for employer-covered consumers to grow comfortable managing their own health care
Grandfather all existing insurance plans for those who do not want to switch. Drop all penalties for those who elect to remain uninsured.
Provide federal subsidies to the financially needy above the Medicaid thresholds on a smooth sliding scale (unlike the current step function) to purchase BCPs and ensure such subsidies encourage recipients to choose the most cost-effective providers.
Over a 10-15 year period, subsume Medicare and Medicaid within the consumer-managed HCA framework.
- Under-50 year-old consumers, once they reach 65, able to transfer an actuarially determined factor of their cumulative past Medicare taxes to their HCAs enabling them
- Optional federal government direct-deposit subsidies to HCAs for those 50-65+ seniors wanting to gain control of their own health-care spending by opting out of Medicare.
- Eventually, government subsidies to Medicaid recipients deposited to their HCAs enabling them to purchase their own BCPs equivalent to non-Medicaid consumers. This would be optional for those unwilling to, or incapable of setting up HCAs.
- The health-care-facilitator profession encouraged to help consumers manage transition away from government health-insurance programs
Don’t rush either of these two processes as it will take time for many consumers to grow comfortable managing their own health care and to wind down the attendant government bureaucracies.
Thanks HP for sharing all the thought you put into these recommendations.