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Recently in the LA Times, columnist David Lazarus writes in “Health Savings Accounts are Ill-advised” multiple reasons why Health Savings Accounts (HSA’s) may not be helpful, and concludes that as an alternative, Medicare should be extended to everyone, using tax dollars to pay for care instead of premiums, deductibles and co-pays.

Though I may agree with Lazarus’ suggestion politically, practically, it makes no sense whatsoever.  In response to his article, I’ve brought up three points to consider:

The government may not be able to fund additional healthcare spending beyond a certain point.

Let’s review some of the facts about the Federal Government’s finances:

1)The government currently has a federal deficit of about $10.6 trillion, or about $37, 316 per US citizen

2)Healthcare spending in 2008 was $2.4 trillion dollars2, or 17% of the Gross Domestic Product.  Healthcare spending is forecasted to reach $4.3 trillion dollars by, or almost 20% of the GDP by 20163, due to the increased numbers of Baby Boomers at or beyond retirement age.

3)We are currently in an economic crisis, with the government spending potentially $700 billion to buy troubled bank assets, and at this writing, President Obama will be pushing through another $900 billion in economic stimulus spending

You don’t have to be an economist to be concerned about the government’s ability to pay for everyone’s healthcare, either now or in the future.  As a beneficiary of Medicare, I would be extremely concerned that the government would have to make cuts in programs that affect me, interrupting my care and affecting my long-term health.  In that case, I would want to ensure that I had as much control over my dollars as possible.

2)HSA’s are not intended for everyone, but can be part of a retirement portfolio strategy for those that can afford it

HSA’s, like many tax-advantaged accounts, including IRA’s and 401k’s, tend to benefit those that can afford to put the money away.  Despite this, Mr. Lazarus has not suggested that people stop putting money away in 401k’s or IRA’s, so why suggest this for HSA’s? The similarities to 401k’s don’t end there – HSA’s were designed to supplement Medicare and insurance for healthcare expenses, much like 401k’s were designed to supplement Social Security and company pensions for retirement.  However, while living expenses and cost of living may change over time, health care expenses invariably will go up with time and age.

Over the last several years, more healthcare costs are being shifted to the consumer, no matter what the income status or coverage may be, meaning patients will have to shoulder the cost directly, HSA or not4.  This ends up being a common sense question then:  If you’re going to have to pay for your care, would you rather pay out of pocket with your after-tax dollars, or use your before tax dollars to pay for your care?

HSA’s should be part of a full retirement portfolio, with insurance products (i.e. health, long-term care, life, etc) and investment planning.  In other words, HSA’s should help some Americans do what they need to do for their future – namely to save some of their earnings to pay for their own healthcare, without bankrupting their futures (or the government’s).  Given the potential benefits, it makes no sense to avoid HSA’s because not everyone can benefit from them. The message should be:  if you have access to it, you should put some of your savings away in your HSA, to help cover your healthcare costs in the future.

3)HSA’s should be improved on, or another vehicle should be created to allow for more US citizens to benefit from them

Signed into law in 2003, HSA’s were intended to replace the original Archer Medical Savings Accounts, in which the saved balances could not be carried over into subsequent years.  HSA’s are not perfect, and as we gain more experience with them, reform measures will have to be advocated for, in order to help them conform to the real needs of American consumers; it will be up to us as voters to communicate our concerns to the government and push for the changes we need.  Some of these changes may include:

1)Changing the contribution limits
2)Not requiring a high deductable insurance plan
3)Employer matching contributions

Another alternative may be to create an entirely new tax-advantaged vehicle to allow for people to save for their own healthcare costs.  If MSA’s or HSA’s are not meeting our needs, constituents need to come together and demand something that will broadly meet the needs of all.  We currently have a new President who is including healthcare reform as a key part of his Administration; we need to leverage this to create the changes we need to both cover us for our health, as well as incentivizing us for saving for our own healthcare costs.

While Lazarus makes some valid points, he comes off sounding like he wants to throw out the baby with the bathwater.  Though the HSA program is not perfect, it’s what we have to work with for now, so let’s optimally use it, while supporting future efforts to reform or improve on the system.  Our future health may depend on it

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Tags: george matthews, government health care, health care, health care costs, health insurance, health savings, hsa, insurance plans, medical savings account

About the Author: George Thomas Mathew, MD, MBA has spent the last 20 year in the healthcare field trying to help patients get access to and afford care. He is a Yale-trained Internal Medicine physician, and has worked at General Electric, Goldman Sachs, Pfizer and WebMD. Dr. Mathew has also contributed to Businessweek’s “MBA Journal” section, and has lectured at Duke University’s Fuqua School of Business for their Health Sector Management Program.

This entry was posted on Monday, February 23rd, 2009 at 9:40 pm and is filed under health care. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.