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Deregulate Health Savings Accounts

25 Dec 2011
Let's stop talking about repealing Obamacare, and start talking about reforming the American health care system. Obamacare is a fait accompli. Meanwhile, a simple reform can go a long way toward easing the cost burden of the everyday patient.

Changes to the American health care system passed in 2009, referred to disparagingly as Obamacare, are no longer a single, separate thing, if they ever were. They are in effect, or going into effect, in a very complex way. They cannot be repealed, only destroyed as you might perform an autoproboscisectomy because your face puts you off. As with any complex system, destroying a portion of it will certainly cause damage throughout. Since we all have to worry about health care in our lives, we all have a stake in a sustainable, reliable health care system. Affordable would be nice, too.

The primary accomplishment of the recent changes is to creep a little closer to universal coverage. And when we say coverage, we do not mean health care per se, we mean possession of a health insurance policy. A person can have insurance and still not be able to pay the co-pay or deductibles.

Much of the expense of this coverage is likely to born by the taxpayer. As additional health care demands are processed by the existing health care system, demand will drive up prices to patients. New regulations are already driving up prices. The mandate to require coverage for pre-existing conditions, while laudable, does not get at the primary problem: the cost of such insurance. I have a buddy, a single adult male, whose insurance went up to $1,700 a month due to his pre-existing condition. This is simply a death sentence for someone who cannot fight back, as he can, barely.

Here is a simple reform that can go a long way toward easing the financial burden of today's health care receivers  that is, everybody: Allow any U.S. citizen to create a Health Savings Account with essentially the same requirements and caveats as a Traditional IRA, with these changes: No maximum deposit and HAS withdrawals may be made at any time for medical purposes, tax free. Children would have an HAS set up at the start (or at birth), controlled by their legal guardians until they reach 18.

A few adjustments would be required to make this a viable approach. Clearly some agency, perhaps the IRS, might have to monitor the types and amounts of medical purposes that go tax free or serious abuses will result. It would be regrettable but a small price to pay. It might also be wise to limit the extent to which such funds may be invested, but we can see possible problems with forbidding all speculative use. It would be reasonable to forbid trading of all commodities and derivatives, though  and margin trading of anything at all.

Another adjustment would be to federal spending. Widespread use of HSAs could put a serious dent in federal tax revenues. Legislators would be faced with raising taxes to make up the difference, or reducing spending. The choice is classic, but the cause would be far more just than most: For once it would affect everyone instead of a favored social class.

HSAs already exist today, but they are so burdened by requirements for your employer (if you have one) that they are meaningless for most purposes. By deregulating HSAs we can create a path toward individual financial responsibility for health care.

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