Today's Downsizer Dispatch
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Quote of the Day:
"Perhaps the sentiments contained in the following pages, are not yet sufficiently fashionable to procure them general favor; a long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable outcry in defense of custom. But the tumult soon subsides. Time makes more converts than reason."
- Thomas Paine, Common Sense, January 1776
If you live in Northern Virginia you can meet Jim Babka this evening. Jim is in the Capitol to meet with various organizations about the "Read the Bills Act." He will also be speaking to a Ron Paul MeetUp group. Look here for details.
Subject: Your questions answered
Kathleen Casey-Kirschling, a retired teacher from Cecil County, Maryland, just became the first Baby Boomer to file for Social Security benefits.
This marks the start of a demographic tidal wave that will compel current and future taxpayers to somehow pay 65 trillion dollars in unfunded liabilities
for Social Security and Medicare.
Meanwhile, nearly every politician in America continues to talk rot about their great plans for making taxpayers pay for everyone's medical care too. Where will all the money come from? Money is no object when it isn't your money, and reality is no problem when you are divorced therefrom.
Meanwhile, in the land of those who can add and subtract, we will continue to promote solutions grounded in mathematical reality. We presented one such powerful solution last week
-- unlimited Health Savings Accounts (HSAs) coupled to tax deductible major medical policies.
Needless to say, we received questions, and we will now provide answers . . .
Many wrote to ask:
Where can I get a Health Savings Account tied to a major medical policy?
We answer: Jim Babka and I found ours here (click on the link for health savings accounts).
We were able to dramatically reduce our overall health care costs. Now, instead of paying huge premiums to a health insurance company, we're paying a small premium for major medical insurance, and the money we're saving on premiums is piling up in our health savings accounts, earning interest tax free.
Very soon I will go for a physical. I will visit a doctor I found at SimpleCare.com
who takes cash-only payments. I will know what the cost is in advance and I will pay the small bill out of my HSA. This is the wave of the future people, climb on board!
Of course, if you have health insurance through your employer it will be a little trickier. You'll have to persuade your employer to switch over to an HSA system, but you should ask. The savings and the benefits are substantial, and they will become even more so if we can get Congress to make a few simple changes (see the answers below).
If the money your employer pays, and your out of pocket expenses, are going into your HSA, what is your insurance premium being paid with?
In our message, "Rob your insurance company,"
we explained that your health insurance premiums would also be paid out of your HSA. Congress simply needs to make it legal for you to do that.
This one simple step would de-couple health insurance from employment. It would make the insurance policy belong to you, and not your employer. You wouldn't have to change insurance providers and risk losing coverage every time you switch jobs.
In addition, as we pointed out HERE
, both the Congressional Budget Office and the Treasury Department agree that this one simple change would also be enough to make health insurance affordable for all Americans who cannot currently afford it, but who make too much money to qualify for many of the existing government programs.
Now, ask yourself this:
Why hasn't Congress made this one simple change already? Why hasn't Congress already put insurance purchased by individuals on the same tax footing as insurance purchased by employers?
Could it be that this would reduce the need for Americans to be dependent on the government, and thereby reduce the power and importance of politicians? Could it be that this would also reduce opportunities for the politicians to dispense corporate welfare through the mechanism of tax funded health programs?
We think those two answers pretty much explain it. Therefore, it is up to us to compel the politicians to place insurance purchased by individuals on the same tax footing as insurance purchased by employers, because it's obvious that the politicians aren't going to do it on their own initiative. We'll tell you how to do this below . . .
P.M. also asks:
What about those whose medical bills are consistently far above the amount that they and their employer both contribute? That amount is currently covered by the premiums of folks who are healthy and not using the full amount paid to the insurance company.
Insurance purchased out of HSAs will work the same as insurance that is currently purchased by employers, and the premiums of the healthy will continue to subsidize the benefits of the sick. That's how risk sharing through insurance works, and HSAs will change nothing about that.
What HSAs will change is the way most routine medical expenses are paid, and how much they cost. In this regard we want to ask P.M. a question . . .
Would you like to pay your insurance company $1,000 in premiums so it can pay your doctor $100 for a blood test, or would you prefer to keep the $1,000, pay $200 for a major medical policy, pay your doctor $50 for the blood test, and keep the balance of $750 in your HSA, where it can earn interest tax free?
HSAs make the latter transaction possible. Why would your doctor take $50 from you for a blood test when he or she can get $100 from an insurance company? It's because you, with the money in your HSA, can walk out the door and get the blood test for $50 somewhere else, whereas the insurance company already has a contract with the doctor to pay the $100.
It's important to understand that insurance companies control costs by signing hardwired preferred provider contracts with doctors. But HSA patients will control costs by looking for cheaper and better providers. Doctors will be forced to compete for customers. This is how HSAs are already lowering medical costs and improving quality.
It's also important to understand that doctors have to charge an insurance company more than they charge cash patients because doctors have to pay the costs of dealing with the insurance companies, which involves a lot of forms and regulations. Patients with HSAs sidestep this red tape, so doctors can afford to charge HSA patients less. This is why more and more doctors are switching to cash only practices.
P.M. also asks:
What about those who can't afford to or won't put money into the HSA?
Most employers are already paying huge amounts of money to insurance companies for Cadillac health insurance policies. We are simply suggesting that they put this money in your HSA instead, and allow you to buy major medical insurance out of that account. Employers would save money and you would make money, through the tax free interest you would earn on your HSA!
People who are self-employed would also benefit by not having to pay the self-employment tax on any amounts they contribute to their HSA. Of course, those who choose not to take advantage of this can still rely on existing government programs if they get sick, or on the legal requirements that hospitals provide care regardless of ability to pay. The fact that some people will be irresponsible when they could afford to do otherwise is no reason to force everyone to become dependent on the the taxpayers.
As for those who are simply too poor for HSAs, or any other form of private insurance, there are already plenty of government programs to take care of them. HSAs are simply a way to preserve and expand the free market aspects of our health care system.
HSAs are a great deal, but they could be even better if Congress would take the following steps . . .