Friday, December 9, 2011

Health care savings account

It's that time of year again.  When millions of Americans get un-needed health care - and spend our own money on it.

Me?  I got the following, "extra care":

  1. An extra doctor appointment.  Sure, I could have waited two more months for my yearly check up, but I got it early.
  2. I pre-ordered some medication that I still have two months of left.
  3. I bought a first aid kit
  4. I bought new reading glasses
  5. I am going to buy sun glasses.  Expensive ones.

Why do we do this?  Because the law encourages us.   My employer offers what is known as a "Flexible Spending Account."(FSA)   Flexible Spending Account is like a "Health Savings Account" (HSA) or a  "Health Reimbursement Account" (HRA), but unlike them you can't roll over the money.  If I don't use it this year, is forfeited to the government. Does the government end up with a lot of cash?  No. Instead we all rush out to spend it now - and decrease how much we save next year.

So at the end of the year I, like millions of other Americans, rush to spend whatever is left.

Is this money a total waste?  No.  But if we want to decrease how much we spend on healthcare each year, this is an easy cut.

Why doesn't my employer use an HSA or an HRA?

The HSA is only available if your health care counts as a "High Deductible Health Plan" - a deductible of at least $1,200 for a single person, 2,400 for a family.  The HRA is entirely funded by the business.  They pay the money, not you.    It is pretty much only used by small businesses - and then often used in place of good health care plans.

Companies with bad healthcare plans offer the HSA - and keep costs down.  Companies with good healthcare plans offer the FSA - and drive up our yearly health care costs.  HRA's are pretty rare in larger corporations.

But the end result is that anyone with an FSA is likely to waste money.  I paid extra for speedy shipping of medication - in part because I knew I would have extra money and decided why take the risk of missing a day or two of medication.   Normally I would have said the missed day or two would not matter.   I can probably make do with old, cheap sunglasses, but why not get a new, expensive pair?

After all it is MY money - I just have to spend it on healthcare this year.

You want to reform Healthcare?   Change the rules for the FSA to make it like the HSA and HRA.  Let any extra money rollover to the next year.

If that was the case, then I would probably spend about $267 less on healthcare this year.  If 5% of the US population did that, it would be $4 billion dollars.

Reform FSA accounts - let people rollover the money.  This will decrease our yearly health care costs without decreasing the quality of care.  Or you could simply let people pay the taxes they did not pay earlier in the year and get the money back.

The point of these accounts is simple - to encourage people to save for and spend money on healthcare.  Letting them rollover the money encourages them to save more money.  You don't have to worry or think about putting too much in.  Yes, the next year you may reduce your monthly contribution, but so what, you still are 'saving' for healthcare as the money you rolled over counts.

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