Macro-economic effects of an HSA regime?

I am not an economist.  I am not trained as one.  I do not play one on the blog.  But I have a health policy question with potential macro-economic implications?

What effect does a low actuarial value/catastrophic coverage paired with Health Savings Accounts (HSA) regime have on national savings?

Insurance (of any sort) has two major economic value propositions.  First, it pools risk so that unpayable costs become payable.  This encourages productive risk taking in the face of tail risk.  Secondly, because of the pooling function, it reduces the variance faced by any individual in the pool.   Lower variance means more predictability which means less uncertainty.  Properly priced insurance will lead to lower net social savings as the risk is distributed and people are not in a position to be run over by a five sigma event.

A good real world illustration is the Chinese savings rate.  China (as of 2015) has a massive savings rate.  The country as a whole saves roughly 50% of GDP.  Some of this is due to a government decision to tamp down on consumption in order to fuel investment.  A good portion however is due to the immature insurance market.  People can not easily buy good health insurance, so they save in case a family member gets cancer.  People can not buy long term annuiuties to protect their retirement against the risk of living long and well, so they save.  People are attempting to self-insurer.  Each person or each family becomes their own risk pool and their own absorber of tail risk.  The vast majority of people never get hit in the face by their tail risk, so they effectively oversave while the people who are hit by tail risk are still screwed as they can’t save enough given average lifetime earnings.

The Chinese government is moving towards national social insurance partially in order to reduce the savings rate and increase domestic consumption.  People who are hit with extreme tail risk will be better protected while the average person will pay a little bit less to get the same protection.  Net society-wide savings, all else being equal, will decline.

Now let’s move over to the HSA world that we may be entering.  The theory of change is that people will be price sensitive to their basic medical care as they’ll pay for it directly with pre-tax personal dollars which could otherwise be rolled over into future years.  This will lead to both lower utilization and more cost effective utilization which will bend the cost curve while also improving the quality of care.  I’m skeptical of those outcome claims but that is irrelevant.  Out of pocket maximums for some of the plans floating around start at $10,000 or more as the minimal acceptable level of coverage (55% AV) and go higher depending on the plan we look at.  After that, insurance would kick in to cover hit by a meteor coverage.  What does this do to net savings?

Right now we know that most Americans’ will have issues meeting a surprise expense of $400.  Plenty of Americans either have minimal savings or what savings they do have are highly illiquid.  Some of the smarter HSA proposals address this problem by using the Federal government’s immense liquidity to do a one time transfer of $1,000 to an HSA to start people off with some medically liquid savings.  But then people are on their own to build up sufficient savings to cover the high probability event of either getting old or getting sick.

For healthy individuals with significant assets including tax advantaged retirement savings, HSA’s probably are a shift in the composition of tax advantaged savings and not a significant net change in total saved.  A one off bad year where the out of pocket maximum is met from reserves would not have a significant change in behavior.  Individuals with chronic conditions and significant net savings would see a permanent yearly net reduction in their standard of living equal to the difference between the out of pocket maximum minus lower premiums and any pass through on higher wages as the HSA is merely a short term tax shelter where money goes in on Friday and out on Monday to pay the bills.

For people with significant incomes and assets, the HSA regime is economically not too interesting except that it expands yet another tax shelter.

What about people with neither significant incomes and assets.   How does this play out economically?

The insurance value of “catastrophic” is currently fairly low.  Employer Sponsored Coverage has an actuarial value of about 85%.  That, with current essential health benefits, means about a $1,800 deductible and no other cost sharing.   That is still an “oh my god” expense for a lot of people with serious disruption.  People who are relatively healthy could probably handle a one time shock through debt but if there are multiple shocks in a five to ten year period, the second shock won’t have the reserves in place to compensate.  So do these people with a fairly high marginal propensity to consume and a low marginal propensity to save start saving more?  And if they do, mechanically that means less consumption and more savings.

Less consumption and more savings when it happens to a lot of people all at once is also known as a recession.  Over the long run, more savings theoretically will lead to higher investment which should lead to higher productivity which should lead to higher wages which should lead to a better ability to weather shocks and surprises.  There are a lot of “shoulds” in that sentence.  The critical one is the linkage between higher productivity and wages.  That mechanism has been broken for years.

Furthermore we are in an environment where long term rates are very low, short term rates are still under 1% and capacity utilization is below long term averages.  The world is still awash in capital and savings.  Do we need more savings as we unravel the low dollar catastrophic insurance function of how health financing system?

I don’t know, I am not an economist.  But where and who should I be reading to ask these questions and learn something?

 






70 replies
  1. 1
    MomSense says:

    I don’t think most people earn enough to adequately save money. If we are going to switch from an insurance model to paying out of savings, wages are going to have to increase yuugely. Individuals paying more for their own health care and increasing savings to the required levels is really going to hurt the economy.

  2. 2
    scottinnj says:

    My employer offers a high deductible/HSA plan and as an added incentive they will fund a portion of the HSA account. IIRC in your example of an $1800 co-pay they will put in around $600 on your behalf. I cover myself/spouse/2 kids so it doesn’t pay but most of the young uns in my office use the plan, figuring that only about 1 year in 3 will they hit the HSA max. And if they win they have a big nest egg when they get older/have kids and move to a traditional plan. Not sure if a plan like these exist on the Exchanges, point being for a low users (young and healthy) it’s an alternative way to get them into the pools.

  3. 3
    Procopius says:

    The theory of change is that people will be price sensitive to their basic medical care as they’ll pay for it directly with pre-tax personal dollars which could otherwise be rolled over into future years.

    This is so far from the way people actually get their health care I’m constantly surprised that anybody can put this argument forward with a straight face. Yes, there are non-emergency surgical operations and routine medical expenses — flu shots, physical exams — but the most costly requirements are unforeseeable. Even for the non-emergency costs we usually have to follow the recommendations of doctors and pharmacists. People do not have the knowledge to make competent choices based on price. Then there’s the fact (yes, there are such things as facts) that prices are unknowable. For one thing the doctors/hospitals/pharmacies won’t tell you, and besides new requirements may be discovered as a treatment proceeds.

  4. 4
    liberal says:

    @Procopius: completely agree. The demand for medical care is pretty inelastic. I think there might be exceptions, like maybe mental health counseling. But otherwise…

  5. 5
    gene108 says:

    The theory of change is that people will be price sensitive to their basic medical care as they’ll pay for it directly with pre-tax personal dollars which could otherwise be rolled over into future years. This will lead to both lower utilization and more cost effective utilization which will bend the cost curve while also improving the quality of care.

    If prices of anything healthcare related were relatively fixed and knowable by the public, it might be possible but with our crazy pricing system it is not possible.

    I believe U.S. healthcare pricing can be harnessed by parascience to be more powerful than Bistromathics:

    Bistromathics is the most powerful computational force known to parascience. A major step up from the Infinite Improbability Drive, Bistromathics is a way of understanding the behavior of numbers. Just as Einstein observed that time was not an absolute, but depended on the observer’s movement through space, so it was realized that numbers are not absolute, but depend on the observer’s movement in restaurants.

    I mean what is less absolute than the cost of our healthcare?

    Your prescription on your old plan cost $30 for a 90 days supply at a pharmacy, but the new plan only allows a 30 day supply at the pharmacy. A 90 90 days supply must be done via mail order. The 30 day supply at the pharmacy costs $40 dollars, on the new plan, which is more than the cash price the pharmacy would charge, if you did not have insurance.

    Edit: The cost of healthcare is not fixed, knowable ahead of time and relative to factors beyond human comprehension, subject to change by factors beyond a person’s control.

    Bistromathics looks like an abacus by comparison.

  6. 6
    guachi says:

    I can’t see HSAs making a difference in the saving rate since, as you note, people already have a hard time saving even $400 for an emergency. If money is tight, locking up money in an HSA that might never get used is crazy talk.

  7. 7
    sherparick says:

    @MomSense: Married households and couples spend about 31% on housing and single people spend 36%. Transportation takes about 17% to 20%. Medical care already takes 10% to 13%. Food takes another 10 to 12%. Pensions and insurance, including apparently Social Security and Medicare Taxes take another 10% to 13% (personally, I always thought of these contributions as “savings” and not consumption since goes to 3rd parties (Insurance companies to invest and Government to buy bonds) for possible future consumption). So obtain the cash needed to save for retirement and medical risk in Ryan-Trump-Pence America, Americans will have to double up in shelter (retirees moving in with their kids, adult kids not moving out of the home till marriage, and people taking in borders and roommates) and cutting back on the purchases of new cars. Think of the world portrayed in movies from the 1930s and 40s on Turner Classic Movies like “I Remember Moma” and “You Can’t Take It with You.” Of course, this will lower private demand just as the Republicans will be lowering Government non-Defense spending. The global glut of savings will expand. https://www.bls.gov/news.release/cesan.nr0.htm See also: https://www.pimco.com/insights/economic-and-market-commentary/macro-perspectives/no-end-to-the-savings-glut

  8. 8
    Victor Matheson says:

    I am an economist. I both play one in the classroom, and until November I had a wildly successful business helping personal injury and medical malpractice lawyers understand how the ACA might affect their clients. Thanks for destroying my consulting practice, Mr. Trump.

    As for national savings and the destruction of the ACA, most studies I have read suggests the ACA would increase national savings primarily by reining in medical inflation resulting in lower budget deficits. Government deficits/surpluses are half of national savings with private savings being the other part. The elimination of the ACA, if it results in a reacceleration of medical inflation, would therefore reduce national savings by increasing government deficits.

    As for private savings, it is hard to believe health savings accounts can be large enough in aggregate to increase total private savings by much. The majority of accounts will be small because people don’t have the capacity to save and the creative of HSAs won’t magically make it so, and there is also a natural upper bound on the size of the accounts.

    You might check incidentaleconomist.com for related articles. I typically find Aaron Carroll and crew the best of the health policy blogs, although with an unfortunate lack of snark, cat photos, and soccer refereeing posts.

  9. 9
    Another Scott says:

    @Procopius:

    Then there’s the fact (yes, there are such things as facts) that prices are unknowable. For one thing the doctors/hospitals/pharmacies won’t tell you, and besides new requirements may be discovered as a treatment proceeds.

    Indeed.

    It reminds me of a case with my elderly FIL when he was living with us. He got a serious infection and I had to pick up some antibiotic for him at the local pharmacy. The after-insurance cost (he was on Medicare and had supplemental BC-BS from his wife’s federal retirement) was over $600 for about 20 pills. People who get sick don’t get to shop for antibiotics or other medication when they have a life-threatening issue. They don’t write the prescription, they don’t get to decide when to start or continue treatment, they don’t have the time to try to make an “informed decision”, and there is no way to figure out the price of medical products, procedures, etc., until they’re undertaken (because the people in the offices/companies don’t know the price until they do the work and apply all the various rules and exceptions). People either find the way to pay the price or they risk death.

    Applying consumer thinking to medicine and medical insurance doesn’t work.

    Cheers,
    Scott.

  10. 10
    Eric U. says:

    we save at a much higher rate than the average household, and we might be able to save enough to go to the ER if it happens a decade from now. That’s assuming we get a decent return on our investments, which isn’t a given. People are stupid about this. I expect the Repblicans know this, but they are taking advantage of people’s ignorance, like they always do. I’m reminded of the guy that thought his $8000 in savings was enough to handle a medical emergency, so he didn’t have insurance. Gofundme isn’t going to be able to keep up with this.

  11. 11
    germy says:

    @Another Scott:

    Applying consumer thinking to medicine and medical insurance doesn’t work.

    Exactly. This sentence should be engraved on a monument.

    I remember many decades ago seeing a comedian in a club somewhere (I don’t remember his name) who asked the audience “Who was the first person, the genius who decided to merge the Healing Arts with the Profit Motive?”

  12. 12
    Starfish says:

    Wasn’t there a cap on these accounts so even if you could save, it would take a number of years to save for things like childbirth?

  13. 13
    germy says:

    @Eric U.: I watch a lot of my local TV news. Every month or so, they run another “heartwarming” story about a bunch of people doing a charity thing to raise money for either (1) a child with a rare disease whose parents can’t afford medical care or (2) a charity to raise money for the wife and kids of a firefighter or someone who was killed.

    The reporter will cover the baked ziti dinner, or raffle, or barbecue, and the focus of the story is always “Isn’t this wonderful? (how people unit to help those in crisis?)” rather than “Why the fuck does a family need to host a barbecue to pay for their son’s medical care?”

  14. 14
    Gin & Tonic says:

    @germy: And how many hamburgers or cookies do you have to sell to pay for a $150k hospital bill?

  15. 15

    The Uwe Reinhardt is the most well-known health care economist; his work might provide a place to start. If not, he would probably be able to refer you to work in the field. If you can get an answer on this — he is very busy —, Krugman would probably, again, have either thoughts or references.

  16. 16
    Another Scott says:

    There are other examples of the societal costs of high savings rates. When Japan was going to kill us all in our beds in the 1980s, there were occasional stories about the cost of land and housing there. It was a huge burden for many many people because they would have to save a lifetime to even have the chance to own a home. When parents did happen to own a home, there were various constraints on the children when it came time to decide what to do with the inheritance. Yeah, these can be personally good problems to have compared to the alternative, but they do have societal consequences. One might think that it wouldn’t be as much of a problem in China as in Japan (lots more land), but there is still the issue of supply and demand, and housing still is much more expensive in a new high-rise than in a dirt-poor village…

    Also, when one is talking about national impacts, one has to consider things like the effect on the trade deficit which may be counter-intuitive.

    If everyone started saving more as described above, it would mostly just lead to a fall in output and employment.

    The reason is that the adjustment process would not come close to offsetting the loss in demand. With the short-term interest rate already at zero we would see no help there. Long-term rates could fall some, but the reduction in longer term rates would at best have a trivial effect on investment. The dollar may not move at all, both because interest rates will have changed little and also because many countries (yes, China is the biggest) have a policy of targeting the price of their currencies against the dollar. If market forces started to push the value of the dollar down against their currencies they would respond by buying more dollars to keep up the value of the dollar.

    Savings is not an automatic good, especially (as you and Dean point out) in a time of a glut in savings and a continuing excessive demand for “safe” assets.

    These “health savings account” things seem to be more about cutting taxes for those who can already afford good health insurance, while cutting benefits for the vast majority of Americans. Funny how that is usually the case when the GOP is in power… :-/

    Cheers,
    Scott.

  17. 17
  18. 18
    germy says:

    @Gin & Tonic: well, lately they’ve added gofundme and the Book of Faces to the mix. The reporter will say something like “Visit our website , we provide a link to their gofundme” thereby driving traffic to their online news and advertisers.

    Nobody questions the bigger picture. It’s the way things are, the way they’ve always been, the way they’ll always be.

  19. 19
    MomSense says:

    @Gin & Tonic:

    Seriously. Guess the Republicans really like those plastic change containers at checkout counters with the sad photos of kids with cancer and the invites to bean suppers to pay for the local fisherman’s open heart surgery.

  20. 20
    Pogonip says:

    @Procopius: My pharmacy says the cost of a medicine varies with the insurance so THEY can’t even tell you what it costs until they “run it through.”

  21. 21
    Big R says:

    Richard,

    A couple of times you note (and a couple of commenters note as well) effects “in the long run.” Kindly eject your neo-classical assumptions and remember, as Keynes said, that “in the long run, we’re all dead.”

    It’s not just pithy; it’s a reminder that policy changes made to effect short-run issues have knock-on effects on long-run predictions that are not necessarily visible at the time of their enactment. In other words, by worrying about short-run effects, we change the long-run situation. And we don’t always (I would say “never”) know how we’ve changed it.

  22. 22
    germy says:

    Bernie Sanders calls for a national day of rallies to defend health care from Trump: Jan 15

  23. 23
    azlib says:

    I had an HSA for a few years. It was a holdover from an employer program which only offered insurance with an HSA account attached. I was able to put in excess income into it when I was self-employed. THe net effect of this accoutn was being able to pay medical bills (mostly deductibles, eye glases, etc) out of that account. For me it really amounted to the Feds paying about 20% of my out of pocket medical costs. I never thought of it as a retirement savings vehicle because it was simply too small to make a difference. I always thought an HSA was simply a SOP to the upper middle class who were in a postion to save execess income and eliminate any tax on it.

  24. 24
    Another Scott says:

    @germy: TheHill:

    The Democratic leaders, Sen. Charles Schumer (D-N.Y.) and Rep. Nancy Pelosi (D-Calif.), as well as Sen. Bernie Sanders (I-Vt.), wrote a letter [2 page .pdf] to colleagues Wednesday calling for a “day of action” on Jan. 15.

    “Rallies will be held across the country to vigorously oppose the Republican plan to end Medicare as we know it and throw our health care system into chaos,” the letter states.

    The leaders dubbed the effort, “Our First Stand: Save Health Care.”

    Warren Gunnels in Sanders’ office is cited in the letter as the POC. I don’t see anything on his Twitter feed about it.

    It’s a great idea, but it seems like a little over 2 weeks is too little time to arrange something like this. :-( And having Bernie’s people in charge doesn’t give me lots of confidence.

    (sigh)

    Cheers,
    Scott.

  25. 25
    randy khan says:

    @azlib:

    THe net effect of this accoutn was being able to pay medical bills (mostly deductibles, eye glases, etc) out of that account. For me it really amounted to the Feds paying about 20% of my out of pocket medical costs.

    My HSA functions the same way. If you have enough money to put a decent amount in an HSA, you generally (not always) have enough money in savings to cover deductibles, and so the clever way to use the HSA is for tax avoidance. People in this category have medical insurance and so are extremely unlikely to hit the 15% floor for deducting medical expenses, so the HSA provides a significant tax benefit for money they’d have spent anyway.

  26. 26
    Steeplejack (tablet) says:

    @Another Scott:

    Hey, it’s a great opportunity for the Sandernistas to get out there and show their stuff!

  27. 27
    Lizzy L says:

    @Another Scott: This. Readers might remember that back in August I was bitten by a dog and had to go to ER by ambulance, where I got an x-ray, meds, and ultimately stitches. I was there about 6 hours. My o-o-p expenses came to about $300. The ER bill, which was paid by my insurance, was IIRC close to $8000. Had I needed to tap my savings for that, it would have wiped out my savings account and I would have had to pull funds from my retirement savings. And that was nothing — just a dog bite!

  28. 28
    Yarrow says:

    @Another Scott: Yes. This. When you’re SICK you don’t have the energy or sometimes ability to price shop. It’s not like buying a sofa or a car where you take days or weeks or months to shop around, try them all out, see what kinds of discounts you can get, and then finally buy something. You’re sick!

    I hate these sadists who are fucking with the healthcare system so much. I want them all to suffer. Long, terrible suffering that affects their families as well. Fuck them all.

  29. 29
    Brachiator says:

    A few random thoughts, probably wrong.

    This will lead to both lower utilization and more cost effective utilization which will bend the cost curve while also improving the quality of care.

    I don’t see a necessary connection between reduced (or even increased) costs and quality of care. A related issue is whether people have easy access and cost effective access to a primary care doctor. Otherwise, people may wait until a medical issue has worsened.

    People who are relatively healthy could probably handle a one time shock through debt but if there are multiple shocks in a five to ten year period, the second shock won’t have the reserves in place to compensate.

    Yep. Another variable is whether the person is single, married, or has children.

    Over the long run, more savings theoretically will lead to higher investment which should lead to higher productivity which should lead to higher wages which should lead to a better ability to weather shocks and surprises.

    But medical savings money is not necessarily used or available for investing.

  30. 30
    Eric U. says:

    @Gin & Tonic:

    And how many hamburgers or cookies do you have to sell to pay for a $150k hospital bill?

    I saw a story about a fundraiser for a relatively young person with cancer who had friends that raised $10k. I’m sure they were fairly generous, but that amount of money is nothing. I’ve seen numbers more like $1 million a year for treatment depending on the cancer. We manage to spend our HSA every year just on incidentals. My employer wants to put us on a combined HSA/crappy insurance plan, which would be huge step down for us. I don’t know how many people the get to do it, hopefully not too many.

  31. 31
    Yarrow says:

    Another HSA twist, recently discovered. After a layoff, the HSA through the employer was transferred from whatever bank managed it for the employer to something called HSA Bank. They now charge a monthly fee to maintain it. There was no fee previously. The minimum in the account to avoid the fee is pretty high.

  32. 32
    patrick II says:

    People at the lower end of the pay scale will not be able to afford necessary medical treatment with just a health care savings account. They have enough trouble paying the rent and buying groceries. Add on that the political context of having a hsa (republicans controlling white house and congress) means less pay for the lower class, less food stamps, and generally lower economic well being, the people with a lower income level have even more trouble saving than they do now.
    Second. In a captured market, and essentially if you get sick you should see some doctor, regardless which one, if there is less use of the commodity (it’s not really a commodity, but republicans pretend like it is so they can keep more of their money) the price of that commodity will go up, not down.
    Third. When people who can’t afford to see a doctor for minor things finally do see one they are sicker and total costs to society go up, not down. Unless the potential patient dies first, which will happen, then there actually will be health care savings. Congratulations republicans on your profits!
    Fourth, once again in the context of a republican government, the option not to take vaccinations because “liberty”, and once again the illusory opportunity for both the government and the less affluent individual to save money, might lead to outbreaks of long suppressed diseases.
    HSA’s have little to do with actual Capitalism as described in the Wealth of Nations. The only part of that book, the bible of capitalism, republicans have read is the page with the “invisible hand” written on it. Somewhere in the rest of the book they skip reading, Adam Smith describes how the government should control the salaries of doctors because health is not a commodity. Free market medicine is not capitalism, it is trying to place a round peg in a square hole for, what else, profit.

  33. 33
    Lurking Canadian says:

    Alan Grayson got into a lot of trouble for his summary of the Republican health plan as “Die quickly”, but seriously that is what they seem to want. I mean, Ryan might believe the Randian kool-aid he spouts, but what he believes is less relevant than what he’s actually doing.

    And what he’s doing is creating a Logan’s Run future where the responsible thing is for grandma to just let herself die rather than bankrupt her children paying for her treatment.

  34. 34
    Gin & Tonic says:

    @Eric U.: My son was very ill a few years ago and required an intravenous medication that is often used in treating cancer (which he did not have.) One infusion cost $11,000. He required multiple infusions. The idea that anyone can handle this sort of thing through HSA or private fundraising or bartering chickens is risible.

  35. 35
    Brachiator says:

    @Yarrow:

    Another HSA twist, recently discovered. After a layoff, the HSA through the employer was transferred from whatever bank managed it for the employer to something called HSA Bank. They now charge a monthly fee to maintain it.

    Jesus! Crap like this, nickle and diming away at the value of an HSA account, should be illegal.

  36. 36
    Revrick says:

    I’m not an economist either, but I do know what economists generally say about the macroeconomic effects of Social Security (which answers the question indirectly).
    Social Security makes us all richer!
    How’s that work?
    Since none of us can predict how long we will live, we would want to prevent the worst case scenario: outliving our assets. The only way to do that would be to increase our savings. But then we run into a macroeconomic paradox.
    If everybody saves more, now, to prepare for this feared state of affairs. that means there would be less disposable income now to spend. This overall reduced spending would play itself out in job layoffs. Which would further reduce the overall spending in the economy. On top of that, as overall consumer spending declines, opportunities for business investment would decline as well. Businesses invest, not because they have extra cash in the till, but because they have more customers beating down their doors. This means that the returns generated by this greatly increased savings would actually fall, requiring more savings to make up for the losses.
    John Maynard Keynes noted this dynamic in his essay on the paradox of savings, that what’s virtuous for an individual, becomes fatal when everyone does it.
    Social Security, by guaranteeing we can never outlive all our income stream, permits less savings and more spending in the here and now, which sets up a virtuous cycle of economic growth.
    (The same is true, by the way, about the effects of debt, which also makes us all richer!)
    There is another non-economic option here, one I’m old enough to remember. The highest suicide rates in the US used to be among elderly men, who ate their guns when they became a financial burden on their families.

  37. 37
    Elizabelle says:

    Some people can only learn through the power of a negative example. Perhaps a long series of them.

    I think we’re all going to get treated to that. It’s sad, it could have been preventable, but all the rightwing whingeing/outright lying and leftwing unrealistic expectations (in the short term!) got us here.

    Mostly, plutocrats funding, aiding and abeting Republicans. From here and abroad.

    Hold on tight.

  38. 38
    Another Scott says:

    @Revrick: Excellent summary.

    This “paradox” should remind us of how toxic it is to think about national economics in terms like “your family budget”. It doesn’t work that way. Krugman and others tried to tell us, but few listened.

    If one does want to think of these things in family-budget terms, we should remember: People don’t instantly go bankrupt on taking out a 30 year mortgage. Governments don’t either.

    Thanks.

    Cheers,
    Scott.

  39. 39
    Yarrow says:

    @Brachiator: Go have look at HSA’s offered by various banks. They all charge fees. Supposed to be waived if the account is over a certain amount, but for this account the minimum is very high to avoid fees. I guess it’s possible to look around and transfer it to some other bank. The whole thing sucks.

  40. 40
    Revrick says:

    I’m not an economist either, but I do know what economists generally say about the macroeconomic effects of Social Security (which answers the question indirectly).
    Social Security makes us all richer!
    How’s that work?
    Since none of us can predict how long we will live, we would want to prevent the worst case scenario: outliving our assets. The only way to do that would be to increase our savings. But then we run into a macroeconomic paradox.
    If everybody saves more, now, to prepare for this feared state of affairs. that means there would be less disposable income now to spend. This overall reduced spending would play itself out in job layoffs. Which would further reduce the overall spending in the economy. On top of that, as overall consumer spending declines, opportunities for business investment would decline as well. Businesses invest, not because they have extra cash in the till, but because they have more customers beating down their doors. This means that the returns generated by this greatly increased savings would actually fall, requiring more savings to make up for the losses.
    John Maynard Keynes noted this dynamic in his essay on the paradox of savings, that what’s virtuous for an individual, becomes fatal when everyone does it.
    Social Security, by guaranteeing we can never outlive all our income stream, permits less savings and more spending in the here and now, which sets up a virtuous cycle of economic growth.
    (The same is true, by the way, about the effects of debt, which also makes us all richer!)
    There is another non-economic option here, one I’m old enough to remember. The highest suicide rates in the US used to be among elderly men, who ate their guns when they became a financial burden on their families.@

  41. 41
    Revrick says:

    Another Scott,
    Thanks, Scott, for the added observations.

  42. 42
    patrick II says:

    @Yarrow:
    I especially appreciate the idea that the bank gets to invest their customer’s money and make a profit, and then charge the customer for their opportunity of investing the customer’s money and making a profit, consequently making even more profit — of which the customer gets none. It is a clear illustration of the “screw your customers as bad as you can” profit motive that currently drives our financial sector.

  43. 43
    RepubAnon says:

    @Procopius: When I took Economics in college, health care was used as an example of “market imperfections” – i.e.: places where free market assumptions break down. The idea of consumers making better decisions the more they pay out of pocket was discussed, and discarded as unworkable

    Classic free market theory assumes that consumers have full (perfect) knowledge of all facts, and also have an infinite number of providers from which to choose. In health care, there’s a limited number of suppliers and consumers don’t have much medical knowledge upon which to base decision.

    This ties into one of the classic Econ 101 questions: why do health insurers offer to pay for preventative care? The answer, of course, is the same reason casinos offer free drinks to folks who are gambling – it shifts the odds further in their favor. Folks who’ve been drinking are less likely to win in casinos – and consumers who visit their doctors regularly are less likely to get expensive illnesses (they’re more likely to be caught and treated earlier, at less cost).

    This has been another chapter in why modeling a real society after Ayn Rand’s fictional societies is a bad idea.

  44. 44
    dr. luba says:

    I opted for an HSA this year. I know I am going to have (expensive) surgery in February with a short hospital stay, and the Healthcare.gov calculator showed that an HSA with a bronze plan would save me $4K over a silver plan. If, OTOH, if I were healthier and was not anticipating major surgery or hospitalizations, a silver plan would be a much better deal, becasue co-insurance beats paying 5K upfront once the bills come due.

    But I am an exception, and know it. HSAs work for people like me, who pay for their own insurance, make too much for a subsidy, and make a decent living (single, no mortgage and no other debts). For most people, HSAs are not economically viable.

  45. 45
    laura says:

    @Brachiator: the banks come out and cheer lead on HSA’s every year during open enrollment here in Cali, where I work as a Union Business Representative. The cheer squad (Wells or BofA) really pour it on as a swell investment vehicle and every year the only employee groups that think it’s a good plan are young firefighters because they are young and healthy and their children are young and healthy and no one ever goes to the doctor in any given plan year.

    HSA’s only work when you don’t need it at all or if your utilization is low. I’m seeing employers wanting to get out of providing health care coverage so badly as a non-controllable cost -and tied to the hysteria about pension debt. I see them as somewhat linked in that ROI is low to non-existent because we don’t spend on investment, preventing a virtuous cycle. Profits is all the FIRE demands, short term profits equals we’re screwed.

    How come double-digit premium rate increases prior to the ACA went down the memory hole? Even the threat of health care reform slowed those increases.

    Pardon the rant, but HSA’s make my blood boil. It’s a scam and only benefits the servicer banks.

  46. 46
    Richard Mayhew says:

    @Brachiator:
    I am describing what the proponents argue not what is likely to occur as the information asymetry is an ass kicker

  47. 47
    Yarrow says:

    @laura:

    I’m seeing employers wanting to get out of providing health care coverage so badly

    I wish they would/could. Put all health insurance on the market. With strict controls, of course. Let people decide their level of coverage. There is no reason someone who works for a large multinational corporation should have great insurance, while someone who works for themselves or a small business should be stuck with something crappy. Ditto people who live in larger states and/or states that took the Medicaid expansion have better options than those who don’t. The employer-based insurance system is stupid.

  48. 48
    MomSense says:

    @Revrick:

    Social Security, by guaranteeing we can never outlive all our income stream, permits less savings and more spending in the here and now, which sets up a virtuous cycle of economic growth.

    The same is true about health insurance. If we have to pay for all our medical care out of savings then we will each be withholding a helluva lot of money instead of spending it.

  49. 49
    Brachiator says:

    @Richard Mayhew:

    I am describing what the proponents argue not what is likely to occur as the information asymetry is an ass kicker

    Understood. I always enjoy your posts because they explain much and stimulate thinking about health insurance issues.

  50. 50

    Heh. From what I heard, high deductible plans with HSA lead to two outcomes:
    1) consumers spend less, and
    2) have worse health outcomes.

    The HSA is the sort of thing that sounds *great* to an upper-middle-class person who can scrape together a couple grand over a couple months. *They* will decide if they need the prescription anti-fungal, or if OTC will work better. They will decide that they don’t want Vicodin, they’ll make due with ibuprofen. They are well informed that they need a colon-cancer screening around the age of 50, so they pick one based upon their choices, possibly choosing a cheaper one over a more expensive one.

    If they can make these choices, why can’t poor people?

    Why indeed? It’s not like $50 is more than the price of dinner for 2 at a restaurant that won’t give you digestive distress!

    Um… $50 is food for two for a week, if you’re excruciatingly careful and have no choice. Elitist boobs talk about how people make better choices when they have “skin in the game”. Well, it’s a damn shame that, today, people don’t have “skin in the game” like, oh, THEIR HEALTH AND WELL-BEING!!!

  51. 51
    Brachiator says:

    @RepubAnon:

    Classic free market theory assumes that consumers have full (perfect) knowledge of all facts, and also have an infinite number of providers from which to choose. In health care, there’s a limited number of suppliers and consumers don’t have much medical knowledge upon which to base decision.

    Much could be learned about how markets operate, and about health care, if Econ teachers could look at the issue creatively. There are times when people have time to make decisions. But I always looked at “free markets” as meaning that the buyer and seller are relatively free of constraints. But people still make poor decisions. For example, I continue to be amazed at the people I know who buy worthless nutritional supplements, or who indulge in folk or Chinese medicine. I recently listened to a talk radio host who popped some Chinese tablets given to her by a coworker for her sore throat, and praised them, even though she had absolutely no idea what was in them.

    This ties into one of the classic Econ 101 questions: why do health insurers offer to pay for preventative care? The answer, of course, is the same reason c@sinos offer free drinks to folks who are g@mbling – it shifts the odds further in their favor. Folks who’ve been drinking are less likely to win in c@sinos – and consumers who visit their doctors regularly are less likely to get expensive illnesses (they’re more likely to be caught and treated earlier, at less cost).

    Interesting comparison. But the c@sino wants you to spend more money, without regard to your financial well being, while the insurance company wants to avoid having to pay out claims while promoting your health.

    ETA: Crap! Got moderated because of a “bad” word. Hmmm

  52. 52
    Brachiator says:

    @RepubAnon:

    Classic free market theory assumes that consumers have full (perfect) knowledge of all facts, and also have an infinite number of providers from which to choose. In health care, there’s a limited number of suppliers and consumers don’t have much medical knowledge upon which to base decision.

    Original comment got moderated. Let’s try a revised response.

    Much could be learned about how markets operate, and about health care, if Econ teachers could look at the issue creatively. There are times when people have time to make decisions. But I always looked at “free markets” as meaning that the buyer and seller are relatively free of constraints. But people still make poor decisions. For example, I continue to be amazed at the people I know who buy worthless nutritional supplements, or who indulge in folk or Chinese medicine. I recently listened to a talk radio host who popped some Chinese tablets given to her by a coworker for her sore throat, and praised them, even though she had absolutely no idea what was in them.

  53. 53

    @Revrick: It’s not quite true that businesses don’t invest without customers. But it’s true that they don’t expand existing capacity.

    They might bring a new product to market. But with lower economic activity, there’s less profit to be seen in that new product, so it does drive down the likelihood of investment, because the returns are likely lessened.

    This might sound odd to some folks – “what, so if they might make 10% lower profits, they won’t bother to bring the product to market?”

    That’s not *quite* what it’s saying. Economics doesn’t discuss any one person’s actions – it discusses the tendency of actions to occur. So: a decrease in the marginal tax rate, from 40% to 39.5%, should increase the urge to make extra money. Why? Because $60 (from $100 earned with a 40% tax rate) isn’t as nice as $60.50.

    “But it’s only 50 cents!” Yes, but it is a *tiny* bit better. Maybe out of a thousand people, one person will decide to earn that extra $100. Heck, maybe out of a million people, one person will decide to earn that extra $100, due to the extra 50 cents. But that extra 50 cents on the c-note is a tiny bit of incentive, And that means it has a tiny push upward on the decision to perform more labor, versus taking more leisure. You can’t say that more money is no better than less money so even a tiny change should have some effect, in the aggregate, when the choice is made millions or even billions of times.

    So: slower economic growth means there’s a tiny bit less incentive to bring a new product to market – some companies will choose to find other uses for the money (such as giving bonuses to the board of directors – so much for the wonders of the free market)!

    It is true that Social Security is a great idea for the very reason you mention. It was originally assumed that there would be a “three legged stool” of retirement security:
    Pensions – usually defined benefit plans, maybe defined contribution plans, but definitely not “cash or deferred plans” like the straight 401(k)
    Savings (and investments – but *not* your 401(k) which is officially a “pension”), and
    Social Security.

    Nowadays, the Big Money Boyz want to cut Social Security because if we don’t cut Social Security, the day will come when we must cut Social Security!

    And pensions are mostly gone – most employees don’t get anything but a 401(k) with minimal company match, and no additional contributions.

    Savings? When so many people are living week to week and month to month? Shyeah, right, good one, now tell me the one about the traveling salesman and the farmer’s daughter.

  54. 54
    laura says:

    @Yarrow: the employer based system was an accommodation in leiu of wage increases in the post war economy. The other option at the time was single payer.
    There’s never going to be strict controls on the market. So good luck with your across state lines plan. And FYI, large, multi-nationals don’t necessarily offer good or great plans, and far too many are limiting coverage to employees, so their dependants can die sooner.

  55. 55
    Russ says:

    With monthly premiums being unaffordable many will seek emergency care like they did pre ACA. They’ll pay what they can but with care facilities and doctors quickly sending overdue accounts to collectors like they do now you’ll see more people blow them off and take a credit hit and move on. Younger Americans already favor renting vs buying and loans for autos are available with poor or no credit score, the two major credit score uses are negated by medical no pay. Until wages rise and it allows theses people to pay more for healthcare they’ll get care where they can and live with little or no debt.

  56. 56
    Yarrow says:

    @laura: I’m aware of how it got started. At the time it was a reasonable thing to do. Now it’s not. I think it’s a dumb way to do health insurance. You lose your job and you lose your health insurance. It’s just stupid.

    I realize I want something that’s difficult to have. Doesn’t mean I can’t want it. As for larger companies offering better health insurance, I may be wrong but my experience and in discussions with friends and family it seems that larger companies offer better insurance. I know that all companies seems to be clamping down on the ability to add spouses and kids. The whole thing is a mess.

  57. 57
    Another Scott says:

    @Russ: Until the Teabaggers change the bankruptcy laws (again) to prevent medical bankruptcy. It’s not like they haven’t done it before, e.g. in 2005:

    Supporters of the bill say that in preventing the abuse of the bankruptcy system it will make credit cheaper for the great majority of borrowers.

    Republican House Speaker Dennis Hastert said the bill’s passage “restores integrity in the system”.

    “It makes it harder for those who want to use bankruptcy as a scapegoat to avoid debts,” he said.

    “Bankruptcy is for those who need help, not those who want to shift costs to other hard-working Americans.”

    Critics

    Yet opponents say it is too harsh on low income Americans who are driven into debt by unemployment, ill health, divorce, or simply through poverty.

    “This is the most special interest-invested bill that I have ever dealt with in my career in Congress,” said Michigan Democrat Representative John Conyers.

    “It massively tilts the playing field in favour of banks and credit card companies and against working people and their families.”

    Remember how credit cards and title loans got cheaper? Sure you do.

    Gotta protect those “hard-working Americans”, you know.

    :-/

    Cheers,
    Scott.

  58. 58
    Dr. Ronnie James, D.O. says:

    @Procopius: It’s absurd. The people who need to be cost conscious are 1) physicians and 2) the payers. There’s an inelegant analogy here where there’s 3 customers at a restaurant (patient, doctor and payer), but only the doctor can order, and only the insurer can pay; the solution is not “don’t eat unless you’re starving.”

  59. 59
    C.V. Danes says:

    And add to this the cost of balance billing, and I have to wonder why have insurance at all?

  60. 60
    Russ says:

    @Another Scott: yes, there will be consequences, when you’re injured or sick the negatives fall by the wayside. In the end everyone is damaged, patients, hospitals, doctors and on down the line. Republicans are going to hasten the pace of inclusion into the group of people damaged.

  61. 61
    RepubAnon says:

    @Brachiator: Consumers purchasing snake oil was why my Econ teacher said government regulation of medicine was needed – it cures a”market imperfection.” Free market theory is intended as a starting point for analyses, with corrections added to address real-world complexities. Only Republicans and other con artists think that unregulated free markets are a good thing.

    Remember, under classic free market analysis, advertising doesn’t work and con artists can’t exist. (Consumers have perfect knowledge, and thus can’t be tricked.)

  62. 62
    Brachiator says:

    @RepubAnon:

    Consumers purchasing snake oil was why my Econ teacher said government regulation of medicine was needed – it cures a”market imperfection.”

    Ha! Of course, in the real world, the supplements industry and “alternative medicine” exists and persists in parallel to regulated medicine.

    Remember, under classic free market analysis, advertising doesn’t work and con artists can’t exist. (Consumers have perfect knowledge, and thus can’t be tricked.)

    I guess this is why Economics classes always frustrated me. Too little consideration of the real world, which I think still illuminates economic principles.

  63. 63
    OGLiberal says:

    My son has Crohn’s disease. My daughter has NF-1. Both are things you don’t cure but you can live a full life with either. But living that life with minimal pain costs money, lots of of it. My daughter is so far asymptomatic but that’s likely to change. My son requires bi-monthly treatments to keep his Crohn’s in remission. A few years back it was covered by my employer plan 100%. My employer and UHC took the ACA opportunity to “survey” the employees and “surprise”, the selfish white d-bags I work with who think they will never get sick voted to get a few bucks more per paycheck v. 100% coverage on most care.

    My kids’ care is not elective and it has nothing to do with their or our lifestyle choices. Yet I am now in financial straits because a bunch of a-holes who think it will never happen to them wanted 75 bucks more per paycheck. My FSA maxes out at 2,500, my son hits his annual max at 2,500 (halfway through his second treatment) but my family max is 5000, leaving us 2500 short…that’s all out of pocket. (As is the 2,500 from the FSA,and the premium deduced from my paycheck). An HSA is about the worst option for a family like us.

    It’s bad enough now. If I lost my job and couldn’t find another with similar benefits I’d be better off going on welfare and get my kids on Medicaid.

    The ACA gave me at least a glimmer of hope if the worst happen. Without it, I may as well just live on the dole.

    This country is fucked. Many voters would just fuck my children than have “other” folks get help. Fuck you and fuck your fantasy coal and manufacturing jobs that ain’t ever coming back no matter who runs shit. And I’m a white, upper middle class dude but I’d be getting fucked just like the “other”. So you white folks of whatever income can live with those consequences as well, other than the very, very rich, of course.

    And all you non-wing nut dudes who didn’t vote for Clinton because, deep-down, you’d rather a black dude as president than some white woman need to eat a bag of dicks.

    I’m through with this country. Run by a bunch of selfish and self righteous and extremely insecure white dudes. A horrible combination but one we seem to like. Have at it, USA. Unfortunately, I’m stuck here so my family will have to deal with the consequences. Thanks, fuckheads. Go fuck yourselves.

  64. 64
    MaryLou says:

    @Brachiator: Even Steve Jobs fell for the ‘alternative medicine’ treatment option for his cancer, and thus delayed getting real medical treatment until the disease was too far along. Even the geniuses among us have trouble making ‘best’ decisions about our own health.

  65. 65
    Richard Mayhew says:

    @OGLiberal: may i use you as an example?

  66. 66
    Richard Mayhew says:

    @OGLiberal: may i use you as an example?

  67. 67
    Pooh says:

    Isn’t the most natural extension of the “skin in the game” argument to never have kids? My son had to spend 8 days in the NICU as the result of basically luck (I’d say bad luck, but he’s thus far doing well so I don’t want to be churlish about it). Fortunately, we had good enough coverage to keep out of pocket reasonably low, but the unadjusted bill was in the neighborhood of 120k. In what possible way is making that a risk of starting a family a good thing from a societal perspective? The “family values” edition of “Press Your Luck” (no whammies!) sucks.

  68. 68
    OGLiberal says:

    @Richard Mayhew: Yes, you can

  69. 69

    […] the same time, doubts continue to surface about Republican alternatives to the ACA, including expanded health savings […]

  70. 70
    RW Force says:

    @Starfish: Google: HSA holders can choose to save up to $3,350 for an individual and $6,750 for a family (HSA holders 55 and older get to save an extra $1,000 which means $4,350 for an individual and $7,750 for a family) – and these contributions are 100% tax deductible from gross income.

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