Health savings accounts and you (26 January 2006)

The state of the union address promises to feature Bush's latest plan to dismantle America's social saftey net, the Healthcare Spending Account, which has the sole function of giving people incentives not to use health care (it's "rationing" but performed by you, who of course understands all the intricacies of medical billing, and not the state, so it's presumably okay) and expects people to build up their own nest eggs for the inevitable time when they will be sick. A series of Ezra Klein's posts at the American Prospect blog do a good job explaining the nuts and bolts of the proposal and the essence of the president's con job to come. Like Bush's plan to junk Social Security, this plan is attractive to those Americans who blame those who suffer for their own suffering and whose own well-being is not affected at all by the misery of others just like him who haven't been as fortunate or prudent. It's operating principle is that society should not share any burdens to care for the sick or the aged -- that those disabled people simply need to fend for themselves. If they've failed to prepare for their old age or their illness by saving their own money, then they can die in the street like stray dogs. Sounds like a recipe for a civil society, doesn't in it? I guess that's just the price of freedom, Republican style.

These plans are geared to appeal to people in their 20s, not because they are preoccupied with tax-evasion schemes like HSAs but because they are cheap and allow the young to stop subsidizing the health care of old people through the common insurance company practice of pooling. The idea is that the young will divert the money that was going to grandpa's hip replacement into these tax-deferred accounts in preparation for their own coming hip replacements fifty years down the road. But there is an obvious flaw here, which is that many young people typically live with a sense of invincibility and are much more likely to find it more satisfactory to spend their extra money on flights to Australia or Xbox 360s or clothes than on what seems like nothing -- a savings account. If savings is truly a kind of spending, as hard-line free marketeers like to argue, it's an extremely unsatifying and unenticing way to spend, especiallly for a cohort bred to respect no impediments to pleasure in their drive to prepetually consume, and consume as much as possible (for the good of the economy, of course). So HSA backers cynically propose that these young people will be prudent enough to care for their future selves and defer gratification while it hands them more disposible income to stoke consumption higher and permit more corporate growth. And those same corporations get to spend much less on their workers health care as well, further bettering their bottom lines.