Comments on: Bad Advice to the GOP on Health Care

By: G Ruggles

G Ruggles — Thu, 11 Mar 2010 19:45:48 +0000

This is so outragous you are saying the government is paying 50% of your healthcare because they are not getting tax revenues? This implies the government is entitled to my earnings which is just wrong they are MY earnings not the governments. It is thie logic in Washington that has us in the mess we are in now. I earned the money it is my money to do with as I please it has never been the governments money and it should never be considered their money.

By: John Goodman

John Goodman — Thu, 04 Mar 2010 18:48:28 +0000

Reply to John Graham: For individuals to self-insure, they need to be able to do individually what an insurance company does — allow money to accumulate over several years without tax penalty until a health need arises. That’s why we needed HSAs and MSAs.

To get the incentives right at the margin, however, the HSA should be a Roth type account — with aftertax deposits and tax-free withdrawals.

By: John R. Graham

John R. Graham — Wed, 03 Mar 2010 23:33:05 +0000

Why do we need HSAs or MSAs at all, if purchasing a health-insurance policy triggers a tax credit to the individual, after which the dollars are after-tax whether the patient spends them on health care or not? The 1995 Goodman & Pauly Health Affairs article obviously did not mention “Roth” but noted that the MSA’s earnings could be tax-free, perhaps with a cap (p. 134). Today, we’d call that a “Roth HSA”, I suppose. However, it seems like another unnecessary investing vehicle, with administrative costs. We don’t get a tax credit for a Roth IRA. If the individuals are simply going to get a tax credit for buying health insurance, why not just forget about the HSA or MSA altogether?

By: Paul H.

Paul H. — Wed, 03 Mar 2010 23:30:08 +0000

John: thanks for the further explanation in your comment.

By: John Seater

John Seater — Wed, 03 Mar 2010 21:04:43 +0000

I understand Frank Timmins’s justification for subsidizing health insurance, and it is reasonble. Nonetheless, I don’t buy it. The question is what you are going to take as given. IF you are going to assume that every uninsured person who suffers a catastrophic medical condition will be treated at public expense, then Frank has a point. I don’t accept that premise. In my opinion, if we already have subsidized the poor, then we have no obligation to care for people who do stupid things. If someone with the means to buy insurance chooses to gamble and not buy it, then I am perfectly willing to let him live with the consequences, including his own death even if said death could be prevented by giving him care he now cannot afford because he freely chose not to buy insurance. If we are not willing to do that, then just what kind of behavior are we willing to hold people accountable for? Anything serious, or just trivial stuff? What are the incentives implied the answer to that question?

By: Bart Ingles

Bart Ingles — Wed, 03 Mar 2010 20:23:13 +0000

“The goal is to have government subsidize insurance (at least catastrophic insurance) without distorting any decision at the margin.”

Here’s a silly question. Why is it necessary to eliminate every trace of market distortion? And why should this take absolute priority over every other reform?

It seems to me the problem is more of excess and of inconsistency, and in some cases of the incentives going the wrong way. Wouldn’t it make more sense to limit market distortion and to harness it for some useful purpose? Which makes more sense, harnessing the overflow from a dam to drive a turbine, or shunting it all into a spillway?

I suppose if one were a religious fanatic it would make sense to eliminate all greed, lust, and gluttony rather than harness those drives to fuel society. Then we wouldn’t have any markets to distort.

By: John Goodman

John Goodman — Wed, 03 Mar 2010 16:05:56 +0000

Response to everybody, but especially John, Greg and Stuart:

The goal is to have government subsidize insurance (at least catastrophic insurance) without distorting any decision at the margin. This is done by making every marginal decision aftertax.

So the choice between an extra HSA deposit versus extra third-party insurance is made with aftertax dollars. On withdrawals from the HSA, the choice between current health care, current other goods, future health care and future other goods is all made on a level (aftertax) playing field.

The only way to get the incentives right at every margin is with a lump sum tax credit, coupled with a Roth HSA.

And, again, subsidizing health savings is not the same thing as subsidizing health spending. The former is good policy. The latter is bad policy.

By: Stuart Prescott

Stuart Prescott — Wed, 03 Mar 2010 14:25:01 +0000

As you know, we sell a high percentage HDHP to clients. Strong advocates. However, what’s different about the items we buy with untaxed money through our HSA and the “bad idea” you’re commenting on below? I’m starting to struggle with this a little. We have more dollars to spend, because the gov’t is subsidizing us, potentially increasing utilization, just as you said. No?

By: Kemmeth A. Fisher, M.D.

Kemmeth A. Fisher, M.D. — Wed, 03 Mar 2010 01:35:14 +0000

Mr. Goodman,
In many instances in health care, financial incentives do not apply. Patients will frequently do what the doctor suggests. The problem is that most physicians have been trained in an overly technological style of medicine. This is because almost all training centers practice a technological expensive style of medicine (see the Dartmouth Atlas of Health Care). Thus to control both demand and supply, I have suggested real time peer review so that only beneficial care is delivered. Much more detail is available on my blog, http://drkennethfisher.blogspot.com.

By: Bart Ingles

Bart Ingles — Wed, 03 Mar 2010 00:37:36 +0000

P.S. I agree wholeheartedly with Frank Timmins. I don’t see why we’re worried about reducing health care spending for those willing to pay for it. The main problem with employer-sponsored insurance is not cost; the main problem with ESI is ESI. Or at the least lack of alternatives. The real spending problem is in Medicare and Medicaid.