Tuesday, July 06, 2004
KC Star columnist declares HSAs healthy
[Jerry Heaster, "A healthy method of saving," The Kansas City Star, 4 July 2004.]
Columnist Jerry Heaster speculates in this recent column that HSAs are just what the doctor ordered for rising health care costs and financial planning:
The advent of health savings accounts brings not only a new wrinkle to the health care insurance mix but also another nest-egg-building opportunity for retirement.
In fact, as the potential of this product for retirement savings becomes more appreciated, it's reasonable to expect the concept leading to sweeping evolutionary changes in how America finances health care coverage. [emphasis added]
The immediate impact is how this approach sensitizes participants to the need to become wiser health care consumers. The tradeoff for substantial premium savings is the relatively large deductible, which typically might be $1,000 for individuals and $2,000 for families.
With the insured paying so much of the upfront costs of their annual health care bill, it's assumed they'll be more discerning when deciding whether a health problem requires professional attention.
Over time, the challenge to gaining widespread acceptance will be convincing those eligible that the long-term benefits outweigh the higher short-term cost of self-insuring. The allure of these accounts in this respect is that they allow any buildup of funds to be carried over from year to year. Thus, the money not spent becomes tax-deferred savings for use either on future medical expenses or other emergencies. An added advantage is that the contributions can be parked in savings and investment accounts to produce added tax-deferred income.
The real beauty of these accounts, however, is how they can begin to work to the advantage of retirees for whom these accounts can become a supplementary source of health care financing to pay for outlays not covered by Medicare. Those 65 and over cannot continue contributing, but they can use what's accumulated to pay Medigap insurance premiums, cover what Medicare's drug benefit doesn't, finance dental and vision expenses, or help with long-term and assisted-living care needs.
Money used for medical-related outlays for those over 65 can be withdrawn tax-free, which makes it something akin to an individual retirement account for health care purposes. Moreover, the money can be used for nonmedical purposes, with the expenditures treated as taxable ordinary income with no 10 percent penalty.
Given the myriad expenses for which Medicare provides no help, and assuming Medicare's financial problems may lead to further benefit shrinkage, a sizable health savings account nest egg could go a long way toward alleviating the burden of out-of-pocket health care expenses in retirement.
[Jerry Heaster, "A healthy method of saving," The Kansas City Star, 4 July 2004.]
Columnist Jerry Heaster speculates in this recent column that HSAs are just what the doctor ordered for rising health care costs and financial planning:
The advent of health savings accounts brings not only a new wrinkle to the health care insurance mix but also another nest-egg-building opportunity for retirement.
In fact, as the potential of this product for retirement savings becomes more appreciated, it's reasonable to expect the concept leading to sweeping evolutionary changes in how America finances health care coverage. [emphasis added]
The immediate impact is how this approach sensitizes participants to the need to become wiser health care consumers. The tradeoff for substantial premium savings is the relatively large deductible, which typically might be $1,000 for individuals and $2,000 for families.
With the insured paying so much of the upfront costs of their annual health care bill, it's assumed they'll be more discerning when deciding whether a health problem requires professional attention.
Over time, the challenge to gaining widespread acceptance will be convincing those eligible that the long-term benefits outweigh the higher short-term cost of self-insuring. The allure of these accounts in this respect is that they allow any buildup of funds to be carried over from year to year. Thus, the money not spent becomes tax-deferred savings for use either on future medical expenses or other emergencies. An added advantage is that the contributions can be parked in savings and investment accounts to produce added tax-deferred income.
The real beauty of these accounts, however, is how they can begin to work to the advantage of retirees for whom these accounts can become a supplementary source of health care financing to pay for outlays not covered by Medicare. Those 65 and over cannot continue contributing, but they can use what's accumulated to pay Medigap insurance premiums, cover what Medicare's drug benefit doesn't, finance dental and vision expenses, or help with long-term and assisted-living care needs.
Money used for medical-related outlays for those over 65 can be withdrawn tax-free, which makes it something akin to an individual retirement account for health care purposes. Moreover, the money can be used for nonmedical purposes, with the expenditures treated as taxable ordinary income with no 10 percent penalty.
Given the myriad expenses for which Medicare provides no help, and assuming Medicare's financial problems may lead to further benefit shrinkage, a sizable health savings account nest egg could go a long way toward alleviating the burden of out-of-pocket health care expenses in retirement.
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