Posted on 01/09/2007 6:29:46 AM PST by oblomov
President Bush Signs Bill to Make Health Care more Affordable, Accessible
Washington, DC- President George W. Bush signed the Health Opportunity Patient Empowerment Act of 2006 today, enhancing Americans' access to tax-advantaged health care savings. The law, part of the Tax Relief and Health Care Act of 2006, provides new opportunities for health savings account (HSA) participants' to build their funds.
"Health savings accounts are improving the way Americans obtain the care they need. This bill makes HSAs more flexible and makes it easier for participants to put money aside for their personal health care," said Treasury Assistant Secretary for Tax Policy Eric Solomon.
HSA provisions of the Act include:
Allow rollovers from health FSAs and HRAs into HSAs through 2011. Employers can transfer funds from Flexible Spending Arrangements (FSAs) or Health Reimbursement Arrangements (HRAs) to an HSA for employees switching to coverage under an HSA-compatible health plan. The amounts rolled over to HSAs from FSAs or HRAs are over and above the amounts allowed as annual contributions. The maximum contribution is the balance in the FSA or HRA as of September 21, 2006, or if less, the balance as of the date of the transfer. The provision is limited to one distribution with respect to each health FSA or HRA of the individual. If an individual does not remain an eligible individual for the 12 months following the month of the contribution, the transferred amount is included in income and subject to a 10 percent additional tax.
Increase in annual HSA contribution. Previously, the maximum HSA contribution was the lesser of the deductible of the individual's HSA-eligible plan or a statutory maximum. The new rules make the limit the statutory maximum contribution, regardless of the individual's deductible. For 2007, the maximum contribution for an eligible individual with self-only coverage is $2,850, and the maximum contribution for an eligible individual with family coverage is $5,650. These limits are indexed for inflation.
Full HSA contribution regardless of month individual becomes eligible. Normally, the HSA contribution is pro rated based on the number of months that an individual during the year a person was an eligible individual. The new provisions provide an exception to this rule that will allow individuals who become covered under an HSA-eligible plan in a month other than January to make the maximum HSA contribution for the year based on their coverage in the last month of the year. This eliminates a common barrier to switching to HSA-eligible coverage. If an individual does not stay in the HSA-eligible plan 12 months following the last month of the year of the first year of eligibility, the amount which could not have been contributed except for this provision will be included in income and subject to a 10 percent additional tax.
One-time transfer from IRAs to HSAs. The new rules allow for a one-time contribution to an HSA of amounts distributed from an Individual Retirement Arrangement (IRA). The contribution must be made in a direct trustee-to-trustee transfer. The IRA transfer will not be included in income or subject to the early withdrawal additional tax. The transfer is limited to the maximum HSA contribution for the year, and the amount contributed is not allowed as a deduction. Generally, only one transfer may be made during the lifetime of an individual. If an individual electing the one-time transfer does not remain an eligible individual for the 12 months following the month of the contribution, the transferred amount is included in income and subject to a 10 percent additional tax.
Certain FSA coverage treated as disregarded coverage. Under previous law, if an FSA had a grace period following the end of the plan year allowing participants to incur additional reimbursable expenses, participants were treated as having disqualifying coverage, reducing their HSA contribution for that year, even though they had switched to HSA-eligible coverage at the first of the year. The new rules treat certain FSA coverage during a grace period as disregarded coverage, eliminating any resulting reduction in the HSA contribution for the year. First, the coverage is disregarded if the balance in the health FSA at the end of the plan year is zero. Second, the coverage is disregarded if the year-end balance is transferred directly to an HSA fom the FSA, as noted above.
Earlier indexing of cost of living adjustments. Previously, indexing was based on a 12-month period ending on August 31. The new rules change the base period to the 12-month period ending on March 31 and require that adjusted amounts for a year be published by June 1 of the preceding year. This change will provide employers and health plans with more time to design qualifying HSA-eligible plans and individuals with more time to make decisions about their health care for the next year.
Allow greater employer contributions for lower-paid employees. Previously, employer contributions under the comparability rules had to be the same amount or percentage of the deductible for all employees with the same category of coverage. Consequently, employers could not contribute higher amounts to lower-paid employees. The new rules provide an exception to the comparability rules allowing employers to contribute more to the HSAs of non-highly compensated individuals. For this purpose, the definition of "highly compensated employee" is based on same definition used for qualified retirement plans.
Demand side solutions will do nothing to increase availability of healthcare. We need a supply side solution.
Hooray President Bush!
Now we need a tax deduction for those who put a lot of $$ into a catastropic health insurance and/or nursing home policy so the government and health care system doesn't take a lifetime of savings in the blink of an eye .
"Now we need a tax deduction for those who put a lot of $$ into a catastropic health insurance and/or nursing home policy so the government and health care system doesn't take a lifetime of savings in the blink of an eye."
Also wouldn't hurt to get rid of the 12% mandatory contribution to Social Security and instead let us invest that into our own retirement funds.
Nahhhhh.....
If this is the type of insurance I think it is and that is if you do not use the put aside money in a year, you lose it. Is this correct?
I think I have the solution to medical care.
At the age of 21, you MUST buy an insurance policy that gets paid annually till age 65. You will either pay for it with either pre-tax dollars or the government will pay for it.
At age 65, the cash from the policy becomes yours to keep for medical expenses till death. If you die before 65, the face value of the policy is paid to your beneficiary, tax free.
If the government paid for your policy for let's say 5 years, they will get paid back from the policy. If you die before 65, the government gets back what it paid in, plus interest and the beneficiary gets the face value of the policy, tax free.
Of course the other option is the government buys the policy in your name, you get to use the cash for medical and the government gets the face value at your death. But then you would see the conspiracy theorists out and the NY Times Headline:
"BUSH KILLS CHILDREN TO FUND SOCIAL SECURITY"
Nope, you're thinking about flexible medical spending accounts. HSA's are yours forever if you don't spend the money. You can also take the funds to the next employer.
Think 401K for healthcare expenses. Money is not taxed going in, can grow tax free, and is not taxed coming out if spent on qualifying healthcare expenses. They can also roll into retirement to pay your portion of Medicare and Long-term care.
I've come up with an odd idea for health care and I'd be interested to know people's thoughts. It's just a rough sketch.
Here are the main elements.
1. People can purchase health insurance a year in advance, if they pay the yearly bill in one sum instead of monthly payments.
2. Those who do this will gain a 10% subsidy from the government, and a 10% subsidy (or price reduction) from the insurer.
3. Individuals can purchase multiple plans, which are then transferrable to any person within their "tier" (for instance, 20-25 single white males).
4. If a person chooses to take part in this system, they must retain one insurance plan for themselves. Thus, if they purchase 5 plans, they can only sell 4 for profits (the sale of these plans will likely take place over various online networks).
Expected Effects: Most of those making significant amounts of money, who are not yet insured, will purchase at least one plan. Many of them will purchase multiple plans, then, because of the 20% discount they received, re-sell the plans for profit, yet cheaper then the price the insurer was offering. This will bring additional people into the system; those wishing to make a profit, and those who are now able to afford health care at it's cheaper price. This will, in turn, likely cause the market price to dip, because adverse selection will have been decreased. Insurers will like the plan for a few reasons. One, they'll have guaranteed sales of many plans, even though the individuals who purchased them, in the hopes of selling them off, might not be able to find a market for them. Two, they'll have significant numbers of plans paid for in lump sums. This is helpful for precisely the same reasons banks are able to function: having money that you'd otherwise have to wait for, is enormously helpful (for expansion purposes for instance). Three, more customers enter the market, many of them quite healthy.
There are a couple of problems I'm sure need addressing. For instance, there'd have to be some sort of penalty to dumping one's current plan, to purchase the new, cheaper plans. You could, for instance, purchase new plans, but you'd have to retain your current plan (or face a hefty fee). Otherwise, it'd simply become a way for the rich, who are already insured, to find cheaper plans. There are probably some other difficulties I haven't forseen.
But I think it allows the health care system to be much more of an entreprenurial enterprise.
I did the calulator for private investment vs soc. security payments and if I was allowed to PERSONALLY invest, I would receive $5,200 MORE per month at age 62 .
"Demand side solutions will do nothing to increase availability of healthcare. We need a supply side solution."
I'd like to think this impacts both sides if it continues to gain popularity. You'd be amazed at the increased efficiencies when it's your own money you are spending. I sit here with a chest cold, at work and unlikely to waste $150 to see the doctor. It does work both from the premium side as well as the efficiency side. Give me an example of what you mean by a supply side solutin that doesn't ential larger government or regulation.
Eliminate the laws that require me to visit a physician in order to purchase medication.
I have asthma. Albuterol, one of the mildest medications available to treat asthma, is only available with a prescription. Epinephrine and all it's nasty side effects is available over the counter, however.
I'm educated and know how to read the Physicians' Desk Reference. I do not want or need someone else's permission to self-medicate. If someone less knowledgeable wishes to obtain a physician's opinion first, they are more than welcome.
This will also free-up time for doctors to treat the serioulsy ill.
It is true that if your supply is fixed (as it is), then cutting demand will cause the price to decline. So a demand side solution that reduces demand might cause a price decline. But that's not what they've got planned. They are planning to find new ways to finance demand, and that means more demand. On occasion, they try to suppress demand, but while that might reduce the price, it does not increase the overall welfare. Telling people they cannot get healthcare that they want is not a positive result. The purpose of the economy is to satisfy wants, not to decide what the wants should be. In a free society, people make their own decisions as to how much healthcare they will demand.
My supply side solutions are basically to reduce the regulation that has restricted the number of doctors and other healthcare professionals. Also, get the government out of the business of telling people that they can't invest in the healthcare industry. Our healthcare regulations are designed to stifle production. It doesn't take an economist to see that reducing supply is a sure fire recipe to drive up costs.
The current regulatory scheme is based on the fundamentally false theory that if you restrict how much producers pay for the inputs they use to produce healthcare, then you can pass the savings on to the consumer. But regulating how much people can spend on producing healthcare does nothing to reduce price. The price of a commodity only reflects costs of production in a purely competitive market, and the healthcare industry is far from that.
think you miss the effectiveness of the supply side solution ...........s/b demand side.....
Why is it he has suddenly started acting more conservative now that we have a Dem Congress?
A very good move. Who says lame-duck status is the pits?
I don't think that high deductibles are really a supply side solution, though. They might be a successful demand side solution, but they really don't do anything to increase supply.
I am not opposed to the idea of a demand side solution that shifts a greater responsibility to the consumer to pay the cost of his own healthcare. My point is that it's not going to happen. All of the demand side solutions that are even remotely on the table are plans to increase demand, or perhaps to shift demand from one group to another. There isn't really anyone who's pressing for significant increases in deductibles as a solution. When deductibles are increased, they are typically increased because there is no choice due to cost increases that have already filtered into the system. In other words, they are reactive--not reformatory, and I don't expect that to change.
But the interesting thing is that in a purely competitive model, if you can expand the level of input without driving up the cost of the inputs, then in the long run, the level of demand is irrelevant anyway. If demand increases, then the price goes up temporarily, suppliers enter the industry, and the price then comes back down. In the long run, there is no increase in price associated with an increase in demand, so it's irrelevant whether you demand a lot or a little, and we don't get into this debate over whether we're demanding too much, etc.
The problem, though, is that if you restrict supply (as we've done) then the process doesn't work that way. Price goes up, but no one enters the market, and it stays up. That's the problem we've got.
I think it would be better to shift the responsiblity for payment to the consumer, so that the consumer could himself deal with the question of whether this high level of service is really worthwhile. But at the same time, I don't think that we'd be seeing inflation in the healthcare industry if it weren't for the fact that the supply is restricted. People aren't demanding more this year than they did last year because the deductibles are too low. If anything, the deductibles are higher this year than they were last.
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