Seven years in the making, the Republican healthcare plan, that has been speculated, sidelined, and approved for debate, is here. Can the hype and sensationalism deliver the affordable healthcare we all desire?
Every new leader likes to make their mark. Love it or hate it, the Republican Party can control the majority of our government legislature. Just like a new CEO, they want to replace old programs with new ones. Removing the Obamacare legacy is at the top of the list. This could create a new healthcare advantage on top of an ever-changing health system. Or it could be a new program with a new name, with little change – a little marketing 101. (Note – from our analysis this is pretty unlikely.) It also could dismantle an imperfect but important system that hurts the average American. But don’t fear change for change’s sake, we need our government to get used to moving at the pace of our technological free market society.
There are some clear pros and cons to legacy programs – if you need a reference point look at social security and medicare. These programs solved huge social needs. They created long-term security and dependability that Americans desperately needed. In the beginning, they worked wonders, but lately, they have become lumbering giants so full of bureaucracy and overburden their cost could be diminishing their value. The enormity of their legacy won’t allow for the proper change they need. They are like a floundering, failing corporation that needs drastic cuts to be saved, yet lack the capital and marketing intervention required to restructure and rebuild.
As such, changing and re-imaging healthcare programs every few years can be a positive process. Why not cut costs of ineffective elements, expand productive ones, and drive more efficiency across healthcare?
Any healthcare act, no matter it be the Affordable Care Act (ACA) aka Obamacare, American Healthcare Act (ACHA) or the Bettercare Reconciliation Act, must work with existing private healthcare. This is crucial as we think about larger healthcare issues like premiums, coverage requirements, and out-of-pocket costs. With or without changes at the government level, healthcare will continue to be driven by capitalistic principals.
In typical Republican fashion, their current changes include enhances to that capitalist model. Changes like removing individual health insurance and tax penalties along with larger employment requirements to offer health insurance.
The arguments for are:
- You can decide for yourself to add or decline individual healthcare and accept or decline jobs based on benefits coverage.
The arguments against are:
- If you get sick and don’t have coverage, you are going to likely experience sticker shock from your ER bills or be unable to pay. Or, be stuck with a job that doesn’t offer you the healthcare you need, therefore lowering your take home income. Healthcare simply becomes unaffordable.
Additional changes include removing out-of-pocket subsidies for low-income Americans and reducing tax credits for middle-income Americans, to offset health premiums. These are a great way to reduce program costs but are not a win financially for most Americans. Based on CBO projections it’s hard to see how these cuts would benefit American healthcare (22 million Americans would lose health coverage).
One aspect largely missing from all (current and proposed healthcare plans) are long-term benefits. Obamacare did and currently does include expansion of federal funding of Medicaid coverage. The Bettercare Act specifies a reduction in federal funding starting in 2021 with a sharp change in 2024, which would likely stop state expansion. Either way, this ignored one current healthcare understanding – retirement healthcare costs are expected to exceed $250,000 for individuals and 350,000 for couples. This is on top of existing Medicare coverage.
What can you do? Enter the HSA. While the HSA isn’t new, it’s the only health vehicle to create long term health savings. HSAs (Health Savings Accounts) allow individuals or employees to save tax-free dollars for out-of-pocket health expenses. 2019 HSA limits (set by the IRS each year) are $3,500 for individuals and $7,000 for families. They must be used in conjunction with a high-deductible health plan (HDHP).
In the Bettercare Act, HSA contributions limits are expected to double. Qualified expenses will expand to include over-the-counter medications. Both spouses will be able to make catch-up contributions starting in 2018 (to the same account).
Proponents think this is a great way to save tax-free dollars for long term health expenses. Critics worry that this won’t impact lower income individuals, who simply don’t have extra dollars to contribute. Either way, the HSA is the only currently proposed elements that incentives Americans to save for their health.
- Decreased taxes (likely for high-income Americans)
- Limit long term Obamacare liabilities (for both the government and individuals)
- Remove coverage requirements
How to Act
The impact on your short term health costs is still unknown, but the likely expectation is they will increase. Either way, the individual requirement to save for long term health cost remains apart from this debate. HSAs remain the most flexible and accessible health tool to save for health costs, both expected and unexpected. Health savings might not be new, it might not be sexy, but it’s becoming more and more important. No matter the outcome over the next few weeks, don’t let the rhetoric of this debate sway your understanding of the importance of health savings for the long term. It’s never too late to get started.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.