CELEBRATING ENLIGHTENED ANAL-CRANIAL INVERSION. and a love of beer.

Saturday, February 12, 2011

Why Health Savings Accounts are a rip-off

One way the government has tried to offset the rising cost of health insurance was to create the Health Savings Account.  It turned out to be a rip-off that didn't do anything but benefit insurance companies and banks.

In exchange for selecting a high deductible health insurance plan, you can create a savings account that you can use to pay your out-of-pocket costs, the savings plan allows you to make your contributions tax deductible, so, theoretically, all your out of pocket costs are tax deductible.

The problems are:
  • The annual contribution limit for tax purposes is less than the out of pocket maximum in the insurance plans.  So, if you go over your out of pocket limit due to large claims, you cannot recover all the money you spend.  You can theoretically recover it in future years, but you need to have enough leftover unspent money in future years to do it then.  (The current annual funding limit is around $7,000 for a family).
  • The premiums for the HSA plans are not comparatively lower than traditional PPO plans to the extent that you take on additional risk; you take on more financial risk, but you are not fully compensated for it with lower premiums. In short, the insurance companies quickly absorbed the difference by ratcheting premiums back up, so the plans were essentially a Trojan Horse for implementing higher deductibles without offsetting rate reductions for the policyholders.
  • There is no individual out of pocket limit as there is in a PPO plan, only a family limit.  If you have family coverage, this is a very bad deal.  Be careful: because the spreadsheets that insurance companies use to compare HSA and PPO plans imply that there is an individual limit.
  • You need enough leftover money to actually put money into the HSA savings account; the point of the whole scheme.
  • You need to pay for your high deductible before any insurance kicks in, that means you "front" more of the first-dollar claims cash, compared to a PPO plan.  You better have enough extra cash ready for a big claims year.

The tax deductibility is a pretty clean benefit, although there are other ways to get it, including the tax deduction on your 1040 schedule A (subject to a limit) or an employer’s Cafeteria plan (subject to use-it-or-lose-it provisions).

In the end, choosing between a PPO and a HSA is a gamble, the outcome depending on how much claims you have in the year, and which family member has them.  There are scenarios where an HSA is better (and the tax deducibility is more assured), but there are many scenarios where an HSA is worse.  It is mainly better if you don’t have any claims that year.  The HSA is best when you don’t use it, and then only to the extent that its premiums are lower than a PPO.

But the real problem – and this is where the rip-off comes in, is that the HSA accounts themselves are a bad deal; and a boondoggle for the banks that hold the accounts.  They have all sorts of fees – account set up fees, low balance fees, and the usual checking account type of fees.  Also the rate of interest you earn is ridiculously low, like passbook savings account low.  The fees can add up to a couple hundred dollars per year, and you must keep a minimum balance sitting in the account our you will get sucked dry with a monthly fee..

In addition, the balance in your account may or may not be FDIC insured, so be careful what bank you use and how much you accumulate.







Sunday, February 6, 2011

The Reagan Revolution in Charts - everything got worse

When Republicans try and articulate a coherent explanation of what they actually do - besides destroy social institutions, tell lies, and ruin a lot of lives - there are inevitably attempts to invoke the myth of Reagan, the trend increasingly notably since his death and now 100th birthday.  This reflex is fitting, since myths and poorly-recalled false memories are what suits modern conservatives best.  As reality's harsh light shines on the nihilism and pathology of the right, Republicans tend to bury themselves in denial and fabrication.


Here's some reality: since 1981, just about every economic measure available has gotten worse.  The election of Reagan brought us the "conservative era;" and as the following measures show, it has been a damn catastrophe for the nation and its middle class (the top 10% excluded, who have done exceedingly well since then, which is not mere coincidence).

The only measure that has improved, at least nominally, is the stock market.  The stock market is of course almost entirely owned by the wealthy, so this uptrend mainly benefits them.  And of course even this increase was primarily financed on the backs of the middle class, through the cannibalization of our productivity  and the piracy of our affluence, and later through taxpayer-backed cheap money for the backs, followed of course by taxpayer-financed bailouts of the banks.  Upwards wealth transfers, all of it.


Here's a simple fact: Reagan massively increased the spending of our government - an inconvenient core truth about the alleged "small government" hero's governance.  But he also sat astride the apex of American power and wealth - the nation's downtrend slide can almost entirely be traced back to its genesis during Reagan's tenure (except a few areas of decline that began under Nixon).

The myths and lies and treasons of Reagan are almost too numerous to list.  But it is worth reiterating that he launched an explicitly illegal war in Nicaragua in violation of an explicit law of Congress, which he did by supporting drug-running death-squad terrorists who were overthrowing a democratically elected government and torturing and killing a lot of civilians in the process, He illegally sold missiles and other weapons to Iranian terrorists in order to pay for the illegal war in a massive secret money laundering scheme, and he lied about all of it to Congress and to the people.  The entire scheme was swept under the rug when his former Vice President pardoned the gang of conspirators with preemptive, prejudicial amnesty - a get-out-of-jail card card that was granted before the trials even began.  Reagan's covert support of Saddam Hussein is another area of disgrace.
 

Reagan also "blinked" in the face of terrorist demands, when he bribed Iranian terrorists with weapons (and a cake) to gain the release of their hostages, this is a betrayal that his predecessor Jimmy Carter refused to make.  

Oh, Reagan also raised taxes several times - on the middle class.  But his biggest betrayal of the nation was that he initiated the destruction of the middle class.  The numbers speak for themselves....



Some things that got worse since 1981...


The National Debt 
(Debt goes parabolic in 1982, second spike in 2003)




Balance of Trade 
(Trade balance declines beginning in 1981, crosses axis from surplus to deficit in 1986; then the decline spikes downward in 2000)



Manufacturing Employment 
(Employment peaks just before 1980; falls off a cliff in 2001)
(To be fair, the manufacturing share of GDP started to decline long before 1981) 
 


Labor's Share of Productivity Gains
(The productivity-wage divergence trend spikes in 1983)
 
 

GDP Growth
(Rate of growth peaks in 1982)




Personal Savings
(Savings rate peaks in 1982 and then falls off a cliff)
 
 

Household Debt 
(First parabolic move up is in 1982; second in 2000)



Widespread Prosperity

(Income growth diverges in 1979; goes parabolic in 1984)





Income Share of the Top 10% Diverges about 1981 (aka the "great divergence" after 40 years of middle class prosperity)

incomgegainsstraight.jpg




"Financialization" of the Economy
(Converting the economy from one that made things to one where the financial sector made money as middlemen, without adding much value, while everyone else went into debt. This change starts between 1981 and 1984, with debt going parabolic in 2002)




Deficit Spending
 





For What It's Worth... (Presidential Popularity)





Thanks to Dave Johnson & Terrance Heath for the idea and many of the charts:
http://www.ourfuture.org/blog-entry/2010062415/reagan-revolution-home-roost-charts
http://www.truth-out.org/revisiting-reagan-nightmare67507

Also:
http://rondam.blogspot.com/2006/10/why-i-bash-republicans.html
http://www.brillig.com/debt_clock/faq.html
http://www.cbpp.org/cms/index.cfm?fa=view&id=3309
http://blog.prospect.org/blog/ezraklein/inequality/
http://www.opednews.com/articles/Tea-Parties--Crackbrained-by-Steven-Leser-090410-987.html
http://www.thefoldblog.com/2011/01/after-running-up-national-debt.html
http://www.headybrew.net/other/federal_budget_deficit_chart.html
http://www.bizindia.net/news/News.asp?newsID=149&catID=58
http://www.obamaftw.com/
http://www.centerforpolitics.org/crystalball/articles/frc2010072901/
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/04/09/businessinsider-15-charts-about-wealth-and-inequality-in-america-2010-4.DTL
http://www.mybudget360.com/financialization-era-banking-welfare-captured-our-economy-wealth-financial-debt-leverage/
http://www.investorsinsight.com/blogs/profitscore_iq/archive/2009/09/22/why-are-americans-earning-less-than-they-did-in-1982.aspx
http://www.shadowstats.com/article/hyperinflation-2010
http://gamingmywife.wordpress.com/2011/03/05/decline-of-the-middle-class/
http://www.frumforum.com/gops-2012-budget-dead-on-arrival/
http://www.stumbleupon.com/su/1Iesg6/www.headybrew.net/other/federal_budget_deficit_chart.html/
http://voices.washingtonpost.com/ezra-klein/2011/01/a_graph_im_trying_to_understan.html
http://economix.blogs.nytimes.com/2013/09/10/the-rich-get-richer-through-the-recovery/?_php=true&_type=blogs&_r=0
http://www.financialsense.com/contributors/adam-taggart/america-cant-afford-future

[updated March 2014 to replace broken links]


http://www.dailykos.com/story/2010/2/27/841375/-Unemployment-Hits-10.8,-Presidential-Approval-Drops-to-35