By Robert (Rob) Klein, Retirement Healthcare Advisor
OCTOBER 26, 2015 – I could never be a politician. You have to put up with a lot of faux journalists who already have their talking points and mind made before they interview you. This link is an excerpt from the exchange with Chris Wallace and Dr. Ben Carson. The subject is health insurance reform: http://dailycaller.com/2015/10/25/ben-carson-says-he-would-not-end-medicare-would-provide-health-savings-alternative
I’ve been paying attention to Dr. Carson long before he became a candidate. I am not endorsing him or anyone else for President. What got my attention with him, besides his amazing background, was he talked about issuing HSAs at birth – the same time a baby’s parents receive the child’s Social Security card. Next was the ability to keep that HSA in the family. So if grandpa had accumulated a lot of funds in the program and died before using them, the account passed on to his son. The son could pass it on to his daughter and so on and so forth.
The idea was simple enough… Instead of FICA taxes disappearing into a black hole and eventually being laundered through the sticky fingers of government, fund HSAs. Carson’s math works out to $5,000 a person, which is enough to pay for a concierge medical practice at $2,000 to $3,000 a year. That still leaves money over to purchase catastrophic insurance. Sign me up.
In order for this to actually work, I suppose the amount over the $5,000 per person would be self funded, voluntarily, like an IRA. Otherwise the math wouldn’t work out and the HSA wouldn’t grow. Therefore we would have to let people view the HSA as a 401(k)/IRA for medical. Not a bad idea, and more on that later.
Dr. Carson talked about keeping Medicaid for the indigent and needy. I don’t think most people would disagree. That’s who and why we have a social safety net. But I also thought he wanted to replace Medicare. Not a bad thing for those under 55.
That being said, here’s the problem. Social Security and Medicare are intertwined. My previous posts and those by my colleagues discuss this often. Perhaps Dr. Carson understands that and is not talking about dumping Medicare – at least not yet. If you understand Medicare and what my colleagues and I frequently discuss, you will know that key to ‘saving’ Social Security is making Medicare premiums go up so you receive less net Social Security.
But with a problem, there is often a solution or two. HSA distributions are currently off the grid with the MAGI calculation to determine if you will pay higher Medicare premiums. HSAs also lower your AGI, and one can argue they are the modern 401(k). Lower your taxes through HSA contributions, and save for retirement in other tax and Medicare friendly vehicles – Roth IRAs/401(k)’s and/or cash building life insurance. Certain annuities give you partial relief too.
Maybe Dr. Carson is trying to put us in the have your cake but eat it too scenario? Medicare will continue to be around for the purposes of saving Social Security. Perhaps Dr. Carson might want it around to be the direct primary care for those over 65, and the catastrophic in that scenario is the Medigap plan. But the last I checked, HSA distributions could not be used to buy a Medigap plan. Maybe under his plan that will happen? Also keep in mind you cannot contribute or open a HSA if you are enrolled in Medicare. So that would have to change, too. Especially if we want to keep the HSA alive with contributions so it be built up and passed on.
I have no idea if Dr. Carson’s plan will become reality. I do think it’s interesting, regardless if Mr. Wallace wanted to understand but couldn’t, or was intentionally obstructing.