Author Topic: HSAs in event of universal health care [US]  (Read 1536 times)

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2167
  • Location: EastCoast
HSAs in event of universal health care [US]
« on: May 07, 2018, 09:37:06 AM »
Some form of government/universal/socialized/whatever health care system in the US is starting to seem more likely and even possible. Probably not in the next few years, but perhaps in the next decade. Avoiding debate on why and how, I'd like some thoughts on simply how this might affect HSA accounts. I just started, but maxing out and in few years will have almost $50k there, and just up from there. But how much does one need? And especially if in ~10 years health care is "free"? I keep receipts, but that'll only be a few thousand, even after many years. What would you then use $50-100k, 200k+ in an HSA for? Just let it sit until you're 65+? Is it likely there there would still be expenses you could use this money for even under such a system?

At 65+ am I right that you can then use it as a roth IRA? I.e. tax free withdrawals? (or is it taxed?). [edit: ok, regular IRA. got it]. I guess that would still make it a decent account even if you can't contribute more to it. Although if HSAs are shut down, and zero new customers, what company would administer them for the next 30 years..?

There's also the issue of what the government will do with HSAs if they do implement single-payer. Hopefully they'll let the rule remain the same and still allow us regular IRA-type withdrawals. But so few have them, still fewer actually have money in them, so it seems the least "lobby-proof" off all savings accounts.. If income tax on withdrawals are implemented it would still be a nice account. Anything short of a punitive tax seems to make the HSA still a really attractive savings vehicle at the moment.

« Last Edit: May 07, 2018, 11:06:47 AM by Scandium »

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4320
  • Age: 10
  • Location: USA
Re: HSAs in event of universal health care [US]
« Reply #1 on: May 07, 2018, 10:01:41 AM »
You can use it as a traditional IRA at age 65, not as a Roth IRA. It's pre-tax money.

Also, if the federal and states government decide to pick up a larger portion of their residents' health spending, it probably won't be 100%. You will still have copays, things that aren't covered, and a market for supplemental insurance.

Unless you already have well over 6 figures in your account, I wouldn't worry about it.

neil

  • Stubble
  • **
  • Posts: 214
Re: HSAs in event of universal health care [US]
« Reply #2 on: May 07, 2018, 10:29:02 AM »
HSAs can be used like IRAs when eligible.  They are pre-tax going in, and you get a form with distributions.  At all times, distributions are essentially considered income with the special provision that eligible expenses can explicitly write off this income specifically.  Any remaining distribution not written off by eligible expenses is first taxed normally, and then assessed a fee if under a certain age.  Once the fees go away - this is what essentially converts an HSA into an IRA for tax purposes.  (But the HSA still has a benefit over IRAs - no RMD!)

Even in countries with "single payer" systems, there are private market options for some cases.  Without getting into a political argument, I think it is safe to say that the US will not implement some kind of system that, in the end, has zero health care costs.  (Medicare in its current form is also not free.)

There are people afraid that retirement savings will get taxed at some point in the future unfavorably, especially Roths.  I think raiding retirement accounts is not as toxic an issue as most assume, but I don't see the point in necessarily going for suboptimal investing decisions today based on any such predictions.  HSAs are currently a superior tax location for money if you are eligible to do so.

In a realistic world, the worst I could see is a forced one-time taxable distribution upon dissolution of the HSA as an investment vehicle.  Far more realistic that a IRA rollover would be allowed in this event.  In a crazy world where the government goes tax-happy, no place is safe anyway and HSAs are not the most valuable source to target.  I don't really think about it and put the money in.

bacchi

  • Magnum Stache
  • ******
  • Posts: 3067
Re: HSAs in event of universal health care [US]
« Reply #3 on: May 07, 2018, 02:49:27 PM »
Save your receipts until it happens. You'll probably have health costs in the next 10-20 years.


pecunia

  • Pencil Stache
  • ****
  • Posts: 523
Re: HSAs in event of universal health care [US]
« Reply #4 on: May 08, 2018, 03:57:08 PM »
Quote
Some form of government/universal/socialized/whatever health care system in the US is starting to seem more likely and even possible.

It wasn't that long ago that there was going to be Trumpcare.  They had a vote on it.  John McCain got out of the hospital and voted against it.  It was going to take away Obamacare.  The elected officials were perfectly willing to take health care away from millions of people.  These people are still in office.  I don't think they want socialized health care.

There are big businesses in this country that make lots of money from health care.  They like making that money.  They contribute to friendly politicians to keep things as the status quo.

For a change like this to happen, people would have to be really mad about their health care.  They don't seem to be.  They would have to vote in an entirely new bunch of politicians.  This isn't likely.

Investing in the health care industry could be a good thing.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1091
Re: HSAs in event of universal health care [US]
« Reply #5 on: May 09, 2018, 09:31:26 AM »
As far as I know, the government has never dared upset the monied class by forcibly converting a tax-deferred account into a taxable account. Yes, they will take away insurance from millions of families, but those folks don't vote and certainly don't donate to campaigns. Still, as a worst-case scenario, conversion to a taxable account is not so bad (i.e. it's your next best savings option anyway). The more likely outcomes include:

-No change. Use it for expenses not covered by the new system.
-Option to convert to traditional IRA.
-Transition to some kind of flex spending account.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1930
Re: HSAs in event of universal health care [US]
« Reply #6 on: May 09, 2018, 12:35:00 PM »
I'm also in the "invest your HSA" club; just checked, and I have about $19,000 invested in a mix of REITs and Value-oriented stock funds.

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2167
  • Location: EastCoast
Re: HSAs in event of universal health care [US]
« Reply #7 on: May 11, 2018, 02:42:53 PM »
Quote
Some form of government/universal/socialized/whatever health care system in the US is starting to seem more likely and even possible.

It wasn't that long ago that there was going to be Trumpcare.  They had a vote on it.  John McCain got out of the hospital and voted against it.  It was going to take away Obamacare.  The elected officials were perfectly willing to take health care away from millions of people.  These people are still in office.  I don't think they want socialized health care.

There are big businesses in this country that make lots of money from health care.  They like making that money.  They contribute to friendly politicians to keep things as the status quo.

For a change like this to happen, people would have to be really mad about their health care.  They don't seem to be.  They would have to vote in an entirely new bunch of politicians.  This isn't likely.

Investing in the health care industry could be a good thing.

https://www.economist.com/news/special-report/21740871-only-large-rich-country-without-universal-health-care-america-health-care-outlier

I think if Trump (don't) care would have gone through it might have made universal care more likely sooner. Assuming Dems can manage to win that is.. The more the GOP get their way the worse the systems become, and the more the public will be on board with scrapping the whole rotten edifice. Obamacare just throws money at the current setup, making it more palpable. I don't for sure it will happen, but the current system is broken and single payer is the only solution on the table that's likely to solve anything, since the GOP solution is "let everyone not-rich die", and everything else are band-aids.

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2167
  • Location: EastCoast
Re: HSAs in event of universal health care [US]
« Reply #8 on: May 11, 2018, 02:46:06 PM »
As far as I know, the government has never dared upset the monied class by forcibly converting a tax-deferred account into a taxable account. Yes, they will take away insurance from millions of families, but those folks don't vote and certainly don't donate to campaigns. Still, as a worst-case scenario, conversion to a taxable account is not so bad (i.e. it's your next best savings option anyway). The more likely outcomes include:

-No change. Use it for expenses not covered by the new system.
-Option to convert to traditional IRA.
-Transition to some kind of flex spending account.

I know, but since almost nobody use an HSA might they not be able to get away with it? Actually, wouldn't a worse-worst case scenario be: "it was for medical expenses, you can now only use it for that"? I'd die with 99% of my account unused.
« Last Edit: May 15, 2018, 08:46:01 AM by Scandium »

pecunia

  • Pencil Stache
  • ****
  • Posts: 523
Re: HSAs in event of universal health care [US]
« Reply #9 on: May 11, 2018, 05:23:16 PM »
Quote
I think if Trump (don't) care would have gone through it might have made universal care more likely sooner

Could be - The videos where folks confronted their reps when they were going to take away their health care showed pure anger.  If more of that anger was unleashed, it would have been more of the band-aid Obamacare fix.

I've maxed out my health care savings accounts. 

UniversityEmployee9

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: HSAs in event of universal health care [US]
« Reply #10 on: May 15, 2018, 07:51:13 AM »
Most countries with single payer healthcare actually have a multi-tiered system where private insurance is still popular. "Single" payer usually just means "public option" for health insurance.

Sent from my Moto G (5) Plus using Tapatalk


simonsez

  • Pencil Stache
  • ****
  • Posts: 695
  • Age: 32
Re: HSAs in event of universal health care [US]
« Reply #11 on: May 15, 2018, 08:15:16 AM »
As far as I know, the government has never dared upset the monied class by forcibly converting a tax-deferred account into a taxable account. Yes, they will take away insurance from millions of families, but those folks don't vote and certainly don't donate to campaigns. Still, as a worst-case scenario, conversion to a taxable account is not so bad (i.e. it's your next best savings option anyway). The more likely outcomes include:

-No change. Use it for expenses not covered by the new system.
-Option to convert to traditional IRA.
-Transition to some kind of flex spending account.

I know, but since almost nobody use an HSA might they not be able to get away with it? Actually, wouldn't a worse-worst case scenario be: "it was more medical expenses, you can now only use it for that"? I'd die with 99% of my account unused.
Okay, so you, your spouse, and your dependents all lived long healthy lives and didn't need to tap into your account which sheltered a higher percentage of income than any vehicle did during your working years.  This vehicle has no RMD and can be passed to beneficiaries (will be a taxable event for anyone besides your spouse).

If ending up too wealthy as a result of good health is your worst case scenario, part of me thinks you might not actually complain too much later in life if this happens.

ABC123

  • Stubble
  • **
  • Posts: 241
  • Location: Nashville
Re: HSAs in event of universal health care [US]
« Reply #12 on: May 15, 2018, 12:49:56 PM »
I highly doubt socialized medicine will come to the US any time soon.  Especially with the Charlie Gard / Alphie Evans type cases making big news.  There are still a whole lot of people here in the US that think socialized medicine equals government death panels.  Of course the same people who are anti single payer health care also seem to ignore the people here in the US who die because they couldn't afford health insurance, or even if they had insurance they couldn't afford to pay the deductible.  But in any case, our country would need a whole lot of changes to happen before anything close to universal health care would be politically feasible.  So I say, keep on filling up that HSA.  Worst case scenario, you have more than you can use, or the rules change at some later point.  But at least for now, I feel the benefits of the HSA still outweigh the possible future negatives.