Health Savings Accounts–Where are the Savings?

1. David Ignatius notes:

“He found that for the 53 percent of households that hold at least one retirement account, the median combined balance was a mere $45,000.”

“Hold on, you say, that figure includes some younger workers who haven’t started saving in earnest yet. Okay, for households headed by persons between the ages of 55 and 64, the median value of all retirement accounts was just $100,000. Purcell noted that for a 65-year-old man retiring last month, that $100,000 would buy an annuity that would pay a paltry $700 a month for life, based on current interest rates.”

This in the generation that has lived through what is arguably the most prosperous era of our country’s history.

Meanwhile:

“Fidelity Investments says a 65-year-old couple retiring in 2008 will need approximately $225,000 to cover medical costs in retirement. That doesn’t even include over-the-counter medications, most dental services, and long-term care. The Employee Benefit Research Institute figures a married couple will need a staggering $305,000, just to have a 90 percent chance of being able to pay for all out-of-pocket retirement health expenses (the money could be paid in part out of retirement income, however.)”

Medicynical Note: Proponents of HSA’s (Health Savings Accounts) and other high deductible health insurance schemes say paying for health care is easy. Simply have people use health savings accounts to put aside money for the times when they need it. The problem is that during the most financially remunerative era in our history savings of any type didn’t occur. Moreover, the health of our economy depended on low savings rates to spur consumption.

Something’s wrong here. HSA’s and such engage in magical thinking rather than serious problem solving. They are recipes for disaster. We need to find better ways to control health costs and pay for them.

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