This is a system I’ve been engineering on and off for 20 years. The concept is far beyond simple health savings accounts, it’s designed to provide an option to Social Security and all other social welfare programs. It lowers the costs of health, education and welfare dramatically to the taxpayer and improves the quality of life. But people would be free to stay in Social Security, or switch to the USA program.
The basic features are this (Numbers/percentages can can be adjusted as needed)
20% flat tax
$10,000 universal tax deduction per worker
$2500 universal tax deductionper child
No personal FICA tax
Nobody making under $50k pays any income tax.
Government contributions.
This may seem like a possible tax increase but it isn’t. Instead of paying the government, most people will be paying themselves. In fact, the biggest “weakness” of this transition would be that the government would end up with less money and while most of it will be offset by future payouts, it will likely require some belt tightening. However the big winners are the people who no longer have to pay exhorbitant prices for healthcare as it will drop by more than 50% almost immediately and by around 75% over time as the market becomes more efficient due to merely having to process a standard bank debit card.
The account would be able to be used for any medical or health expenditure, such as a gym membership, dental, doctors visits, surgeries, home fitness equipment, medicines. Each child would start their adult live with up to $45,000 plust interest in their USA account, enough to potentially paycash for an education or to start a small business, or put a downpayment on a house, or to leave in the bank for medical emergencies. It also allows people with a certain level of savings to be self insured for car, home, employment or life. At the age of 65, the remaining money can be used for personal expenses as well as health care, and any money left over can be inherited or gifted to family or friends.
The biggest advantage of this system by far is that health care is paid in cash. This has a STRONG downward pressure on costs and an upward pressure on efficiency. This is enough to drop the cost of heathcare by 50-75% of current costs, as long as government avoids subsidizing or protecting existing cost structures with anti-competitive laws. And as we have seen, services paid in cash are generally 50% or less of those paid via insurance, and with less overhead for the provider and user. It would also reduce unnecessary medical expenses, and procedures as well as waste, fraud and abuse, and overmedication. It would also allow taxpayers to wean themselves off of government, eventually allowing the system to even be removed or replaced by something even less onerous, as medical systems become more efficient and affordable through technological upgrades and cost deflation.
Adults would start with up to $45,000 in their accounts, and then would accrue an additional $10,000 per year throughout life. Meaning someone who decides not to spend this money can have up to $515k in their USA bank account at the age of 65 plus interest, investment returns.
For those who continue in Social Security, nothing changes. For those who decide to change, they would receive a voucher for money paid into the Social Security system. There would be a chance that this money won’t be received as it wouldn’t be inheritable, just like Social Security, but would serve as a backup for those who, through misfortune or illness or longevity were forced to empty their accounts early.
Social Security would continue to be paid out until everyone chooses to be on USAs, using employer contributions and increased tax revenue on the wealthy, however all tax returns would be dramatically more simple and Constitutional as all income would be taxed identically for individuals.
The biggest savings would come from competition and efficiency. Lifting importation of drugs will force prices down dramatically. This will not just reduce medical costs for those with USAs, but for Social Security and Welfare recipients as well, benefitting all Americans and the economy.
Here are a few examples of how the system would work.
Steve makes $30,000 per year. Her contribution would be $6000 and she would pay no federal tax. Her employer would be responsible for paying 7.5% of her salary to her account because she cannot complete her $10k deduction. This adds $2250 for a total of $8250. The government would complete the account with an addition of $1750 from employer contributions.
Brenda is a single mother of two children making $80,000 per year. Her tax deb is $16,000 but her contribution is $15,000. $10,000 goes to her account, $2500 goes to each of her children, leaving $1000 that is paid to the Federal government.
George makes $500,000 per year. His tax contribution is $100k. He is able to directly deduct $10,000, making his tax payment $90k, and he takes home $400k, plus his $10k USA amount.