Healthcare, taxes, and the HSA solution

I looked like a grumpy Republican.

Receipts were flying out of my printer, my wife was calling out numbers from across the room, and I was looking at an invoice for private school tuition that cost as much or more than my college education. Meanwhile, my itemized property tax receipt was showing that $864.98 the country taxes on my home go to fund the local school district, the school district my kid doesn’t attend.

I grumbled.

On 360-something days out of the year, I am a scruffy, neohippie who eats granola and bleeds from his heart like a drunk pig that stumbled into a knitting needle factory. On the days I actually look at where my income goes, I turn into a wingnut for a couple of hours. It passed quickly. I was reminded and fully understood that part of growing a community and country is helping to educate its people. And in the grand scheme of things, a few hundred bucks a year is a small price to pay for that.

On the other hand–and this was what had me reeling–my wife and I sat down and calculated to the penny how much we spent on healthcare costs in 2009. The following number represents out-of-pocket costs for insurance, doctors, hospitals, labs, and pediatric dentistry.

$24,677.91

That’s right. Of the money I earned in 2009, nearly $25,000 of it went to the healthcare industry. Now, yes, we paid out-of-pocket to have a baby delivered, and that accounted for around $8,000-$10,000 of the cost. Insurance represented around $9,500 in premiums. That still left $5,000-$7,000 of extraneous medical costs that insurance didn’t pay for and that were not related to having a baby.

Now, we didn’t have the best year in 2009. Income-wise, we tanked pretty bad due to the vagaries of–oh, it doesn’t matter. The point is, we were fortunate to even be able to pay $24,677.91 in medical costs at all. It’s not been too many years ago that the same number represented more than my yearly income. Now, it’s the amount that I paid for the cost of being healthy in one year.

See, we’re healthy people. I go to the doctor when my arms are falling off or I’m pretty sure I died already. My wife does all the preventative stuff and the kids get their shots. Apart from the odd baby ear infection, we don’t spend a lot of time letting the white coats tell us that we have the common cold and there is nothing they can do. We appreciate doctors and know we’ll need their talent someday, but for now, we’re fortunately healthy people.

So, $25,000 to be healthy for a year. That’s with insurance. Take from it what you will. I’m out of political arguments. I know I could buy a car with that money. I could put a down payment on a new house. I could buy into the World Series of Poker twice and still have money left over. I still can’t fathom it, despite the fact the money is gone and there is nothing I can do about it.

It was time to make lemonade. While 2009 sucked in a number of ways, the stars aligned a bit for us. See, the law allows taxpayers to deduct medical expenses for every dollar they spend over 7.5% of their gross adjusted income. So, because I had a pretty rotten year on the income front, I can take a sizable deduction on that big medical bill figure I keep ranting about. That means my end-of-year tax bill (the check for which I’ll be writing this week) won’t be nearly as hard to swallow.

While that’s all well and good, it’s just a practice in giving money away if I keep paying out the nose for medical costs. Fortunately, I have some very good friends who counseled me in the ways of the Health Savings Account (you all know who you are, so thank you).

As of today, I no longer pay $940 per month premiums to Blue Cross Blue Shield of South Carolina. I am now the proud owner of an HSA. My monthly insurance premium is less than half of what I was spending before. I deposit money into my HSA account on a pre-tax basis. Whatever I don’t use from the HSA in the coming year, I can roll over to the next year without penalty. Sure, I have a pretty high deductible, but on the off-chance I actually end up spending that much, everything is covered after that. So the upshot of all of it is that in the best case scenario, we are completely healthy in 2010 and end up spending less than half on insurance premium than we would’e spent if we stuck with Blue Cross Blue Shield. In the absolute worst case scenario, we spend exactly what we spent on Blue Cross premiums and don’t have to pay a penny more.

It’s a weird place to be, I’ll admit. I’m screaming about taxes, and in the same breath screaming about how out of control the healthcare system is. If anything, though, I’ve worked the solution as best I can. It’s still not fun, but I guess the forefathers never promised us an easy road, did they?