PCSA
A PARENT CARE SAVINGS ACCOUNT

Introducing the PCSA, another proactive and innovative idea from Dan Taylor.

Unless you’ve just arrived on the planet you may have noticed over the past year the number of media articles on the impending elder health care crisis and the potential looming budget deficits over Medicare and Medicaid deficiencies. Crisis extrapolated always makes for interesting reading and newspaper sales.

The fact of the matter is that there is a huge opportunity for the Congress to act in a prospective and responsible way by establishing what we at The Parent Care Solution have designed as a Parent Care Savings Account. (PCSA).

A PCSA account would resemble a 401(k) in deductibility and tax free accumulation characteristics while resembling an Health Savings Account (HSA) in both purpose and use in the area of health care for aging parents.. The current regulatory structure could be modified to make the proposed PCSA account match the employer/employee relationship that currently exists for 401(k) accounts.

The only real difference would be that employees would be allowed to make a contribution equal to and in addition to their 401(k) contributions.

When you combine the accumulation benefits of the traditional 401(k), plus the expanding contribution limits associated with the new HSA accounts, a Parent Care Savings Account could come very close to eliminating for what many will become an intergenerational health insurance nightmare for their parents health care and their own..

The PCSA could be structured in a way that would allow the Boomers to set aside additional monies for care for their aging parents on a tax deductible basis while at the same time building an account for them to use as they age. The PCSA accounts could be transferable from one generation to the next on an income tax and estate tax free basis as long as the future use of the account was limited to the health care of parents.

The real requirement here is that monies distributed from the PCSA account would need to be used for health care maintenance first for parents of aging Boomers and then for the Boomers themselves. The account would be different from an HSA in that its primary focus would be on providing health care subsidy for an aging parent.

The aging parent focus would continue from one generation to the next. The monies could be used for a broad range of health care issues for a parent as they age including long term care, chronic disease management, adult daycare, etc.

I see all sorts of opportunities for the life insurance and investment communities here. It may be possible to place life insurance inside the PCSA (something an HSA account should allow now!) in order to multiply the inherited amount inside the PCSA once the current parent passes away.

Not all the monies could be used for this but a reasonable amount, say up to 25% of the current contribution (or balance in the account) on an annual basis could be used in this type of arrangement. The math here is fairly staggering. In just over a generation, millions of dollars could be available for aging parent subsidies.

It is fairly obvious to me that we are going to seriously consider a national or universal health care system in the United States within this decade. It will probably be funded through a payroll or consumption tax and will allow access to fundamental health and medical services for everyone in need on a broad non-discriminatory basis.

The Canadian system of national health care has often been cited as the exemplary model. As someone familiar with the Canadian system I can tell you that the Canadian system never tells you ‘NO”. It also can be very oblique about ‘WHEN’. The Canadian system works really well for runny noses, the flu, delivering babies, and broken bones. It isn’t as efficient with chronic disease management, elder care treatment, or critical surgery requirements such as cancer and cardiac situations.

It is also fairly obvious that in that universal system being bantered about for Americans affluent Boomers and their parents will be indexed out of receiving benefits from that system by either a means, balance sheet, or income test.

Translation: If you can pay for your benefits then you are going to have to do just that. In addition, you will get to contribute to a national fund for those who can’t. Heads you pay, tails you pay…twice.

At this writing the Congress is busy with figuring out whether mistakes in firing eight US Attorneys should capture their attention for the next quarter or whether the war in Iraq should be pronounced DOA. A little thing like thinking through how we pay for our parents care should be nothing more than a lunch time conversation in relation to the others.

Write to your Congress people on a state and federal level. Tell them you would like to take responsibility for your own health care future…and that of your parents. Tell them you would like to do it now.

Back to Articles

pcsa