Tony Novak profile picture
  "AskTony" column archive        


Most Popular

AskTony Archive

This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

Content is the opinion of the author and does not represent the position of any other person or entity. Information is from sources believed to be reliable but cannot be guaranteed.

The author is paid for product endorsements and has an ownership or other financial interest in the businesses related to the topics covered.

New questions

Submit consumer finance questions at and health insurance questions at

Sponsored by: Insurance Exchange - your source of valuable information on state and federal health reform benefits.

Core Health Insurance - America's favorite mini-med insurance  with affordable premiums, freedom to choose providers, optional PPO discounts and guaranteed eligibility regardless of medical conditions.

Please support the Web sites that make publication of AskTony services possible.

Retirement account for health care

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If in doubt, please send a new question or ask for an update.

Q: I'm in a situation due to health conditions where monthly premiums are too high for the level of my income. I'm curious what happens if I drop my health insurance and pay for my health costs myself. I can't get underwritten for HSA's either, so that is not an option. If I have to go in for an expensive operation (say 30K and up), can the hospital take my retirement fund assets for payment or are they restricted to my disposable (liquid, taxable monies). Whereas I don't want huge premiums to eat up my salary each year, at the same time, I don't want my retirement monies wiped out in the event of an expensive operation. I just wondered what the laws were in regard to this. Basic health insurance only seems to pay partially for operations, so you are still left with a huge bill for an expensive operation. That might be something I would consider since it is relatively cheap, but it still brings one back to the question of whether they can make you use your retirement funds (401K, Roth, IRA,etc) to pay the bill. I realize this question may prompt you to ask who's going to pay the bill, if I don't? And I understand that question, yet at the same time, it seems unfair that the system could strip me down to potential poverty.

A: The primary question raised is if you do not have medical insurance and are not enrolled in Medicaid or an alternate welfare plan, then what makes us believe that the desired medical care (an expensive operation, as used in your example) would be provided? While stabilizing and comforting care is provided by U.S. hospitals without regard to the ability to pay. Almost every day we hear of medical where individuals can not obtain the care they want because they do not have the ability to pay. This is commonly referred to as a "rationing" of health care for uninsureds. More information on the political aspects of this issue can be found at A creditor cannot attach your assets held in a qualified retirement plan. It would be up to you to decide whether to use these funds to pay for health care that is not covered by insurance. A rule of thumb is to realize that about 1/3 of your post-retirement expenses will be used for health care. If you allocate your income and assets accordingly, and still cannot afford the cost of health insurance, then there is a good chance that you qualify (or will soon qualify) for Medicaid. On the other hand, if the cost of health insurance is less than 1/3 of your total resources then the burden is on you to rearrange your finances; do not expect much help form the government. Many people do not realize that our national health financing policy for lower middle class people is actually, as you state, to allow them to strip down their assets to poverty level and then pay the remaining costs from public funds. This spend down may be done voluntarily (some even plan for it) or forced by state-imposed liens on the estate of a decedent. It may not seem fair but there are no viable alternatives at this time.


More resources: