Investing General Discussion

In the USA it's more like, get appproved for X, found something for 1.25 X that's the "perfect dream home", either just be given the financing anyway or be told about this wonderful, and totally not shady thing called an 80/20 mortgage.

Been sitting on oil stocks since Iran attacked the refinery this summer, still waiting for the breakout...

Falxy-US said:

I'm not aware of a backdoor HSA withdrawal method.

I do know that you can withdraw from your HSA for any medical expense in any year. So lets say you are doing well this year, and you end up with $5000 in medical bills for 2020, you can save those receipts and in 2025 withdraw the $5000 if you wanted to spend it on something else, since you would be simply reimbursing yourself. As long as you had the plan active during the time the expense occurred you could reimburse yourself at any time.

But honestly, how on earth can they keep track with hundreds of millions of people having HSAs in america making small withdrawals?

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This is the one area of "healthcare" that isn't 20 years behind current tech. Most people have stored value (debit) cards they get issued with an HSA, and most people are going to use that card when they want to spend against any healthcare related items. This leaves an obvious electronic trail that is very easy to substantiate. If you spend cash and then try to reimburse yourself the mere fact that there is no electronic audit trail means you are immediately going to get sent to letter generation and be mailed a notice to submit receipts.

If you want to try to game the system there are ways but you need to be prepared for whatever non-healthcare related withdrawals you make to not fall through the cracks. Because, in all honesty, they probably won't.

This is actually what I do for a living. Years ago it used to be stupidly easy to game the system. You could walk into what was known as a "90% merchant" (like Walgreens) and buy anything in the store with your HSA issued debit card and not get questioned about it. Walgreens conveniently sells gift cards, and merchant specific gift cards (like Best Buy) don't have a fee associated with them. So you could dump a bunch of money into an HSA and then do all your Christmas shopping tax free using gift cards. These loopholes were quickly closed. There are still ways to get around it but they all carry risk (well, if you consider just having to actually pay the tax on the money a "risk") and quite honestly the gains are so small since these accounts don't offer great interest rates that... it's not even worth it.

Just leave the money in the HSA for inevitable healthcare spending, especially in old age.

Khane said:

If you spend cash and then try to reimburse yourself the mere fact that there is no electronic audit trail means you are immediately going to get sent to letter generation and be mailed a notice to submit receipts.

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I've spent many thousands out of my HSA (eight orthopedic surgeries). I've never used the debit card once and self-reimburse on an annual basis. I just bundle everything and send myself a check for "2019 medical expenses". I've never once been asked for verification of any kind. This is across 10 years and at least three different major insurers/plan managers.

Outside of years where paying all my medical expenses from taxable income would be inconvenient, my general approach is to contribute the max and let it sit. Given that you're almost guaranteed to spend the money eventually it's basically an extra IRA without income limits.

Did you write a check against the account? Because there's still that verifiable, easily substantiated audit trail. I did specifically talk about cash transactions.

If these are actual medical procedures why wouldn't you just use the card or ACH transactions?

Khane said:

Did you write a check against the account? Because there's still that verifiable, easily substantiated audit trail.

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No, I used my general checking account or credit cards and reimbursed myself.

Khane said:

If these are actual medical procedures why wouldn't you just use the card or ACH transactions?

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I wanted the credit card rewards, prefer to centralize my financial activity to facilitate easy record-keeping and reconciliation, and I can't be bothered to carry around another card I barely use.

Credit card points are worthwhile but what I would say is happening is your insurance company is substantiating your HSA spend against your actual insurance claims. Keep in mind these are banks, insurance companies and credit card processors validating these transactions and they all spend a ton of money on fraud prevention. I work for one of the biggest stored value card providers for healthcare spending (WEX Health) and I can tell you we gather and compare data from all three to facilitate automated substantiation, since we are essentially the clearing house. That is the service we provide.

Things definitely fall through the cracks, its inevitable, but actual healthcare spend is pretty easy to substantiate when all three players are trading data and validating balances. It's when you are trying to work outside those parameters that you generally get to letter generation and it is really hard to pull one over on any of those types of businesses, let alone 3.