The innovative concept of Medical Savings Accounts was included in the health care reform bill passed by the House, but was defeated in the Senate. Many experts believe the tax-free health care accounts should be included in the final legislation.
They contend that MSAs will benefit Americans in three ways: by expanding freedom of choice, portability and affordability without the interference of government or insurance bureaucracies.
MSA advocates once included Democrats who now oppose them. Supporters believe MSAs are necessary to expand Americans' health care choices.
Source: U.S. Rep. J. Dennis Hastert (R-Ill), "Don't Drop MSA Plan," USA Today, May 2, 1996.
DALLAS - While Congress debates Medical Savings Accounts (MSAs), which allow people to control some of their own health care dollars in individually owned accounts, a new study says Singapore has had MSAs for more than a decade and they work.
Whereas most proposals in the United States would make tax free MSA deposits only an option, in Singapore they are compulsory. Employees must deposit 6 percent of their income (3 percent comes from the employer) into "Medisave" accounts each year. They can use part of their deposit to buy catastrophic health insurance and use the remainder to pay medical bills directly.
"Singapore has shown that MSAs work," said Merrill Matthews, a vice president of the National Center for Policy Analysis, a Dallas-based think tank that produced the study. "These accounts give people access to care and help hold down costs at the same time."
According to the Study:
"Singapore has done what no developed country has succeeded in doing," said Matthews. "It has controlled health care costs without imposing the type of health care rationing that exists in such countries as Britain and Canada."
"The fact that people are spending their own money rather than that of a third-party insurer has helped to curtail Singapore's health care costs," said Dr. Thomas A. Massaro of the University of Virginia Medical Center, one of the authors of the study. "And because people are free to exercise choice in the medical marketplace, providers of care have strong incentives to maintain quality.
"Both doctors and patients fare well in the Singapore health care system. The reason the Singapore health care system works so well is because it is efficient."
According to the study:
No one goes without medical care in Singapore, according to the study. Low-income families with very little accumulation in their Medisave accounts have access to subsidized care. But even here, patients are expected to contribute something. For example, the 26 government-subsidized outpatient clinics charge for most services, reflecting the philosophy that health care should not be free.
Legislation currently before the U.S. Congress would allow tax-free deposits to Medical Savings Accounts when combined with high-deductible insurance for catastrophic expenses. "Giving individuals greater direct responsibility for their health care spending would have beneficial effects in the United States," Dr. Massaro said.
"These accounts work in Singapore because the prudent buyer can obtain quality health care at low cost," Massaro said. "If Medical Savings Accounts were available in the United States, prudent buying would begin to chip away at the high price of care and might reduce it significantly."
The National Center for Policy Analysis is a public policy research institute founded in 1983 and internationally known for its studies on public policy issues. The NCPA is headquartered in Dallas, Texas, with an office in Washington, D.C.
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The Senate included language in the Kassebaum-Kennedy health care reform bill which would force companies which offer health insurance to their employees to provide comparable mental health benefits. Most plans now provide only limited coverage for mental health services, if they are covered at all. Since this provision was not a part of the House bill, the two chambers must reconcile this difference.
Opponents of the Senate's action point to a number of problems which this mandate would stir up.
Critics point out that if psychologists and psychiatrists are included, how long will it be before chiropractors, acupuncturists, massage therapists and other groups clamor to get aboard.
When state governments started mandating benefits, such groups started exerting pressure on state lawmakers, and many states caved in.
Moreover, mental health -- a far broader concept than mental illness -- is hard to define. Genuine mental illnesses, such as manic-depression and schizophrenia, are definable -- causing great pain and anguish to the afflicted and those around them. But mental health could also include treatment for pathological gambling, kleptomania and attention deficit disorder.
Critics say the Senate's move opens up a Pandora's Box of problems and should be abandoned in conference.
Source: Editorial, "The Senate's Gone Mental," Investor's Business Daily, May 9, 1996.
Another flaw in the Senate's health reform legislation is its failure to include provisions which would allow Americans to establish Medical Savings Accounts -- which many say would be the best way to help workers, especially the uninsured, get affordable health care.
MSAs level the playing field by giving everyone an opportunity to buy some health care with pre-tax dollars. A low-income worker or his employer can put funds aside in an MSA to pay for routine medical care, while purchasing a high-deductible insurance policy to cover major health problems. If the worker is laid off or changes jobs, the MSA goes along with the worker.
Analysts make a number of other points to counter the claim that MSAs would only benefit the "healthy wealthy."
Thus low and middle income workers -- not the "healthy wealthy" -- have the most to gain from MSAs.
Sources: Sue A. Blevins (Competitive Enterprise Institute), "Democrats Vs. The Poor," Investor's Business Daily, May 9, 1996.
Trustees of Medicare's Hospital Insurance Trust Fund have racked up astonishingly poor performances in predicting its financial health and future, experts charge.
Now, the Congressional Budget Office is warning that the fund will likely be bankrupt by 2001 -- a full year earlier than the trustees forecast in April of 1995.
Source: Editorial, "The Medicare Trust Deficit," Washington Times, May 13, 1996.
A Rand corporation study, conducted between 1972 and 1982 and largely ignored until now, establishes that families will shop wisely when their own health care dollars are at stake. Moreover, such judicious shopping should have the effect of limiting increases in health care costs overall. it presents a powerful argument for the use of Medical Savings Accounts.
A total of 3,958 Americans in 2,005 families participated in the study.
Here's what the Rand study found:
The survey also answered a question central to the debate over Medical Savings Accounts: when people spend their own money, do they stint on care and thus risk damaging their health? The Rand study said it had no effect on any of five general health measures for the average enrollee.
By bringing the consumer directly into the health care market, supply and demand pressures take hold and health care providers respond to price-sensitive consumers.
These findings all support efforts to allow Americans to establish MSAs, since consumers would reestablish control over their medical spending.
A provision to allow employees and employers to put aside pre-tax dollars in MSAs is included in the House version of health care reform legislation, but not in the version passed by the Senate.
MSA supporters are hopeful the House version will prevail and recognize Americans' right to spend their health care dollars as they deem fit.
Source: James K. Glassman, "$2,000 Health Care Trick," Washington Post, May 14, 1996.
Requiring insurers to include coverage for mental illnesses in health benefit plans would not only be costly, but counter-productive as well, according to a current Congressional Budget Office report.
CBO researchers admitted their figures were uncertain because experts could not know for sure how employers would respond. But they predicted that any increase in premiums could also be passed along to workers in the form of lower wages or reductions in other fringe benefits.
Some 40 million Americans have no health insurance and that number has been rising in recent years.
Source: Robert Pear, "800,000 May Lose Benefits If Mental Coverage Is Added," New York Times, May 14, 1996.
A government advisory committee on Medicare headed by a former Clinton health adviser supports reforming the program to give seniors more choices in health care and help control costs, according to a recent report.
The report of the Prospective Payment Assessment Commission (PROPAC), headed by Robert Altman, suggests that Medicare beneficiaries should have a wider range of health plan options -- in addition to the traditional fee-for-service program and health maintenance organizations.
Congress' MedicarePlus plan, vetoed by the president last year, would have given seniors the option of a medical savings account (MSA) -- an account they could either save or draw on for medical expenses below the deductible of an insurance policy offering catastrophic coverage.
PROPAC states "Most beneficiaries who selected the Medicare MSA option probably would benefit financially." It also suggests that in order to encourage cost control, the MSA must be structured as a savings plan, so that the seniors receive whatever funds they don't spend on health care. Finally, it recommends that there be "no undue legal restriction" on managed care plans' ability to offer MSAs.
PROPAC also notes that Medicare spent $177 billion in 1995, an amount equal to 12 percent of the federal budget, and spending is expected to reach $332 billion by 2002.
Source: Robert E. Moffit, "What Medicare's Advisers Are Telling Congress About Medicare Reform," F.Y.I. No. 99, May 6, 1996, Heritage Foundation, 214 Massachusetts Avenue, NE, Washington, DC 20002, (202) 546-4400.
To its credit, Congress has made it illegal for the federal government to impose unfunded mandates on state and local governments. No longer can the federal government require them to take certain actions or provide certain services without providing the federal funds to pay for them.
But they have apparently discovered a way to pose as the doers-of-good-works, and still pass the costs on to others. No where is this more evident than in health care reform -- where business is being required to pick up the costs.
Take, for example, the Kassebaum-Kennedy Health Insurance Reform Act:
Unfortunately, health insurance isn't the only area in which Congress is considering imposing unfunded mandates on business.
The issue of raising the minimum wage is another example. Doing so would raise the cost of labor to state governments, local governments and private employers -- forcing them to cover the added costs. Sadly, the 23 Republican members of Congress pressing the GOP leadership to increase the minimum wage all voted for the prohibition of unfunded mandates in the original "Contract With America."
Source: Former Governor Pete du Pont (National Center for Policy Analysis), Washington Times, May 22, 1996.
Proponents of Medical Savings Accounts are puzzled as to why groups which purport to speak up for consumer interests are critical of the concept.
MSAs give health care consumers the opportunity to move from a conventional, low-deductible health insurance plan to one with a high deductible (say $2,000 to $3,000) and to put the premium savings in a personal savings account. The savings are used to pay for routine and preventive medical care, while the high-deductible policy pays for major medical expenses.
With more control over their health care dollars, most individuals will seek more information to become value-conscious shoppers in the health care marketplace.
But political liberals and groups such as Consumer Union have been beating the drums against MSAs, even though MSAs would benefit working families.
Under a typical plan, a family with an employer-provided MSA might get a $1,500 after-tax contribution to its account and a $2,000 deductible policy. Such a plan:
Where standard policies force insurees to pay the first few hundred dollars out of their own pockets -- even though they may not have the money readily available, MSAs give families access to cash the very first time they need health care.
If Congress would allow employers to make deposits to the MSA tax free, working families would have even more money deposited in their account, since they wouldn't have to pay income tax on that MSA contribution.
By opposing MSAs, liberals are harming the very working people they claim they want to help. Moreover, insurers and managed care firms are left free to wrest ever more control of health care dollars away from consumers.
Health policy experts wonder why liberal and consumer advocate groups are taking such a consumer-disadvantaging position.
Source: Merrill Matthews, Jr. (National Center for Policy Analysis), "Why Liberals Should Support MSAs," Investor's Business Daily, May 28, 1996.
Observers say a stalemate is developing over the inclusion of tax-deductible Medical Savings Accounts in the health care reform bill set to go to conference between the House and Senate. The House version of the bill included MSAs; the Senate's did not. The House bill would give a tax break for contributions to savings accounts established to pay out-of-pocket medical bills -- such as expenses below the high deductible on a catastrophic insurance policy.
Apparently, Democrats are blocking the appointment of conferees to reconcile the differences between the two versions. It is reported that Democrats may offer a compromise allowing a watered-down MSA provision in exchange for achieving passage of the overall legislation.
The Democrats might allow several "demonstration project" options. MSAs might be limited to employer-sponsored plans, to states that have already passed MSA bills or to specific areas of the country.
Some MSA proponents advise Republicans to reject these options and hold out for unfettered MSAs, for these reasons:
And in case observers wonder how much politics -- as opposed to genuine concern for health care reform -- influences this debate, consider:
MSA proponents point out that the concept, if activated, will help control health care costs and present consumers with an opportunity to chose another health care financing option.
Source: Editorial, "MSAs: To Deal or Not to Deal?" Investor's Business Daily, May 31, 1996.