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Saving the Medicare System With Medical Savings Accounts
1 1995 Annual Report of the Board of Trustees of the Federal Hospital
Insurance Trust Fund (Washington, DC: U.S. Government Printing Office,
April 1995). Back...
2 Projection based on Sandra Christensen, CBO Staff Memorandum: Single-Payer
and All-Payer Health Insurance Systems Using Medicare's Payment Rates
(Washington, DC: Congressional Budget Office, April 1993). Back...
3 See Michael A. Morrisey, Price Sensitivity in Health Care: Implications
for Health Care Policy (Washington, DC: NFIB Foundation, 1992). Back...
4 Evidence suggests that premature discharges have harmed some patients.
See, for example, Edward E. Berger and Edmund G. Lowrie, editorial, Journal
of the American Medical Association 265, no. 7 (February 20, 1991),
pp. 909-10; Philip J. Held, Journal of the American Medical Association
265, no. 7 (February 20,1991), pp. 871-75; and Ron Winslow, "Cost
Control May Harm Dialysis Patients," Wall Street Journal, February
20, 1991. Back...
5 For example, cochlear implants are far superior to previous technology
for treating some types of hearing loss. But Medicare does not pay for the
implants, which are somewhat more costly than hearing aids. See John C.
Goodman and Gerald L. Musgrave, Patient Power: Solving America's Health
Care Crisis (Washington, DC: Cato Institute, 1992), p. 309. Back...
6 See Peter J. Ferrara and John C. Goodman, "Medical Savings Accounts
for Medicare," National Center for Policy Analysis, NCPA Brief Analysis
No. 160, April 17, 1995. Back...
7 It is widely expected that congressional leaders will offer a similar
Medicare reform proposal and attempt to pass it as part of this year's budget
reforms. Back...
8 There is some evidence that Medicare pays more than expected costs because
HMOs are succeeding in attracting healthier enrollees, whose expected costs
are below average. See Randall Brown et.al., Does Managed Care Work for
Medicare? An Evaluation of the Medicare Risk Program for HMOs (Mathematics
Policy Research, Inc., December 1993), p. 1; and Gail R. Wilensky, testimony
before Subcommittee on Health, Committee on Ways and Means, U.S. House of
Representatives, February 7, 1995. Back...
9 "Coming Up Short: Increasing Out-of-Pocket Health Spending by Older
Americans," prepared by the Public Policy Institute, American Association
of Retired Persons and the Urban Institute, April 19, 1994. Back...
10 In 1996, the cost of the policy is estimated to be $2,697 and administrative
costs an additional 2.0 percent. Back...
11 By that year, the trend will have stabilized so that the maximum out-of-pocket
expense can be expected to continue at that level in real terms, or perhaps
even decline. The out-of-pocket expense increases more sharply in the early
years because of the one-time impact of shifting out of Medicare's price-controlled
reimbursement system into an open market system. Back...
12 Again, these projections are consistent with the spending targets Congress
intends to impose on Medicare. Back...
13 See Robert Brook et al., The Effect of Coinsurance on the Health of
Adults (Santa Monica, CA: Rand, 1984); and Willard Manning et al., "Health
Insurance and the Demand for Health Care: Evidence from a Randomized Experiment,"
American Healthcare Economics, June 1987. Back...
14 Congressional Budget Office, "Reducing the Deficit: Spending and
Revenue Options," Washington, DC, February 1995, p. 287. Back...
15 John C. Goodman and Gerald L. Musgrave, "Controlling Health Care
Costs With Medical Savings Accounts," NCPA Policy Report No. 168, National
Center for Policy Analysis, Dallas, Texas, January 1992. Back...
16 Mark Litow, Milliman & Robertson, "Financial Impact of Medical
Savings Accounts on Health Care Spending in the Federal Budget," Council
for Affordable Health Insurance, October 1993. Back...
17 Stan Liebowitz, "Why Health Care Costs Too Much," Cato Institute,
Washington, DC, Policy Analysis No. 211, June 13, 1994. Back...
18 Peter J. Ferrara, "More Than a Theory: Medical Savings Accounts
At Work," Cato Institute, Washington, DC, Policy Analysis No. 220,
March 14, 1995. Back...
19 Ibid. Back...
20 Ibid. Back...
21 Employees get catastrophic insurance along with a savings account equal
to the deductible on that insurance, providing complete first dollar coverage.
The MSA funds can also be used for check-ups, preventive care, dental care,
eye exams, eyeglasses and other health services not covered by the old policy.
And, of course, employees can withdraw their remaining MSA funds at the
end of each year. Back...