NCPA - National Center for Policy Analysis


October 16, 2006

Medicare officials say it's time to modernize the health plan by providing America's seniors with more information and choice.

Next year, Medicare will launch plans with features similar to health savings accounts (HSAs):

  • Under the plan, Medicare pays for high-deductible insurance coverage and puts money in an account for the Medicare recipient.
  • The money and its earnings accumulate tax-free as long as they're used to buy health care.
  • If the money in the account isn't used, it can roll over to the following year.
  • Medicare recipients would pay more of their initial costs out-of-pocket, but unlike traditional Medicare there would be a cap on their total spending for the year.
  • Medicare said the program would be good for people who already had an HSA in the private market and are familiar with the concept, and those who want more control over health spending or who need protection from catastrophic health expenses.

In many ways, the new Medicare initiatives reflect a shift within the private insurance market to more "consumer-driven" health care. In essence, patients pay part of their health care costs so they have more incentive to stay healthy and choose cost-effective care when they're sick.

John Goodman, president of the National Center for Policy Analysis, says there's a chance the introduction of HSAs will skew premiums, but changing Medicare is worth the risk.

"What we have now is a very wasteful system," Goodman said.

Source: Mary Jo Feldstein, "Drug plan held up as example," St. Louis Post-Dispatch, October 13, 2006.


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