Medical Accounts, Take 2

Maine lawmakers will spend a lot of time this winter looking for a comprehensive answer to the problem of health-care costs. The Bush administration will be looking much more narrowly, according to a recent article the National Journal, at new versions of medical savings accounts. MSAs could become a partial answer to making health care more affordable and a thorough study of their likely effects could add to the debate.

Congress approved a pilot program of MSAs six years ago, hoping 750,000 people would use the tax-sheltered accounts to put away money for health care. But only about 100,000 did, according to the National Journal’s story by Marilyn Werber Serafini. The three new options being considered by Health and Human Services Secretary Tommy Thompson are a reflection of the that lack of interest, offering more consumer opportunities and protections.

For instance, one of the three options being considered by the administration would allow all workers to participate in tax-shelters account and require a flat $1,000 deductible after which insurance coverage would begin, a much simpler approach than earlier MSAs. A second version is similar to one that many employees use now, a benefit to allow employees to designate a portion of their paychecks to be set aside tax free for health-care costs not covered by insurance. The current drawback of these programs – money set aside but not used by the end of the year is lost – would have to be ended and the money rolled over into the next year for them to become more attractive.

A third type of MSA, called a health reimbursement arrangement, has employers contributing a fixed amount, which, if not spent entirely, may be rolled over year to year. Employees who spend the entire amount would be responsible for the paying the deductible before meeting a predetermined payment level before a health maintenance organization or a preferred provider organization begins to cover costs.

None of these actually hold down the cost of individual drugs or procedures except to the extent they encourage consumers to shop around. They would certainly have an effect on utilization, which would, in turn, affect the price of health care, perhaps increasing individual prices while holding some costs down.

Importantly, one form or another of these tax-sheltered savings can be used along with other types of reform. What Congress needs as it considers these options is plenty of good data describing the likely effects of each idea. And at the same time it needs to not kid itself that this is anything like a comprehensive reform. Still, given the lack of movement on health care in the last couple of years, any help is appreciated.