[Congressional Record Volume 140, Number 130 (Friday, September 16, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 16, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
    MEDICAL SAVINGS ACCOUNTS: A NEW APPROACH TO A CONSERVATIVE IDEA

                                 ______


                           HON. NEWT GINGRICH

                               of georgia

                    in the house of representatives

                       Friday, September 16, 1994

  Mr. GINGRICH. Mr. Speaker, I rise today to submit into the Record an 
article written by Christina Jeffrey and Lois Kubal. Their paper helps 
to confirm the advantages of utilizing medical savings accounts and a 
free market to preserve quality health care for all Americans.

    Medical Savings Accounts: A New Approach to a Conservative Idea

              (By Christina F. Jeffrey and Lois M. Kubal)

       More heat than light is being aimed at the health care 
     issue. Americans are becoming increasingly skeptical that 
     such reform is even needed. The health care system in the 
     United States is the best in the world. That it is not equal 
     for all our citizens is also true. But need it be? Is health 
     care a guaranteed right? ``Life, liberty and the pursuit of 
     happiness'' does not mean a government guarantee for even 
     more basic needs such as housing, clothing and food much less 
     health care. If these basic needs are met according to the 
     individual citizen's desires, can health care be forced on 
     those with their own ideas of what health care should be. 
     Individuals can place more emphasis on housing than on 
     clothing. So, many factors go into making life decisions. 
     Just as housing and clothing are not equal, neither is health 
     care. Can the government mandate universal health care? Not 
     without destroying the economy of the nation. We have only to 
     look at the existing governmental agencies to realize how 
     true that statement is.
       Private enterprise has proven itself better at managing 
     most government functions. From prisons to city government, 
     communities are finding more efficient operation by bidding 
     out the services once provided by government. If an important 
     document needs delivery, it doesn't go to the Post Office. 
     Children who go to private schools receive a better 
     education. Anyone that has had dealings with the V.A. 
     hospitals will tell you what a difficult if not impossible 
     ordeal they have been through. So allowing our government to 
     become involved in anything as important as health care is 
     putting the fox in the hen house. Taxes will go up. 
     Individual freedoms will suffer.
       That the current administration wants to increase its power 
     by controlling our health care doesn't make economic sense. 
     The President's wife with the best intentions has presented 
     the Congress an overwhelming, unreadable document. Experience 
     has show that establishing another agency would only add to 
     the inefficiency and wastefulness of existing centralized 
     government. Whether you look at the Post Office, the Army, or 
     the Small Business Administration, any agency run by the 
     government would be better run by private industry. This fact 
     is not only true in the United States, but as most 
     industrialized nations are finding out, private enterprise 
     can do a better job anywhere in the world! As nations such as 
     Germany and Britain are scrambling to divest themselves of 
     this overwhelming burden, the President of the United States 
     is determined to have universal health care.\1\
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     Footnotes at end of article.
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       If the President or Congress had a real interest in health 
     care reform for our citizens, they would honestly examine 
     what other nations have been doing. All of the socialized 
     nations are having trouble funding health care. Canada is an 
     example. Their health care is not funded property, Provinces 
     have run out of money before the end of the fiscal year, and 
     the Canadian government is sending its citizens to our 
     country for treatment.\2\ The socialized government of Canada 
     underestimated the cost of ``free'' health care!
       The realization is that the United States may not be 
     perfect, but we are ahead of other industrialized nations in 
     health care. That the system could be improved is not the 
     question. Most of us agree some reform to the system is 
     necessary. But before the reforms are made, we need to look 
     at all aspects of the existing system. Then we can decided 
     what to throw out and what to keep. One cannot examine health 
     care reform with examining prescription drugs, hospital 
     costs, doctors' malpractice insurance, third party payers, 
     lawyers' pay scales, and many other areas. One of the most 
     remarkable features of this list is the inclusion of 
     insurance and legal fees . . . areas that should have nothing 
     to do with health care. Without addressing these issues, no 
     health care reform is possible.
       Within the existing health care system in the United 
     States, people may choose Health Maintenance Organizations 
     (H.M.O.'s), private insurance or benefits from the work 
     place. All three are acceptable. It is a matter of which 
     works best for the individual. True, private insurance can 
     exclude people with known medical conditions, but that 
     problem can be solved by giving tax deductions to individuals 
     and families rather than to companies. In addition to this 
     change, insurance companies could be barred from 
     dropping someone with three years of on-time payments; 
     then insurance would truly insure people against becoming 
     ill.
       Businesses should not be allowed to deduct the cost of the 
     employee health insurance. If the deduction goes to consumers 
     then consumers will own their policies just as they do other 
     kinds of insurance such as auto or home. Insurance would then 
     be portable. When one loses his job or changes employers, the 
     benefit goes with the worker. There's no gap in the coverage 
     as so often happens when one changes jobs.
       An advantage of incremental reforms, such as the one above, 
     is that it does not require a complete change in either the 
     way we do business or in our health care system. Additionally 
     we should be able to establish medical savings accounts 
     similar to the independent retirement accounts (I.R.A.) of 
     the Reagan era. Just as that would have ensured a retirement 
     fund for individuals, such independent medical funds could 
     ensure medical care for everyone in the United States. Each 
     citizen would be required to save a certain amount of money 
     each year. That tax-free money would be held in an Individual 
     Medical Savings Accounts (I.M.S.A.) similar to the I.R.A.\3\ 
     The money could accrue interest and grow. When the account 
     has reached its full requirement, no additional money would 
     be paid into the account. If the account becomes larger than 
     the requirement, one could remove the extra cash minus taxes 
     due.
       This idea has received considerable attention from 
     conservatives seeking to encourage price shopping and 
     restraint among consumers. But in most proposals, the savings 
     accounts, once spent, act as deductibles for insurance 
     purposes. This lessens the cost-control advantages since the 
     prospect of third-party payment remains a major factor in the 
     system, and it is the disconnection between first parties 
     (providers) and second parties (patients) which has been one 
     of the biggest factors in pushing up the cost of health care. 
     One unfortunate effect of these conservative plans could be 
     for health care providers to raise their prices in order to 
     get more of their patients' I.M.S.A.'s.
       In order to get true cost control from the effects of a 
     viable free market, there can not be a huge pot of insurance 
     money waiting to be spent as soon as the patient exhausts his 
     own funds. Once your tax-free savings account is spent, you 
     would have to spend pre-tax dollars, unless you had invested 
     in ``medi-gap''\4\ insurance. To cover catastrophic cases, a 
     small percent of money that has been paid as Social 
     Security\5\ would be used to fund catastrophic health care 
     insurance.\6\ Thus each citizen would have minimal medical 
     and catastrophic coverage.
       As we still believe in choice, those not interested in an 
     I.M.S.A. could opt for an H.M.O. If the person chooses the 
     H.M.O. route, they would pay their I.M.S.A. money directly to 
     the H.M.O. They could still be covered by the catastrophic 
     insurance policy since that would be funded through Social 
     Security. In the event an H.M.O. patient becomes 
     catastrophically ill, that insurance money would go to the 
     H.M.O.
       The program is simple. People would still be able to select 
     their physicians and types of treatment. Without third party 
     payers, consumers would shop of the best price. And in 
     keeping with the American way, the wealthier part of the 
     population could spend additional money on ``frills.''\7\ 
     Insurance companies would sell additional insurance, medi-
     gap,\8\ to those who choose to purchase more than the 
     required minimum. This would be a ``frill'' and not 
     deductible. The only change would be that the insurance 
     company reimburses the patient, not the medical facility. 
     There will be no mandate for business to pay for their 
     employees, thus small business\9\ will not be adversely 
     affected.
       It is necessary for the free market to dictate the prices 
     paid for medical services. Current prices are grossly 
     inflated. The airline industry may be a good example. With 
     deregulation, competition has become fierce. Entrepreneurs 
     have come up with new ways of doing business. The computer 
     industry is another example of major changes in the market 
     place. Similar changes will occur with medical care once the 
     free market can generate realistic prices.\10\
       For those people including children on the dole, the 
     government would pay money into their accounts just as if it 
     were their own money. The recipients of that money would be 
     responsible for paying their own medical bills, and the 
     agency giving them the money would be responsible for 
     insuring that the money is spent properly. When the fund is 
     used up, they've had all of their benefits for that fiscal 
     period. If they don't use all of their money, they can 
     withdraw it somewhere down the road. Of course, it would be 
     necessary to deal very severely with fraud in order to 
     protect the system.
       Parents will establish an I.M.S.A. for each child,\11\ thus 
     starting an I.M.S.A. for every citizen. Local charity will 
     play a role in individual cases. A possibility may be to 
     allow families to borrow up to twenty percent of a relative's 
     I.M.S.A. However, when a person runs out of their I.M.S.A., 
     medical treatment can and will be terminated. Life is 
     precious, but there is a time for each of us to die. Families 
     will have financial as well as emotional stakes when they 
     decide to use extraordinary means to prolong life.
       As for medical malpractice, the courts could have a policy 
     similar to that which is used in Japan. If a person is 
     injured, the person causing the injury is responsible for 
     maintaining the injured party and their family in their 
     normal manner for life. There is no great gain for the 
     injured person, but money will not make the injured person 
     better. The lawyers will not make large profits because there 
     are no large profits to be made. Accidents happen. In the 
     real world they will continue to happen. That doctors have a 
     responsibility to use their best judgment is without 
     question. Stronger guidelines for the medical profession may 
     be necessary. Removing licensing from the A.M.A. may be 
     needed. Doctors guilty of true malpractice should lose their 
     licenses. Such an important problem needs discussion in 
     another place. However for the health care issue, it is 
     sufficient to say that million dollar law suits will be a 
     thing of the past.
       Could such a system work? The retirement I.R.A. could have 
     replaced Social Security, and has done so in some countries 
     such as Chili. Similarly the I.M.S.A. could provide coverage 
     for the citizen of the United States in an affordable, simple 
     manner. Keep in mind this plan does not work as a deductible. 
     The entire medical bill is the responsibility of the person 
     using the service. Health departments and other alternative 
     services may be necessary at the beginning of the program. 
     Some form of charity will always be needed to catch those 
     that fall between the cracks of any system, but most people 
     will become more independent and self-sufficient because of 
     this program. As the needs of the family change, individuals 
     will be able to change their type of coverage. This simple 
     plan will allow for creative entrepreneurs to come up with 
     better ways to provide medical care.
       The best feature of this program might be its political 
     downfall, the lack of government control! Without the 
     government owning the plan, most Washington insiders will not 
     support it. However the people of the United States can send 
     a wake up call to the President and Congress by demanding 
     such a program be established. Within a decade the United 
     States will have affordable health care. The only difference 
     will be that the individuals pay for their own medical 
     treatment with money they have set aside for the purpose.


                               footnotes

     \1\The notion of universal coverage may not be realistic. 
     There are laws that require hospitals to treat all patients 
     that seek treatment regardless of their ability to pay. For 
     the homeless, the social drop outs and non tax payers 
     coverage may not exist. That small percent not covered may 
     have to go to charity clinics or hospitals. Mickey Kaus's 
     dream in The End of Equality to make rich and poor equal in 
     health care treatment is a utopian idea which will never 
     work.
     \2\This is especially true in the northwest where Canadian 
     cancer patients come over to Seattle for treatment. The 
     A.M.A. has done several articles on this, and other authors 
     are finding additional information to substantiate these 
     findings.
     \3\The money in each I.M.S.A. is not a deductible. The 
     account will grow to a sufficient amount to cover all of the 
     medical expenses a person might have including an annual 
     check up, dental bills and eye care. If the person should 
     need an operation the funds will be available in their 
     account as all medical expenses will become more reasonable 
     with the free market controlling the costs. It is through 
     people taking the responsibility for their own health care 
     that costs will become realistic.
     \4\Just as many senior citizens buy additional insurance to 
     cover areas not covered by medicare, insurance companies will 
     develop additional policies, ``frills'', to supplement 
     I.M.S.A.
     \5\Medicare will not longer be needed. So eventually that 
     portion of F.I.C.A. taxes can be used to fund catastrophic 
     insurance. In the meantime, there may need to be a slight 
     increase in Social Security payments, although no if current 
     ``savings'' are discontinued and the system goes back to 
     being a pay as you go system which it logically should do 
     anyway.
     \6\Catastrophic insurance does not kick in once an I.M.S.A. 
     has been depleted. Catastrophic is just that . . . 
     catastrophic! Once a person is deemed to have a major 
     condition such as cancer, M.S. or AIDs, they don't have to 
     use their I.M.S.A. The patient has to have at least two 
     physicians to confirm the diagnosis, then their insurance 
     company will take over the medical expenses. Each company can 
     choose to provide services or just reimburse the customer, 
     depending on the policy. Again, there should be choices for 
     the purchasers of an insurance policy.
     \7\Frills might include additional insurance policies such as 
     those purchased by Medicare patients referred to as ``Medi-
     gap'' as well as out of pocket expenses, i.e., cosmetic 
     surgery.
     \8\Refer to Footnote 3.
     \9\Some type of worker's compensation will be required to 
     safeguard the I.M.S.A. although that is an area which 
     requires much study and should probably be left up to the 
     individual states. Auto insurance will still cover the 
     medical expenses of person's injured by another.
     \10\It may take extraordinary measures to eliminate the 
     present disincentives for cost control. A temporary board or 
     other vehicle may be able to quickly get health care prices 
     within the reach of most Americans. But this approach should 
     be viewed with great suspicion by us due to the tendency of 
     such boards to perpetuate themselves. After all, protective 
     tariffs were also supposed to be a temporary measure until 
     the free enterprise system could get on its feet. Alexander 
     Hamilton would be shocked that we still have them.
     \11\Federal and state tax laws will have to be amended to 
     allow families to deduct enough money from their income taxes 
     to establish I.M.S.A. for each child. If the family does not 
     make enough money to fund the account fully, then government 
     assistance may be offered.

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