[Congressional Record Volume 142, Number 84 (Monday, June 10, 1996)]
[Senate]
[Pages S5988-S5990]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     MEDICAL SAVINGS ACCOUNTS AND THE HEALTH INSURANCE REFORM BILL

  Mr. KENNEDY. Mr. President, the insistence of the House Republican 
leadership on forcing medical savings accounts into the Kassebaum-
Kennedy bill has become the Trojan Horse that could destroy health 
insurance reform.
  This untried and dangerous proposal does not belong in the consensus 
insurance reform bill. It has already been rejected by the Senate. A 
bill containing it cannot be enacted into law and signed by the 
President.
  The Democrats and the White House have offered a fair compromise, 
which would provide for a controlled demonstration of the MSA concept 
to see if it should be expanded. But the House Republican leadership 
has said that it will be their way or no way. As Majority Leader Armey 
said yesterday, ``I will not give up medical savings accounts,'' and he 
dared the President to veto the bill.
  Senator Dole is the only one who can break this impasse and persuade 
House Republicans to abandon their intransigence and pass a bipartisan 
bill that the President can sign. Senator Dole clearly understands how 
important this program is to the American people. When the bill was 
passed, Senator Dole said:

       Common sense has finally prevailed. Passage of this bill 
     will not only improve our health care system, it could very 
     well restore the faith of the American public that the work 
     of Congress is not just a series of political stalemates. 
     Even in an election year, we can work on a bipartisan basis 
     to pass legislation that will improve the lives of so many 
     Americans.

  Senator Dole deserves considerable credit for this bill. All of its 
reforms were also included, in one form or another, in the health 
insurance bill he introduced in the last Congress. It also includes 
constructive proposals that he offered for aid to small business, and 
to help families meet the high cost of long-term care, and to crack 
down on fraud and abuse in Medicare and Medicaid.
  Last week, Senator Dole said, ``I'm afraid if I leave and it's not 
done, it might not happen.'' He is right. No one else has the ability 
to persuade House Republicans to back off their extreme position. If 
Senator Dole means what he says, he should postpone his departure from 
the Senate for a few days and pass this bill. He can do a great deal of 
good for the American people by staying for a few days and finishing 
this legislation.
  Medical savings accounts are a highly controversial issue that does 
not belong on this bill except on the basis of a carefully controlled 
test. MSA's have the potential to severely undermine the current health 
insurance system that millions of Americans rely on--particularly those 
with serious illnesses or disabilities.
  MSA's are likely to raise health insurance premiums through the roof 
and make insurance unaffordable for large numbers of citizens. They 
will discourage preventive care and raise health care costs. They are a 
multibillion-dollar tax giveaway to the wealthy and healthy at the 
expense of working families and the sick. Their cost could balloon the 
deficit.
  The Kassebaum-Kennedy bill contains consensus reforms that virtually 
everyone agrees on. It guarantees that no American will be denied 
health insurance or be saddled with exclusions for preexisting 
conditions because they change their job or lose their job, or because 
their employer changes insurance companies. It provides help to small 
businesses that want to join together to negotiate lower insurance 
premiums of the kind that only large corporations can obtain today.
  The bill is truly bipartisan. It passed the Labor and Human Resources 
Committee 16 to 0. without medical savings

[[Page S5989]]

accounts. It passed the Senate 100 to 0, without medical savings 
accounts. It will pass the House of Representatives by a wide margin, 
if the House Republican leadership will permit it to be offered. But, 
so far, they continue to insist that if medical savings accounts for 
the special interests are not added to the legislation, there will be 
no insurance reform for the American people.
  Medical savings accounts sound good in theory. Why not encourage 
businesses and individuals to buy less costly high deductible health 
insurance policies and put the premium savings into a tax-free account 
that can be used to pay routine medical costs? But in this case, what 
sounds like good medicine in theory is quack medicine in practice.
  Medical savings accounts are an idea whose time should never come. 
Under estimates by the Joint Tax Committee, they are a $3 billion tax 
break for the wealthy and healthy.
  As the Center on Budget and Policy Priorities said, ``MSA's create 
new tax shelter opportunities. Use of an MSA would be highly 
advantageous to substantial numbers of higher income taxpayers. Low- 
and moderate-income taxpayers would receive little or no tax benefits 
from using MSAs, because they either do not pay income taxes or pay 
taxes at much lower rates.'' The American Academy of Actuaries 
concluded that medical savings accounts are ``Taking money from the 
unhealthy and giving it to the healthy.'' The Joint Tax Committee 
estimated that only 1 percent of the tax benefits would go to people 
with incomes of less than $30,000.
  If more people enroll in these accounts than the estimates predict, 
the cost could rise to tens of billions of dollars. The Joint Tax 
Committee estimated that only about 1 million policies would be sold. 
But other analysts have estimated that enrollment could be many times 
higher. Those who are loudest in their clamor to reduce the deficit are 
willing to waste vast sums on this destructive, special interest 
boondoggle. If we have billions of dollars to spend on health care, we 
should spend them on reducing the cost of coverage for hard-working 
American families or on deficit reduction--not on a perverse scheme to 
transfer benefits from the poor and the sick to the healthy and the 
rich.
  The most troubling aspect of medical savings accounts is the risk 
that they will destroy the health insurance pool, and price 
conventional insurance out of the reach of most American families. 
Medical savings accounts raise premiums for the vast majority of 
Americans--especially those who are sick and need coverage the most--by 
siphoning the healthiest people out of the insurance pool. As premiums 
rise for everyone else, more and more working families will be forced 
to drop coverage. In the words of the Congressional Budget Office, 
medical savings accounts ``could threaten the existence of standard 
health insurance.'' Mary Nell Lenhardt, senior vice president of Blue 
Cross and Blue Shield concluded that MSA's destroy ``the whole 
principle of insurance.''
  The Urban Institute found that, even under conservative assumptions 
about how many people would use medical savings accounts, the premiums 
for comprehensive policies could increase by 62 percent. If employers 
chose to contribute only the cost of the MSA, the worker's share of the 
premium for a comprehensive policy would rise by 300 percent.
  American families who choose medical savings accounts could be 
exposed to financial crisis if someone in the family becomes seriously 
ill. As the American Academy of Actuaries said, ``individuals and 
families who experience significant medical expenses soon after the 
establishment of MSA programs will face high out-of-pocket costs. These 
high out-of-pocket costs will not be randomly distributed. They will be 
concentrated among older workers and their families and among those 
with disabilities and chronic illness.'' The last thing that the 
American people need--especially those who need health care the most--
is another massive increase in the cost of medical care.
  Because they encourage high deductible plans, medical savings 
accounts discourage preventive care. According to the Congressional 
Research Service, the high deductible plans that come with MSA's mean 
that poor children are 40 percent less likely to get the care they 
need, compared to fully insured children. Abandoning preventative care 
is the wrong direction for health policy.
  Medical savings accounts are also a giveaway to the insurance 
companies who have the worst record of profiting from the abuses of the 
current system. It is no accident that a company like the Golden Rule 
Insurance Co. favors medical savings accounts. This company is ranked 
near the bottom by Consumer Reports because of its inadequate coverage, 
frequent rate increases, and readiness to cancel policies.
  When the Golden Rule Insurance Co. withdrew from Vermont because it 
was unwilling to compete on the level playing field created by the 
State's insurance reform, Blue Cross and Blue Shield took over the 
policies. They found that one in four policies included controversial 
extensions. Sometimes, arms, backs, breasts, and even skin were written 
out of coverage. Newborns were excluded unless they were born healthy.
  The Republican medical savings account plan includes no provisions to 
prevent abuses like these. Although MSA's are billed as providing 
catastrophic protection, there are no prohibitions on unreasonable 
life-time limits, or excessive copayments when the deductible level is 
reached. The $3,000 per family deductible level in the bill is a 
minimum--not a maximum. Companies can establish a much higher level--a 
$5,000 or $10,000 deductible for example.
  The Golden Rule Insurance Co. has refused to share any data about its 
plans with the American Academy of Actuaries or other impartial 
analysts. Golden Rule knows that medical savings accounts can't stand 
the light of day.
  Further, Republicans are also anxious to include MSA's in the 
insurance reform bill, because MSA's are part of their longrun plan to 
dismantle Medicare and turn it over to private insurance companies. 
Tactics like that have no place in a consensus insurance reform bill.
  Proponents of MSA's make a number of claims about the merits of 
medical savings accounts--but these claims can't stand the truth-in-
advertising test. One major false claim is the allegation that the 
savings on the premium of a high deductible policy will pay for a 
medical savings account covering the entire deductible.
  The Urban Institute concluded that for an individual policy with a 
deductible of $2,000, the savings to the employer that would be a 
meager $251--leaving you exposed to $1,749 in medical costs if you 
became seriously ill.
  The American Academy of Actuaries compared a family comprehensive 
plan to an MSA with a deductible of $3,000 and found that the family 
would be exposed to $1,800 in costs before reaching the deductible 
limit.
  Nothing in the Republican plan requires the employer to give all of 
the savings to the employee. Nothing requires the deductible to cap 
your liability. The insurance company could continue to charge a 20-
percent or even a 50-percent copayment. In fact, they would not be 
required to have any limit at all on your out-of-pocket payment.
  Another claim of the proponents of medical savings accounts is that 
they would reduce costs because people would shop around for the best 
care, and wouldn't go to the doctor for trivial illnesses. Every family 
knows that when someone is sick, the last thing on their minds is going 
from doctor to doctor to see who will charge the least. No family wants 
to be in the position of trying to decide whether chest pains or any 
other symptoms are something that will pass, or something that needs 
medical care immediately.
  Proponents of MSA's try to justify this claim by relying on the Rand 
health insurance experiment of the 1970's. Joe White of the Brookings 
Institution points out that, in fact, high deductibles had the effect 
of reducing necessary care just as much as unnecessary care. People who 
are sick are not responsible for the high cost of care--health care. 
Providers are.
  Those who support medical savings accounts also say they increase 
portability by giving you money to spend on health care while you are 
between

[[Page S5990]]

jobs. That assumes there will be something in your savings account when 
you leave your job--and that won't be true for anyone with significant 
health problems. With hospital costs running $1,000 a day or more, no 
one can afford the cost of care without insurance. The Kassebaum-
Kennedy bill is designed to guarantee access to coverage to people who 
leave their jobs--but it won't become law if medical savings accounts 
are attached to it.
  Advocates also say that MSA's increase choice, but the American 
people know better. The choice to pay thousands of dollars for health 
care you need but cannot afford because of a high deductible is no 
choice at all.
  In addition, Republican proponents of medical savings accounts note 
that some Democrats have changed their position since the last 
Congress. The fact is that MSA's have received much more analysis in 
recent years, and the pitfalls are better understood. I voted against 
them both times they were offered in the Labor and Human Resources 
Committee. In the past, President Clinton said that they are something 
we might explore and experiment with but he has never supported their 
widespread adoption. Democrats who supported them in the context of 
comprehensive health reform understood that they would be an add-on to 
comprehensive coverage with effective cost-control, not a substitute. 
In fact, the sense of the Senate resolution approved by the Labor and 
Human Resources Committee on the Health Security Act in 1994 
specifically said that they were to be used ``in conjunction with the 
comprehensive benefit package'' established by the bill.
  Few respectable health policy analysts support medical savings 
accounts under today's conditions. Editorials in the Washington Post, 
the New York Times, the Los Angeles Times, and the Boston Globe have 
condemned them.
  Most important, the people who need good coverage are strongly 
opposed to this program. The major organizations representing 
consumers, the elderly, the disabled, and working families have 
vehemently condemned them. Who is best capable of speaking for the 
interests of American families and who need health care--these 
organizations, or the Golden Rule Insurance Company?
  Most Republican leaders know that Americans want the consensus 
reforms in this bill and have little interest in medical savings 
accounts. That is why Representative Kasich said, on March 24, ``We 
will not let medical savings accounts destroy the ability to give 
people portability and eliminate pre-existing conditions.'' He made a 
similar statement yesterday.
  On March 29, Speaker Gingrich said he would not let medical savings 
accounts stand in the way of a Presidential signature.
  But actions speak louder than their words. The House Republican 
leadership has been unwilling to accept the fair compromise that the 
President and Democrats have offered on medical savings accounts. And 
now Republican House Majority Leader Armey has made it clear that the 
Republican strategy is to force the President to veto the legislation, 
and then try to blame him for the failure to enact the consensus 
reforms the American people need and deserve.
  Whether the issue is tax fairness, preservation of comprehensive 
health insurance for the vast majority of Americans, or the special 
interests versus the public interest, medical savings accounts are bad 
medicine for our health care system. They are a poison pill that will 
kill health insurance reform. The President has offered a reasonable 
compromise--but he cannot fulfill his obligation to protect the health 
and welfare of the American people by swallowing this Republican poison 
pill.
  Senator Dole understands the importance of insurance reform. Two 
years ago, on August 17, 1994, he stated on the floor of the Senate, 
``We will be back. . . . And you can bet that health care will be near 
the top of our agenda. . . We ought to take all the common parts of 
these plans, put them together and pass that bill.'' A week later, he 
identified the components of reform that he thought were most 
important. He said, ``My second suggestion is one that I have made for 
almost a year and a half. That we pass into law provisions to help 
those Americans who cannot afford insurance, who cannot get insurance 
because of pre-existing conditions, or who cannot keep insurance due to 
a job change.''
  Medical savings accounts were not on Senator Dole's list then, and 
they should not be on his list now.
  Senator Dole is planning to leave the Senate tomorrow. But he can do 
the American people an immense service if he will put off his departure 
for a few days and help pass this bill. He knows how important this 
bill is. He knows that his participation is essential if House 
Republicans are to be persuaded to accept a reasonable compromise. I 
hope he will act now to end this shameful gridlock and give the 
American people the health reforms they deserve.
  The ACTING PRESIDENT pro tempore. The Senator from South Carolina.
  Mr. HOLLINGS. I thank the distinguished Chair.

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