[Congressional Record Volume 143, Number 23 (Thursday, February 27, 1997)]
[Senate]
[Pages S1729-S1730]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        MEDICAL SAVINGS ACCOUNTS

  Mr. ROTH. Mr. President, as part of the Kassebaum-Kennedy health care 
legislation, passed in the 104th Congress, we provided for a pilot 
program to explore the potential of medical savings accounts.
  These MSA's represent a significant step forward in our objective to 
promote an environment where Americans can receive quality and 
affordable health care in market-based programs. MSA's would allow 
families to participate in higher deductible, lower premium plans.
  The money saved on premiums would be placed in tax-sheltered MSA 
accounts. Families could then use this money to pay for health care 
costs. They would have a greater stake in the health care delivery 
system. Their vigilance--as they use their own money--would encourage 
health care providers to keep costs competitive and quality high.
  MSA's would also go a long way toward cutting the high costs 
associated with health care administration.
  It's projected that as families play a more active role in paying for 
their health care, because of the high deductible nature of MSA's, that 
less than 10 percent of those using MSA's would send a bill to their 
insurance. Insurance company involvement would come only after the 
deductible has been met, or in the case of a catastrophic illness.
  As we look for innovative and workable programs to help Americans 
meet the costs associated with health care, MSA's offer a viable and 
attractive possibility. I anxiously await the results from the pilot 
program we initiated, as well as response from our health care 
community.
  Recently, I received a letter and an article from two academics 
associated with the allied health profession field. Amy B. Hecht, 
former dean of the Temple University College of Allied Health 
Professions and James L. Hecht, professor in the political science 
department at Temple, authored an impressive overview of MSA's.
  I ask unanimous consent that their article be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 Rx for Health Reform--Medical Savings Accounts Give Consumers a Stake 
                            in Cutting Costs

              (By James L. Hecht and Amy Blatchford Hecht)

       Horror stories constantly are being reported by the media 
     about how America's rapidly changing health care system has 
     caused disastrous results for some and suffering for many. 
     That is not surprising since tens of millions of people are 
     being forced into managed care, where they have far less 
     control than under the previous fee-for-service system.
       Unfortunately, little has been said about an alternative: 
     having people pay for normal

[[Page S1730]]

     health care expenses directly from tax-sheltered Medical 
     Savings Accounts. Much of what has been said has been 
     directed at MSAs' one disadvantage as opposed to their many 
     advantages.
       Employers are the vector for the rapid transition to 
     managed care. The cost of medical care in the United States 
     has been more than 30 percent more per capita than anywhere 
     else in the world. Thus American companies are under enormous 
     pressure to cut health costs since they have become a major 
     expense and a disadvantage against foreign competitors. 
     Moreover, large expenditures have not produced better health 
     as measured by criteria such as life expectancy and infant 
     mortality rates.
       Some of the America's high costs results from its 
     leadership in using technology to provide the best care in 
     the world for those who are able to take advantage of it. 
     That is desirable. But there is another reason why health 
     costs in the United States have gotten out of control: an 
     enormous government subsidy which encourages payment by 
     insurance.
       Providing most health care payments through insurance makes 
     as little sense as having homeowners' insurance cover 
     maintenance. The purpose of insurance is to protect against 
     expensive catastrophes. Home maintenance costs are 
     significant, but can be handled more economically and 
     satisfactorily without a third party involved.
       But in the case of health care, insurance paid by employers 
     became the standard following World War II because employers 
     were able to shelter part of their employee compensation from 
     taxes by providing health insurance that covered normal 
     expenses. Thus the U.S. government subsidized a health care 
     system financed unlike any other in the world. As costs of 
     new treatments increased and options for care expanded, costs 
     skyrocketed but were not matched by improved results.
       That is why tax-sheltered contributions to Medical Saving 
     Accounts, whether made by an employer or individual, make 
     sense. Consumers should have the option of administering 
     their own medical bills, barring catastrophic costs, while 
     receiving the same government subsidy given to employer-paid 
     insurance and managed care.
       People with MSAs would have insurance, but it would only 
     cover expenses after a deductible of at least $2,000. Thus, 
     less than 10 percent of those with MSAs would send a single 
     bill to their insurance company in a single year. That's one 
     huge advantage of MSAs: a big decrease in the costs of health 
     care administration. Studies indicate that administration of 
     third-party payments accounts for well over 20 percent of 
     health costs. Billions of dollars spent on paperwork would be 
     saved. And that does not include the time and aggravation 
     consumers spend to get reimbursement.
       MSAs might cause some people to skimp on preventive care. 
     But insurance policies for catastrophic care could cover 
     periodic physical exams, Pap tests and prenatal care because 
     they effectively prevent expensive medical problems.
       Meanwhile, people paying their own bills are more likely to 
     compare prices when a physician orders tests. Some will 
     question the necessity of recommended tests. Nurse 
     practitioners and physician assistants would be used more 
     since their fees are far lower than physicians'. Savings of 
     tens of billions more would result from giving consumers a 
     stake in reducing costs.
       Plus, having people pay directly for much of their health 
     care will be a powerful force for choosing healthier 
     lifestyles.
       Many of these same advantages can be achieved by managed 
     care, which is why employers are shifting health benefits in 
     this direction. In fact, a good HMO usually will be the best 
     option for people who are not careful consumers. However, 
     people who value control over their health decisions, or who 
     do not have access to a good HMO, usually would be better off 
     with an MSA and fee-for-service.
       Competition between managed care and MSAs is another 
     important reason to shelter MSAs from taxes. Competition 
     solely between HMOs and other managed care plans will not 
     necessarily result in good, cost-effective health care. There 
     was fierce competition between General Motors, Ford and 
     Chrysler, but until Japanese automakers captured a 
     significant share of the market, American manufacturers 
     produced inferior cars and did not control costs as 
     efficiently. Today, doctors are being offered financial 
     incentives to decrease patient care. Tax-sheltered NSAs and 
     fee-for-service could shift incentives where they belong: 
     bonuses for better patient outcomes.
       While tax-sheltered MSAs will provide better care at 
     greatly reduced costs for most Americans, they would not be 
     good for those with chronic illnesses requiring costly, long-
     term treatments. This is why they were opposed by Senate 
     Democrats and President Clinton. The chronically ill would 
     lose money with MSAs (although some might still choose one in 
     order to exercise greater control), and their alternatives 
     would cost more than at present because health care plans 
     would serve sicker populations with higher than average 
     expenses.
       So in fairness, legislation creating tax-sheltered MSAs 
     should include a benefit for the chronically ill to offset 
     their higher costs. It might be a credit for families who had 
     out-of-pocket health expenses greater than some percentage of 
     gross income in the previous two years. The credit might be 
     for expenses greater than 7.5 percent of gross income, which 
     is the current medical and dental deduction on the federal 
     income tax. The credit also should have a cap on the amount 
     of expenses that qualify.
       And legislation should be enacted as soon as possible, 
     instead of waiting years for the results of a small trial 
     program established under the Kassebaum-Kennedy Bill. The 
     trial is unlikely to yield definitive results.
       No legislation will be a panacea for all health care 
     problems. But Medical Savings Accounts are a simple way to 
     provide better, more cost-effective care for many Americans. 
     This in turn will contribute to a political and economic 
     environment more conducive to keeping the promise of decent 
     health care for all.

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