Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, June 23, 1995 TAG: 9506230080
SECTION: EDITORIAL PAGE: A-11 EDITION: METRO
SOURCE: JOHN BURRY JR.
DATELINE: LENGTH: Long
Proponents of MSAs - also called medical IRAs - believe that by giving individuals more responsibility for purchasing their own health care, they will act wisely, and overall national spending will drop dramatically. And policyholders can use tax-free dollars to shop for doctors and hospitals. The result, they say, is that our health-care system will save tens of billions of dollars annually.
They couldn't be more wrong.
The concept of MSAs tests very well politically. The rhetoric of giving people personal responsibility and putting tax-free dollars in their pocket makes for great TV sound bites.
The medical savings account works this way. Instead of an employer buying medical insurance with a low-deductible policy for employees, a cheaper high-deductible policy replaces it. The difference in cost between the two policies is put into an employee's medical savings account, where it gathers interest.
The employee draws on the MSA for medical expenses until the high deductible in the insurance policy is reached. If no medical services are required, the funds gain interest until needed.
Some proposals before Congress call for the accounts to be tax-free while others are expected to reject the cutting of federal revenues. Either way, the MSA is a potential time bomb.
The insurer proponents of medical savings accounts wrap themselves in "personal responsibility" and patriotic themes to promote their self-serving initiative. There is nothing patriotic about MSAs. Patriotism does not harm the sick and frail, the very young and very old. Yet, MSAs do just that. They are the ultimate "cherry-picking" scheme invented by some insurers to guarantee themselves large profits by insuring only the healthiest among us. A much better - and more honest - name for MSA would be IPA - the Insurance Profitability Act.
If you accept the theory that people will do what's in their own self-interest, then you must accept the fact that MSAs will lead to a massive "self-selection" process, which will pull the healthy out of large insurance pools and drive up costs for those unable to "profit" from their own health. The medically less fortunate will suffer, through no fault of their own, and no amount of government-sponsored insurance reform will help.
The least healthy among us will end up insuring each other, a pool of bad risks stuck with premiums only the wealthy could afford. MSAs destroy the whole concept of insurance to spread risk over both the healthy and the sick by promoting a "me first" attitude that is socially selfish and greedy.
We studied 38,729 families in Blue Cross & Blue Shield of Ohio small-group coverage, and found that 10 percent of the families incurred 55 percent of all health-care charges for a year. With funds lying dormant in the medical savings accounts of the healthy, removed from the flow of health-insurance dollars needed to care for the ill, our study discovered a shortfall of $50.2 million when the cost of medical care for all the families was computed.
Projected nationally, assuming this legislation passes, the plan could easily result in an incredible $83.6 billion deficit.
Because of the deficit, employers will be asked to make up the difference to pay for the escalating insurance policies of the ill. Employers will stagger under premium increases.
More and more people will forgo too expensive health insurance, putting more financial pressure on the government and employers. It will leave doctors and hospitals with millions in unpaid bills. This burden will finally bankrupt the system.
The medical savings account is supposed to be an incentive for the individual to shop for the best care at the best price. But without the ability of groups to negotiate lower costs through managed care, doctors and hospitals will charge fees they deem appropriate, plunging health care into further confusion and making the consumer go it alone.
The American College of Physicians is skeptical about MSAs and the market chaos they could create. Said Clifton Cleveland, the college's president, "Physicians are strong individuals, and all of us think we could come up with solutions to complex problems by ourselves. But it would be absolute chaos for doctors if they had to negotiate with so many individuals."
The real answer to our health-care crisis is not a gimmick like the MSA. We need to cut waste and fraud, rid ourselves of unnecessary hospitals and create an integrated hospital system where all the components of health care - doctors, hospitals and insurers - work together to provide the best medicine at the best price.
Experts estimate that 25 percent of the cost of the U.S. health-care system is lost through waste and fraud. That is nearly $230 billion annually. There is plenty of money available in this system. It needs to be managed better so that every American can enjoy better health.
Sooner or later, almost every family is going to be part of that 10 percent who need expensive medical care. While not perfect, our present system is working right now for the vast majority of Americans. We shouldn't undermine the foundation of that security with a dangerous gimmick that sounds great, but in reality just won't work.
John Burry Jr. is chairman and chief executive officer of Blue Cross & Blue Shield of Ohio.
by CNB