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COMMENTARY: A GOOD IDEA--BUT HMOs DON'T WANT US TO TRY IT
Randy Velting wasn't going to let some torn knee ligaments keep him off the basketball court. So he got his damaged knee repaired by the best surgeon he could find. Only trouble was, Velting, 44, wound up paying more than half the $1,675 bill after his Blue Cross/Blue Shield insurance plan decided the amount wasn't "reasonable and customary." But Velting, a partner at Concord Management, got his revenge. He helped persuade fellow partners at his Michigan property- management company to adopt a Medical Savings Account.
With MSAs, a company establishes a pool of cash to cover routine health costs. A high-deductible insurance plan kicks in on major expenses. At Concord, for instance, all employees get $2,000 deposited yearly into an account to be used for medical bills. Most expenses over that are covered by an insurance plan also paid for by Concord. "It costs the company no more than before, but now we can shop around, choose our own doctors, and get it paid for," Velting says.
His experience shows why Republicans are right to be pushing two provisions to encourage Medical Savings Accounts. One would make MSAs eligible for the same tax exemptions given traditional forms of medical insurance. The second would allow elderly Medicare recipients to choose an MSA for themselves as one of several options.
EQUAL FOOTING. Unfortunately, powerful forces are arrayed against the effort. Foremost are lobbyists for managed-care health plans. "Managed-care companies aren't happy with the idea that someone is going to take away some of their business after they just spent the last two years convincing employers that managed care is the only way to go," explains Arthur J. Drechsler, senior vice-president at benefits consultant Segel Co.
Moreover, managed-care companies are backed by Democrats, such as Senator Edward M. Kennedy (D-Mass.) and Representative Pete Stark (D-Calif.), who prefer a government takeover of all health-care spending. Stark warns darkly that MSAs could "threaten the health-insurance system across America." The pair hope to use a last-minute parliamentary ploy to delete the provisions from the GOP budget plan.
Opponents of the accounts ought to back off. MSAs need to be given a test run on an equal footing with tax-advantaged managed care. After all, workers like the accounts because they are portable and offer the widest possible choice of doctors. Doctors like them because it eliminates a layer of bureaucracy between them and the patient. Economists like them because they encourage patients to seek low-cost care.
So what's the downside? Some consumer groups warn that workers will squander their medical accounts on other expenses--such as vacations. But employers who have tried MSAs report that workers aren't so stupid. After Dominion Resources Inc., a Richmond (Va.) utility holding company, offered a medical-account option four years ago, 87% of its 245 workers made the switch from managed care. "Anytime people are spending their own money, they are just going to be more prudent," says Anne Grier, the company's human-resources manager. Besides, under the proposed law, private MSAs would be treated much like retirement accounts--spend the tax-free benefit on health care or roll it over tax-free into next year's account. Spend it on a Caribbean cruise and you would wind up facing income taxes and a 10% penalty.
"SMART CARDS." Another argument against the plans is that MSAs may wind up costing the government more money and raise overall private spending on health care. The Congressional Budget Office figures Medicare costs could rise by $3.5 billion over seven years with MSAs.
Others insist they will lead to savings. In addition to giving consumers incentive to shop more carefully, one Indianapolis company, Eclipse Consulting Group, is betting the accounts can help save billions in administrative costs. Beneficiaries would carry Eclipse's "smart card" with a computer chip containing medical records and account information and linking the employer, insurance company, and provider. A patient with Eclipse's card could simply debit his MSA account at the doctor's office or pharmacy.
In fact, while bureaucracy-loving Washington dithers, the states already have caught on. Fifteen have passed laws encouraging employers to provide MSAs. Whether the new accounts will save money can't possibly be known until the legislation is passed and consumers have a chance to use them. Besides, beyond cost, Congress has vowed to provide Americans with a choice in who provides and administers their health care. Providing competition to the growing managed-care monopoly would do much to help legislators keep that promise.By Paul Magnusson