Why the Campaign Against MSAs?

December 20, 1996 • Commentary

What is the establishment so afraid of? Within the past few months there has developed an extraordinarily vitriolic campaign against medical savings accounts. From Congress, the media, and the insurance establishment, this consumer‐​based health care reform has been denounced with ever rising hysteria.

The New York Times, which over the last three years could barely manage to mention MSAs, suddenly devoted three stories within a month to the alleged dangers of giving patients control over their health care. A variety of publications, from the New Republic to Rolling Stone, announced that they were shocked –shocked! — to discover that Golden Rule Insurance Company, a proponent of MSAs, had made campaign contributions to several Republican candidates. A PBS special echoed the same theme. Amidst ad hominem attacks on Golden Rule’s business practices, there were ominous hints at political payoffs. Curiously, not a word was said about the millions of dollars being spent by the managed care insurance industry to defeat MSAs.

Meanwhile, many members of Congress who had previously supported legislation that included MSAs, such as Sen. Edward Kennedy (D‐​Mass.) and Richard Gephardt (D‐​Mo.), announced that they were now unalterably opposed to the concept, even at the price of scuttling any attempt at health care reform this year. President Clinton threatened to veto any health care reform bill that included MSAs.

The question is, why? Economists from across the political spectrum understand that one of the major factors driving health care costs is our third‐​party payment system that insulates consumers from the cost of their health care decisions. MSAs would establish an incentive for consumers to act more responsibly in purchasing health care services. There are numerous studies that show that health care consumers can and do make cost‐​conscious decisions when given a financial incentive to do so. For example, the RAND Corporation conducted a study of changes in people’s health care decision‐​making in relation to the size of the consumer’s copayment. The study found that an individual who had to pay 50 percent of the cost of health care spent 25 percent less than an individual with no copayment. The study also showed that, contrary to the assertions of some critics, those reduced expenditures are not caused by individuals’ forgoing truly necessary health care. (Health outcomes were virtually identical.) Rather, the savings result from reduced utilization of optional services and cost‐​based selection among competing providers.

Moreover, health expenses paid out of an MSA would entail no insurance administrative cost. Insurance is a very inefficient way to pay for small or routine health expenses. It costs approximately as much to process a $50 claim as it does to process a $50,000 claim. MSAs would cut insurance companies out of the vast majority of health care transactions. That would reduce both the overall cost of health care and the paperwork burden on doctors.

MSAs would also increase the quality of medical care by strengthening the relationship between the physician and the patient. One of the great tragedies of medicine today is that the medical ethic, according to which the doctor is responsible to the patient, has been replaced by a veterinary ethic, according to which the doctor is responsible not to the patient but to whoever is paying the bill. MSAs would reverse that trend.

Finally, while MSAs are not a “silver bullet” that would instantly solve the problem of Americans without health insurance, they would be a major step on the road to universal access. Of the 39 million Americans who lack health insurance, half are uninsured for four months or less, 70 percent for one year or less. MSAs would provide these individuals with a pool of money with which to pay health care and health insurance costs during those short uninsured spells. Moreover, because MSAs belong to the individual and are completely portable, there is no longer the fear that the loss of a job leads to the loss of insurance.

The campaign against medical savings accounts is really just a continuation of the battle over the Clinton health care plan. The fight over MSAs is fundamentally about control. They give control to patients and physicians. Advocates of national health care understand that once MSAs are passed, their hopes for a government‐​run health care system will be over. Insurance companies understand that MSAs represent a roadblock to insurance domination of the health care system.

It would be a shame if naked self‐​interest or ideological zeal prevented genuine, consumer‐​oriented health care reform.

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