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May 14, 1999
The Honorable William V. Roth
United State Senate
Washington, DC 20510
Dear Mr. Chairman:
We understand that on May 20, 1999, the Senate Finance Committee will mark-up various proposals that would expand Medical Savings Accounts (MSAs). We urge you to vote against any and all proposals that would have the effect of prematurely expanding MSAs beyond the demonstration program initiated in the Health Insurance Portability and Accountability Act. MSA expansion could come in a variety of forms - including building MSA options into the Federal Employee Health Benefits Plan, allowing all people under age 65 to be eligible for a tax-favored MSA plan, increasing the size of the allowed contribution to the MSA, and increasing the ceiling on the number of Medicare MSA enrollees.
While poor marketplace response to MSAs denied the General Accounting Office the ability to conduct the research called for in the Health Insurance Portability and Accountability Act, other research has confirmed fears of what MSAs will mean over time for the health care marketplace if readily available. Specifically, health economists have found that:
· When MSAs and low-deductible coverage are offered side-by-side, healthy people are drawn to MSA plans disproportionately, leading to premium spirals in the low-deductible plans.
· When employers offer both MSA plans and traditional coverage, eventually the MSA plans will "crowd-out" traditional low deductible coverage. This means that, in the long-term, consumers will have less, not more choice.
· The likely "losers" from MSA plans tend to be poorer, and in families with infant children.
It is important to understand that the splitting of the healthy from the sick can even occur if the minimum deductible for the catastrophic policy is $1,000. Research by the American Academy of Actuaries found that premiums could increase over 60 percent as a result of adverse selection with deductibles of this magnitude.
MSA plans should not be allowed in the Federal Employee Health Benefits Program. Ironically, in the long-term, including MSAs (and high deductible insurance) for federal employees could mean less choice of health plans for federal employees. Research suggests that, over time, premium spirals for traditional insurance will crowd out the low-deductible plans. Federal employees may, over time, have no choice but catastrophic coverage.
We believe that by splintering the healthy from the sick, expanded MSAs would move the nation's health care system in the wrong direction, and we urge you to oppose any expansions of MSAs.
Sincerely,
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Gail Shearer |
Adrienne Hahn |
Consumers Union's Washington, DC Office
