How Would You Spend Four Billion in Healthcare Dollars? Consumers Union: Expanding Medical Savings Accounts a "Poison Pill"

Press Release

July 22, 1998

Contact: 202/462-6262
Gail Shearer, sheaga@consumer.org,
Kathleen McShea, mcshka@consumer.org
Consumers Union Washington, DC Office

How Would You Spend Four Billion in Healthcare Dollars?
Consumers Union: Expanding Medical Savings Accounts a "Poison Pill"

WASHINGTON – The GOP plan to balloon the failed Medical Savings Account (MSA) experiment is a poison pill designed to kill the Patients Bill of Rights, according to Gail Shearer, Director of Health Policy Analysis at the Washington Office of Consumers Union.

"It is time to recognize Medical Savings Account’s for what they are – a marketplace flop, a mechanism that drains the Treasury and benefits the health at the expense of the sick," Shearer told a public forum hosted by the House Democratic Working Group on Wednesday. "We strongly urge the Congress to remove poison pills such as expanded Medical Savings Accounts from legislation that is designed to improve the quality of health care provided through managed care."

MSA’s first launched as an experimental program in the 1996 Health Insurance Portability and Accountability Act of 1996, were approved by Congress only after a series of important restrictions were added. These restrictions limited the number of policies, set a range for deductibles, tailored their tax advantage and excluded large companies from participating.

As part of their version of a Patients Bill of Rights legislation to reform the managed care industry, the Republican party is seeking to greatly expand the use of this insurance product. All limits on the number of policies are removed, every employer is permitted to offer them and the significant tax advantages are added.

A large scale MSA program will mean a myriad of problems for the health care marketplace, according to Shearer, who priced the cost of the expansion to taxpayers at $4 billion over ten years. Among them are that MSA’s:

Split the healthy from the sick
Give large tax breaks to the wealthy, while working families lose
Replace traditional $250 deductibles with $2-4000 deductibles
Drive up costs, by over 60 percent if one in four healthy Americans enroll
Give a tax break to bad health care policies which have no guarantees of comprehensive benefits, pregnancy benefits or coverage for illnesses like AIDS

A better way to spend limited health care dollars would be to put more kids who have no health care insurance under the umbrella of the Medicaid program, according to Shearer. Each uninsured person who buys an MSA costs taxpayers $3600, while each additional uninsured child put under Medicaid costs $1178, by her calculations.

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NOTE: To obtain a copy of Ms. Shearer’s testimony at forum, please dial our faxback line at 202/238-9282 and request doc. no. 3411. For a four page chart pack request doc. no 3412. To obtain a fact sheet on MSA’s request doc. no. 3413.

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