|
June 10, 1997
By Gail Shearer, Director, Health Policy Analysis, Consumers Union, Washington, D.C.
Congress is currently pounding out the details of the budget reconciliation bill. As they work, many Members are waxing eloquent about cutting the costs of Medicare and reducing the deficit. At they same time, they are putting medical savings accounts into Medicare -- an option that will cost taxpayers at least $2 billion, and lower the quality of health care provided to Medicare recipients. As usual with these supposed cost-cutting schemes, consumers who can least afford it will lose the most.
Who is pushing for these medical savings accounts? Doctors, who stand to gain limitless extra fees that they currently are not allowed to charge Medicare recipients and insurance companies who stand to make profits off the nation's seniors.
Medical savings accounts have two parts: a high-deductible health insurance policy (the deductible in the current proposal is as high as $6,000), and tax-advantaged savings accounts. Sounds good until you look at the details.
Most Medicare beneficiaries are healthy and cost Medicare just a little. The average Medicare beneficiary had Medicare costs of about $5,000 in 1996. But the average hides a wide variation. The healthiest 90 percent of beneficiaries had costs of about $1,400. The reason Medicare costs are high is that the sickest 10 percent had average costs of about $37,000.
MSAs will separate the healthy from the sick The introduction of MSAs into Medicare will create financial incentives for the healthiest half (or even more) of beneficiaries to accept a high-deductible-policy, with cash that can grow in a savings accounts. The result for the less healthy is alarming: there will be billions less dollars available to pay their costs. Instead of pooling funds to care for the sick, a substantial chunk of Medicare dollars will help the healthy build up investment accounts.
Medicare beneficiaries and baby boomers who hope to one day become Medicare beneficiaries will suffer if Medicare MSAs are introduced. Congress should reject Medicare MSAs and should focus its attention on taking steps to ensure the long-range viability of Medicare. But if Congress insists on heading down this dangerous path, it should at least take steps to minimize the damage.
Some of the ways that Congress could reduce the harm from Medicare MSAs:
First, require budget neutrality. Right now proponents of MSAs admit that they will cost taxpayers at least $2 billion. Reject any MSA design that would drain the federal treasury. Don't make contributions to MSAs or MSA investment earnings tax deductible. Limit payments to MSA plans to an individual's Medicare payments for the prior years, to prevent insurance companies from cherry picking the healthy.
Second, make sure that MSA funds are used for health care costs. The fear is that MSAs will become yet another tax-shelter for the rich. Don't let MSA funds be withdrawn for non-health care uses. Require that MSA funds left after a person dies do not go to his or her heirs, but to the Medicare trust fund.
Third, build consumer safeguards into the MSA high deductible health insurance policies. Deductibles should be limited in level to $1,500 to $2,250 for individuals, just as Congress overwhelmingly endorsed in the bipartisan 1996 Kassebaum-Kennedy health insurance bill. These levels reduce the problem of the selection of the very best risks into MSAs, and help protect moderate income seniors from high out-of-pocket costs.
Cap individuals' out-of-pocket expenses at $3,000, with the insurance policy paying all costs after the maximum is met. Private policies should be watched and banned from anti-consumer practices that make coverage unavailable or unaffordable to high-risk individuals. Benefits should be standard and comprehensive, starting with traditional Medicare benefits and adding prescription drugs. And doctors' fees should be limited to levels allowed in the traditional Medicare program.
Finally, Congress should end the demonstration if the MSAs harm the Medicare program. Congress set up one MSA demonstration last year, and now they want to launch this one before Americans have had a chance to see that MSAs really don't make sense.
The future viability of the Medicare program and its ability to provide health care for America's senior citizens and disabled are at stake. Congress should not include a provision that destroys Medicare's quality of care and solvency for future generations.
