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The "compromise" on Medical Savings Accounts put forward by the Congressional Republican leadership could cost the average American family more than 20 percent of its annual income if the family needed costly medical care, shows a study released today by Consumers Union, publisher of Consumer Reports magazine.
Legislation sponsored by Senators Kassebaum and Kennedy to expand health insurance to people who change jobs or have pre-existing conditions has been held up by efforts to add MSAs to the bill. Under a proposal put forward by the Republican leadership on June 10, and still under negotiation, families could face insurance out-of-pocket expenses as high $7,500 before their insurance coverage kicks in.
The Consumers Union study shows that the average American family in 1996 has an income of $33,000. Under the deductibles allowed in the Republican proposal, the average family with an MSA health insurance plan could have to pay 23 percent of its annual income for health care before insurance pays anything.
"Paying $7,500 of their own money before health insurance pays a dime would be devastating to most American families and would present a barrier to receiving essential health care," said Gail Shearer, director of health policy analysis for the Washington, DC, office of Consumers Union and author of the study, "Medical Savings Accounts: A Growing Threat to Consumers' Health Care Security."
"Even if employers make a substantial contribution to their employees' MSA, the Republican plan would leave the average American family with out-of-pocket health care costs of 6 to 20 percent of their annual income because families would face insurance deductibles of $3,000 to $7,500 a year," Shearer said.
While MSAs may benefit the healthy, Consumers Union and other organizations argue
that the sick who would suffer under the plan. MSAs encourage consumers to gamble with their health insurance because someone who is well today and signs up for an MSA may suffer from an illness or accident tomorrow.
MSAs will mean less health care security for average Americans.
Today workers who have insurance through their employers have much lower deductibles than those proposed with MSA plans. In 1995, the median health insurance deductible for an individual was $250 and the total deductible for a family typically was $500. With MSAs, those out-of-pocket expenses skyrocket to anywhere between $5,000 and $7,500.
Today, an amazing 98 percent of employers offer health plans that limit the burden of costs their employees' must carry to 20 percent. The MSA proposal under debate in Congress allows insurers to charge coinsurance of 30 percent, even after the $5,000 to $7,500 deductible is met. Incredibly, this 30 percent cap on coinsurance is lifted completely after five years which means consumers could be faced with paying deductibles of thousands of dollars and still be responsible for 50 percent of the cost of their care.
Today, 81 percent of employers' health care policies protect employees from bankruptcy by limiting out-of-pocket costs to $1,200 per year. After employees pay $1,200 in health care expenses through deductibles and copays, insurance covers the rest. With MSAs, there would be no limit on what consumers would have to pay out of their own pocket.
Consider what an MSA plan would mean for a young family that finds it is expecting a child. Assume the employer contributed $2,000 to the family's MSA and that the MSA has a $7,500 deductible. An uncomplicated childbirth, including both doctor and hospital care, costs about $15,000 in Washington, DC. The family would use the $2,000 MSA balance to cover some costs but would face another $5,500 of health care expenses before insurance kicks in.
Making this very likely scenario even worse, the MSA plan allows insurers to charge consumers for 30 percent of the cost of their care even after the deductible is met. Assuming the young family had to pay for 30 percent of covered health care costs, it would face another $2,250 in childbirth expenses. This family would face a bill of $7,750 to deliver a healthy baby, a total that is a whopping 23 percent of its income if it earns the national average of $33,000 a year.
"Today, four out of five consumers who get their health care from their employers are protected against never-ending health care costs. Under the proposal now being debated in Congress, those who choose MSAs would lack similar guarantees. Whether your health need is for childbirth, diabetes, paralysis or heart bypass surgery, MSA plans would mean financial agony for the average family," Shearer said.
"Consumers Union urges Congress to reject income-depleting MSAs," Shearer said. "If Congress moves forward with this costly proposal, MSAs plans should not be allowed to discriminate against middle income consumers or people with chronic illnesses."
The study released today describes 10 ways that MSAs, as embraced in the June 10 Republican comprise, could harm consumers. It makes recommendations on how to ensure MSAs, in the unfortunate circumstance that they are adopted in some from by the Congress, would cause less harm. The study also outlines more examples of how average people, such as a diabetic or someone maimed in an accident, would fair under the MSA plan. For a copy of the report call 202/462-6262.
