MSA PREFACE
Why Medical Savings Accounts?

After two years of intensive nationwide debate, the 103rd Congress of the United States adjourned without passing major health care reform legislation. Nobly inspired health care reform ideas centered around government design and delivery collided with economic reality. The 104th Congress is taking a different, more decentralized approach.

Many of the concerns, observations and recommendations regarding health care have been debated endlessly for nearly seventy years. Most proposals, past and present, advocate major financing reforms dealing predominantly with the supply side of health care. In addition to correcting perceived problems of how health care is organized and delivered, these supply side controls purport to eliminate waste and inefficiency as well.

Supply side, or top-down controls feature externally regulated, complex, highly organized systems that integrate the financing and delivery of health services. Proposals with these properties are known as "managed competition"—an oxymoron of sorts. The centerpiece of "managed competition" is "managed care." These systems decide what is best for patients, constraining consumer choice of providers and independent sources of care. Patients are told where, what and how they receive services.

Generally an authority or appointed commission determines the rules of engagement and participation by all stakeholders in the system. The authority or commission establishes global budgets or sets maximum premiums. They establish rules that guide the purchase and implementation of compulsory insurance; i.e. employer and individual mandates.

Supply side strategies attempt to influence and reform the health care process in the following manners:

• Influence provider decision-making and behavior
• Influence the billing process
• Introduce, impose and tighten price management
• Reduce sources and uses of providers, facilities and tools of care
• Identify and establish "guidelines" for the processes of care
• Reorder the organization, delivery and financing of health services
• Specifically, the Washington State 1993 Health Services Act of 1993 captures much of the above and more.

Why are we having a public policy debate of this nature? It is worthwhile to remember that comprehensive prepaid medical benefits and insurance have dominated employer-provided fringe benefits since the wage and price controls of World War II. Employers offered tax-preferred medical benefits and insurance rather than higher wages. Unfortunately, this spawned a double-digit spiral in health care spending, contributing greatly to the current health care crisis and the resultant reform plans.

But emerging amidst the various reform plans is a different and powerful approach to help solve the health care crisis. This approach restores the patient to a central and influential position in health care transactions. It unleashes the power of patients who, informed about the cost of their personal health care, use health services more prudently and effectively.

What is it about this approach that makes the patient an important economic stakeholder with the potential to make as good or better health care decisions than remote bureaucrats, boards and agencies?

Cost is a function of utilization. Health care costs decrease when utilization decreases, and utilization decreases in relation to the extent people have direct responsibility to pay for it. When people have sufficient funds to cover immediate health-related expenses, when they are protected from the threat of infrequent but costly medical care, when they are personally rewarded if they use health care carefully and only when needed, reform of our health care system is well on its way.

This describes the concept of medical savings accounts and what makes them work.

• What is this thing called a medical savings account and what does it do?
• Is it good for individuals, families, employees, state employees?
• How about employers?
• Is it good for retirees and low-incomes folks?
• Are medical savings accounts only for the healthy and wealthy?
• Do MSAs reduce costs and increase access to health care?
• Do they decrease the use of preventive services?
• Will MSAs work with managed care?
• Are MSAs for everyone?
• We will discuss these questions on the pages that follow.

The central idea behind the MSA Health Plan is to complement and balance effective supply and demand management strategies. Together, they exert powerful leverage upon the objectives of health care reform.

S.B.

"Most proposals for health care reform focus on government, physicians, hospitals, and insurers. Usually, they leave out the most important participant—the patient." —Michael Tanner

reprinted from AAPS bulletin

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org