Medical Savings Accounts Study
Commonly Held Objections

"Don't Be Seduced by Medisave" headlines a New York Times editorial claiming MSAs are a "needless payoff to rich families and a body blow to market reform."30

The May 30, 1994, issue of State Health Notes features "Medical Savings Accounts: Much Ado about Nothing?" This report denies the value of MSAs and doubts future acceptance of MSAs. The editor generally dismisses MSAs as lightweights in resolving the health care access and spending issues. Claiming little true tax benefit to working people and predicting further tax complications, this report asserts the sole participants to benefit from MSA programs will be upper income tax payers.31

Without convincing empirical evidence, one Congressional Budget Office memorandum broadly hypothesized that MSAs offer scant advantage toward meeting legislative health reform objectives. In assessing Congressman Michel's health proposal, this Congressional Budget Office memorandum concluded that MSA programs would "exacerbate the problem of adverse selection thereby threatening the existence of standard health insurance stability." This will occur, the authors speculated, because healthy people would abandon the standard insurance pool causing severe consequences later. Again without valid actuarial evidence, the report asserts that the validated Rand HIE findings do not apply to proposed MSA benefit structures. It also questions whether there are administrative savings with MSAs.32

Iris Lav, medical researcher and analyst, authored a more detailed study concluding that MSAs threaten to increase, not reduce health care costs. Lav's analysis suggests that MSAs would likely generate serious problems mostly from the effects of the healthy choosing MSAs and thereby pushing the older and sicker into prepaid comprehensive health plans. She believes that MSAs will motivate people to "game" the health care system by shifting between MSAs and comprehensive coverage in anticipation of desired cost advantages.33

This analysis speculated that MSAs would primarily help higher income taxpayers, the same people who earlier benefited from IRAs while lower income people did not. She implies that MSA cash savings of $1000 or more per person are not meaningful to low income workers but would be to high income families. Lastly, Lav asserts MSAs are not likely to make affordable health care coverage available to everyone. The greater part of Lav's study concentrated upon the likely effects of severe adverse selection resulting in unaffordable rates for prepaid health plans.

"Medical Savings Accounts - Bad Medicine for the U.S. Healthcare System" was written by John Burry, Jr., Chief Executive Officer of Blue Cross of Ohio. He labeled MSAs a "poorly conceived solution that would seriously undermine our nation's healthcare system - and potentially the health of our nation." Finding unresolvable and fatal fault with MSA programs, Burry pronounced judgment against MSAs using the harshest language of all studies. Burry concluded MSAs "would bankrupt our healthcare system and potentially harm medically fragile people and families who need help the most...[and] change our nation's collective healthcare behavior in unhealthy ways."34

"Without convincing empirical evidence, one Congressional Budget Office memorandum broadly hypothesized that MSAs offer scant advantage toward meeting legislative health reform objectives."

Another often quoted MSA study was published early in 1994 as directed in the Minnesota Care Act of 1993. This study was undertaken by the Commissioner of Health conjointly with commissioners of employee relations, commerce, revenue, and the Minnesota health care commission. The authors found multiple disadvantages inherent in the MSA concept and deemed the assumptions underlying MSAs to be flawed.35

They concluded MSAs would not produce substantial savings; would not positively influence utilization and spending; would create serious new administrative problems; would likely encourage unhealthy trade-offs between economic and health benefits by individuals; would exacerbate equity problems for poor, racial or ethnic communities; and would be incompatible with Minnesota's health care reforms. The study concluded that the Minnesota Care reform goals of individual responsibility and self- restraint in utilization would be better achieved through a combination of low deductibles and copayments with health promotion and education efforts sponsored by government agencies and employers.

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