Medical Savings Accounts Study

Most of the outcomes projected for MSAs and qualified high deductible health insurance were observed in the employer-sponsored MSA programs we studied. Consistent with the findings of the Rand Health Insurance Experiment, utilization of health services dropped along with substantial and proportionate decreases in overall health plan and benefit spending. MSA programs save money for employer and employee alike. In one employer's case, annual 1994 family premiums exceeded $11,000 for prepaid comprehensive medical services but plummeted to $5,965 with adoption of an MSA plan, thus saving $5000 per family.39

"Somani has projected large savings to the state of Ohio. ...Projected total savings over the five years from 1994 through 1998 are $231 million."

Employees and their families exercise greater decision-making control over their health and health seeking behaviors. Speculation that preventive care services and diagnostic tests decrease with MSAs and that overall health suffers as a result has been proved false. The fear of adverse selection with MSAs attracting primarily only the healthy and the wealthy does has not been observed.

In fact, MSAs reduce out-of-pocket spending even for heavy users of health services with costly hospitalizations, frequent provider visits, and multiple pharmaceutical requirements. This happens because a properly designed MSA program can eliminate deductibles, copayments, and coinsurance that characterize traditional prepaid medical health plans. This particular advantage to MSAs serves patients well by virtually removing financial barriers to health services that patients want and need. Such an MSA program prefunds the MSA and pays for a catastrophic health insurance plan.

MSA enrollees actively pursue clinical and economic transactions that are in their self-interest and that meet their needs, wants, and preferences. Freed from third party intrusions into transactions covered by their MSAs, enrollees seek more detailed information about the costs and expected benefits of services. These active consumer behaviors often carry over when catastrophic coverage kicks in, even though the MSA enrollee knows someone else is paying the bill. Sensitivity to price, quality, and service is an emerging and predicted behavior MSA beneficiaries display almost as a matter of course.

Providers report favorably upon the prompt payments being made out of MSA funds. As enjoyed by patients using MSAs, providers and their office staff share similar relief with elimination of the long-standing hassles and complications brought on by third party processes. Pre-negotiated charges replacing usual and customary fees readily enhance the MSA program with contracts for network rental, provider risk sharing and similar practices. Reductions in administrative costs accompany these improvements in reimbursements.

In addition to incentives to pursue healthier life-styles and seek preventive services and tests, MSAs help restore the patient-physician relationship. As controller, manager, and purchaser of first dollar health expenses, the MSA enrollee contracts voluntarily with the provider of choice to meet needs as they are perceived. Such a relationship is direct and unencumbered by external decision makers. Physicians act more as agents of the patient and less as agents of a bureaucracy.

Experience confirms MSA funds accumulate from year to year for more than 80% of MSA enrollees. Only small numbers of people exceed their MSA deductibles year in and year out, making possible substantial accumulations of unspent MSA deposits. For most people, general good health is the rule not the exception.

Enrollees who conserve and invest unspent dollars in their accounts provide funds for use as needed and desired in the future. Depending again on individual preferences and decisions, individuals may use their long term savings in ways they desire. These funds may help pay for long term care insurance; purchase of qualified retirement investments; purchase of a home or payments for uncovered but desired medical or dental services.

"Speculation that preventive care services and diagnostic tests decrease with MSAs... has been proved false."

"The fear of adverse selection with MSAs attracting primarily only the healthy and the wealthy does has not been observed."

"Physicians act more as agents of the patient and less as agents of a bureaucracy."

The point of this part of the discussion is to reinforce the understanding that funds in MSAs are the sole and rightful property of the individual who is the account holder, subject only to federal and state tax laws and similar requirements. Otherwise funds that belong to and are the rewards of individuals pursing their own best interests are funds to be used or conserved at the discretion of the owner.

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