The Ideal Medical Savings Account System

Stanley Feld M.D., FACP, MACE

Medical Savings Accounts for our discussion are tax free trust accounts that are funded by the employer, the self-employed, and the government for the employee, or the Medicare or Medicaid beneficiary. The Medical Insurance provided by the employer, the self employed, or the Medicare or Medicaid beneficiary in addition to the MSA trust account is a high deductible insurance plan. The rating on the high deductible insurance should be community rating without exclusions for preexisting illness.

The deductible is $6,000. The MSA contribution will be $6,000. If the patient does not spend the trust accounts money in the current year that money accumulates tax free until retirement. In the case of Medicare the money accumulates tax free until used at the beneficiaries discretion or is deposited in the beneficiaries’ estate. At that time the rules for traditional IRA’s apply.

It is mandatory to have insurance and the premiums will be subsidized by the government for persons that qualify. Price transparency by the insurance industry, hospitals, and physicians is also mandatory. It is the responsibility of all parties to aid the patient to become an educated consumer. If they want to purchase an unnecessary or inflated medical care product it is their decision and not the insurance industry or government’s decision. The patient pays the inflated price and not the insurance industry and the government.

This is the basic formula for the Medical Savings Accounts. It is important for this system of insurance not be contaminated by modifications made by stakeholders in order to benefit their vested interest. The formula creates a system of insurance that compels the patient to be an informed consumer. It also compels the stakeholders to be competitive for the patients’ healthcare dollar.

The result will be lower prices and increased quality. The advantages to stakeholders are obvious. It would foster individual ownership of the healthcare dollar with individual responsibility for the healthcare dollar. The result would be lowering the cost of health insurance with a high deductible. People would no longer face premium increases resulting from wasteful medical care decisions made by others. This is the famous restaurant effect discussed earlier. It would also lower the administrative costs of adjudicating bills. The charges would be adjudicated at the point of service serving to lowering the cost of insurance further.

Patients would have a vested self interest to avoid unnecessary costs because the result would be additional savings for the patient in their Medical Savings Trust Account. Also, MSAs would eliminate the barriers for the purchase of insurance by the temporarily unemployed. Patients would create a competitive medical marketplace with their individual purchasing power. We will see this happening right now with the Wal-Mart $4 generic drug policy.

The high deductible insurance would be true insurance and not the “managed cost insurance” we have presently. Managed cost insurance simply angers every stakeholder in the system. Patients would now have incentive to think about as well as learn about the risk of certain lifestyles and the need for lifestyle changes to prevent the complications of chronic diseases. The patient by avoiding the complications of chronic diseases with be earning money in their own Medical Savings Trust Account that would continue to grow tax free until retirement.

All of these incentives are free market incentives. None of the incentives force the patient to have certain behaviors. It is in their vested economic interest to make appropriate lifestyle changes and wise medical care decisions.

With pure Medical Savings Accounts the Healthcare System will be in a position to self repair.

Comments

[Savings]

The saving account is good for healthcare system.In which we get lower cost but best quality.
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Jessica
Savings

[DH-Richmond, VA]

Do I understand you expect me to pay $500 per month toward tax free trust account and also budget $500/month for medical expenses toward my deductible?
How does a person making under $28,000 year do this!

[Jeff C]

While MSA's sound like a good idea, they fail to bring about true economic parity because there are still intermediate parties between the provider (physicians) and consumers (patients). Not to mention the fact that 60% of the U.S. workforce is employed by companies with 100 or less employees for whom MSA funding would be an unwanted management and financial burden. What about the 45-50 million persons who don't have $6,000 available to pay their deductible (currently the uninsured)?

No competitive marketplace will exist until the cost/benefit of healthcare is experienced directly by the consumer. The reasons that huge amounts of employees do not take advantage of corporate 401 plans is because they are managed by the corporation and therefore the employee is insulated from its effect and benefit.

The answer is for patients to pay doctors directly. As an uninsured person I can tell you that this absolutely works. Here's an example: My son recently stepped on a rusty nail. We called the local pediatrics group but since we have no insurance and are treated as lepers by the local physician pool, we visited a "Quick Med" clinic staffed by a Nurse Practitioner. Her staff gave us the total price over the phone and we were seen within 15 minutes of arrival. My son received an X-ray, wound cleaning and a lollipop for less than $200.00. The NP didn't give him an unnecessary tetanus booster because he had one before school started. We received the care we needed and this practice received full payment at the time of service - no billing, no codes. Insurance does have a place - as a catastrophic safety net. Sadly, no insurers offer a decent product which fits this description, and they won't until forced by consumers.

I applaud your desire for change (most doctors have built their practice on the current faulty model and are doing all they can just to keep it from collapsing) but a direct provider-consumer relationship with no middle parties is the only thing that will fix our healthcare system.

[steve hodgson, md, m.a.c.e.]

The insurance industry wants to control the deductible portion of the HSA. This is wrong - the patient should have complete control. Health expenses should be deductible to the patient. HSAs are already allowing preventative services to be paid outside the deductible and there is data to show that this is cost effective. Contributions to HSAs should start at birth. Would it be cost effective for the government to provide a, say, $2000 contribution to an HSA at birth?