Reality check on MSAs
They’re just another tax shelter, not health-care reform.
By Des Moines Register Editorial Board
08/25/2003
They’re back. Every few years, medical spending accounts (MSAs) are rolled out as an answer to problems in the health-care system. A provision to expand who can use these accounts has made its way into the Medicare reform being debated in Congress.
The concept is simple: Individuals can put money into savings accounts each year, tax free, and use that money to pay health-care bills out of pocket. If money is left over, the individual gets to keep it.
It’s appealing on the surface. Advocates argue the accounts are an incentive to “save money” by using less health care because people will think twice about “spending their own money.” Participants might pass on unnecessary tests. It’s an opportunity to inject a free-market principle into health care by allowing individuals to select their own doctors and negotiate rates for services.
Now back to the real world:
- Currently insurance companies and the government leverage down doctors” fees. It’s unlikely a single consumer, with no leveraging power, will be able to accomplish that. This is demonstrated over and over when the uninsured pay more than an insurance company does for the same service. People with these accounts could end up paying more.
- Medical spending accounts are another way to tax shelter money for the affluent. Low-income people will not have the extra dollars to stow away in a savings account. Yet higher-income people will be able to let this money build for years, investing it in stocks and bonds to grow tax free.
- Medical spending accounts will appeal to healthy people because they don’t use many medical services and therefore would get to pocket the unspent balance in their accounts. However, the core concept of insurance is pooling the sick and healthy together to balance out the risk. Widespread use of spending accounts could leave a higher proportion of sick people in insurance pools and result in higher premiums for that group.
- Individuals skipping a checkup or opting not to go to the dentist a few times won’t make even a small dent in the health-care spending of this country. The vast majority of spending on health care is done for the few sick and elderly individuals. MSAs won’t change that.
A special-interest radio ad currently playing in Iowa states: “President Bush supports making MSAs available to all Americans, but Senators Ted Kennedy and Hillary Clinton are against it. They want the government to run our health-care system. But Senator Charles Grassley can make the difference. . . . Tell him to keep fighting for the uninsured by making MSAs available to all Americans.”
What do “national health care” and “Hillary Clinton” have to do with spending accounts? And a tax-free account doesn’t “fight for the uninsured” who likely don’t have the money to invest in one of these plans anyway.
The ads are disingenuous. After all the hype is stripped away, it’s clear medical spending accounts don’t render people “insured.” They simply disguise another tax shelter for the affluent while peddling it as something for the average person.