Have you ever wondered why an employer is empowered to spend the money of an individual ( that part of an individual’s compensation called a “benefit”) tax free on his healthcare while the individual isn’t equally empowered to do the same. Or why this form of discrimination in tax law further diminishes the purchasing power of two groups who need it even more -the unemployed, and self-employed who likewise cannot purchase healthcare tax free.
 

Well, this tax law aberration is probably best described as a well intended historical accident. During W.W.II businesses faced a labor shortage in the setting of fixed wages and prices and offering health benefits was permitted to further attract employees. Thus, with the blessing of government, tax exempt purchase of healthcare for the employer only became law and has led to today’s disenfranchisement of individuals like yourself by creating this system of employer based healthcare. This system now limits choice and pressures many into undesirable health plans that the employer chooses. 83% of employers offer only one health plan option . Add to this, the increasing cost of healthcare, much of which relates to the absence of market forces and lack of perception on both the part of patients and healthcare professionals that there is a cost to these real services. This is because “someone else” that is, a third party or insurance company, is usually paying , while creating a burden of administrative costs and making a large profit in the process and passing this extra expense on to you either directly or through the employer who is spending your hard earned dollars. 
(see Fig. 1)
 

Fig. 1
 

The issue of cost of healthcare has only become an issue because someone else, namely the employer or a debt laden government is procuring it. We don’t talk about a computer crisis- ‘we’re spending more per capita than any other country on computers and this has to be contained so that all may have equal access to computers.’ Ironically the prices of computers are changing little while the technology is rapidly advancing. Computers are, of course, sold to individuals, not their employers and subject to American free market forces. This is in contrast to healthcare where the cost continues to go up while services are being restricted and research stifled. It should be noted that in advanced societies, the portion of GNP related to human services such as medical care is expected to increase as the economy moves away from basic labor and jobs reflecting a less developed economy. Thus to focus on the cost of healthcare only is contrary to a very basic tenet of economics.

Anyone analyzing healthcare will easily see that the system has become top heavy, overly micromanaged, profit driven for the benefit of those not performing the healthcare to the disadvantage of patients and those that are performing the healthcare ( nursing layoffs, underqualified personnel, attempts to deny care, less access to specialists, tests, and services, premature discharge of patients, etc.) The system is, in a word, anti- patient interest, anti- medical, and and trespasses American rights and principles. Additionally, it becomes clear that in a system where the employer is most empowered to buy healthcare that it becomes linked to your job and a change in job means a loss or change in healthcare insurance which leaves one vulnerable to preexisting condition clauses, joblock, portability, affordability, accessibility (esp. with managed care), and often detaches you from doctors and hospitals you have had a relationship with for years.

Thus a combination of employers who focus on the bottom line buying cheaper care ( and not really passing on the savings to you), an insurance industry who enjoys the fact that a “sell job” to one employer yields them contracts with thousands of patients and little accountability to individuals, and a government that says it’s reasonable for employers to take your hard earned compensation and spend it on your healthcare with pretax dollars while you can’t- has created a corporate and political collective where the individual's rights and freedoms are sacrificed for the benefit of this collective entity. You are not one of the beneficiaries. You are now called a covered life, or client, or even a customer . You are a liability as illustrated by the healthcare industry term- “Medical Loss Ratio”- that is that portion of the premium dollar that goes to actual healthcare. It should be concerning that the insurance industry sees it as their loss when they have to pay for your healthcare with your money. Recently at a physician/hospital conference the process of healthcare dynamics was described in terms of The Food Chain. The status of individuals like you and your family, surely equates to the “plankton” of the system as hospitals, HMOs, insurance companies, consultants, micromanagers, and CEOs consume more of your hard earned health dollars while decreasing the amount of healthcare that you can access. The insurance industry, corporations, consultants, politicians, lobbyists, “ administrative physicians” employed by insurance companies and many others not actually involved in creating your healthcare are clearly the predatory element of this Corporate Food Chain.  

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Now let's look closely at a solution that puts you back in charge of your healthcare!  

Medical Savings Accounts are what would happen if the tax law that discriminates against you, the individual, was corrected. People would then be encouraged to buy their own healthcare. They wouldn’t overinsure (low deductible) by purchasing coverage for the expected events such as office visits, tests, or even minor procedures and would not bear the significant administrative costs (and profit costs) related to “first dollar coverage”. MSAs are a clear expression of Americans who have enjoyed freedoms not seen in many other countries and who are declaring that they will not give up their right to choose their doctors, hospitals, pharmacies, and professional services. In spite of the tax law they have met with success because contrary to the view of self interest groups like the insurance industry, employers, and corporations — people can responsibly manage their medical affairs in conjunction with the professionals they trust.

As an example assume that the employer offers an option for a high deductible policy like $2,500 -it costs much less because the odds of insurable events is much less likely with higher deductibles. The policy may cost around $2800 dollars for family coverage while a low deductible with similar coverage would cost $5,600. The savings of $2,800 is passed on to you but by present law is taxable. In spite of that when you add your traditional $500 deductible you now have $2,500 dollars per year to spend on your healthcare yet the protection of a comprehensive so-called catastrophic policy to protect your out of pocket expenses. And you maintain choice unlike managed care and hmos. 
( see fig. 2 & 3)

  

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If I asked you “ How would you like to have $3400 to spend on your healthcare each year that you’ve never had before?”- what would your response be? The monies are derived from the savings on a high deductible comprehensive policy as opposed to the low deductible expensive policies and you keep the unspent monies. (see Fig. 2)
The coverage is the same after the deductible is met. Because these policies cost much less and offer the same coverage thousands of dollars saved on the premiums are put back in your hands instead of being retained by insurance companies who pay seven figure CEOs like that of Blue Cross or $20 million a year to the CEO of U.S. Healthcare or pay excessive personnel to micromanage you and ration your care. And the fact that you keep the unspent monies distinquishes MSAs from so called cafeteria or flex plans where you “use it or lose it”. These monies are then freed up to obtain medicines, preventive care, and avoid the rationing of services characteristic of HMOs and managed care. The experience of 3,000 companies, and support of 26 states for MSAs are testimony to the fact that the individuals not only can but demand to have control of this aspect of their private lives - their healthcare.

The reason the insurance industry opposes MSAs is purely one of self interest as a significant amount of your premium dollars that had been relinquished by the employer are now returned to you- the person that earned and owns those dollars. Actuarial statistics show us that 92% of insured individuals require less than $3,000 of health services, and 80% less than $2,000 of health services in a given year thus a significant portion of savings account monies are retained since you would likely spend less than the MSA money. One company with MSAs returned an average $1,000 to their employees at the end of 1994 demonstrating that while more money is made available to spend on basic health care needs that it is spent with good discretion and can be saved for later needs. There is essentially no net “out of pocket” money over that of other insurance. Imagine, instead of an HMO saying ‘no you don’t need that test or specialist ( even though it is medically appropriate) you can discuss this with your doctor and use the money you are empowered with to acquire the service. The experience of MSAs shows that doctors and patients will process healthcare in a cost effective manner. One company that sells MSAs received a letter from a patient who saved $600 by simply inquiring about costs and got the outpatient testing and care recommended and saved money.

                                                                Family Insurance example -Fig.3                  

Plan Type	Conventional Indemnity	HMO	Medical Savings Account
Maximum Deductible	$500	copays variable and increasing	$4500
Maximum Copay	$1,000	yes	$0
MSA Deposit	No - large sum of employee's money spent by employer with no retention of unspent monies	No - large sum of employee's money spent by employer with no retention of unspent monies	$3400 -employee keeps the unspent money
Out of Pocket	$1,500 (up front) and medications not covered	copays - costs of uncovered care and potential for rationing by a profiteering third party	$1,100 after MSA spent
Keep the Unspent monies to develop a medical pension ?	no	NO	YES!
Maintain freedom of choice of physician and, hospitals!	yes	NO	yes - no gatekeeper

When one looks at the literature and documented success of MSA in many American companies and now various city and state public entities such as Ada County, Idaho; Jersey City, New Jersey; and Knox County School district in Ohio, it’s clear that the rapid growth of this concept demonstrates that people are taking back control of their healthcare.

Other literature that has more formally looked at MSA dynamics has been clearly supportive. To cite one important study- The Rand Corp. Study in the late 1970’s addressed the question of the ability of consumers to make cost based healthcare decisions. Contrary to the critics of MSAs who claim individuals using healthcare services can’t adequately make decisions, this study demonstrated the clear ability to do so. It studied families who had no copayment while other families had high deductibles ( in today’s dollars about $2900- as is used with MSAs today). In this study of 2500 families over 5 years, they learned that people with no copayment used 53% more hospital services, 63% more office visits than the families who exercised good judgment with higher deductibles - and with no difference in medical outcomes. This study and others demonstrates the tendency to overuse services if there is no sense of cost as is the case with no or low copayment. (Fig.1) It also demonstrates that when people can exercise choice they will do so in a very responsible fashion. This is exactly what MSAs do - they give you back your money and choice.

The second study was published just recently in The Journal of The American Medical Association. This study on MSAs looked at costs and outcomes. They concluded that there would be a less dramatic cost savings with MSAs but emphasized an important point- that the healthy and sick populations can use MSAs effectively. What these two studies and many other reports demonstrate is that MSAs will result in no increased cost, usually will reduce cost, and can be used by the sick and healthy, across a large spectrum of incomes while preserving patients rights of choice; and maintaining cost effectiveness, access, and affordability.
 

We have also heard about the projected insolvency of Medicare by the year 2001- this comes as no surprise as government has never shown itself capable of doing anything better than the private sector let alone something as private and sacred as healthcare. With MSAs one could set monies aside for later times for long term care, medications or the day when Medicare finally fails and senior citizens will need to secure healthcare.

When federal tax exemption for purchase of healthcare is legal for individuals as it is for employers and tax discrimination is rectified -the insurance industry will have to respond to you, not an employer detached from your needs. Additionally, it has been offered, based on studies, that the number of uninsured could be cut in half in just a few years with MSAs and that the same concepts can be applied to other populations such as Medicare and Medicaid. The perverse products of perverse tax law that are created by employer based healthcare including the problems of portability, affordability, accessibility, joblock, and vulnerability to preexisting conditions will be very effectively resolved and less complex when we unload the corporate and political baggage and apply American principles to American medicine.
 

Family Plan	Blue Cross	Fortis MSA
Comprehensive Policy	12000 per year ( year -2000)	3600 per year	save 4500 for MSA
deductible	500	4500 *	* real insurance
Money in MSA* ie disposable medical dollars	0	3375
Other monies	pocket ( for office meds etc.)	if needed office reimbursement, drug purchase from MSA

 

With the MSA I keep unspent monies, I also can use the MSA monies as first dollar coverage for office, medicine, etc. If I exceed the MSA -an unusual event I can use an a tax deferred reimbursement plan. For the first time we will keep our unspent monies instead of a predatory insurance corporation

 
 

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