MSAs are an innovative form of health insurance that advocates
say side steps the cumbersome third-party insurance reimbursement that has
dominated American healthcare for decades. In doing so, MSAs promise to lower
healthcare costs by making individuals responsible for paying for their own
care -- and hence more cost-conscious.
At the same time, advocates say that MSAs promise to return to
individuals their right to seek out care from any healthcare provider they
wish, without the restraints of managed care.
"Patients can have more control over their own
resources," says health policy analyst Greg Scandlen. "They have no
restrictions on who you can see and not see, and many physicians are willing to
provide discounts in return for instant payment. Just as important, it helps to
restore the doctor-patient relationship by empowering patients to deal directly
with their physicians."
Scandlen is with the National Center for Policy Analysis in
Dallas, which has been a major proponent of MSAs.
Here's how they work: Purchase a low-cost, traditional
indemnity (non-managed care) insurance plan with high deductibles. Then use the
savings from paying a lower premium to make deposits into a tax-deferred MSA.
While the insurance company would still pay for high-cost medical episodes,
such as lengthy hospitalizations, the individual could use the MSA to pay out
of pocket for lower-cost routine care.
The virtues of MSAs were extolled in a 1994 book called
Patient Power written by health economist John Goodman, PhD, president
of the National Center for Policy Analysis." The vision gained considerable
momentum in the years following the Clinton Administration's failure to reform
the national health system. Even the American Medical Association voiced their
support for MSAs.
In 1996, federal legislation to promote MSAs was enacted as
part of HIPAA, the Health Insurance Portability and Accountability Act.
Since that time, however, the vision of MSAs seems to have
withered somewhat. Many health policy analysts saw the idea as an innovative
one with many virtues -- possibly attractive to some individuals -- but full of
shortcomings when it came to answering the larger problem of spiraling
Len Nichols, PhD, a health economist at the Urban Institute in
Washington, says the outstanding flaw in MSAs is that they are likely to appeal
only to the youngest, healthiest, and wealthiest of the population. Left behind
in the traditional insurance market would be the older and sicker population,
for whom costs would likely rise.
"The difficulty is that health expenditures are extremely
skewed," Nichols tells WebMD. "One percent of the population accounts
for 30% of all expenditures."