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Health Reform Ideas in the Primeval Soup
Unformatted Document Text:  32 shelter from taxes in a Medical Savings Account (MSA) money that could be spent for the medical expenses up to the deductible amount. 78 Strengths This policy idea reflects the concentration of health expenses in a single year. 79 It offers financial and tax flexibility in the use money that might otherwise be spent for health insurance. The presumption of the idea is that the premium for a high deductible policy would be much cheaper than a standard policy. For those who incur little in the way of expenses in a given year the MSA money would not be spent, and could be used for other purposes in the future. The advocates also see this as a cost containment device because they presume individuals would be more frugal with the personal out of pocket expenses than if those same expenses were covered by insurance. Weaknesses In a given year the average risk of incurring high medical bills is low. Health purchased on a broad scale allows for the socialization of that risk. Even with extensive private health insurance, those with small expenses in a given year are contributing to the cost of offsetting the very high expenses of those few unlucky individuals. It seems those with lower than average risk will be more likely to opt for MSAs. This will remove from the insurance pool very healthy individuals and drive up insurance coverage costs for more moderate to high-risk individuals. 80 Summary The catastrophic insurance policy idea began as a less expensive, and perhaps first step, approach to universal coverage at time when even many reasonably good employer groups policies did not cover very high expenses. In the subsequent thirty years the idea has metamorphosed into an approach advocated by some in the conservative and market oriented health policy advocacy coalition. This idea now represents a presumption that cost containment would be enhanced if consumers had more “skin in the game”, and if combined with appropriate tax credits offer desired choice at all income levels. A limited test of the concept was authorized in by Congress in 1997. Subsequent analysis found less acceptance of the approach that its sponsors anticipated, and questions about the achievement of the goals sought by its advocates. This approach more than any other is philosophically opposed to socialization of any risk associated with health expenses, except for very high cost episodes. Most other approaches at least assume socialization of risk will occur through large group private insurance. Expansion of this approach 78 Greg Scandlen, “MSAs Can Be a Windfall for All”, National Center for Health Policy Analysis, Policy Backgrounder No157, November 2001. 79 , William Yu and Trena Exzzati-Rice “Concentration of Health Care Expenditures in the US Civilian Noninstitutionalized Population”, Agency for Healthcare Research and Quality, Statistical Brief#81, (May, 2005). 80 Alexandra Minicozzi, “Medical Savings Accounts: What Story Do The Data Tell?, Health Affairs (January-February, 2006),p. 256-67; Dahlia Remler and Sherry Giled, “How Much More Cost Sharing Will Health Savings Accounts Bring?” Health Affairs (July-August, 2006),p. 1070-78.

Authors: Brasfield, James.
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32
shelter from taxes in a Medical Savings Account (MSA) money that could be spent for
the medical expenses up to the deductible amount.
78
Strengths
This policy idea reflects the concentration of health expenses in a single year.
79
It offers
financial and tax flexibility in the use money that might otherwise be spent for health
insurance. The presumption of the idea is that the premium for a high deductible policy
would be much cheaper than a standard policy. For those who incur little in the way of
expenses in a given year the MSA money would not be spent, and could be used for other
purposes in the future. The advocates also see this as a cost containment device because
they presume individuals would be more frugal with the personal out of pocket expenses
than if those same expenses were covered by insurance.
Weaknesses
In a given year the average risk of incurring high medical bills is low. Health purchased
on a broad scale allows for the socialization of that risk. Even with extensive private
health insurance, those with small expenses in a given year are contributing to the cost of
offsetting the very high expenses of those few unlucky individuals. It seems those with
lower than average risk will be more likely to opt for MSAs. This will remove from the
insurance pool very healthy individuals and drive up insurance coverage costs for more
moderate to high-risk individuals.
80
Summary
The catastrophic insurance policy idea began as a less expensive, and perhaps first step,
approach to universal coverage at time when even many reasonably good employer
groups policies did not cover very high expenses. In the subsequent thirty years the idea
has metamorphosed into an approach advocated by some in the conservative and market
oriented health policy advocacy coalition. This idea now represents a presumption that
cost containment would be enhanced if consumers had more “skin in the game”, and if
combined with appropriate tax credits offer desired choice at all income levels.
A limited test of the concept was authorized in by Congress in 1997. Subsequent analysis
found less acceptance of the approach that its sponsors anticipated, and questions about
the achievement of the goals sought by its advocates. This approach more than any other
is philosophically opposed to socialization of any risk associated with health expenses,
except for very high cost episodes. Most other approaches at least assume socialization
of risk will occur through large group private insurance. Expansion of this approach
78
Greg Scandlen, “MSAs Can Be a Windfall for All”, National Center for Health Policy Analysis, Policy
Backgrounder No157, November
2001.
79
, William Yu and Trena Exzzati-Rice “Concentration of Health Care Expenditures in the US Civilian
Noninstitutionalized Population”, Agency for Healthcare Research and Quality, Statistical Brief#81, (May,
2005).
80
Alexandra Minicozzi, “Medical Savings Accounts: What Story Do The Data Tell?, Health Affairs
(January-February, 2006),p. 256-67; Dahlia Remler and Sherry Giled, “How Much More Cost Sharing Will
Health Savings Accounts Bring?” Health Affairs (July-August, 2006),p. 1070-78.


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