MSAs: One Year After
One year after a law went into effect allowing a demonstration project for a limited number of medical savings accounts, the New York Times takes a look at individuals' experiences with the accounts and finds "mixed reviews." While some people have successfully used MSAs, others find them a "financial disaster" because of large, unexpected medical expenses. One MSA participant, who ended up with $4,000 in out-of-pocket medical expenses in one year, said, "If you are healthy or if you make a lot of money, it's a great plan. But if things start to go wrong and you don't have a high income, it's not." However, another participant noted that even though the birth of a baby depleted his account, the MSA still saved him federal and state income taxes. He said, "It's definitely the program to have if you are self-employed."
Room For Improvement
The Times reports that the experiences of MSA enrollees to date "are important because Washington is considering changes to the four-year pilot project." Among the proposals are "changes being debated by the House Ways and Means Committee and the Republican Health Care Task Force [that] would lower the deductible ... allow both employer and employee to contribute tax-free dollars ... and lift the restrictions on the size of the businesses that can offer the plan" -- currently those with fewer than 50 employees. The Times reports that even supporters of the MSA concept "now conclude that there are serious problems -- including the complexity of the program's administration, the 50-employee cap ... and the high deductible." While the pilot project contained in the Health Insurance Portability and Accountability Act authorized 375,000 of the policies to be sold, to date only 100,000 have been purchased. Jack Strayer of the National Center for Policy Analysis, one of the organizations that helped create the MSA concept, said, "The program is not doing well. I predicted that a million policies would be sold by now" (Kirk, 7/5).
In a letter to the editor in yesterday's New York Times, Karen Kerrigan, president of the Small Business Survival Committee, noted that 20% of those purchasing MSAs were previously uninsured. In addition, "one-third of small businesses surveyed by Dun & Bradstreet, forced to shop for new coverage because of rising costs, selected medical savings accounts." Kerrigan contends that the "only problem with the accounts is that not everyone can buy them because of the discriminatory restrictions placed on them by Congress" (7/6).