Medical savings accounts: A solution for health care

By Joseph Kellard
web posted March 1998

America's health care system is failing. Many Americans alarmed by this fact voice their usual mantra: "Something must be done." But virtually every "something" politicians enact -- such as Medicare reform, government- mandated HMOs, the Kennedy-Kassaubaum bill -- ultimately intensify the failures caused by their original programs and past reforms.

Because Medicare was egregiously enacted as a "guaranteed" insurance, most politicians continually enact reforms to maintain that morally and already financially bankrupt system from extinction. In reality, they must enact reforms that send it gradually into extinction.

The increased costs for treating Medicare patients are imposed on younger, privately funded patients. "If you are under 35, the money expropriated for Medicare from your paycheck is going to pay for people who are currently over 65," says Scott Holleran, editorial director of the educational organization Americans for Free Choice in Medicine (AFCM). "Though Medicare 'contributions' ostensibly go to cover part of your health care expenses over age 65, if you are young, you are not going to see a dime of that money."

In essence, HMOs seek to forcibly cut the costly bills of high-risk patients by financing their expenses with surplus money from healthier individuals and by restricting care overall. Under HMOs, the more the "gatekeeper", i.e., the bureaucrat, can save money by restricting care, the more he is paid. Since premiums must therefore rise, insurers are pressured to drop costly, risky patients.

Enacted in 1996, the Kennedy-Kassebaum bill forces insurers to cover those patients regardless of their health. But this only raises premiums further and intensifies pressure from managed care administrators to restrict care within pre-paid plans.

Whereas Medicare sacrifices the young to the old, HMOs and the Kennedy-Kassebaum bill sacrifice the healthy to the sick.

The only rational, efficient solution to these corrupt reforms are Medical Savings Accounts (MSAs). The amount of money your employer pays in health insurance is invested in a tax-free savings account, which you would use to purchase any health insurance or medical care policy, be it, for example, catastrophic insurance, a $250 deductible, or an HMO. MSAs transfer your money from your employer back to you-to be used for anything you want to spend it on.

By instituting a freer market and consumerism, MSAs will put an enormous downward pressure on prices and thus greatly reduce the cost of health care. They will allow individuals to deduct 100 percent of their medical expenses, including their health insurance premiums, from their taxes. Since surplus money from healthier individuals could no longer be used to cover those who need extended care, the healthier would be able to leave pre-paid programs.

Therefore, MSAs engender what individuals must possess in a free nation: the personal responsibility to provide for their own medical expenses. They would thereby be required to exercise choice and economy in regard to a medical plan and doctor. But what about the people who paid into Medicare but are now too old to work and save on their own? Medicare can nevertheless be phased out over an allotted time span without effecting them.

People currently 65 and older will continue to receive their Medicare benefits. However, those who are younger will gradually get X percent less from Medicare and be obligated to save on their own to cover that loss, until those 35 or younger become ineligible for any Medicare benefits. As individuals in both age groups accumulate tax-deductible, interest-earning income invested in MSAs for their retirement expenses, largely by saving on insurance deductibles and medical bills, the eligibility age for Medicare can be progressively raised over the allotted time span, until that system is phased into extinction.

Congress inaugurated these "experimental" accounts in 1996; however, they are currently limited to fewer than one million self-employed Americans. Many politicians, including President Clinton, oppose MSAs because they will drain the collective medical insurance pool that sacrifices the healthy or young to the sick or old. This is precisely what MSAs will do. They undercut the whole pre-paid system that continues to strengthen the government's paternalistic, coercive powers that shackle freedoms and reduce individuals to sacrificial lambs.

Our statist politicians and their supporters must accept that freedom and adulthood demand of individuals the self-responsibility to exercise their own judgments and choices in each aspect of their lives.

Joseph Kellard is a freelance writer living in New York. To hire him and to find out information about his e-mail list to receive other articles, essays and letters of his, write him by e-mail or by mail at: PO Box 334, Rockville Centre, NY 11571-0334

For information on Medical Savings Accounts write to: Americans for Free Choice in Medicine, 1525 Superior Avenue Suite 100 Newport Beach, CA 92663 ~ Telephone: 714/645-2622 ~ Electronic Mail: Web Site:

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