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Medical Savings Accounts in FEHBP-S.1344

On July 15th the Senate passed  S-1344, a bill which includes Medical
Savings Accounts in the FEHBP under Section 503.  The bill has now been
referred to the House of Representatives where similar legislation will
be considered. While there are several bills in the House addressing
Medical Savings Accounts none specifically attaches them to the FEHBP.
NARFE opposes any legislation that refers to MSAs in the FEHBP.

One of the bills to watch closely is H.R. 1136 sponsored by Representative
Charles Norwood of Georgia.  Representative Norwood was part of a 3 
member committee of physicians appointed to draft  a consensus managed
care reform bill. The committee favors a comprehensive managed care 
consumer protections bill.  H.R.1136 is also referred to as  "Affordable
Health Care Act of 1999."

MSAs are plans that combine a high deductible catastrophic insurance 
policy with a tax-deferred savings account dedicated for health care
expenses.  Several recent studies on MSAs indicate that those most likely
to choose them would be healthier enrollees who are low utilizers of
health care and consequently more likely to have MSA balances left at
the end of the year. Older and chronically ill enrollees would be less
likely to participate in MSAs and would be left in traditional plans.
The result would be adverse selection. Without healthier enrollees, the
costs of traditional plans would increase significantly because most 
of those who remain would be high utilizers. Insurance carriers would
be forced to raise premiums, cut benefits, or both, leaving less healthy
enrollees worse off than before. 
                       
Others fear MSA participants would delay preventive and necessary care
because the plans reward low utilization of health care with cash 
balances. The medical problem could get worse and result in higher 
health care utilization than if the patient sought assistance at the
first sign of trouble.

In summary, MSAs would fail to save money because adverse selection and 
incentives to delay preventive and necessary care would boost costs.
According to the Congressional Budget Office, proposals made to establish
MSAs in Medicare in the FEHBP would result in new costs-rather than 
savings to the federal government. 
                       
NARFE opposes the introduction of MSAs in FEHBP, and so testified at 
hearings in the 2nd session of the 105th Congress.  A moratorium on 
further expansion of MSA plans should be maintained until results from
the Kassebaum-Kennedy demonstration project are made available.  Further-
more, Consumer's Union also opposes all Msas.  Click on Consumer's Union Comments
See the Action items for suggested steps. Click on the Fact Sheet for a more complete statement of the problem. References: See Retirement Life 1/98 (p.7), 11/97 (p.15)

Additional Information

Medical Savings Account Action Items:
Medical Savings Accounts Fact Sheet:
MSA Sample letters:
Legislative History:
Consumer's Union Reports
Home Page: