Extending Patient Power

The National Center for Policy Analysis held a Capitol Hill briefing yesterday to discuss legislative improvements that could be made to consumer-driven health care options. Speakers at the briefing, entitled ?Extending Patient Power: Ideas for the 108th Congress,? were Senator Larry Craig (R-ID), Congressman Jim DeMint (R-SC), and Ronald Bachman, principal, PricewaterhouseCoopers. John Goodman of NCPA was the moderator.

?Clearly we need to change the dynamics in the health care market,? said Senator Craig. Craig described the structure of Medical Savings Accounts (MSAs) and concluded that there were too many restrictions placed on them when Congress created them. Craig emphasized that the market should determine the structure and eligibility for MSAs, not the government. ?We should not, as members of Congress, think we know better than the market.? He said he was in favor of ?opening up? these options so that ?we can see the cost of health care start to decline.?

?The way we pay for our health care is on the verge of destroying our health care system,? said Congressman DeMint. ?We don?t pay for anything else like we do for health care?the incentives are lined up all wrong.? Instead, DeMint favors a system in which consumers are in control of their health purchasing decisions. DeMint said most health care could be purchased out of a cash account funded by employees, employers, or the government (for Medicare and Medicaid), and that this would make purchasing health care a consumer decision again.

DeMint used the briefing to announce that he will re-introduce a bill to end the use-it-or-lose-it rule for Flexible Spending Accounts (FSAs). His legislation, cosponsored by Congressman Albert Wynn (D-MD), would allow employees to roll over up to $500 in unspent FSA contributions to the next year, withdraw their money as taxable income, or contribute it to their 401(k) or other qualified savings account. ?The use-it-or-lose-it rule is an extreme deterrent for using FSAs and is at odds with the purpose of these,? DeMint said.

Ronald Bachman discussed Health Reimbursement Arrangements (HRAs). He said there are one million people enrolled in HRAs already, and predicted three times as many by next year. ?More than half of all companies in this country are looking at consumer-driven options, including HRAs,? said Bachman. He also supports making an HRA option available to every Medicare beneficiary, and encouraged the president to include HRAs in any Medicare reform package.

To improve HRAs, Bachman suggested congressional or regulatory action to allow both employer and employee contributions to the account, provide ?ERISA-like? protection against insolvency, allow funds in the account to be converted to cash, and allow electronic account transactions, which would reduce administrative costs. Concerning ownership of the account, Bachman said employers should be encouraged to allow their employees to take account balances with them from job to job, but stopped short of recommending employee ownership of the account.

Bachman and Newt Gingrich also had an article in yesterday?s Atlanta Journal-Constitution in which they said ?HRAs may be the most important change to affect health care in 25 years.?

See also a new two-page comparison of MSAs, HRAs, and FSAs prepared by NCPA?s Michael Cannon.

–Joe Moser
Galen Institute

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The National Center for Policy Analysis held a Capitol Hill briefing yesterday to discuss legislative improvements that could be made to consumer-driven health care options. Speakers at the briefing, entitled ?Extending Patient Power: Ideas for the 108th Congress,? were Senator Larry Craig (R-ID), Congressman Jim DeMint (R-SC), and Ronald Bachman, principal, PricewaterhouseCoopers. John Goodman of NCPA was the moderator.

?Clearly we need to change the dynamics in the health care market,? said Senator Craig. Craig described the structure of Medical Savings Accounts (MSAs) and concluded that there were too many restrictions placed on them when Congress created them. Craig emphasized that the market should determine the structure and eligibility for MSAs, not the government. ?We should not, as members of Congress, think we know better than the market.? He said he was in favor of ?opening up? these options so that ?we can see the cost of health care start to decline.?

?The way we pay for our health care is on the verge of destroying our health care system,? said Congressman DeMint. ?We don?t pay for anything else like we do for health care?the incentives are lined up all wrong.? Instead, DeMint favors a system in which consumers are in control of their health purchasing decisions. DeMint said most health care could be purchased out of a cash account funded by employees, employers, or the government (for Medicare and Medicaid), and that this would make purchasing health care a consumer decision again.

DeMint used the briefing to announce that he will re-introduce a bill to end the use-it-or-lose-it rule for Flexible Spending Accounts (FSAs). His legislation, cosponsored by Congressman Albert Wynn (D-MD), would allow employees to roll over up to $500 in unspent FSA contributions to the next year, withdraw their money as taxable income, or contribute it to their 401(k) or other qualified savings account. ?The use-it-or-lose-it rule is an extreme deterrent for using FSAs and is at odds with the purpose of these,? DeMint said.

Ronald Bachman discussed Health Reimbursement Arrangements (HRAs). He said there are one million people enrolled in HRAs already, and predicted three times as many by next year. ?More than half of all companies in this country are looking at consumer-driven options, including HRAs,? said Bachman. He also supports making an HRA option available to every Medicare beneficiary, and encouraged the president to include HRAs in any Medicare reform package.

To improve HRAs, Bachman suggested congressional or regulatory action to allow both employer and employee contributions to the account, provide ?ERISA-like? protection against insolvency, allow funds in the account to be converted to cash, and allow electronic account transactions, which would reduce administrative costs. Concerning ownership of the account, Bachman said employers should be encouraged to allow their employees to take account balances with them from job to job, but stopped short of recommending employee ownership of the account.

Bachman and Newt Gingrich also had an article in yesterday?s Atlanta Journal-Constitution in which they said ?HRAs may be the most important change to affect health care in 25 years.?

See also a new two-page comparison of MSAs, HRAs, and FSAs prepared by NCPA?s Michael Cannon.

–Joe Moser
Galen Institute

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About the author