IN THIS ISSUE:
? CBPP Tackles MSAs, HSAs, HSSAs, FSAs, HRAs, etc.
? Discovery Health Finds No Adverse Selection w/ MSAs
? Milliman USA Predicts 14% HMO Rate Hike in 2004
? Government Should Get Out of the Way
CBPP Tackles MSAs, HSAs, HSSAs, FSAs, HRAs, and Every Other New Idea
Ya gotta give ’em credit. Ten days after the HSA/HSSA provisions were passed in Ways and Means, the Left-leaning Center on Budget and Policy Priorities (CBPP) was out with three separate papers and press releases explaining how these ideas would be the ruination of civilization, destroy the employer-based system of health insurance (of which CBPP is so fond), and create massive deficits in state government (not that the states need any help in creating deficits). In a news release dated June 26, 2003, CBPP predicts that enactment of the HSA/HSSA provisions would “encourage employers to replace traditional health insurance plans with plans that offer fewer benefits and impose higher deductibles and co-payments?.” Well, by golly, it’s hard to argue with that. But, the news release goes on to repeat the old thread bare and discredited assertions that “Younger, healthy individuals would tend to come out ahead,” leaving older, sicker, and lower-income workers worse off.
The first paper focuses on the MSA expansion part of the Ways and Means amendment. It was able to be written so quickly because it simply repeats all the old falsehoods CBPP has been spreading for years now. It relies on sloganeering instead of analysis of actual events. It says, “Proponents of large-scale (MSA) expansion argue it would increase health insurance coverage and thereby reduce the ranks of the uninsured. But most health analysts disagree.” The assertion that “most” disagree is, of course, unsubstantiated, and disregards the reality that some 75% of new MSA accounts go to people who were previously uninsured.
The paper goes on to say that widespread use of MSAs could double the premium for “traditional health insurance,” by attracting the healthy and wealthy away from traditional coverage. Of course, it doesn’t define what is meant by “traditional health insurance.” Are HMOs considered “traditional” health insurance these days? PPOs? POSs? If it refers to “traditional” major medical policies, they have already nearly disappeared from the market. The paper cites the Rand Corporation, American Academy of Actuaries, and the Urban Institute as sources for the notion. In fact, Rand concluded that wealthy people would prefer HMO coverage over MSAs, and the Urban Institute said, “on average, lower wage workers would benefit from switching to a catastrophic/MSA plan.” The AAA report hedged its bets because it couldn’t tell if workers would see the MSA funds as their own money, or their employer’s money. It is pretty clear now that MSA account holders view the MSA funds as their own money – which it is – and they are careful with those funds.
The reports CBPP rely on were mostly written before the MSA law went into effect, so are entirely speculative and have been disproven over the years of MSA and HRA experience. There is no evidence whatsoever that adverse selection occurs. There is plenty of evidence that MSAs allow people to afford coverage for the first time, and lower the numbers of uninsured. The CBPP worries about employers shifting to less comprehensive coverage, but employers are doing that anyway, with or without MSAs. At least MSAs (and HSSAs and HRAs) enable workers to pay their out-of-pocket costs with tax-favored dollars. The notion that employers will go back to first-dollar coverage in light of double-digit premium hikes is nothing but fantasy. In fact, it is first-dollar coverage that is creating double-digit premium hikes in the first place. Employers are unlikely to ever repeat that mistake.
The other papers are unsurprising and predictable. In a nutshell, any decrease in tax revenue is seen as a bad thing, as is any expectation that consumers should pay some portion of their own medical expenses.
http://www.cbpp.org/6-26-03tax-pr.htm (for the press release)
http://www.cbpp.org/6-26-03tax.pdf (for the anti-MSA paper)
http://www.cbpp.org/6-25-03tax.pdf (for the anti-HSSA paper)
http://www.cbpp.org/7-8-03tax.htm (for a paper on state tax revenue loss)
I might as well also give you the URL for a paper I did rebutting most of these MSA charges. Go to: http://www.ncpa.org/pub/bg/bg157/
Discovery Health Finds No Adverse Selection with MSAs
An article in the South African magazine “Personal Finance” might help the CBPP people find their way out of the woods. It’s based on an interview with Discovery Health’s CEO Adrian Gore and it asks about some of the very charges leveled by CBPP. The article asks Mr. Gore about Discovery’s ten-year experience and whether MSAs are, “only good for the healthy and not suitable for the sick.” On the contrary, says Mr. Gore. He divides his enrollees into three populations – healthy, sick, and transient. He finds that healthy people in both “traditional” plans and MSAs receive in benefits about 90% of their expenses, and the “transient” enrollees received about 70% of their expenses in benefits under the MSA and between 80% and 90% of their expenses in benefits under traditional coverage. The “sick” population found benefits rising in relation to expenses under the MSA, but just the opposite under traditional coverage. This is consistent with calculations in the States that show both the healthy and the ill better off financially with an MSA. The group that is worse off are those in the middle with annual expenses of $2,500 – $4,000. Mr. Gore also finds that account holders use generic drugs far more than traditional enrollees, and use preventive care more, especially when combined with wellness programs. He also finds, “generally lower hospital use by members on a savings account option,” which argues against the idea that they would delay care until they are very ill.
Milliman USA Predicts 14% HMO Rate Hike in 2004
Meanwhile, Steve Cigich at Milliman USA has conducted another survey of HMO executives, and finds they are predicting another round of double-digit increases in 2004, this time of 14% (down from 17% in 2003). He says, “Premium increases of this continuing magnitude are likely to accelerate the development of consumer-driven approaches to health care?. Health care decisions are being pushed to the point of maximum effectiveness: the patient and the provider.” The press release notes that the Milliman survey is unique because it asks about increases for a given set of benefits and demographics, controlling for changes in benefit design and cost sharing. These are the realities real employers are facing in the real world – notwithstanding the fantasies of the CBPP.
SOURCE: Contact Steve Cigich at 262-784-2250 or James Loughman at 212-751-6126
Government Should Get Out of the Way
Writing in the “SFGate,” Adam Sparks asks, “Is there an affordable doctor in the house?” He remembers his childhood in Spanish Harlem when doctors would make house calls and his dad, a union baker, would pay cash for the service. Today, he says, “The health care system is in crisis … Democrats tend to favor a single-payer system, which will be both a financial disaster and a health care delivery catastrophe for our nation, and Republicans simply wish the issue would go away on its own.” Neither approach will do it, he says. “We need a system that’s not run by HMOs, politicians, bureaucrats, lobbyists, drug companies, or doctors, but is patient driven.” He goes on to list ten bullet points that he adopted from a Heartland Institute report, that include: tax credits; expanded MSAs; association health plans; full-cost payment under Medicare; malpractice reform; repeal of mandates; allowing low-cost insurance plans; high risk pools; repeal certificate-of-need programs, and support of community health centers. He concludes, “The government needs simply to limit its role to paving the way for true competition and free-market reforms and then get out of the way.”
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