On December 9, 2003 President George W. Bush signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003 into law. While great skepticism abounds regarding this large and complex piece of legislation it does contain some hope that the American health care system might be given a real opportunity to head in a productive direction by empowering patients to be in the driver’s seat regarding personal health decisions.
Since the original implementation of Medicare in 1965 the sad truth is that the American health care system has become progressively more dysfunctional while also making patients more dependent on organizations more interested in profit than the benefit of those seeking medical help. The introduction of managed health care in 1969 was a classic example of good intentions gone awry. Since that time the managed care industry has become huge and powerful and has worked hard to maintain that position.
In 1995 a glimmer of hope emerged with the creation of Medical Savings Accounts which were, at their birth, almost destroyed by adverse congressional action. At the end of June 2003, however, the Congress, reauthorized, renamed and expanded MSAs as Health Savings Accounts (HSA’s). On December 22, 2003 the United States Treasury Department announced new HSA policies which have allowed private insurers to be financially incentivised to offer them. This “game” is clearly not yet over as the opposition to MSAs remains high by those who would have us emulated health programs such as the now defunct Soviet Union and other basically failed health care systems typified by England and Canada.
As John C. Goodman has pointed out, HSA’s are important because they can correct a major distortion in the tax law. Another example of another perverse influence against a rational health care policy (Goodman JC: To Your Health, WSJ, Dec. 26, 2003):
“Under current law, every dollar an employer pays in employee health insurance premiums avoids income and payroll taxes. For a middle-income employee, this generous tax subsidy means that government is effectively paying for almost half the cost of the health insurance. On the other hand, suppose the employer tries to put that same dollar in a savings account, from which an employee pays medical expenses directly. In this case, government will fully tax the dollar, taking almost half of it before it lands in the account.
In this way, our tax law lavishly subsidizes third-party insurance and severely penalizes individual self-insurance. It encourages us to use third-party bureaucracies to pay for minor discretionary expenses, even though it would make much more sense for patients to manage those expenses on their own. The new legislation will change all of that. It will give deposits to HSA’s the same tax advantages now granted only to health-insurance premiums. It will allow individual self-insurance and third-party insurance to compete against each other on a level playing field by allowing individuals to control some of their own health-care dollars without a tax penalty. And, for the first time, it will allow a rational approach to the difficult social problem of how to allocate scarce dollars between health care and other goods and services”. In his January 24, 2004 State of the Union Address President Bush included a proposal to allow individuals with Health Savings Accounts to purchase catastrophic health insurance with tax-exempt funds. This represented an important step in the right direction for workers who would then be given the same opportunity (deductibility) that only the self-employed and employers enjoy today. As with a retirement account HSA owners can designate beneficiarys.
Another important consideration relates to the decreasing the temptation for the medical profession to perform medically unnecessary and overpriced procedures on patients as well as the bgreat deal on medicine when completely fraudulent treatment claims are submitted for payment (Furhmans V:FBI Raids California Surgery Clinics, WSJ, March 18, 2002). HSA’s would restore a competitive, and much healthier, free market in health care which would serve to applaud quality and discourage patients being economically squeezed to having to deal with feral practitioners.
More rational thoughts regarding the presently perverse system are possible.