Nearly four years ago, Congress established a trial period for Medical Savings Accounts (MSA)–a tax-free savings account from which you pay your medical expenses. On December 31, 2000, unless Congress acts, the MSA program will become extinct. It is now time, particularly with an election approaching, for you to express your support for one of the few remaining vestiges of personal and financial freedom in the health care industry.
Not only should the MSA program be extended and made permanent, all restrictions on the program should be eliminated. The number of MSAs permitted during the trial period was only 750,000, and only self-employed workers and employees of small businesses (up to 50 employees) were permitted to sign up. All who signed up had to be covered by high deductible health insurance plans, the minimum being $1,550 for individuals and $3,100 for families. Furthermore, contributions to MSAs were restricted to 65% of the deductible for individual health insurance and 75% for families.
These [arbitrary government] restrictions contributed directly to a distinct lack of interest by the American people as well as insurance companies. With so few people eligible for MSAs and no opportunity to develop large-scale, cost-effective programs to accommodate individuals working at large companies, there was little if any motive for insurance companies to develop MSA programs let alone publicize and market them. As a result, many Americans are completely ignorant of the existence of this alternative in health care. As of last year, fewer than 55,000 people had established an MSA.
By contrast, South Africa’s MSA program has faired much better. There are no comparable restrictions on the South African program and half of all private policyholders in South Africa have chosen an MSA.1
One of the leading tax reform proponents in Washington, Chairman of the House Ways and Means Committee, Bill Archer (R-TX), has proposed the sort of program that would allow MSAs–and health care freedom–to flourish in America as they have in South Africa. Says Archer: “Medical Savings Accounts can and should be a major part of our effort to make health care coverage affordable and accessible to all Americans…[now] is the time to open up this innovative health care option to all Americans.”2
A plan such as Rep. Archer’s would make the MSA program permanent, eliminate all restrictions on who could purchase an MSA, lower the minimum deductibles by more than 50%, and raise contribution limits to 100% of the deductible. These are the kinds of reforms necessary to promote MSAs as a viable health care alternative for all Americans and restore health care choices and financial freedom to every individual who buys one.
A number of economic groups, such as the RAND Corporation and Price Waterhouse Coopers, have reported on the desirability and practicality of MSAs. A Price Waterhouse Coopers survey shows that 60% of health care leaders surveyed expect that most employers will offer MSAs as an option by 2010.3
To safeguard the expansion of the MSA program, more Americans need to be aware of the financial health care benefits it provides. Those of us aware of the system must become more active in spreading the word among friends, family, colleagues, and our elected representatives, lest we lose a great opportunity.
1 Association of American Physicians and Surgeons (AAPS), AAPS News, October 2000
2 Gary Clott, “Tax-Writer Urges Expanding Medical Savings Program,” Orange County Register, 9/18/2000
Americans for Free Choice in Medicine (AFCM) is a national non-profit, non-partisan educational organization. AFCM promotes the philosophy of individual rights, personal responsibility and free market economics in the health care industry. AFCM advocates a full, free market health care system by promoting medical savings accounts (MSAs), tax equity for the individual, and AFCM teaches the history of HMOs, which were instituted by a long, incremental process of government intervention.