Are medical savings accounts the health care solution?

• Author: Schnepper, Jeff A.

TWO YEARS AGO, the nation was in the throes of an immense health care crisis that could not wait another day to be solved. The uninsured were about to die in droves. Socialized medicine was on a roll, and we were all being herded into massive health care alliances for our own good. It was not only time for action, defined as new legislation and higher taxes, but that action was, according to Congressional mandarins, already late in coming. The American public did not buy the rhetoric, and, amazingly, the Republic still stands. However, the real problem of a lack of universal affordable medical care still exists.

In another attempt at least to face and try to mitigate the situation, last June, House Ways and Means Chairman Bill Archer (R.-Tex.) and Rep. Andrew Jacobs (D.-Ind.) introduced legislation to allow employers to set up tax-preferred medical savings accounts for their employees. Moreover, the Archer-Jacobs bill would make these medical savings accounts available to individuals and the self-employed.

The Family Medical Savings and Investment Act would attempt to control health care costs by letting individuals decide how to spend their own money. Participants would be given incentives to look for the best health care bargains, and the accounts they would create would be kept even if they changed or lost their jobs. Moreover, since participants would be able to keep whatever they had left in their accounts at the end of the year and use the money for health care costs in subsequent years, additional savings would be promoted.

How the plan would work would be relatively simple. The Archer-Jacobs bill would encourage employers and individuals to buy high-deductible catastrophic health plans that would be linked to a tax-preferred medical savings account. Employer contributions would be excluded from the employee's income, and individual contributions would be tax-deductible.

A participant then would be able to spend the account money on a tax-free basis for any medical expenses except for insurance premiums for non-catastrophic plans. The catastrophic plan would have to have a deductible of at least $1,800 for an individual or $3,600 for a family. The total amount of deductions and exclusions for the year would be either the amount of the catastrophic plan deductible or $2,500 for an individual medical savings plan and $5,000 for a family plan, whichever is less. Those with existing flexible spending arrangements, which are spend-or-lose...