Study Claims Medical Savings Accounts Could Reduce Health Care Costs $558b In 5 Years.

• Position: BUSINESS & FINANCIAL

ALEXANDRIA, Va. -- Medical Savings Accounts (MSAs) could reduce system-wide health care costs by $588 billion over a five year period, according to a new study released October 13 by the Council for Affordable Health Insurance.

The estimate is based on a computer model developed by the independent actuarial consulting firm of Milliman & Robertson, Inc. for the Council for Affordable Health Insurance. It was conducted by Mark Litow, consulting actuary.

Litow estimated that the number of people without health insurance would be cut in half through the use of Medical Savings Accounts. "Most of the uninsured are without coverage for a very short period of time." said Litow. "Half are without coverage for four months or less, usually because they are between job," he added. "The Medical Savings Accounts would provide a source of funds for them to keep their coverage during spells of unemployment."

Litow also said, "One source of savings is in the form of dramatically reduced administrative costs as insurance companies are freed from the expense of paying small claims. These routine, low-cost medical services would be paid directly out of the MSA, without having to be processed by an insurance company, saving a great deal of money, as well as reducing the paperwork burden on providers and patients." The model projects $55.5 billion in administrative savings over five years.

Greg Scandlen, executive director of the council, added that Medical Savings Accounts arc a key feature of many of the congressional proposals that have been introduced by both Democrats and Republicans Plan (H.R. 3080). and the Senate bill being developed by Senators Gramm. McCain, Coats and others.

Scandlen said, "MSAs work by allowing employers or individuals to replace expensive low-deductible insurance policies with high-deduclibles "catastrophic" policies. The savings on premiums are invested in a personal IRA-type savings account and are available to pay for low-cost services below the amount of the deductible. If the money is not spent, it belongs to the employee and builds up over time to be available for periods of unemployment, long term care needs, or a host of other sen ices." He added. "MSAs represent real...