December 23, 2003

Yet another "Bush Revolution�under the radar" story

They're here! Medical Savings Accounts are here! Or rather, they are now law, and will be available next year. Here's an article (PDF) you should read if you are interested.

The new Health Savings Accounts (HSA) provision in the Medicare bill was signed into law by President Bush on December 8, 2003 and goes into effect January 1, 2004. All 250 million non-elderly Americans will now have access to a Medical Savings Account (MSA), and one that is far more attractive than the Archer MSAs that were enacted in 1996.

Account holders must have a qualified insurance plan, but the insurance requirements have been opened up considerably. Allowable deductibles have been lowered to $1,000 for an individual and $2,000 for a family. The maximum deductible requirement has been replaced by maximum out-of-pocket limits of $5,000 and $10,000 for individuals and families. These limits include deductibles and coinsurance for �in-network� providers. There is no restriction on the stop-loss limits for out-of-network services. These amounts will be adjusted annually for cost of living increases.

Preventive care services may be covered on a first-dollar basis. That is, deductibles will not have to apply to services as defined by section 1871 of the Social Security Act.

Annual contributions to the HSA are limited to 100% of the deductible up to a maximum of $2,600 for an individual or $5,150 for a family. Account holders aged 55 and up may make additional contributions of $500 in 2004, increasing by $100 each year until it reaches $1,000 in 2009.

This is going to be BIG. There are MSA's already, but only a limited and tentative plan that hardly anyone uses. But there's nothing tentative about the new law. Look for the banks and brokerages who are now trying to sell you IRA's to soon be pushing MSA's.

What will be interesting are the behavior changes we may expect to see. Imagine tens-of-millions of people going to any doctor they like, and just paying for the visit. Spot cash money. No calls to "the Plan" to see if they will authorize such-and-such. No special negotiated rates because you belong to some group. Just free-market choices. (This is for routine stuff�big problems will still be paid by your insurance.) The savings in overhead should be huge. And the incentives to avoid unnecessary treatments will be huge�the money will be yours. If you don't spend it, it stays in your account and grows.

In the last few years I've been to 3 physicians. And every time I've had to listen to bitter complaints about "managed care." Now a lot of patients and doctors are going to be managing things themselves.

(via Brothers Judd Blog)

Posted by John Weidner at December 23, 2003 9:19 AM
Weblog by John Weidner