Conservatives Propose `Medisave' Health Care

TRUE or false: The debate about health-care reform centers around whether the United States should move toward ``managed competition'' or a government-run ``single-payer'' system like Canada's.

Most Americans would probably answer true, but some conservatives say there is another idea out there, little discussed, that could have a big role to play in controlling health-care costs and expanding access to many people who are now uninsured.

The idea, known as ``patient power,'' is based on ``medical savings accounts'' similar to the individual retirement accounts (IRAs) used by many people to save for retirement. Applied to health care, such accounts would basically put individuals, rather than insurance companies, in charge of two-thirds of America's health-care dollars.

``People tend to look after their own welfare very effectively,'' says Robin Bernhoft, a former surgeon who is promoting the concept at the grass-roots level in Washington State. He and other conservative thinkers here are hoping to build momentum for rolling back reforms passed a year ago by Gov. Mike Lowry (D) and a Democrat-controlled Legislature. The state law, similar to what President Clinton hopes to pass, requires all employers (including the self-employed) to insure their workers.

Many lack coverage

Here on the state level, as nationally, the concept of free markets and free choice in health care faces an uphill fight.

Critics say medical savings accounts do not go far enough toward tackling one key problem: Too many Americans (around 37 million) lack health insurance.

Proponents of the ``medisave'' idea acknowledge that their ideas don't ensure ``universal coverage,'' which is Mr. Clinton's line in the sand. (He says he will not sign health-care reform that does not meet that goal). Universal coverage shows up in polls as a health-care preference, but many Americans are wary of too much government involvement in reform. That is where conservatives hope to gain ground.

``Even though medisave accounts don't achieve universal coverage, they are a big step in that direction,'' and they don't involve an increase in government bureaucracy, says Michael Tanner, a health-care expert at the libertarian Cato Institute in Washington, D.C.

Medisave accounts might work as follows: As today, people could buy health insurance on their own or with help from their employer. Currently, a family of four might pay $4,500 on a policy with a $100 deductible and small copayments for medical services. Instead, if tax incentives were enacted for medisave, they might choose to buy a policy with a much higher deductible (say $3,000) for $1,500. The resulting savings of $3,000 would then be deposited into a tax-sheltered medical savings account. That account would be used to cover medical expenses up to $3,000.

Most families would have money left in the account at the end of the year, which they could either spend elsewhere or save for future health-care expenses. Thus, the family gets the same medical coverage as before, but with an incentive to watch how much health care it buys.

That financial incentive, proponents argue, could cut health spending by 25 percent or more, without reducing the quality of health care. For evidence, they point to the similar systems of Singapore and Chile, and to successful tests in the United States. Savings would come not only from reducing unneeded tests and treatments, but also from lower administrative costs (owing to less use of insurance companies as intermediaries).

The accounts could reduce the number of uninsured Americans by providing a cushion of medical savings that people could use if they lose their jobs and their health benefits run out. Such temporary lapses in coverage account for a large share of the uninsured. Government-funded medisave accounts could also be used to expand coverage to those who can't afford insurance. For example, Bernhoft says Washington State could save money by using this system for its Medicaid recipients.

It remains unclear whether this scheme will find a place in America's health-care system.

Democratic support needed

Sixteen bills in Congress contain some version of medisave as at least part of their prescription. The total of 200 co-sponsors, mostly Republicans, allows Mr. Tanner to call medisave the ``single most popular concept'' in Congress for health reform. Still, the idea will need more Democratic support in order to pass.

The kind of health-care reform favored by many in Congress, known as managed competition, also aims to use free-market incentives but relies mostly on health-insurance companies, rather than individuals, to keep tabs on hospital costs. Clinton's version of managed competition would require that employers buy health insurance for their workers.

If reforms based on managed competition pass, medisave could still be incorporated as an option for people buying insurance through their employers, Tanner says. The concept has such a low profile in the health-care fray, he says, because ``the Republicans have not done very well at framing the debate.'' With the exception of a few leaders such as GOP Texas Sen. Phil Gramm, many are unsure if free-market ideas can be a plus for the party on this issue, Tanner says.

It appears that there is still plenty of time for political ground to shift, however. Chances of passing major health reforms this year are seen by some analysts as diminishing. In November elections, the GOP could gain a few seats in both houses of Congress.

Similarly, Bernhoft is looking for some shifts in Olympia, Washington State's capital. ``We expect the next legislative session to be wide open to our ideas.''