Edited from a speech delivered by AFCM President, Dr. Art Astorino, Costa Mesa CA on December 11, 1993
Good afternoon, ladies and gentlemen:
The Medical Savings Account (MSA) is the future for health care financing. It is the best option available today for returning control, responsibility and freedom of choice to the individual and will thereby preserve and advance quality medical care.
Many of our current healthcare financing problems, such as lack of affordability and portability, result directly from government incentives that discourage personal responsibility and restrict individual freedom of choice.
MSAs are a moral and practical solution to all these problems.
What are Medical Savings Accounts?
An MSA is a trust account set up to pay for medical expenses at the discretion of the individual. It is generally tax-advantaged, either excluded or deducted from income. Each individual chooses the medical care he wants at the price he is prepared to pay the doctor of his choice.
Money not spent during the year on medical care stays in the MSA and accumulates tax-free and with interest.
Under existing laws, the MSA may be funded with contributions ranging from $500 to $3,000 depending on the design of the plan. Ideally, the only limits would be those the individual chooses for himself.
The MSA is combined with an indemnity type insurance that has a deductible higher than the annual MSA contribution. For example, a family plan may have $2,000 in the MSA and a $3,000 deductible policy.
This means that the family essentially has first dollar coverage for the first $2,000, and $1,000 out of pocket costs before their insurance policy kicks in to cover expenses. This $1,000 is often referred to as the “corridor.”
The understanding of the savings achieved by an employer who self-insures may be applied to the MSA concept. The individual is essentially self-insuring for the relatively small dollar costs, but covers the catastrophic costs with a stop-loss type plan. If the individual has a good year and is a prudent shopper, he saves money. If he is very sick, he is covered with a good plan after a manageable, predetermined out-of-pocket cost.
The MSA is generally designed such that most participants never use the insurance part to pay for medical care in any given year; as many as 75% of MSA holders will have money saved in the MSA at year end.
The potential savings are a tremendous incentive. The individual accurately perceives he is spending his own money for his own medical care; there is no more powerful economic force than a consumer empowered with his own money.
“The Medical Savings Account…is the best option available today for returning control, responsibility and freedom of choice to the individual and will thereby preserve and advance quality medical care.”
To be continued…
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.