An advisory panel is cautioning Congress about allowing Medicare beneficiaries to join private-sector medical savings account plans.
Meanwhile, Republican leaders are working on a new medical savings account proposal that they hope will overcome Democratic opposition to MSAs.
Although the Physician Payment Review Commission doesn't oppose Medicare MSAs, it raises questions about switching to a different approach for some beneficiary coverage. Among the PPRC's concerns:
The potential for healthier beneficiaries to opt out-a result known as adverse selection-and unravel the Medicare risk pool.
The negative fiscal effect on providers if low-income beneficiaries don't keep enough money in their MSAs to cover deductibles, potentially increasing providers' uncompensated-care burden.
The PPRC won't be able to gather data on MSA plan enrollees as effectively as on other beneficiaries because the federal government will not be involved in many of the MSA enrollees' day-to-day healthcare transactions.
The advisory panel also recommends that federal law be changed to allow HMOs to offer high-deductible plans.
Congressional balanced-budget legislation would allow Medicare beneficiaries to enroll in private, low-premium, high-deductible insurance plans and then put the remainder of their Medicare benefit payment into savings accounts, from which they could draw to pay for routine healthcare costs.
Offering Medicare beneficiaries an MSA option has emerged as one of the greatest conflicts between Democrats and Republicans on both the balanced-budget measure and efforts to reach a compromise on Medicare reforms.
President Clinton cited his opposition to MSAs as one of the reasons he vetoed balanced-budget legislation last year. But about 140 House Republicans, or nearly one-third of House members, signed a Feb. 9 letter to Clinton urging him to support the MSA provisions in the budget bill (Feb. 12, p. 3).
Meanwhile, negotiations between Republicans and conservative Democrats on a smaller Medicare reform measure also have bogged down partly on the MSA issue. The GOP insists on MSAs, while the conservative Democrats known on Capitol Hill as the "Blue Dogs" want to restrict MSAs to a demonstration project first (Feb. 19, p. 6).
But last week, in a speech to the American Association of Health Plans, House Speaker Newt Gingrich (R-Ga.) said GOP leaders were developing a new MSA proposal he hoped would overcome Democratic opposition.
Under the new plan, a private board of actuaries would review Medicare's contribution to MSAs to compensate for any adverse selection.
Gingrich also said he would not agree to a White House plan for a pilot MSA program but would agree to sunset the MSA plan after seven years.
Because of the House Republican majority's strong interest in offering the MSA option, PPRC Chairwoman Gail Wilensky said the commission's role shouldn't be to question whether MSAs should be offered, but how to design them so that they work well.
"Our role should be to say these are the kinds of things we ought to do to try to protect (Medicare)," she said. "If (MSAs) can be structured so that they do not undo the program, they ought to be an option."
The PPRC's annual report to Congress, due by March 31, will caution that the MSA provisions of the congressional Republican balanced-budget measure could increase Medicare's costs. That could occur because healthier beneficiaries who tend to cost the traditional fee-for-service program less would get the full value of the Medicare benefit if they enroll in MSA plans.
Although early versions of the balanced-budget bill called for lower benefit payments for younger beneficiaries, that age-adjustment provision was removed from the final version of the bill.
Since payments would be the same for all beneficiaries enrolling in MSA plans no matter what age, it would be an even greater incentive for healthier beneficiaries, who tend to be closer to age 65, to enroll in such plans.
Congress could offset such a trend by requiring that MSA enrollees stay in those plans for a specific time, perhaps as long as five years.
Furthermore, the PPRC is concerned that low-income MSA enrollees also wouldn't keep in their MSAs more than 60% of the value of their insurance deductibles, the minimum required under the law.
That has the potential to increase the bad-debt load on providers, particularly providers of last resort or free clinics, which wouldn't be able to rely on Medicare to cover the cost if low-income enrollees don't keep enough money in their MSAs.