Fewer than 10,000 people established medical savings accounts as of April 30, far less than the 375,000 limit set by a new federal law, according to an Internal Revenue Service report to be released next month.
But proponents of MSAs said the IRS data understate interest in the new accounts. They predict when the next census is released later this year the number of people with MSAs will rise dramatically.
Last year's health insurance reform law allowed anyone to sign up for medical savings accounts, which receive preferential tax treatment. MSAs are individual accounts from which beneficiaries pay routine medical expenses. Persons opening MSAs must also purchase a high-deductible insurance plan.
Republican supporters say MSAs will save money by giving individuals more control over healthcare spending. But Democrats say they will siphon the healthiest and wealthiest beneficiaries from the insurance pool. As a compromise, the two parties agreed to a demonstration program allowing no more than 375,000 accounts by April 30 of this year. That limit increases gradually to 750,000 by the end of 2000. People opening MSAs who were previously uninsured do not count toward the cap.
The law also requires the IRS to periodically report the number of accounts to be sure limits have not been breached.
So far, that doesn't appear a problem.
As of April 30, only 9,720 MSAs had been reported sold. Of those, 1,787 were opened by previously uninsured individuals, according to the IRS report.
Both Republicans and Democrats on Capitol Hill said the number seems low.
"That number just can't be right. We'll have to see what happens in the second report," said an aide to Rep. Fortney "Pete" Stark (D-Calif.). Stark expressed reservations about MSAs during last year's debate.
Insurers agreed the report appears to understate the actual accounts.
"That number is ridiculously low," said Scott Stevens, vice president of marketing for United Chambers, a Naperville, Ill.-based insurer. "From what I hear in the industry the number is more like 100,000."
There are several possible reasons for the discrepancy. One is the IRS totals are based on numbers submitted by insurance companies, which may not all be reporting.
The second possibility is there is a significant time lag in the report. "The issuance of MSAs is not like a light switch; you can't just turn it on," said an aide to Rep. Bill Archer (R-Texas), chairman of the House Ways and Means Committee and one of the staunchest supporters of MSAs.
Several insurance companies contacted recently said sales of MSAs have picked up significantly in the past several months.