Why Medical Savings Accounts Can't Work

During the last week, in the backdrop the Republican convention, we started to hear again of the "ownership society", where we citizens would have control of our social security and medical savings accounts. Though one might concede the privatization of social security as a possibility due to the prospect of bankruptcy, medical savings accounts will never work, for two reasons:

1. Outside of insurance, even the most routine medical procedures are beyond the savings capacity of most Americans (who are tasked as is with saving for their children's college education). Routine childbirth costs in the neighborhood of $10,000, not to mention the catastrophic diseases that can rack up hundreds of thousands of dollars of bills and are responsible for half of the personal bankruptcies in the U.S. Because of its high costs, medicine requires the leveraging capability of insurance -- for a relatively small premium paid each month, I have access to a vast insurance pool to handle medical bills that I would not otherwise be able to afford.

2. By privatizing even routine procedures such as checkups or early-symptom doctors visits, you discourage the one factor that is crucial to holding down medical costs -- prevention. Even if I have, say, $3000, in my medical savings account, I still have an incentive to not go to the doctor for a slight pain that "might be nothing". I will probably think about saving my limited funds for something more substantial. However, by the time I make the determination that my condition is worth a doctor's visit, my condition may have progressed that much further and be that much more expensive to treat.

Those on the right find this type of scenario essential. They argue than we users of medical care are currently insulated from the true costs of our procedures, and until we are re-attached to the financial consequences of those procedures, we'll never get control of soaring medical costs. The conceptual mistake in this argument is that medicine falls outside of normal market forces. When we are sick we don't price shop doctors or hospitals. As a result, the normal transactional analysis that we make when we buy a house, car or backyard grill, never occurs. The only market force that will work in medical care is the downward pricing pressure that a large insurance pool, such as a city, state, federal government or large corporation, can provide. President Bush alludes to this very advantage in the most workable of his medical reform proposals -- allowing small businesses and individuals to join in multi-state buying groups that would give them the clout of our largest insurance users. Unfortunately, the Bush Administration, in a sop to the drug companies, refused to allow the federal government this very pricing advantage when enacting the Medicare drug benefit, adding billions to its cost.