Friday, May 20, 2005

Here’s a good start to reducing Medicare’s financial woes while helping seniors: Let recipients have health-savings accounts, let them use Medicare funds to buy high-deductible insurance and then let them put the rest of their Medicare money into HSAs. Allowed to do this, seniors would opt out of the prescription-drug benefit and choose the better coverage that the combination of HSAs and high-deductible insurance can provide. This would save the U.S. Treasury billions annually, not to mention giving seniors greater control over health-care options and cutting inefficiencies. For reforms that push President Bush’s vision of an America where people “own their own health care,” this would seem to be a winner.

The idea belongs to health-care innovator J. Patrick Rooney, chairman emeritus of Golden Rule Insurance Co. and well-known champion of school vouchers. In an editorial briefing with The Washington Times, Mr. Rooney estimated that letting seniors on Medicare have HSAs would save Medicare $1,260 annually for every recipient who opts in. By Mr. Rooney’s calculations, a 65-year-old Medicare recipient in Tampa, Fla., could use the $500 or so he receives each month from Medicare to purchase a $2,600-deductible plan with enough money left over for about $1,400 annually to contribute to his HSA. The senior would get full prescription coverage with his high-deductible health plan and avoid the out-of-pocket expenses the new prescription coverage currently entails. If paying a deductible more than twice Medicare’s sounds unappealing — $2,600 compared to the present $1,022 — the senior effectively has over $3,200 he didn’t have before to cover it. That’s because he no longer has to pay $1,400 for Medigap and a $420 prescription-coverage premium. He now has $1,400 in the bank as an HSA.

Mr. Rooney ran the numbers for a 75-year-old disabled recipient in the same city who gets about a month $1,000 from Medicare and found that she could purchase a $3,000-deductible plan with just under $3,000 left over for an HSA, plus full coverage for prescription drugs. Her deductible would be higher, but with the money she saves from Medigap, the prescription-coverage premium and her HSA savings, she has another $5,200 to cover it.

To ward off insurers that would “cherry pick” the healthiest seniors, Mr. Rooney would disallow adjusting premiums based on a senior’s recent medical utilization. Every senior would pay the same amount whether they visit a doctor twice a month or once a year, and insurers would be obligated to take them.

Clearly HMOs, Medigap insurers, the left and opponents of President Bush’s ownership agenda will oppose Mr. Rooney’s idea. They will have a progressively harder time doing that. The momentum behind HSAs only seems to be growing. Both the House and Senate recently introduced bills to clear away tax disincentives for HSAs among the eligible population and maximize their benefits for low-income workers. The bills, the House’s Health Coverage for the Uninsured Act, and the Senate’s Healthcare Tax Relief for the Uninsured Act, have Mr. Bush’s support. If HSAs continue to grow in popularity, it won’t make much sense to deny seniors more choice and better care while costing the Treasury billions we can’t afford.

The March summary of the trustees’ reports on Medicare and Social Security lay out precisely how many billions that is: About 14 percent of GDP by 2079, given current trends. As the report concluded, “Medicare’s financial difficulties come sooner — and are much more severe — than those confronting Social Security.” It projects Medicare expenditures will exceed Social Security by 2024. All of which confirms the need for innovative ideas like Mr. Rooney’s.

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