HEALTH SAVINGS PLAN MAKES GOOD SENSE FOR MEDICAL REFORM

Although the Republican sweep in the 1994 congressional elections likely buried any immediate Democratic hopes for socialized health care in the United States, the problem of skyrocketing health care and insurance costs refuses to go away.

Now the chairman of the House Ways and Means Committee, Rep. Bill Archer of Texas, has suggested a possible solution: medical savings accounts.

Archer and Rep. Andrew Jacobs, D-Ind., have sponsored the Family Medical Savings and Investment Act, which would give people a way to save tax-free for medical bills the way they now can set aside money for retirement.

Here's how medical savings accounts would work:

Get Americans to switch from current health insurance plans to catastrophic-only insurance with high deductibles -- typically $2,000 or more for each individual and at least $4,000 for a family -- and low premiums. The catastrophic insurance would cover any high-dollar, major-medical expenses.

To encourage people to switch from their current high-premium, low-deductible coverage, employers or individuals would set aside an amount equivalent to their premium in a tax-free medical savings account to be used for day-to-day medical expenses.

The idea, which is avidly backed by the American Medical Association, already has been tried by some employers, including the management of Forbes magazine, and has shown a marked decrease in medical claims and expenses.

The reason medical savings accounts reduce costs, proponents say, is they give patients complete control over where and when they spend their own money. In contrast, existing health insurance policies typically insulate consumers from the high costs of medical procedures by placing the burden on a third-party payer: the insurance company. That insulation encourages Americans to seek unnecessary care, fueling higher costs.

Those with medical savings accounts instead are encouraged to shop around for the best health-care deal, spending their money wisely rather than spending someone else's money frivolously. What consumers don't spend from their medical savings accounts they get to keep for future medical expenses.

The Business Coalition for Affordable Health Care and the Golden Rule Insurance Co. have lobbied heavily for creation of medical savings accounts. The AMA backs them as a way to let patients, not insurance companies or HMOs, decide which physicians they want to see.

A study released in May by the American Academy of Actuaries found that almost three-quarters of workers would come out ahead if their employees switched from a $200-deductible plan to a $1,500-deductible plan with a medical savings account.

Those with steep medical bills could wind up losing money, but is this necessarily bad? One of the most common complaints about health-care waste is the amount of money spent on cures for preventable illnesses. Consumers who are forced to take greater responsibility for their health-care bills are more apt to take better care of themselves.

Congress should look for ways to introduce the curative effects of the marketplace into our nation's ailing health-care system. Medical savings accounts are a good way to do just that.