OCTOBER'S U.S. CENSUS Bureau report on the increase in America's uninsured contained a bright spot in an otherwise gloomy picture. Medical savings accounts, or MSAs, appear to be the one free-market solution that is actually battling the increase of families with no health plan, with 73 percent of MSA beneficiaries coming from the uninsured.
Not only are MSAs the best policy solution for the uninsured, they are the only proposal that has a chance of holding in check health-care cost increases, which are the underlying reason for all the problems in our health-care system. Medical Savings Accounts do this by providing a major-medical policy to cover large expenses, and a patient-controlled cash account to cover everyday medical costs.
These policies restore what's missing in health-cost containment - the ability of patients to benefit from health-care savings, instead of having that frugality benefit the bottom line of corporations.
But what is likely to happen when our MSA pioneers try to use their cash to pay for services? If they follow in the footsteps of uninsured patients, who already pay cash for services, the result may be a consumer disaster.
Today's cash-paying patients are being charged 500 percent more than HMOs for the same service. The prime victims are middle-class uninsured patients, who don't qualify for indigent care, but have enough assets and income to whet the appetite of for-profit hospital chains.
If these patients can't pay the inflated charge, they are pursued by collection agencies, have their homes foreclosed, cars and bank accounts seized, and wages garnished. All to subsidize discounts for large, wealthy HMOs that pay below cost for the same services.
HERE'S WHAT IS happening to these families in the real world:
The hospital's average cost per day for inpatient care is $1,411.
Their average amount received for the room is $1,466.
A traditional Medicare patient walks out for $1,701 a day.
A managed-care insurance plan pays below cost, just $1,318.
A middle-class working family with no insurance pays $6,685 a day to make up for the HMO's discount.
In stark contrast, a non-profit hospital in the same market as the above facility has a very different and infinitely fairer billing practice:
Their average cost per day is $1,197.
Their average amount received is $1,181.
A traditional Medicare patient pays $1,135.
A managed-care insurance plan pays $1,863.
A family paying its own bill pays $1,518.
Which price will our MSA holders pay? If it's $6,000 using their own money, their entire annual cash allotment is shot times three in one day.
Some insurance companies are actually encouraging both hospitals and providers to charge holders of medical savings accounts these inflated prices until the patient's funds are exhausted, and only then revert to the discounted rate when the insurance company starts footing the bill.
BUT IT'S EVEN more devious than that. Hospitals receive a government subsidy known as Disproportionate Share Funding, or DSH funds, to compensate for indigent care. To validate the rates used to calculate these payments, someone has to actually pay the "sticker price." Americans with no insurance are charged the outrageous rates to justify this price. Both the uninsured patient and the taxpayer are cheated in the process.
The problem is nationwide - primarily with hospitals, but also with a small but growing number of corporate-owned group physician practices and chain pharmacies.
What can be done about it? Federal legislative action offers little immediate hope of relief, based on the health-reform track record of Congress. The administration could help by tasking the Justice Department to look into whether these billing practices cross the line of legal fraud.
The American Bar Association could energize its members to challenge the inflated health bills of consumers through state court civil action. But doctors and patients likely have the greatest chance to impact the problem by uniting to stay away from health-care institutions that don't offer a fair price to those who pay cash.
There are plenty of good hospitals around the country that do offer discounted rates to cash-paying customers. Patients need to use them whenever possible, and refrain from using institutions that refuse.
IT'S TIME TO ACT. Patients and providers must lead the way without waiting for government action. If we fail, these billing practices spell crib death for the entire consumer-driven health movement, including the most promising reform of all - medical savings accounts.
(Editor's note: The writer is the director of the U.S. Freedom Foundation based in Washington, D.C.)
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