From: AdmrlLocke@aol.com Sent: Thursday, July 16, 1998 12:44 PM Subject: Gramm on Medical Savings Accounts GrammNet Issue 7/16/98 Dear Friend, Following is an excerpt of U.S. Senators Phil Gramm and Don Nickles at a press conference discussing the Republican bill to allow us to have Medical Saving Accounts. Unfortunately, Gramm starts off by restating the tired old myth that HMOs are the only way to control medical costs. In fact, HMOs are not the only way to control medical costs, and in fact they do not control medical costs at all roughly half the time. Most of the reason that HMOs appear to have lower costs per patient is that they tend to group together younger, healthier people. In fact, the number of people who experienced higher medical costs after entering an HMO slightly exceeded the number experiencing lower medical costs, with the remainder (about 10%) experiencing no change at all. Fortunately, the rest of his speech isn't marred by his inclusion of the myth. It's classic Gramm: it illustrates both the problem and the proposed solution in a manner that's folksy, funny, and accurate. Go Senator Gramm, go! Sincerely, David B. Levenstam, CPA, MT, MA GrammNet back issues at http://www.geocities.com/Capitolhill/3390/ To subscribe to GrammNet, email me at AdmrlLocke@aol.com, with a message to the effect that you'd like to subscribe. --------------------------------------------- Federal News Service July 15, 1998, Wednesday Capitol Hill Hearing News Conference with Senate Republican Health Care Task Force Members Subject: Patients Bill of Rights (Excerpts) SEN. NICKLES: <...> One other tax component that is very important and has been championed by many, but none more strongly than by Phil Gramm, and that's an expansion of medical savings accounts. Senator Gramm? SEN. GRAMM: Thank you, Don. Today in America there's only one approach that enables us to control cost, and that approach is the health maintenance organization. As a result of concern that people have and employers have and government has about health care cost, we've seen an explosion in the number of HMOs, and they have gone from a very small part of our market to dominate the market in the last 15 years. But there's one problem that many people have with HMOs, and that is, when you go into the examining room with your doctor, you want to be alone. You don't want a gatekeeper in the examining room with you. Now Senator Kennedy has a solution to this problem, and his solution is to bring a government bureaucrat and a lawyer into the examining room with the gatekeeper and with the doctor, so that the government bureaucrat can regulate the doctor and the gatekeeper, and so the lawyer can be there to file a lawsuit. But that hardly solves the problem that most Americans have, because when they're examined by their doctor, they want to be alone with their doctor. We are bringing into the health care system for the first time a workable alternative, and that workable alternative is the medical savings account. Now, we did have an earlier effort, that Senator Kennedy was involved in, which limited the number of medical savings accounts to such a small number that no national company would market it; that set a date limit of three years so that no one would buy it, not knowing if they could get their insurance back; and finally, made it unworkable, where if you didn't spend the money in your medical savings account on health care, you couldn't keep it. What we have done in this bill is given a full-blown alternative called the Medical Savings Account, where we believe tens of millions of American families over the next few years will, in conjunction with their employer, buy a high deductible insurance policy and put the savings into a medical savings account. They will pay the deductibles out of those medical savings accounts. And that has two advantages: one is they have an incentive to be cost conscious and quality conscious; and second, and most importantly, they have the right to choose, they have the right to be in the examining room alone with their doctor because they're spending money that they control, not money the government controls, not money their employer controls. I have here a MasterCard that Mellon Bank is now beginning to issue that is a Medical Savings Account. I have a Visa Card that Merrill Lynch is beginning to issue as part of the Medical Savings Account program. And I have a check the Golden Rule Insurance Company now issues as part of a Medical Savings Account. The power of these three instruments is this: Under our bill, when you want to go to the doctor, you don't have to call a gatekeeper, you don't have to get a lawyer, you don't have to see a government bureaucrat. You simply have to call up and say, "Do you take Visa or Master Charge or do you take a check?" If they do any of those three things, you choose your primary care physician, not someone else; you get to go into the examining room by yourself. Finally, two points. Those people who are for the Clinton health care bill, those people that are for the Clinton -- the Kennedy bureaucracy bill, hate Medical Savings Accounts. They draw back from it like a vampire does from a cross. (Laughter.) And why? Because they know that if Americans have a right to choose, where we empower the individual family, that they won't need and won't want and will never tolerate a government-run health care system. That's what this debate is about; it's about consumer choice. We're going to defeat Senator Kennedy's plan. We believe we can adopt our plan. And we hope the Democrats, unable to pass their plan, won't impede and delay and filibuster our proposal. SEN. NICKLES: I might make a couple of additional comments concerning the tax changes. There's actually three tax changes, if you caught that, in this proposal, all of which are to improve competition and also equity in the tax code for people buying insurance. Right now corporations get to deduct 100 percent of their health care costs for health care. That's a nice deduction. Self-employed only get to deduct 45 percent. Senator Roth mentioned we're going to make that January 1 it's going to be 100 percent. So that's a big change for self-employed. But what about individuals? Individuals, if they are not working for an employer that's subsidizing, basically have to pay after-tax dollars for their health care, unless their health care expenses exceed 7-1/2 percent of their adjusted gross income, and that hardly ever happens. So an individual who is unemployed or an individual that's not subsidized by their employer gets nothing. What we're trying to say is, Wait a minute, let's give them some benefits. And that's what we're going to do with medical savings accounts. We're going to create some tax equity. We're going to try and make insurance more affordable for everybody. And one of the other real pluses about medical savings accounts is that yes, we make them available for every American. So this is a real positive opportunity. And it also can change by our behavior, because they'll be spending their own money. And people are a lot more frugal with their own money than they are with government money or their employer money. So it's a real positive change. And again, we've said at the outset instead of increasing regulation, bureaucracy, and increasing costs, as we think some of the other proposals do, we want to increase choice and competition and maybe help improve the medical market with people spending their own money because they'll be more frugal and more cost- conscious with their own money. And I think that's what we've encompassed with these three tax proposals.