| Summary: | While addressing the Medicare financing problem, Congress wrestled with rising health care costs in the private sector and the need to balance the budget. Between 1994 and 1998 Medical Savings Accounts (MSAs) emerged as a controversial policy option. This thesis examines the evolution of MSAs from their inception to legislation introducing them to the private sector and then to Medicare. Data was obtained from congressional reports, periodicals and telephone conversations with a Health Care and Finance Administration (HOFA) analyst. The thesis explains how MSAs became available as an option to Medicare beneficiaries via the Balanced Budget Act of 1997. It details the legislative history of MSAs, identifies the key players involved and explains their incentives. The primary findings were that MSAs are supported by congressional Republicans as a way to reduce Medicare costs by allowing beneficiaries to manage their own health care, financed by a fixed annual contribution from Medicare. The President and many congressional Democrats opposed them because of lost tax revenues and possible damage to the existing health care system. The critical first step to Medicare MSAs was congressional approval of tax free NSAs for small employers via a four year demonstration project in the Health Insurance Portability and Accountability Act of 1996. Medicare MSAs were delayed because insurers failed to file applications to provide them in time. In 1998, MSA supporters failed in their attempt to extend the small empoyer MSA demonstration and to expand MSAs to the Federal Employees Health Benefits Program.
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