WASHINGTON - Banks will lose the power to offer medical savings accounts this year unless Congress passes legislation making these experimental products permanent and more widely available.Few banks, or consumers, have shown interest in the tax-sheltered accounts since Congress created a four-year pilot program in 1996. During the trial, lawmakers capped the number of accounts at 750,000 and restricted them to the self-employed or those who work at businesses with fewer than 50 employees.

According to Internal Revenue Service estimates, only 44,000 medical savings accounts have been opened. Under the law, individuals may contribute up to $2,250 a year tax free to cover medical expenses; families may contribute up to $3,700. Though there is a penalty for withdrawing funds for nonmedical expenses, people can make withdrawals for any reason after they turn 65.

Bills to make MSAs permanent, remove the cap on the number of accounts, and allow all employers to offer them are pending in the House and Senate as add-ons to the controversial patients' bill of rights legislation.

House Ways and Means Committee Chairman William Archer has predicted a bipartisan compromise on the broader bill. But the Texas Republican has also said that if the patients rights bill fails, he would support a separate measure to make MSAs permanent and more accessible. "Medical savings accounts empower individuals to choose their own doctor … relate cost to value, and make those decisions in a free marketplace," Rep. Archer said at a news conference June 15.

At least one major banking company is still bullish on MSAs.

Mellon Financial Corp. announced June 12 that it will provide MSAs to 180,000 employees of Cendant Corp.'s network of real estate and tax companies, such as Century 21, Coldwell Banker, and ERA.

Jack Wild, head of MSA marketing activities at the Pittsburgh banking company, said these accounts grew 50% last year, and are having similar growth this year. "An MSA is really a checking account with interest. The mechanics were already in place, so it wasn't difficult to set up the product," he said.

The end of the four-year-old MSA test program does nothing to existing accounts, but without new legislation no new MSAs could be opened after Dec. 31.

Mr. Wild said he is optimistic that Congress will eventually reauthorize the accounts.

"Even if nothing happens in Congress this year, that doesn't mean it can't be resurrected in the future," he said.

Paul Merski, chief economist and director of federal tax policy for the Independent Community Bankers of America, said the process of qualifying for and opening these accounts is a hassle.

"Typically, when there's a reluctance to participate it's because … the paperwork is too complicated to the average consumer," he said.

Mr. Wild said customer instruction will be a focal point of Mellon's arrangement with Cendant. "The more education we can come up with, the better results we're going to get," he said. "We're now working on a video to deliver to their franchises that will help."

Mr. Wild insisted that MSAs make sense and said Mellon is committed to becoming a leader in offering them. "We're going to stay in it for the full run, wherever that goes," he said.

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