Friends and foes of medical savings accounts are set for a Senate showdown Thursday. That's when the Senate is scheduled to take up legislation that would open the federal health insurance program to medical savings accounts.

The federal health insurance program is the largest employer plan in the United States. Many group plans follow the federal program's lead in providing or expanding benefits. Politicians of both parties--who along with their families are covered by the federal program--have often used the program to push nonfederal plans into expanding coverage.

Last month, for example, President Clinton ordered federal health plans to offer the same coverage for mental illness and substance abuse that they do for physical disorders. The change won't take place next year. And it affects mainly health maintenance organizations (as opposed to fee-for-service plans that already provide comparable coverage) participating in the federal program.

Backers of the medical savings accounts for the federal program say the option would allow many employees and retirees--those who are healthy and seldom use their health insurance--to "bank" money in an account to be used for rainy-day medical emergencies. Having the option, they say, would let individuals and families enroll in more basic, less costly insurance plans while maintaining a cash reserve that they could use if they needed it. Depending on how the medical savings accounts program is set up, it could provide a tax break.

Generally speaking, congressional Republicans support the idea.

Opponents believe medical savings accounts would lure many workers and retirees--especially those with low incomes--into low-premium plans that provide only bare-bones coverage. Those employees and retirees would be liable for a much larger share of medical bills if they or their families had a bad medical year.

Generally speaking, congressional Democrats, most federal employee unions and the National Association of Retired Federal Employees oppose the introduction of medical savings accounts into the federal health program.

Republicans are as eager to get medical savings accounts into the federal health program--which covers more than 9 million people, including nearly half the residents of the Washington area--as Democrats are determined to block their introduction.

Action is expected on Thursday, when the Senate is scheduled to take up the GOP version of a proposed "Patient's Bill of Rights."

'Windfall,' 'Offset' Laws Senate and House bills that would modify the effect of the "windfall" and "offset" laws on the Social Security benefits of federal retirees continue--however slowly--to pick up co-sponsors.

The windfall law can reduce--but not eliminate--the Social Security benefits earned by federal workers. The reduction is based on a complex formula, but generally it applies to individuals who spent part of their careers, but less than 30 years, paying into Social Security.

The offset law applies to the spousal Social Security benefit of someone retiring with a civil service annuity or other retirement benefit not covered by Social Security. The offset law usually eliminates the spousal Social Security benefit.

Neither the windfall nor the offset has any effect on the earned civil service benefit of federal retirees.

Proposals in the Senate and House would modify the effect of the offset and windfall laws by applying reductions only to combined monthly benefits over certain amounts.

Legislation watchers believe it is too late in this session for either bill to make it through the congressional process. But additional pledges of support--in the form of members signing on as co-sponsors--improve the chances of passage next year.

G-Fund's July Rate Money invested in the G-fund (special Treasury securities) of the federal thrift savings plan will be invested at 6.125 percent for the month of July. That is the highest rate for the G-fund since December 1997.

The two other funds available to workers in the government's 401(k) plan rise and fall with the markets. The C-fund tracks the Standard & Poor's 500 stock index; the F-fund tracks a bond index.

Although the G-fund, with its guaranteed return, remains the "safest" investment for feds in the thrift savings plan, workers who have invested exclusively in the higher-risk, higher-reward C-fund have much larger account balances, thanks to the booming stock market of recent years.

Mike Causey's e-mail address is causey@washpost.com

Tuesday, July 13, 1999