This position paper examines medical savings accounts (MSAs) as a supplemental mechanism for financing health care services.Although federal legislation to encourage MSAs did not pass in 1995 and is not likely to pass in 1996, MSAs will continue to be seriously considered by public policymakers.
Individual retirement accounts accumulate funds for retirement; MSAs could be used to accumulate funds for health care expenditures.Changes in the federal tax code would be required to permit tax-deductible contributions and tax-free earnings to individual MSAs. To be withdrawn without penalty, funds from an MSA could only be used to pay for approved medical or health insurance expenses. Each person would own and control his or her account, regardless of changes in employment. Coupled with high-deductible health insurance, MSAs could empower cost-conscious patients in health care decision making, increasing competitive pressure to reduce health care costs. Administrative costs and paperwork associated with health insurance might also be reduced, and some people who currently do not have health insurance might be able to obtain some financial protection.
Medical savings accounts may not help unemployed persons or low-and middle-income persons who cannot afford to contribute to such accounts. These accounts may result in reduced health insurance protection and greater out-of-pocket expenses for those most in need of health care. Problems of adverse risk selection could arise if healthy persons choose insurance options involving MSAs; this choice would cause premiums to increase for persons who desire traditional health insurance.
*This paper was written by Jack A. Ginsburg, MPE, and was developed for the Health and Public Policy Committee of the American College of Physicians: Whitney Addington, MD, Chair; Philip D. Bertram, MD, vicechair; Philip Altus, MD; Robert A. Berenson, MD; William M. Fogarty, MD; Nancy E. Gary, MD; David J. Gullen, MD; Janice Herbert-Carter, MD; Richard Honsiger Jr., MD; Derrick L. Latos, MD; Risa J. Lavizzo-Mourey, MD; Angela McLean, MD; and James Webster Jr., MD. Approved by the Board of Regents on 15 July 1995.