Editorial debate. Medical savings accounts: a worthy experiment

Abstract

THE MOTIVATION AND POTENTIAL BENEFITS OF MEDICAL SAVINGS ACCOUNTS Medical savings accounts (MSAs) were implemented in die United States as a pilot programme. The primary motivation for implementing MSAs, which are privately invested healthcare accounts, is die consistently rising cost of healthcare in traditional medical insurance plans due to moral hazard. Moral hazard is die phenomenon that occurs when consumers utilise more of a service or product when cost is shared than when the consumer is responsible for the entirety of the cost.' The consumer would dierefore use more of a service when they are not or are only partially responsible for the payment than when they pay for the service diemselves. Moral hazard has been shown to increase the costs of existing traditional health plans. MSAs seek to reduce moral hazard and thereby make health coverage both accessible and affordable. By forcing consumers to become the executors of die bulk of their healthcare expenditures, moral hazard is reduced, as are healthcare costs. A secondary benefit realised by MSAs is the increase of health insurance coverage for the previously uninsured. Currently, 25 million people who work for businesses with 50 or fewer employees in the USA are uninsured. Of self-employed people another 9.7 million are uninsured. A total of 35.7 million are therefore eligible for MSAs. Golden Rule an MSA administrator reported that 15 to 20% of the MSA policyholders were previously uninsured. MSAs represent a viable solution to alleviating a part of the uninsured population.'' An MSA is composed of two components. The first part is a personal savings interest-bearing account where the consumer deposits monthly premiums or payments. (Under the US tax system the payments—up to $ 1462.50 for individuals and $3,375 for families—are not taxed.) The money in the account is used to pay for routine and preventative care. When die money in die account is exhausted or an expensive medical procedure is necessary, the consumer can invoke the second part of die MSA. In this situation, the consumer first pays for a fixed portion of the medical fees (known as a deductible); afterwards,