Medical savings accounts and risk segmentation.

Abstract

proposal. Gone is the aspect of MSAs that would use tax-sheltered contributions and earnings to accumulate savings for retirement or to replace Medicare-the gist of Goodman’s original proposal that gave it its distinctive features. Not that Goodman has abandoned those ideas, but he has not brought Pauly around to them in this paper. So, in the end, Pauly has not endorsed MSAs, only tax-neutrality, while Goodman, at least temporarily, has set aside his abhorrence of managed care. Nevertheless, between the two, we may have the most technically appealing and politically feasible of all market-based, incremental reform ideas. As with almost all of Pauly’s proposals, this one is technically flawless, but that is in part because he and Goodman duck the tough questions of how exactly to construct the transition rules and how to prevent gaming and opportunism as particular groups and individuals decide whether and how to convert to the new tax credit.