Can MSAs help reduce healthcare costs? - medical savings account

Healthcare Financial Management, April, 1996 by Michael T. Bond

Among the criticisms of MSAs are that unused funds left in an account currently are taxable and that MSAs may discourage preventive care, thwart growing initiatives toward cost-effective managed care, and encourage the possibility of adverse selection by healthy employees.

(a.) Carlstrom, C., "The Government's Role in the Health Care Industry: Past, Present, and Future," Economic Commentary, Federal Reserve Bank of Cleveland, June 1994. (b.) Newhouse, J., "Free for All: Lessons from the RAND Health Insurance Experiment," Santa Monica, California: RAND Corporation, 1993. (c.) Feldstein, M., and Gruber, J., "A Major Risk Approach to Health Insurance Reform," Working Paper No. 4852, National Bureau of Economic Research, Inc., p. 7, September 1994. (d.) Cleaver, Joanne, "MSAs add up: interest in new benefit on rise," Crain's Chicago Business: 19, 9, pp. Sr4-6, February 26, 1996. (e.) Barchet, S., "Medical Savings Accounts: A Building Block for Sound Health Care," Evergreen Freedom Foundation, Olympia, Washington, March 1995. (f.) Litow, M., "Examining Medical Savings Accounts with Guaranteed Issue, Community Rating, and Risk Pools," Milliman & Robertson, Inc., December 1994. g. Golden Rule Employee Survey on MSAs: Luntz Research Companies, January 1995.

About the author

Michael T. Bond, PhD, is associate professor, department of finance, Cleveland State University, Cleveland, Ohio.