MSAs

Doug Henwood dhenwood at panix.com
Wed Jan 19 21:14:27 PST 2000


"Medical Savings Accounts: Windfalls for the Healthy, Wealthy &

Wise"

BY: REGINA T. JEFFERSON

Catholic University of America

Document: Available from the SSRN Electronic Paper Collection:

http://papers.ssrn.com/paper.taf?abstract_id=171973

Contact: REGINA T. JEFFERSON

Email: Mailto:Jefferson at Law.CUA.edu

Postal: Catholic University of America

Columbus School of Law

Washington, DC 20064 USA

Phone: (202)319-5025

Fax: (202)319-4459

ABSTRACT:

This article analyzes the Medical Savings Account (MSA) program,

and critiques its impact on the retirement and health care

systems. The MSA program is an experimental health care program

created by The Health Insurance Portability and Accountability

Act of 1996. The program allows a limited number of small

employers and self-employed individuals to establish MSAs during

an experimental period. MSA funds may be used for medical

expenses, or carried forward and accumulated tax-free as

retirement savings. The underlying purpose of the MSA program is

to reduce the cost of medical care by providing consumers

greater incentives to be sensitive to health care costs than

traditional insurance provides. Based upon the outcome of the

MSA experiment, in 2000 Congress will decide whether to abolish

or expand the program.

On its face the MSA program appears to be an efficacious

method of tackling both the overwhelming problem of health care

financing, and the increasing need for retirement income

security. However, this article demonstrates that the MSA

program is a questionable response to these concerns because its

underlying policy runs counter to existing retirement income and

health care goals. Furthermore, the article shows that the MSA

program raises serious issues of fairness as it benefits only

relatively few, namely, the healthiest, wealthiest, and most

informed members in society. The article acknowledges that the

program's failure to deliver health benefits and savings

opportunities to all Americans would not render it void of

value, or its cost unjustifiable, if it were successful in

curbing rising health care costs. However, using health care

consumption trends, a comparative analysis, and MSA

participation rates the article determines that the MSA program

is unlikely to significantly impact medical care costs.



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