Medicare and MSA's

Saving Medicare With Individual Accounts

NCPA President John C. Goodman has proposed changing the method for financing Medicare to allow individuals to contribute more to private investments accounts. The plan would not change the Medicare payroll tax, which finances current retirees' benefits.

Under Goodman's plan:

  • Individuals would contribute $500 a year to private investment accounts that would earn interest until retirement.

  • Upon retirement, a person could use the account to pay medical expenses.

  • The government would give individuals a tax credit to offset the $500 annual deposit.

  • The loss to the federal treasury would be paid for with money from the tobacco industry settlement.

The Medicare system is expected to go broke by 2010. Goodman's plan to control Medicare costs also includes the use of Medical Savings Accounts, tax-free savings accounts used to buy health care services.

Source: Marilyn Werber Serafini, "Financing Medicare Through Private Savings," National Journal, February 27, 1998.

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