Medical Savings Accounts

NCPA Study: Making Medical Savings Accounts Flexible (SUMMARY) (TEXT)

A new study recommends that restrictions be eased on the Medical Savings Accounts (MSAs) included as a demonstration project in the 1996 Kassebaum-Kennedy health insurance reform legislation. Among the needed changes, say health policy experts, are lifting restrictions on MSA enrollment, coverage and deductibles.

For instance, the MSA legislation dictates the size of deductibles -- from $1,500 to $2,250 for an individual policy and from $3,000 to $4,500 for a family policy. Another problem is that the deductibles do not reflect geographic differences in medical costs. For example:

  • According to the American Hospital Association, the cost per day of a hospital stay in 1995 ranged from more than $1,300 in California, Alaska and the District of Columbia to $476 in South Dakota (see figure).

  • According to 1993 claims data from the Metropolitan Life Insurance Company, the cost of a vaginal childbirth ranged from more than $8,000 in New York and New Jersey to $2,700 in Wisconsin (see figure).

A deductible of $2,000 per person in New York City does not go nearly as far as the same deductible in Lincoln, Neb. However, deductibles of $5,000 to $10,000 are not uncommon in the individual market, especially in higher-cost areas. Consumers wanting such high deductibles actually have to lower their deductible amounts to purchase an MSA plan under the current legislation. Others might be more comfortable moving first to a $500 deductible, gradually increasing the deductible amount as savings accumulated in their MSA.

Another problem is that MSA contributions are limited to 65 percent of the deductible for individuals and 75 percent for families. Experts say people should be allowed to fully fund the deductible amount with their MSAs, eliminating out-of-pocket costs. Such flexibility would make MSAs a more appealing alternative, and make them available to more people.

Source: Greg Scandlen, "Medical Savings Accounts: Obstacles to Their Growth and Ways to Improve Them," Policy Study No. 216, July 1998, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, Texas 75240, (972) 386-6272.

Home | Support Us | All Issues | Social Security | Debate Central | Contact Us

Dallas Headquarters: 12770 Coit Rd., Suite 800 - Dallas, TX 75251-1339 - 972/386-6272 - Fax 972/386-0924
Washington Office: 601 Pennsylvania Avenue NW, Suite 900 South Building, Washington, DC 20004 - 202/220-3082 - Fax 202/220-3096
© 2001 NCPA