Researchers from the RAND Corporation conclude that Medical Savings Accounts (MSAs) could reduce health care expenditures and would be attractive to both sick and healthy, rich and poor. The results of their study were recently published in the Journal of the American Medical Association.

Legislation before Congress would allow nonelderly Americans the option of MSAs to which they would make tax-free deposits and from which they could pay routine medical expenses up to the deductible on a catastrophic insurance policy they would purchase. Congressional plans would also allow employers to fund such accounts for their employees to complement catastrophic insurance in an employer-provided group health plan.

Depending on the design of the MSA plans and the availability of alternatives -- such as traditional fee-for-service insurance and Health Maintenance Organizations (HMOs) -- the authors of the RAND study project these effects:

• If all insured nonelderly Americans switched to MSAs, their healthcare expenditures would decline by up to 13 percent, depending on how the MSAs are designed.

• However, not everyone would choose MSAs, and taking into account selection patterns, health spending would change by less than 2 percent.

• Medical savings account legislation would have little impact on health care costs of Americans with employer-provided insurance.

• However, depending on the size of the catastrophic limit, waste from the excessive use of generously insured care could be reduced.

• And MSAs would be attractive to both sick and healthy people.

The study assumes that health care consumers prefer the insurance/MSA alternative that benefits them the most after taxes. However, the authors point out that individuals also consider such nonfinancial factors as control over choice of physician and amount of care when choosing a health care plan.

Source: Emmett B. Keeler, et al., "Can Medical Savings Accounts for the Nonelderly Reduce Health Care Costs?" Journal of the American Medical Association, Vol. 275, No. 21, June 5, 1996.