Medical Savings Accounts in South Africa

Policy Reports | Health | International

No. 234
Thursday, June 01, 2000
by Shaun Matisonn


  1. For a survey of these problems and their consequences, see John C. Goodman and Gerald L. Musgrave, Twenty Myths about National Health Insurance, National Center for Policy Analysis, Policy Report No. 166, December 1991.
  2. Ibid., pp. 64-67. For a theoretical explanation of why democracies exhibit these tendencies, see John C. Goodman, National Health Care in Great Britain (Dallas: Fisher Institute, 1980), ch. 6.
  3. Johannesburg Star, April 28, 1999.
  4. Source: South Africa Survey 1999/2000 millennium edition, South African Institute of Race Relations.
  5. Goodman and Musgrave, Twenty Myths about National Health Insurance, pp. 29-31.
  6. South African Health Review, Health Systems Trust, 1998.
  7. See John C. Goodman, The Regulations of Medical Care: Is the Price Too High?, (Scan Francisco, California: Cato Institute, 1980), Chapter 5 and John C. Goodman and Gerald L. Musgrave, Patient Power: Solving America's Health Care Crisis, (Washington, D.C.: Cato Institute, 1992), Chapter 5.
  8. The insurers were mutuals with no shareholders.
  9. Where for-profit companies did the administration for the mutuals, they earned administrative fees, but they had no financial incentive to be concerned about overall costs.
  10. John C. Goodman and Merrill Matthews, "Medical Savings Accounts: The Private Sector Already Has Them," National Center for Policy Analysis, Brief Analysis No. 105, April 20, 1994.
  11. The advantage of a tax-qualified plan is that MSA contributions are treated the same way as the payment of insurance premiums under the tax law: both are paid with pretax dollars. (If the plan is unqualified, MSA deposits are taxed.) However, if unused MSA funds are withdrawn by the account holder at the end of the year, they face income taxes plus a 15 percent penalty (if the account holder is younger than 59 1/2). Funds that remain in MSA accounts grow tax free.
  12. For example, they may contribute more than the deductible.
  13. However, since the service is not a "covered benefit," the expense will not count toward the deductible.
  14. Employers receive a tax deduction on any insurance expense - just as they do for other employee benefits.
  15. Note also that only the contract rate counts towards the deductible.
  16. John C. Goodman and Merrill Matthews, "Answering the Critics of Medical Savings Accounts: Part I," National Center for Policy Analysis, Brief Analysis No. 132, September 16, 1994.
  17. The MSA data set comes from two well-established MSA carriers, Discovery Health and Fedsure Health. The non-MSA data set comes from D & E Healthcare. The data was based on all members present for the full 1997 calendar year. To eliminate potential anomalies caused by different group sizes, the analysis was confined to groups of more than 20 families.
  18. Assumes a switch from a conventional health plan with a $500 deductible and a 20 percent copayment up to a maximum out-of-pocket limit of $1,500. The net gain is the difference between the MSA end-of-year refund (or out-of-pocket expenses under the MSA plan) and out-of-pocket expenses under conventional insurance.

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