NCPA - National Center for Policy Analysis

Demand For Medical Savings Accounts Higher Than Previously Thought

May 31, 2000

Medical Savings Accounts (MSAs) are seen as a way to reduce medical costs and/or increase consumer choice. MSAs allow enrollees under a health care plan to pocket a set amount of health care money if they do not use it to pay health care deductibles or copayments. This gives recipients an incentive to ration medical care. While medium-to-large-size firms are generally seen as the best candidates for such a system (because of their large risk pools), the current law does not give a tax exemption to MSAs except for small employers. A recent study finds that if a tax exemption were available for MSAs, a number of larger companies would seize the opportunity.

A recent survey of company Benefit Specialists finds:

  • 42 percent would recommend an MSA to a typical medium-large sized firm.
  • 39 percent would recommend an MSA to their own firm.
  • 81 percent would recommend adding the MSA option to existing managed care plans of medium-to-large-sized firms.

The study also says a number of benefit specialists are concerned about the complexity of the MSA program, the difficulty in educating the recipients, and the increased administrative costs of such a system.

Source: Mark Pauly, Allison Percey, Bradley Herring, and Jerry Rosenbloom, "What Would Happen If Large Firms Offered MSAs?" Health Affairs, May-June 2000.

 

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