Experience with Medical Savings Accounts in Selected Jurisdictions

CHSRF Series of Reports on Financing Models: Paper 4

Raisa B. Deber, PhD
Department of Health Policy, Management and Evaluation
University of Toronto
With the assistance of Kenneth C. K. Lam

Final report (257 KB) 

This synthesis is the fourth of a series of papers that the Canadian Health Services Research Foundation is producing on the topic of healthcare financing models. It is a companion paper to the third paper in the series, Medical Savings Accounts in Financing Healthcare, also written by Raisa B. Deber, PhD.

Medical savings accounts (MSAs) refers to a family of financing approaches that use a personal health spending account, often combined with a high-deductible insurance plan, to pay for specified health care services. They already exist in a number of countries, including the U.S., Singapore, South Africa and China, and several reports have urged the use of MSAs in other countries including the U.K., Australia, and Canada.

There are considerable differences across plans, in terms of such details as: who can join; whether membership is voluntary; who contributes (employer, employee or both); who owns the funds (employer, employee); levels of deductibles and co-payments; availability and generosity of insurance for costs above the threshold; which services can be purchased with these funds; and whether unused contributions can be carried over to subsequent years. Regardless of these differences, these plans do not usually involve government contributions, except indirectly through the tax system. A number of authors have reviewed international experience with MSAs.

Note that the descriptions in this companion paper are based on the materials reviewed, and may accordingly not capture recent changes, should these have occurred.

Key Messages

  • The design of medical savings account (MSA) plans varies considerably within and among jurisdictions.
  • The impact of MSAs depends heavily upon how the plan is designed. The design of certain MSAs is likely to increase total costs.
  • The U.S. has implemented a number of MSA models, each with its own rules and tax implications. To date, relatively few people have selected such models. Those who have selected MSA models tend to be richer and healthier, perhaps because the models were being used primarily as a savings device and tax shelter.
  • In the U.S., some studies found that families would attempt to control costs by delaying or avoiding physician visits. However, families did not feel that they could control costs once the clinical encounter had occurred.
  • Being exposed to even modest increases in personal costs did make U.S. consumers more cost-sensitive, but they seemed unable to distinguish between cutting back on necessary versus unnecessary care. Co-payments for needed services yielded worse outcomes, and often generated costs which offset or exceeded the savings from reduced utilization.
  • China employs MSAs in some jurisdictions (largely cities) as part of a multi-level system of financing. Where used, the individual-level MSA is the first line of financing. Once those funds have been exhausted, the individual must still pay a deductible out-of-pocket (set at up to 5% of salary), with a pooled social insurance account (paid by employers, at the city level) responsible for financing costs above that level.
  • Observers of both the U.S. and Chinese plans suggest that costs for care had increased through loss of bargaining power over providers.
  • MSAs are compulsory in Singapore, where they are blended into the social insurance system. About 70% of health expenditures are financed out-of-pocket. Analysts argue that the MSA plan has resulted in higher costs and worse equity.
  • South Africa introduced MSAs and, while some analysts were enthusiastic, a Department of Health inquiry soon concluded that MSAs were problematic and should be phased out.