Medical Savings Accounts in Financing Healthcare

CHSRF Series of Reports on Financing Models: Paper 3

Full report (430 KB)

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

This synthesis is the third of a series of papers being produced by the Canadian Health Services Research Foundation on the topic of healthcare financing models. The fourth paper in the series, Experience with Medical Savings Accounts in Selected Jurisdictions, also written by Raisa B. Deber, PhD, is a companion paper to this synthesis.

This report examines the potential of Medical Savings Accounts as a financing model for healthcare in Canada.

Medical Savings Accounts, or MSAs, refer to a family of financing approaches used to pay for specified healthcare services. MSAs are currently in use world-wide, including in the U.S., Singapore, South Africa, and China. Although called by different names, all plans or models have two fundamental features: a personal or household savings account; and a high-deductible catastrophic insurance plan.

This paper highlights the characteristics and underlying assumptions of MSAs as a financing model for healthcare and reports on what research tells us about the extent to which these assumptions hold. Particular attention is paid to the distribution of health expenditures in the population.

Key Messages

  • The underlying premise of Medical Savings Accounts (MSAs) derives from economic theory that argues that people will be more efficient purchasers if they must pay from their own resources.
  • Opponents of MSAs suggest that such gains in efficiency are unlikely for a number of reasons and suggest that there are strong potential risks, such as increased total costs and worse health outcomes.
  • MSA models represent an explicit rejection of risk-pooling across populations for those services they are intended to cover. They are often designed to encourage individuals to save early to defray anticipated expenditures later in life.
  • Total health expenditures—including the most expensive sub-categories of services—tend to be heavily skewed, with a small number of people accounting for most of the cost.
  • Accordingly, MSA models should be reserved for services that meet three criteria:
    • Utilization is not highly skewed.
    • The costs are relatively large but not ongoing.
    • The service is not seen as necessary (for example, to avoid the adverse health and fiscal consequences of not using preventive services or managing chronic diseases).
  • Very few services meet the three criteria.
  • MSAs represent high costs for minimal benefit, particularly as they exclude both the most expensive services and those most important to improving health.
  • MSAs do not appear to be a valuable addition to financing Canadian healthcare.