Raisa B. Deber, University of Toronto

The policy option presented here was chosen to stimulate discussion, but is only one of several options examined by the author in the report Medical Savings Accounts in Financing Healthcare


About the presenter

Raisa Deber is professor in the Department of Health Policy, Management and Evaluation at the University of Toronto. She is currently the director of M-THAC (From Medicare to Home and Community: Overtaking the Limits of Publiclyfunded Healthcare in Canada), a community alliance health research program funded by the Canadian Institute of Health Research. She has lectured and published extensively on Canadian health policy, and advised numerous local, provincial, national and international bodies, serving on editorial boards and review panels. She received her PhD in political science from the Massachusetts Institute of Technology, Boston.

Main concern/problem

As care moves from hospitals to home and community, certain costs (e.g. outpatient pharmaceuticals, community-based care) may move outside the requirements for coverage under the Canada Health Act. The costs incurred by individuals will depend on the type of services they need/want, whether they have supplemental insurance, and what is covered through publicly-funded insurance plans (which varies by province or territory).

Proposed Option

Medical Savings Accounts (MSAs) are a family of models that combine a personal or household savings account with a high-deductible catastrophic insurance plan. MSAs represent an explicit rejection of risk-pooling across populations for the services they are intended to cover. They are often designed to encourage individuals to save early to defray anticipated expenditures later in life.


To the extent that the theory of moral hazard applies to healthcare, it predicts that individuals with good health will over-consume healthcare services because they do not have to pay the full cost of that care. MSA advocates argue that people will buy more efficiently if they have to pay with their own resources.

Experience/evidence of success

MSAs are currently in use in several jurisdictions, including the U.S., Singapore, South Africa and China. The evidence strongly suggests that the impact of MSAs depends heavily on the exact design of the plan, the type of care and the characteristics of the clients. Studies have found that utilization for some services decreased among those with higher co-payments. For most participants, health outcomes were unaffected, although the small number who were sick had worse outcomes. Co-payments led to similar reductions in utilization of both necessary and unnecessary care. Subsequent studies have confirmed these findings; copayments for needed services (e.g., preventive care, chronic disease management) may yield worse outcomes, and often generate costs that offset or exceed the savings from reduced utilization. Economic theory would also predict that, particularly when MSAs are voluntary, they are likely to be most attractive to those at lowest risk of incurring health expenditures. This will erode risk-pooling. A series of analyses of U.S. MSAs has concluded that, when people had a choice, MSAs were selected by the healthier and wealthier.

Challenges and limitations

Opponents suggest that MSAs could undermine insurance arrangements, transfer resources from the sick to the healthy, and produce worse health outcomes. Our review suggests that MSA models should be reserved for services that meet three criteria: 1) Utilization is not highly skewed. For skewed categories of expenditures, almost everyone who receives allowances will not need them. This is both expensive and inefficient. 2) The costs are relatively large and episodic. If costs are small, even if predictable, they should be manageable through regular household spending. If high costs recur, individuals would soon deplete their accounts and would have to depend on other sources to meet their bills. 3) The service is not seen as necessary (to avoid the adverse health and fiscal consequences of not using needed services noted above). In practice, 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.

Considerations for Canada

MSAs do not appear to be a valuable addition to financing Canadian healthcare.