Publicly Funded Medical Savings Accounts: Expenditures and Distributional Impacts

Jeremiah Hurley, G Emmanuel Guindon (), Vicky Rynard and Steve Morgan
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Vicky Rynard: Centre for Health Economics and Policy Analysis, McMaster University
Steve Morgan: Centre for Health Services and Policy Research, University of British Columbia

No 2007-01, Centre for Health Economics and Policy Analysis Working Paper Series from Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada

Abstract: This paper presents the findings from simulations of the introduction of publicly funded Medical Savings Accounts in the province of Ontario, Canada. The analysis exploits a unique data set linking population-based health survey information with individual-level information on all physician services and hospital services utilization over a four year period. The analysis provides greater detail than have previous analyses regarding: the distributional impacts of publicly funded MSAs across individuals of differing health statuses, incomes, ages and current expenditures; the impact of differing degrees of risk-adjustment for MSA contributions; and the impact of MSA funding over multiple years, incorporating year-to-year variation in spending at the individual level. In addition, it analyses designs for publicly funded MSAs than existing studies. Government uses information available from period t-1 to allocate its budget for year t between MSA contributions and catastrophic insurance in a manner that is actuarially fair for the public sector: the government first withholds funds equal to expected catastrophic insurance payments under the MSA plan, and then allocates only the balance to individual MSA accounts. The government captures the savings associated with reduced health care utilization under MSAs and we examine deductibles that vary by income rather than current health care expenditures. The impacts on public expenditures under these designs are more modest than existing studies and under plausible assumptions MSAs are predicted to decrease public expenditures. MSAs, however, are predicted to have unavoidable negative distributional consequences with respect to both public expenditures and out-of-pocket spending.

Keywords: Medical Savings Accounts; Health Care Financing; Health Care Funding; Cost Sharing (search for similar items in EconPapers)
JEL-codes: I10 I11 I18 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2007-04-11
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Citations: View citations in EconPapers (1)

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