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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Medicare medical savings account

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: Probably the best kept secret and one of the most significant developments in our out of control medical system, was announced in November. This was the announcement of Medicare Medical Savings Accounts, available after 11/15/06. MMSA promises to inject a much needed element of patient cost control for Seniors. No wonder it has been kept under wraps! What can you tell us about MMSA?

A: There is no indication of an intention to keep the program under wraps, but the administrative details have been extremely slow in developing. The MSA/HSA program (it is not clear whether the final program will be called "Medical Savings Account" or "Health Savings Account) was always intended to be eventually available for Medicare beneficiaries. This was a hotly discussed topic in 1998 when the program was first authorized. The Center for Medicare and Medicaid Services introduced the first test MMSA program in July 2006. WellPoint, to our knowledge, is the only insurance plan participating in the test program so if you want to try this program right now then you must live in an area serviced by WellPoint. The biggest obstacle to the growth of this program is that current tax law specifically excludes a deduction for the account contributions to those enrolled in Medicare. We presume a change in tax law will follow, hopefully retroactive to January 1, 2007. This may be the primary reason that insurance companies are not promoting the MMSA option. It seems that the reasonable course of action is to wait until this program becomes "mainstream" so there might not be much more to discuss now. But eventually is seems reasonable to assume that most Medicare beneficiaries will have access to a MMSA option. Separately, there is no indication that this would program would be extremely popular. If we extrapolate from the popularity of the HSA programs already available to the under-65 group, then we could expect perhaps 10% of Medicare beneficiaries to eventually enroll in the program. There will always be the majority of people who prefer a managed care or traditional Medicare program. As far as the impact on costs and behavior, the latest research seems to indicate that while HSAs do reduce costs, the effect is minimal - perhaps 5% to 10% net savings overall.


More resources:

Summary of HSA Reform Proposals for 2007 Spin on HSA Reform Medicare and Health Savings Account