Popularity of Medical Savings Accounts Demands an Immediate End to Restrictions

WASHINGTON, D.C. – Calling the 1996 Health Insurance and Portability Act's imposed cap on Medical Savings Accounts arbitrary and restrictive, speakers at a Washington, D.C., press conference today called for expansion of the program.

Public policy experts and Congressman Matt Salmon urged reform of the laws which made tax-free MSAs available as part of an experimental program open to only 750,000 policy holders.

"The response to MSAs has been exactly what we expected: overwhelming," said Dr. Merrill Matthews, Vice President for domestic policy for the National Center for Policy Analysis. The NCPA has been instrumental in popularizing MSAs.

"Now they're a proven commodity and it's time to open up the program," Matthews stated.

Matthews continued by suggesting several ways to increase the number of available policies:

  • Expand MSA availability by raising the cap
  • Create MSAs for federal employees
  • Allow the use of MSAs for Medicare
  • Create Super IRAs (integrating the MSA concept into an IRA)
  • Permit Back-ended MSAs (in which deposits are made with after tax dollars, but withdrawals are made tax-free)

Several MSA bills have been introduced in Congress. One, proposed by Rep. Matt Salmon (R-AZ ), would lift the cap on the 750,000 MSAs allowed under the 1996 legislation. Salmon has also introduced separate legislation to make MSAs available to federal employees.

"It's a matter of fairness and efficiency," Salmon said. "We've offered MSAs to the self-employed and to those working for small firms. This bill would allow federal employees the same opportunity to take control of their health care decisions."

Under a provision of the Kassebaum-Kennedy health insurance reform bill, employers with 50 or fewer employees and the self-employed can purchase less expensive health insurance policies with a high deductible and make tax-free deposits to an MSA. They can use their MSA money to pay small and routine health care expenses, reserving insurance to pay large, catastrophic expenses. Money that remains in the account at the end of the year earns tax-free interest.

Also taking part in the press conference were Karen Kerrigan with the Small Business Survival Committee and Peter Ferrara with Americans for Tax Reform.