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Publicly funded medical savings accounts: expenditure and distributional impacts in Ontario, Canada

  • Jeremiah Hurley
  • G. Emmanuel Guindon

    (Centre for Health Economics and Policy Analysis, McMaster University, Hamilton, Ont., Canada)

  • Vicki Rynard

    (Centre for Health Economics and Policy Analysis, McMaster University, Hamilton, Ont., Canada)

  • Steve Morgan

    (Centre for Health Services and Policy Research, University of British Columbia, Vancouver, BC, Canada)

This paper presents the findings from simulations of the introduction of publicly funded medical savings accounts (MSAs) 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 along three dimensions than have previous analyses: (1) the distributional impacts of publicly funded MSAs across individuals of differing health statuses, incomes, ages, and current expenditures; (2) the impact of differing degrees of risk adjustment for MSA contributions; and (3) the impact of MSA funding over multiple years, incorporating year-to-year variation in spending at the individual level. In addition, it analyses more plausible designs for publicly funded MSAs than the existing studies. Government uses information available from year t − 1 to allocate its budget for year t in a manner that is ex ante fiscally neutral 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 by current health-care expenditures. The impacts on public expenditures under these designs are more modest than in the previous studies and under plausible assumptions MSAs are predicted to decrease public expenditures. MSAs, however, are also predicted to have unavoidable negative distributional consequences with respect to both public expenditures and out-of-pocket spending. Copyright © 2007 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 17 (2008)
Issue (Month): 10 ()
Pages: 1129-1151

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Handle: RePEc:wly:hlthec:v:17:y:2008:i:10:p:1129-1151
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  1. Jonas Schreyögg & Lim Meng Kin, 2004. "Health-Care Reforms in Singapore - Twenty Years of Medical Savings Accounts," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 2(3), pages 55-60, October.
  2. Peter C. Smith & Nigel Rice & Roy Carr-Hill, 2001. "Capitation funding in the public sector," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 164(2), pages 217-257.
  3. Martin Feldstein, 2006. "Balancing the Goals of Health Care Provision," NBER Working Papers 12279, National Bureau of Economic Research, Inc.
  4. Cardon, James H. & Showalter, Mark H., 2007. "Insurance choice and tax-preferred health savings accounts," Journal of Health Economics, Elsevier, vol. 26(2), pages 373-399, March.
  5. Deber, Raisa B. & Forget, Evelyn L. & Roos, Leslie L., 2004. "Medical savings accounts in a universal system: wishful thinking meets evidence," Health Policy, Elsevier, vol. 70(1), pages 49-66, October.
  6. Jeremiah Hurley & Brian Hutchison & Gioia Buckley & Christel Woodward, 2004. "Developing Needs-based Funding Formulae Using Individual-level Linked Survey and Utilization Data: An Application to Home Care Services in Ontario, Canada," Centre for Health Economics and Policy Analysis Working Paper Series 2004-01, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
  7. Meng, Qingyue & Rehnberg, Clas & Zhuang, Ning & Bian, Ying & Tomson, Goran & Tang, Shenglan, 2004. "The impact of urban health insurance reform on hospital charges: a case study from two cities in China," Health Policy, Elsevier, vol. 68(2), pages 197-209, May.
  8. Zabinski, Daniel & Selden, Thomas M. & Moeller, John F. & Banthin, Jessica S., 1999. "Medical savings accounts: microsimulation results from a model with adverse selection," Journal of Health Economics, Elsevier, vol. 18(2), pages 195-218, April.
  9. Liu, Yuanli & Hsiao, William C. & Eggleston, Karen, 1999. "Equity in health and health care: the Chinese experience," Social Science & Medicine, Elsevier, vol. 49(10), pages 1349-1356, November.
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