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Discounting of Medical Savings Accounts

Author

Listed:
  • Maoyong Fan

    (Department of Economics, Ball State University)

  • Zhen Lei

    (Department of Energy and Mineral Engineering, Pennsylvania State University)

  • Gordon Liu

    (National School of Development, Peking University)

Abstract

Medical savings accounts (MSAs), personal medical accounts that are restricted for health-care consumption only, have been widely adopted to cushion individuals against the financial risk due to illness and to address the potential moral hazard problem in the health insurance system. This paper studies the effects of MSAs on health-care expenditures and suggests that there may be some inherent tension between the two purposes of MSAs: account holders are likely to discount MSA funds because of their restricted use, which renders MSAs to be less effective in controlling health-care costs. We exploit a quasi-natural experiment in China that exogenously reduced MSA funds for enrollees in certain age cohorts. We find that this reduction led to a large and statistically significant decrease in health-care expenditures that is unlikely due to an income effect. The effect was driven by enrollees who were likely to exhaust MSA funds and enter the deductible phase in which they paid out-of-pocket.

Suggested Citation

  • Maoyong Fan & Zhen Lei & Gordon Liu, 2016. "Discounting of Medical Savings Accounts," American Journal of Health Economics, MIT Press, vol. 2(2), pages 161-183, Spring.
  • Handle: RePEc:tpr:amjhec:v:2:y:2016:i:2:p:161-183
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    References listed on IDEAS

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    Cited by:

    1. Tianxu Chen, 2019. "Can Health Savings Account Reduce Health Spending?: Evidence from China," Working papers 2019-08, University of Connecticut, Department of Economics.

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    More about this item

    Keywords

    discounting; medical savings accounts; natural experiment; health care; restricted use; difference-in-differences;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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