The U.S. Congress is on the verge of enacting the most sweeping reform legislation in the 30-year history of Medicare, the federal health insurance program that covers about 37 million seniors and disabled Americans. This Brief Analysis explains how MSAs work. Medical Savings Accounts are personal, individual accounts used to pay for routine and preventive health care and are combined with high-deductible, catastrophic health insurance that pays for major expenses.
Catastrophic insurance pays all expenses above the deductible.
Private insurance companies such as Aetna and Prudential would offer high-deductible insurance policies to seniors as an alternative to traditional Medicare. After paying normal income taxes, seniors could spend the money as they wished. One way is by means of a health care debit card. Seniors would present the card to a doctor at the time a service was rendered and funds would automatically be transferred from the patient's MSA to the doctor's account. Another way would be to pay in cash and take or mail the receipt to the financial institution managing the MSA for reimbursement.