Medical Savings Account (MSA)

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Definition: Medical Savings Account (MSA)

A Medical savings account is an account where tax-deferred deposits are made to meet medical expenses incurred by the individual. It was introduced in Singapore in 1984, while in US it was introduced in 1993.

Medical savings account was introduced in China in 1994. In United States the MSA are generally used for self-employed people who can make tax-deferred deposits for medical expenses. The withdrawals from MSAs are free from taxes if withdrawals are made for the purpose of meeting the medical expenses. These expenses can pertain to almost all forms of health related ailments, disabilities, vision care, dental care etc.

The Medical savings account is also mostly coupled with high-deductible health plan (HDLP). The idea of the MSAs was first introduced by the healthcare analysts. The main reason was to reduce healthcare expenses due to over-insurance. Also, if the patients paid for their own treatments, the healthcare expenses would be much less. Finally Congress in US passed the MSA pilot in 1993 and by 1998 at least 25 states in US had some MSA legislations.

The main advantages include

• The deposits made in the MSAs are completely exempt from taxes and the money added to the account in a year can roll over to the next year

• The plan involves the self-employed people and small businesses with less than fifty employees and is absolutely self-directed

• MSAs also include long-term health coverage. However in many cases the claimants may find that the contributions they get from the MSAs is much lower than the actual medical expenses


Hence, this concludes the definition of Medical Savings Account (MSA) along with its overview.


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