I was fortunate enough to have a guest post written by Ashley from WideOpenWallet.  It’s a great post explaining the pros and cons of Medical Savings Accounts and how they work.  Enjoy!

Medical Savings Accounts

I really love the idea of a Medical Savings Account with a high deductible insurance plan. If you’re not familiar with the Medical Savings Account (MSA) then here’s the scoop…

First thing you need to do is to set up a high deductible health plan that is compatible with an MSA. I found one that works with an MSA and had a deductible of $3,800 for the family. It cost $308 a month. Which a traditional plan not through an employer is going to cost $400 or $500 a month, so it seems there is some room for possible savings.

After you get a high deductible health plan you need to set up your MSA. The MSA is very much like an IRA except that it’s used to pay for medical expenses rather than retirement. You put money into the account tax free and then can use it to pay for medical expenses. Now it depends on your circumstances on whether or not this will actually save you money.

Let’s take my family as an example. Let’s say that we could get traditional health insurance for $450 a month for the family, with the same copays we currently have. My husband and daughter each have a monthly prescription that costs us $32 a month in copays. So our total outlay would be $482 a month, if no one needs to go to the doctor.

Now if we had the high deductible plan mentioned above, it would cost $308 plus the prescriptions. Which would cost us another $140 a month, or a grand total of $448 a month. Which leaves us $34 a month ahead. Again, assuming no one needs to go to the doctor. Which isn’t very realistic. But we could put that $34 a month into the MSA. We would then have $408 a year to pay for doctor visits. We might be able to pull that off and break even.

The beauty of the MSA is two fold. One thing is that once we spend $3,800 on medical expenses everything that’s covered by the insurance is covered 100% from that point forward. Sweet! As with all insurances you want to know what is covered and what isn’t.

The second thing, and this is the true reason I love the MSAs is that it makes the consumer very conscious of what they are spending on health care. Just the simple act of writing this post has opened my eyes. I can buy my daughters daily asthma medicine online for only $25 a month. My local pharmacy charges $92. Wow. Of course with my insurance I only pay $22. But if I was paying for it out of pocket there is no way I would pay $92.

If everyone had MSAs then the consumer would drive down the cost of health care. Good ole fashion competition would force doctors to provide a value, hospitals wouldn’t get away with charging $40 for one aspirin because the consumer wouldn’t allow it! It makes me wonder where else I could be saving money. Is my pediatrician over charging me? Could I get the same care from a cheaper doctor? Maybe.

When I was researching my pediatrician one question I didn’t even think to ask was “How much do you charge for an office visit?” Don’t you find that strange? If I were researching any other kind of service that would be the first thing I would ask. The first question is always, “How much do you charge?” Think of the impact that would have on the medical world?

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I think an interesting conundrum, that if we go to a free market system as Ashley is suggesting we’d all have to “shop” for the best deal in medical care.  But does that mean that those with money would always be seen faster because they could afford doctors who see less patients and thus more time?  Or does it mean that if you can pay you can get better treatment?  There is more involved in the US system than just cost.