A Good Briefing on Medical Savings

You’ve probably heard the jargon and perhaps the underlying theory behind medical savings accounts as an alternative to big-government solutions or even to tax-preferred insurance in health care. There are lots of different kinds of medical accounts: MSAs, HRAs, FSAs, HRRAs, etc. A good, quick primer on the issue is now available from the National Center for Policy Analysis. I’d recommend it to those who want to learn more about market innovation in health care.

One small complaint: the piece doesn’t adequately address the issue of why there should be any tax breaks associated with health care saving or spending. Many free-market types — including some conservatives and libertarians I met with this weekend at the annual convention of state think tanks, held in Seattle — believe that the ideal tax treatment of health care spending, saving, and insurance premiums would be to tax them all as ordinary consumption. I disagree. Some component of the health care services we believe is really a form of (human) capital formation and should be treated as we treat IRA deposits: not taxed up front because they generate future taxable income. I’ll explain the idea more if anybody cares.

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