Question: Can Medical Savings Accounts (MEDICAL SAVINGS ACCOUNTS s) as healthcare financing mechanisms contain rising healthcare expenditure, as well as increase equity and efficiency in healthcare provision? Discuss critically, with specific references to case studies, examples and readings from HP400.
Can Medical Savings Accounts as healthcare financing mechanism contain rising healthcare expenditure as well as increase equity and efficiency in healthcare provision?
This study critically analyses the use of medical savings accounts which are used as the healthcare financing mechanism. In most of the cases of health care systems, financing is developed from various types of sources, like private health insurance premium, taxes, user charges and social health insurance contribution. Medical savings accounts are introduced as the part of funding health care system in all most all the countries. This medical savings account is similar to the bank account(Yip & Hsiao, 2016). The account holder is the owner of this account, but he or she can only expense the money from this account only in the case of medical requirements for the family or individual. For this reason, the implementation of this MSA is found to be limited which can be raised for widespread international interest (Borda, 2011).
This study discusses all the possible reasons for implementing these type savings accounts in the case of healthcare sector and provides some examples in which way they are implemented in some countries.
Concepts of medical savings accounts
MSA or medical savings accounts indicate special types of personalized savings accounts. Both compulsory and voluntary contributions for the medical savings accounts are implemented strictly for covering the entire expenses of healthcare(Wouters, et al., 2016). These accounts are worked as the instrument in finance and it is designed in such a way so that it is able to spread any kind of financial risk related to illness at any point of time. Hence, the basic principle of this MDS system includes some specific criteria regarding making payments, interest earned as well as withdrawals which would vary considerable way based on the role of MSA in the health care system(Dixon, 2002). According to Schreyogg (2004), MSA is such an instrument which can be used as the financial security against any kind of risk regarding illness, like social health insurance as it provides risk covering policies and ways for every individual(Borda, 2011).
On the other hand, it is needed to emphasize on the fact that for using Medical Savings Accounts, there are various macroeconomic factors, such as wage growth, inflation rate as well as employment rate etc. It also depends on the investment component and the performance of financial markets(Wouters, et al., 2016).
Therefore, the objectives of MSAs are as follows(Borda, 2011):
Applications of MSAs in China:
In China, there is half of 350 million urban population is found to cover under the Government Insurance Scheme or GIS and Labor Insurance Scheme or LIS. Under GIS, any government employee, university teacher and student, retired government employee and disable veterans etc all are financed by the Government budgets. In the case of LIS, the health insurance covers the life of any employees and retirees, other dependents working under any state enterprises having over 100 employees. 9 and 40 percent of total population in China are associated with GIS and LIS schemes respectively. But, China has faced serious problems with these two health schemes particularly in the case of urban healthcare(Yip & Hsiao, 2016). In China, the fiscal crisis has happened for both GIS and LIS schemes. In GIS share, there was a 14 % increment happened in the government budgets in the year 1978. It has been continued to grow 16 percent by 1983 as well as it would rise by 30 percent in the year 1993(OECD, 2014).
In this scenario, China has reformed its health care funding schemes for urban population by implementing medical savings accounts. This finance reform has been initiated by the local government of Zhenjiang and Jiujiang in the year 1994 among a population of 2.5 million(Yip & Hsiao, 2016).
In both the places, Zhenjiang and Jiujiang of China, the government has experimented with three tiers processes. Those are MSAs, deductibles which are considered as out-of-pocket spending and social risk pooling. In this case, at first, MSAs are used to provide incentives for the consumers which are more cost-sensitive with the demand for health services. Deductibles are utilized in health financing in order to enhance the cost-sharing through the patients(Myint, et al., 2019). The aim of financial risk pooling is to protect all those individuals against any situation of catastrophic expenses. The contribution ratio of employees and employers is 1percent to 10 percent in this MSAs scheme. This is deducted from their total wage bill each year. From these two accounts 5 % goes to social risk-pooling fund and other 6 percent goes to individual account(Myint, et al., 2019).
Investment in equity fund:
This has to be noted in the case of Jiujiang/Zhenjiang experiment the equity investment is increased through pooling the risk at any city level. This also allows the profitable unit as it would cross-subsidize which can run for the amount of the deficit. Previously, it has happened that entire contributed amounts in GIS and LIS in China were available for the risk pooling in every organization. In this case, half of the amounts were deposited to individual account as many people do not use the medical services(Worldbank.org, 2018).
After implementing MSAs, there is a fair chance of increasing catastrophic health insurance. This scheme also encourages the medical service users for becoming more cost-conscious as the MSAs system includes high deductibles transfer of income from less healthy to healthy enrollees. Through MSAs it is possible to retain 6 percent of wage on behalf of healthy beneficiaries(Dixon, 2002).
System of MSAs in Singapore:
In Singapore, the main reason of implanting the MSAs system in the health care sector is that the citizen of Singapore as an individual is responsible for their healthcare and for this reason, they use to save the money into an account from which they can do the expense as required for any health issue. Workers and employers have to follow a mandatory process of contributing a tax-free proportion to their income. The contribution will be reduced with increase in age and any individual can use healthcare policies by providing a small part in this scheme at their old age(McKee, 2013). These funds are found to share among all the members of a family. Moreover, any money would be left over for any case of death which would be inherited for survival of the family members.
Other than these, there are two other fundraising activities happened in Singapore for which any gaps found in availing the health care system can be destroyed. Those are Medisave and Medishield schemes and it includes all types of long term treatment for draining out the Medisave accounts(Wouters, et al., 2016). From the year 2002, those two accounts are supplemented by applying the Eldershield scheme where health insurance covers for older peoples who have long-term disability. Again, this scheme also protects those individuals who do not possess enough funds for their health management. In this case, another safety net is available as the form of Medifund. This scheme provides the priority to the older people for whom the Medisave funds are depleted. It has been paid from the income which refers to the large endowment fund provided by the Government of Singapore(Mukherjee, et al., 2012).
Therefore, from the above discussion, it can be said that the medical savings accounts are more feasible for the people who cannot afford money for larger insurance schemes. Also, in some cases like China, the Government has implemented this scheme as they want to get rid of the high amount of budgeting cost. The main reason for implementing the medical savings accounts in different countries is to raise fund through the social risk-pooling system. The money from MSAs can be invested in equity fundraising scheme through this pooling for which government can provide better healthcare service to all the citizens covered under these policies. Further, MSAs can be deployed because of its simple usability where both employees and employers can get rid of their extra wage tax. Therefore, the medical savings accounts can be considered as the most important financing instrument in the healthcare system in almost all the countries in near future.