HOW WILL MEDICAL SAVINGS ACCOUNTS AFFECT MEDICAL SPENDING

This paper estimates that if a cross-section of nonelderly adults swit ched from comprehensive insurance to a combination of catastrophic ins urance and a medical savings account (MSA), they would reduce their me dical spending by between 2% and 8%. The author constructs measures of the prices individuals pay for medical care under a typical comprehen sive insurance policy and a particular combination of catastrophic ins urance and MSA. The difference in prices paid in the two health plans is combined with price elasticity estimates from the Health Insurance Experiment to predict changes in spending. Several qualifications to t he estimate are considered.