The macroeconomics of heath savings accounts

Abstract

We analyze whether the introduction of Health Savings Accounts (HSAs), which is a health insurance reform coupled with a capital tax reform, can reduce health care expenditures in the United States, while simultaneously increasing the fraction of insured individuals. Unlike previous studies on HSAs, our analysis relies on a general equilibrium framework and therefore fully accounts for feedback effects from general equilibrium price adjustments. Our results from numerical simulations indicate that the introduction of HSAs increases the percentage of the working age population with health insurance in the long run but fails to curtail spending on health care. These results depend critically on the interaction of general equilibrium effects and the annual contribution limits to HSAs. Finally, the long-run tax revenue loss due to the introduction of HSAs is substantial and can amount to up to 5 percent of GDP.