A medical savings account (MSA) is an account where tax-deferred deposits can be made for medical expenses. Withdrawals from the MSA are tax-free if used to pay for medical expenses. Typically, a MSA is coupled with a high-deductible health plan (HDHP). Withdrawals from the MSA go toward paying the deductible in a given year. If the deductible is met in that year, the high-deductible policy will pay the remaining medical expenses for that year. If there are funds remaining in the account at the end of the year, the funds can either roll over into the account for the following year or can be withdrawn as taxable income.

The idea of the MSA appears to have come from health care analysts that were concerned about the problem of "overinsurance." They reasoned that overinsurance was raising the cost of health care expenses. They further reasoned that if patients (as opposed to third-party payers) paid their own medical expenses, the cost of health care would decrease.

During the early 1990s, think tanks like the National Center for Policy Analysis in Dallas, TX and insurance companies like Golden Rule Insurance Company in Indianapolis, IN began to promote the passage of a MSA law that would allow for contributions to the savings account to be tax-free. Even though the US Congress was under Republican control and even though the MSA was central to the Republican's health care agenda, a federal MSA law failed to materialize during the 1990s. However, Congress did pass a MSA pilot as a part of the Health Insurance Portability and Accountability Act (HIPPA) in 1996. In the meantime, some states did pass MSA legislation during the 1990s. Missouri was the first state to do so in 1993. By 1998 25 states had some form of MSA legislation offering a state tax break to those that would open a MSA.

For you are not a self-employed person, or working for a self-employed person, you can still setup a medical savings account, see health savings account.

The MSA for the self-employed person or business is now called an 'Archer MSA' by the USA Internal Revenue service, 'IRS'.

All text is available under the terms of the GNU Free Documentation License (see Copyrights for details).