Question

What is Medical/Health Saving Account (or Health Saving Account) and how does it work? Please discuss the advantages and disadvantages of the Medical Saving Account policy. How do you rate its effectiveness in controlling cost and providing access to care for the poor and the sick?

Answer 1

• Health saving account is a personal account but it can be used only for healthcare expenses.It is available to all taxpayers in US ,to be eligible one must  subscribe in high-deductible health plan (HDHP).HSA can be used to pay current and future medical expenses any time without tax.It is similar to IRA account.It reduce employees investment on health expenses and insurance premiums.The goal of HSA is to make the consumers to involve more in their healthcare decisions.HSA become widely available now.One can also use this account to pay other family members medical expenses.If we don't use the money to pay medical expenses then your money increases from year to year . At the age of 65 ,we can withdraw the unspent HSA funds .If one withdraw the fund before the age 65 for paying other than medical expenses, in addition to income taxes, you will get 20 percentage penalty on the withdrawal.
• Advantages:Pre tax benefits is the important advantage provided by HSA.It is used to increment the retirement if the HSA funds are not used. Employee's can contribute to their employee HSA account.If HSA fund is not used ,it increases the interest.It gives the freedom to use the HSA fund for various medical expenses .
• Disadvantages:There are limits on how much can be added to your HSA account each year.If the HSA funds not used properly ,there will be penalties.There are many risks associated with investments.There are monthly maintenance charges for some HSAs.
• HSA help to pay various kinds of medical expenses. HSA fund grows year by year if it is not used to pay any medical expenses .Money in HSA have no tax.HSA funds can be invested in mutual funds .So it is a big solution for the poor people to meet up their medical expenses .