The Macroeconomics of Health Savings Accounts (Preliminary and Incomplete)

We use an OLG model with heterogenous agents where agents can choose between a low deductible- and a high deductible health insurance. In addition, they can save tax free in a health savings account (HSA) if they choose the high deductible insurance. We study the effect of transitioning from a system with private health insurance for young agents and Medicare for old agents to a system with HSAs for young agents and Medicare for the old. We focus on whether HSAs can increase the number of insured workers and whether health expenditures can be contained. In addition, we investigate the effects on output, distributional issues and the effects on the government budget. Preliminary results from a numerical exercise indicate that HSAs decrease the premium of the high deductible insurance, increase the number of insured workers, increase savings, increase income and have a negative effect on the distribution of wealth. HSAs, under the current parameter setting, cannot decrease aggregate health expenditures