To answer this question, I'll make a crude anology to the now-familiar Individual Retirement Account (IRA). In the USA, the IRA is supported by tax benefits; the Roth IRA, now standard, enables one to avoid taxes on withdrawals from an IRA. In effect, an IRA allows one to avoid capital gains taxes entirely on a certain pool of investments. The 401(k) allows one similar benfits on a much larger pool of investments through one's employer. The MSA (or HSA, as it will hereafter be known) is basically an IRA, except that one is resticted to using the money for paying for medical expenses. In Singapore, the laws apply far more pressure for employees to join and contribute at a very high rate; the money in the MSA is used for paying the deductible on health insurance, and one is allowed to choose among different qualities of health care. The object of this was to ensure that the tiny, authoritarian island nation was forming capital internally. Social security in countries like Singapore, Hong Kong, and Taiwan tend to be organized as a fund into which people pay a large share of available income. As a consequence, savings rates are high, even relative to investment, and those nations usually run large positive balances of payments.

The American plan now before Congress is similar, in that you would use yours to pay the deductible on your health insurance; HSAs would be tailored to extremely high-deductible plans, thereby sharply reducing premiums. In Singapore, the MSA is the gateway to the national healthcare system; here, it is an opt-out for firms with good actuarial bases. People like me, who are seldom sick, young, and big savers, would escape from the burden of paying for those of you with health problems, children, and a mortgage. Arguments in its favor are that all consumers, including me, would have an incentive to avoid healthcare expenses; supposedly, people would "take ownership" of being healthy by eating better, quitting smoking, drinking less booze and coffee, and so forth. If that were really probable, it might be the single strongest argument for adopting some version of an HSA plan.

This does open the door to slippery slope arguments: that insurance is designed to make risk managable, reduce the financial effects of a personal disaster, and distribute the expense of rebuilding in the wake of really big disasters. Just as earthquake insurance prevents Los Angeles from plunging into a depression after the big one hits (because the cost of reconstruction is literally spread worldwide, and therefore reconstruction is virtually guaranteed) so other forms of social insurance prevent one problem-unemployment-from setting in motion a chain reaction of reduced consumption, more layoffs, and then deflation.

The usual arguments for the North American MSA proposals tend to overlook this point. The favorable article from the market fundamentalist National Center for Policy Analysis (NCPA) that I cited above, rebuts this article (Dr. Shortt) examining the importance of the incentives and regulations of different MSA schemes. The NCPA tenaciously clings to the argument that insurance schemes are a form of redistribution, and hence smack of Communism (hence, the allusion to to the fall of the Berlin Wall). But as I attempted to explain in this entry, merit goods such as health care are subject to inadequate market incentives. Insurance is good, and it originated in the global market of 18th century shipping, but for merit goods there are compelling reasons why the state has to guarantee a basic minimum.

The HSA plan before Congress does nothing for this. According to this article in the 26 June CBPP article,

Few would propose a tax cut targeted toward healthy, affluent people that increases health insurance premiums for those who are sick. That is the probable consequence, however, of the Health Savings Accounts proposal coming to the House floor.

Widespread use of MSAs could jeopardize coverage for substantial numbers of Americans in traditional health insurance by causing premiums for traditional insurance to rise markedly; research by the RAND Corporation, the Urban Institute, and the American Academy of Actuaries has found that premiums for traditional insurance could more than double if MSA use becomes widespread.

Once substantial numbers of younger, healthier workers withdraw from an employer’s comprehensive coverage plan — either to purchase a high-deductible policy and set up an MSA on their own or to participate in an employer-sponsored MSA/high-deductible package — a death spiral can set in for the employer’s comprehensive coverage option. The withdrawal of younger and healthier workers from comprehensive insurance causes the employees left in traditional insurance to become a group that is less healthy on average and therefore more expensive to insure

The bipartisan Health Insurance Portability and Accountability Act of 1996 [HIPAA] established a demonstration to test and evaluate Medical Savings Accounts. The demonstration was designed to provide information about the effects of MSAs on workers, employers, and insurers and to do so without creating widespread, irreparable harm to the participants or the insurance market as a whole. Participation in the demonstration is limited to no more than 750,000 participants who are either employees of small businesses (businesses with 50 or fewer employees) or self-employed individuals. Participants must be enrolled in a high-deductible health insurance policy that meets certain statutory requirements and may take tax deductions for contributions they make to MSAs in amounts up to certain limits.