The Medicare MSA

---

Medicare is on an unsustainable financial path.

• Federal Medicare spending exceeded $900 billion annually  
• Combined federal health spending (Medicare, Medicaid, ACA, ESI subsidies) exceeded $1.6 trillion in 2021  
• Projections show federal health spending approaching $3 trillion per year within this decade  
• Medicare’s Hospital Insurance Trust Fund faces insolvency within the next several years  

The core issue is not demographics alone. It is how Medicare is structured and financed.Medicare operates primarily as a defined-benefit program:

• The government promises a set of benefits  
• Costs are open-ended  
• Utilization risk sits with taxpayers  
• There is little incentive for beneficiaries to conserve dollars  

This structure guarantees cost growth faster than GDP and revenue.

The Medicare Medical Savings Account (MSA) was created under the Medicare Modernization Act of 2003 and has been available since 2007.It is the only Medicare Advantage plan that:

• Has no provider networks by law  
• Allows beneficiaries to see any provider who accepts Medicare 
• Combines a high-deductible plan with a government-funded savings account 
• Deposits Medicare funds directly into the beneficiary’s account  
• Allows unused funds to roll over year to year 
• Gives the beneficiary full control of spending decisions  

Under an MSA:

• Medicare pays the insurance premium  
• Medicare deposits a fixed dollar amount into the MSA  
• The beneficiary decides how and when to spend those funds  
• After the deductible is met, the plan pays 100% of Medicare-covered services 

This is a defined-contribution model inside Medicare.

Lee Benham sold the first Medicare MSA in America in 2007.For over a decade:

• Medicare MSAs delivered lower utilization 
• Produced lower taxpayer costs 
• Gave seniors more choice and control 
• Created incentives to save, not overspend  

In many cases, seniors accumulated thousands of dollars in unused MSA funds, while maintaining full access to care.In short:

The MSA aligned patient incentives with taxpayer sustainability. 

If MSAs work so well, why didn’t they scale? The answer is not policy failure — it’s incentive distortion.

Medicare Advantage plans receive STAR bonus payments based on quality metrics.

• These bonuses are paid as a percentage of premium 
• Higher utilization → higher premiums → higher bonuses  
• HMOs and PPOs benefit most  
• MSAs benefit least  

Because:

• MSAs encourage lower utilization 
• MSAs reduce premium growth  
• MSAs generate smaller STAR bonuses 

As a result:

• Insurers shifted capital to HMO/PPO MA plans  
• MSA marketing was deprioritized  
• Carriers exited the MSA market despite good outcomes  

This is why:

• Nebraska had MSAs for only one year  
• Lasso Healthcare offered MSAs in 35 states, then exited  
• Today, only one state (Wisconsin) still has an actively marketed MSA plan  

The market did not fail. The payment incentives punished the most efficient plan.

The Medicare MSA proves something critical:

Government can fund coverage without controlling spending decisions. 

Medicare insolvency cannot be solved by:

• Raising taxes alone  
• Cutting benefits alone  
• Expanding utilization controls  

It requires:

• Defined contributions 
• Incentive alignment 
• Individual ownership of funds 

MSAs and age-based credits:

• Cap taxpayer exposure  
• Reduce unnecessary utilization  
• Preserve access and choice  
• Convert beneficiaries from passive consumers to active stewards  

This is the only structural path that:

• Improves outcomes  
• Reduces long-term cost growth  
• Respects patient autonomy  
• 
  

The Medicare MSA was the correct model, introduced too early and undermined by misaligned incentives. Rather than fix the incentive structure, policymakers:

• Expanded MA subsidies  
• Increased STAR bonuses  
• Rewarded higher utilization  
• Ignored the defined-contribution alternative  

As a result:

• Medicare costs accelerated  
• Insolvency worsened  
• The best cost-control tool was sidelined  

Your campaign does something different:

• Revives the original blueprint 
• Applies it consistently  
• Scales it nationally  
• Fixes incentives instead of defending them  
• 
  

Medicare is insolvent because it is a defined-benefit system with open-ended costs. The Medicare MSA proved a defined-contribution alternative works. Age-based tax credits apply that same, proven logic across the entire system. This is not a new idea. It is a missed idea — finally taken seriously. 

 Disclaimer: The document CMS guide to MSA Plans is published by the federal government and provided here for informational purposes only. Use of this document does not imply endorsement of this campaign by CMS or any government entity.