Medical Savings Account vs. Health Savings Account

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Your health insurance choices can seem puzzling. According to the Internal Revenue Service, health savings accounts (HSAs) and medical savings accounts (MSAs) are two tax-advantaged savings accounts for health expenditures. They both give savers tax-deductible contributions but differ in who is eligible for them. The best account depends on the type of employer you work for.


A medical savings account and a health savings account are available to anyone who has an employer that offers a qualifying high-deductible health insurance plan (HDHP) or a self-employed person with an HDHP. For both accounts you cannot be enrolled in Medicare or another health insurance program and still be eligible for a savings account. For both accounts you must be enrolled in an HDHP to make contributions to the savings account.


For both accounts contributions are tax-deductible. The maximum contribution for a Medical Savings Account is 75 percent of the deductible. The amount you can contribute is decreased if you do not have an HDHP for the whole year.The maximum contribution for an HSA is $3,050 for an individual and $6,150 for a family. For both accounts the last day you can make a contribution for the current tax year is April 18 of the following year.


Both accounts offer tax-free withdrawals if they are used for qualifying medical purchases such as nonprescription medications. For both accounts, interest and gains from asset appreciation are tax-free. For both accounts, qualifying purchases include doctors visits, medical services and prescription drugs. Starting in 2011 non prescription drugs are not considered eligible purchases. Both accounts are 'portable' and can be used for withdrawals after they leave their employer or no longer have an HDHP. For an HSA, withdrawals for non-medical purchases after the age of fifty-nine are taxed as regular income. (source 1)

Employer Participation

A medical savings account is designed for employee's of small businesses. The accounts must be administered with an employer of some sort and only an employee or an employer can make contributions to the account, but not both. An HSA does not have this distinction. An employer and employee can make contributions at the same time and an individual can get an HSA without a company affiliation.