Investment and Health Scenarios

The following tables illustrate how an MSA plan can work over a number of years and in various scenarios.

NOTE:  These numbers were ran in 2000 when the maximum family MSA deductible was 4500 and the maximum individual MSA deductible was 2250.  Because an individual can still have deductibles of this size, the numbers presented below are still just as valid as they were a couple of years ago.  Moreover, actual savings could actually be greater today if an individual opted for the highest possible MSA deductible(s) with corresponding maximum annual tax-deductible contributions to the account.

Normal expected medical, dental & vision expenses, for which you would draw funds from the MSA, might include: 

  • Dental appointments every 6 months
  • Routine medical check-ups every two years
  • Early warning tests (PAP, mammograms, PSA's etc), 
  • Vaccinations
  • Medications, glasses, orthopedic aids etc.


Prices in the tables will appear stable, as no one can predict the future, but consider some optimistic possibilities:

  • The cost of  health insurance premiums will be stable and  might actually decrease because they are underwriting a pool of prudent health care shoppers whose bulk of medical expenses will fall within the high annual deductible.
  • The maximum contribution allowed for tax purposes increasing to 100% of the amount of the annual deductible.  This possibility is reflected in legislation currently pending in Congress.   
     
  • The cost of the expected medical, dental & vision expenses going down as health care providers realize the 30-40% cost savings when the patients pay for visits in cash and require no claim or other regulatory paperwork. 

 

Scenario #1.  Family of 5 in best of health never purchasing above normal (scroll down)

Scenario #2.   Family of 5 with unexpected medical needs in 7 out of 30 years (scroll down)

Scenario #3.   A single lady or gentleman in the best of health (scroll down)

Scenario #4.   Single lady or gentleman  with health troubles in 7 of  the 30 years (scroll down) 


Calculations are: 
1.0275 x amount in MSA in prior year + 1.015 x net amount added in that year; or,
in the higher yield column:  1.07 x prior year MSA balance  + 1.02 x net amount added in that year. 

 

In real life a single person might marry, have children,  and any combination of scenarios.  Scroll down to last chart for another example of "a lifetime use of an MSA"

 

Scenario #1.   Family of 5 in best of health, withdrawing only  $1,375 a year for normal medical expenses.

Year of MSA

Annual premiums for high deductible health insurance

Annual tax deductible contribution of 75% of $4,500 deductible

Normal expected medical, dental, vision expenses

Accumulated medical savings at 2.75% annual simple interest

Accumulated savings at a higher yield of 7%

1

$3,000

$3,375

$1,375

$2,030

 

2

$3,000

$3,375

$1,375

$4,116

$4,116

3

$3,000

$3,375

$1,375

$6, 259

$6,444

4

$3,000

$3,375

$1,375

$8, 461

$8,935

5

$3,000

$3,375

$1,375

$10,724

$11,601

10

$3,000

$3,375

$1,375

$23,006

$28,002

20

$3,000

$3,375

$1,375

$53,181

$83,270

30

$3,000

$3,375

$1,375

$92,760

$191,990

Compare $191,990 in your medical savings account with $0 if you fail to begin a medical savings account during this window of opportunity. 

After the 30th year of  your MSA, you might be retiring and wanting to draw out of the MSA (say $2,000/ year); then again you might be happy working and contributing the same $2,000 year.   Either way you'll probably be able to buy a rowboat and a fishing rod, probably you can buy the lake and the house too.

50

withdrawing $2,000 each year

$100,259

$645,316

50

adding $2,000 each year

$212,768

$826,571

The 60th year below is shown with great optimism.  Anyone who begins saving at age 25 and contributes $2,000 a year to his savings right on through retirement can actually accumulate $1.6 million dollars by age 85.

The marvel of compound interest, diligent savings and good health. 

60

$3,000

$3,375

$1,375

$302,083

$1,654,176

 

Scenario #2.   Family of 5 with unexpected medical needs in 7 out of 30 years

Year of MSA

Annual premiums for high deductible health insurance

Annual tax deductible contribution of 75% of $4,500 deductible

Expected  expenses + high expenses in 7 of the 30 year period.

Accumulated medical savings at 2.75% annual simple interest

Accumulated savings at a higher yield of 7%

1

$3,000

$3,375

$1,375

$2,030

 

2

$3,000

$3,375

$5,500

These setbacks early in an MSA might require drawing from other sources, until better health resumes.

3

$3,000

$3,375

$5,500

4

$3,000

$3,375

$5,500

(4,448)

$226

5

$3,000

$3,375

$1,375

(2,540)

$2,281

10

$3,000

$3,375

$5,500

$3,627

$10,724

20

$3,000

$3,375

$1,375

$13,760

$32,710

30

$3,000

$3,375

$1,375

$37,023

$88,492

$5,500 is calculated in years 2, 3, 4, 10, 15, 16, & 17 seven years of health troubles that required funds from your health insurance company in addition to your $5,500 out-of-pocket (from your MSA or another source).  Your insurance company collected $3,000 in premiums from you  each year.  They also collected that from the guy in the family in Scenario #1.  Whether or not that company made a profit depends on lots of factors and figures that actuaries can tell us all about.  But the good news is you lived through 7 years of medical troubles and still have between $37,000 and $90,000 in a medical savings account at about the age you might like to retire.  Then the account might go like this:

50

No more contributions to the fund, withdrawing $2,000 each year for medical expenses.

$11,301

$260,444

60

$37,829

$540,518

However, if you prefer to keep working & contributing to your fund in the same manner, now that there is no Alzheimer's or Arthritis to trouble you, then you can see a bit more in your account.   Money to pass on to your loved ones and charities of choice. 

50

$3,000

$3,375

$1,375

$123,810

$441,699

60

$3,000

$3,375

$1,375

$185,401

$897,075

 

Scenario #3.   An individual lady or gentleman in the best of health

Year of MSA

Annual premiums for high deductible health insurance

Annual tax deductible contribution of 65% of $2,250 deductible

Normal expected medical, dental, vision expenses

Accumulated medical savings at 2.75% annual simple interest

Accumulated savings at a higher yield of 7%

1

$960

$1,462

$462

$1,020

 

2

$960

$1,462

$462

$2,063

 

3

$960

$1,462

$462

$3,135

 

4

$960

$1,462

$462

$4,236

$4,374

5

$960

$1,462

$462

$5,367

$5,700

10

$960

$1,462

$462

$11,509

$13,861

20

$960

$1,462

$462

$26,599

$41,359

30

$960

$1,462

$462

$46,391

$95,453

Compare $95,000 with $0 if you fail to begin a medical savings account during this window of opportunity.   To continue with the similar possibilities described above: 

50

No more contributions, withdrawing $1000 each year, beginning in the 30th year. 

$50,148

$320,559

60

$54,444

$616,772

The same agent or broker who set up your MSA plan will likely have other excellent retirement and life insurance plans for you; there are many options available.  We could play with spreadsheets all day but we have other things to do.   Here is what the savings account would look like if you continued with the $1000 input each year.

50

Continuing the $1000 contributions each year.

$106,403

$411,187

60

$151,066

$822,960

 

 

Scenario #4.   Individual lady or gentleman beset with major health troubles for 7 years.

Year of MSA

Annual premiums for high deductible health insurance

Annual tax deductible contribution of 65% of $2,250 deductible

Normal expected medical, dental, vision expenses

Accumulated medical savings at 2.75% annual simple interest

Accumulated savings at a higher yield of 7%

1

$960

$1,462

$462

$1,020

 

2

$960

$1,462

$462

$2,063

 

3

$960

$1,462

$462

$3,135

 

4

$960

$1,462

$462

$4,236

$4,374

5

$960

$1,462

$462

$5,367

$5,700

10

$960

0

$3,000

$3,019

$4,571

20

$960

$1,462

$462

(34)

(292)

30

$960

$1,462

$462

$6,603

$7,064

Calculations are based on the maximum out-of-pocket of $3,000 during years 6, 10, 11, 12, 13, 19, and 23.  This illustrates that someone who goes through a major difficulty might  have to dip into debt for awhile.  Yet if gainful employment is possible after the ordeal, one might pull back out of debt and still accumulate a sizeable savings.   The same person impoverished at age 45 can restore to an enviable level of prosperity even with this simple saving plan of $1,000/year. 

50

Net annual contributions of $1,000.

$37,951

$69,150

60

$61,281

$150,122

 

Lifetime use of an MSA

 

The following table is copied, with permission, from the Appendix of Society's Mirror: Reflections on Health Care Reform, by John W. Gollatz, M.D.   More about the book and other excellent information can be found on the site for Society for the Education Physicians and Patients www.SEPP.net. 

Robert Urban, M.D. President of SEPP, said of this book:  "A 'must read' book for all Americans who value freedom and who cannot accept a needlessly inferior quality of government or corporate-controlled health care for themselves, their children, and their grandchildren."

Age

$ Deposited/year

Total in MSA

Events

21

$1750

$1,750

 

22

1750

3,623

 

23

1500

5,377

 

24

1750

7,503

 

25

1750

9,778

 

26

1750

12,212

 

27

2500

15,567

Married

28

2750

19,407

 

29

2500

23,265

 

30

2500

27,394

 

31

2750

32,062

 

32

0

34,306

First child

33

2300

39.007

 

34

0

41,737

Second child

35

2500

47,159

 

36

2000

52,460

 

37

1000

57,132

wife / minor surgery

38

200

61,331

Husband  / colonoscopy

39

2400

68,024

 

40

2500

75,286

 

41

2400

82,956

 

42

2000

90,763

 

43

2100

99,216

 

44

2200

108,361

 

45

400

116,346

Husband / minor surgery

46

2400

126,890

 

47

1800

137,572

 

48

2200

149,402

 

49

1700

161,560

 

50

0

172,869

Wife / hysterectomy

 

51

2000

186,969

 

52

0

200,057

Son / leg surgery

53

2500

216,597

 

53

1500

233,259

 

54

1500

233,259

 

55

0

249,587

wife / gallbladder

56

0

267,058

Husband / heart attack

57

500

286,252

 

58

1000

307,290

 

59

1000

329,800

 

60

0

352,886

Husband / heart attack

61

0

377,588

Wife / hospitalized

62

500

404,519

 

63

1000

433,835

 

64

500

464,703

 

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