To lower health care costs, Health Savings Accounts (HSAs) offer tax incentives encouraging people to trade off current consumption against future consumption. This paper tests whether consumers use HSAs as self-insurance over the life cycle. Using administrative data from a large employer and a regression discontinuity design, I estimate the marginal propensity to consume from HSA assets is 0.85 and reject the neoclassical benchmark of 0. Comparisons with 401(k) saving show most employees do not treat HSA money as fungible with retirement savings. In this setting, HSAs did not reduce health spending and instead increased the share that was financed tax-free.
"Health Insurance Design Meets Saving Incentives: Consumer Responses to Complex Contracts."
American Economic Journal: Applied Economics,
Intertemporal Household Choice; Life Cycle Models and Saving
Asymmetric and Private Information; Mechanism Design
Insurance; Insurance Companies; Actuarial Studies
Household Finance: Household Saving, Borrowing, Debt, and Wealth
Health Insurance, Public and Private