Title: Tax advantaged savings for healthcare: good for your pocketbook, bad for your health?

Authors: Robert Rosenman; Rashmita Basu

Addresses: School of Economic Sciences, Washington State University, P.O. Box 646210, Pullman, WA 99164, USA ' Department of Internal Medicine, Baylor Scott & White Health, Texas A&M Health Science Center, 2401 S. 31st Street, Brindley Circle, 5th Floor, Temple, TX 76502, USA

Abstract: Current US law allows two types of tax-advantaged savings accounts, flexible spending accounts and health savings accounts, to pay for healthcare expenses. These tax-advantaged savings offer a financial hedge against future healthcare costs, but may have implications for individuals' choice about healthy behaviour to avoid the risk of future illnesses. We compare tax-advantaged savings to non-tax advantaged savings focusing on the impact on healthy behaviour. We find tax-advantaged savings encourages savings as a hedge against future healthcare costs, but does so at the expense of healthy behaviour, potentially increasing overall societal healthcare costs.

Keywords: uncertainty; healthy lifestyles; health investment; healthy behaviour; healthcare savings; tax advantages; USA; United States; flexible spending accounts; health savings accounts; healthcare expenses; healthcare costs.

DOI: 10.1504/IJBHR.2015.071467

International Journal of Behavioural and Healthcare Research, 2015 Vol.5 No.1/2, pp.41 - 51

Received: 04 Oct 2014
Accepted: 21 Nov 2014

Published online: 29 Aug 2015 *

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