In most cases it is required that the health care savings account be coupled with a high-deductible health plan or HDHP. Tax-free withdrawals from the flexible spending account count towards the HDHP's deductible. Once the deductible is satisfied, 100% of medical expenses will be paid from the medical account's savings balance.

Individuals and some small businesses can implement these medical accounts. Each covered individual generally elects to have a specific amount deducted from his paycheck each month. This money is deposited into the person's health reimbursement account and is tax-deferred. This lowers the person's taxable income, and therefore the annual tax burden.

Consumers with saved money in their healthcare accounts can withdraw the money to pay for doctor visits, dentist visits, glasses, long-term care, emergency room visits, and other medical expenses. Once the amount of money withdrawn from the medical savings plan equals the deductible of the HDHP coverage, the HDHP takes over and pays all future medical expenses for that year. Any money left over in the MSA for the year can either be withdrawn as taxable income, or can be rolled over into next year's plan.

This plan is currently referred to as an "Archer MSA." The Internal Revenue Service (IRS) allows money in these tax-deferred accounts to be rolled over into Individual Retirement Accounts (IRA) under certain circumstances. More recently, the Health Savings Account or HSA was established, which is replacing the MSA program. If the MSA program is discontinued, then all MSA accounts will be converted to HSA accounts.

Regardless of its name, the medical savings account allows you to set aside tax-free money to pay for your yearly medical expenses, saving you money on health care costs.