Optimal Contributions to Flexible Spending Accounts
Published in: Economics Letters, v. 76, no. 1, 2002, p. 129-135
Posted on RAND.org on January 01, 2002
Flexible spending accounts (FSAs) permit tax-free healthcare spending. FSA dollars at year-end are lost. Given no alternative for leftover money, rational consumers spend to zero. Optimal FSA contributions should emphasize tradeoffs between utility from pre-tax medical expenditures and post-tax non-medical consumptions.