A tax-advantaged personal savings account used in conjunction with a high deductible health policy. Individuals can contribute money to this account on a pre-tax basis to set aside money for eligible medical services and expenses, including annual deductibles, co-payments, and carry over of the unused funds to the next year. In short, MSA are designated for out-of-pocket medical expenses.
One major difference between a Flexible Spending Account (FSA) and a Medical Savings Account (MSA) is the ability -- under a MSA -- to carry over the unused funds for use in a future year, instead of losing unused funds at the end of the year. Most MSAs allow unused balances and earnings to accumulate. Unlike FSAs, most MSAs are combined with a high deductible or catastrophic health insurance plan.