A bi-partisan effort in Congress is underway that would allow Medicare recipients to open and contribute to a health savings account (HSA).
H.R.3796, the Health Savings for Seniors Act, would allow more than 57 million Americans 65 and older currently enrolled in Medicare to take advantage of the triple-tax1 savings and roll-over benefits currently associated with HSAs.
Similar legislation will be introduced in the Senate in late July 2019.
Currently, people enrolled in Medicare cannot open a new HSA, and those who had an HSA before enrolling in Medicare can spend funds but cannot contribute more to the HSA.
If passed, the Health Savings for Seniors Act would:
- Allow those enrolled in Medicare plans to open and contribute to a new HSA
- Allow those who opened an HSA prior to enrolling in Medicare to contribute to the HSA
- Allow working seniors to enroll in Medicare and still be HSA eligible on their employer-sponsored coverage
- Not change Medicare coverage in any way
- Change the term “high deductible health plan (HDHP)” to “HSA-qualified health plan” for those plans that meet the HSA deductibles and out-of-pocket requirements
- Include a provision where seniors enrolled in Medicare would base annual HSA contributions on an individual HSA plan
HSA individual annual contribution limit
Accountholders 55 and older can contribute an additional $1,000. Medicare recipients will be able to do the same if the bill passes.
If passed, the legislation would also add two restrictions:
- HSA owners enrolled in Medicare will no longer be allowed to use HSA funds for Medicare premiums
- Medicare enrollees will only be allowed to spend HSA funds on qualified medical expenses or face tax penalties
This new legislation will help seniors enrolled in Medicare save hundreds of dollars each year. For example:
- The average household with someone 65 or over earns about $48,000 per year2
- The average individual “original Medicare” recipient in good health spent $7,620 on healthcare in 20173
- $1,200 in premiums
- Nearly $6,500 in possible qualified medical expenses
- Assuming a 20% marginal income tax rate,4 a Medicare recipient could save $900 per year by running $4,500 (the annual HSA contribution limit) of medical expenses through an HSA
- A couple could save twice that amount ($1,800 per year)
This new legislation can also be a tremendous benefit for seniors by allowing them to pay for medical bills through their HSA and keep more of their fixed income to pay for food, clothing, shelter and other priorities.
In addition, an HSA would allow Medicare enrollees to pay for dental and vision expenses, as well as hearing aids — none of which are currently covered by Medicare.
“The introduction of the Health Savings for Seniors Act and the new IRS notice represent two of the most important developments for health savings accounts since their creation in 2003,” said HealthEquity founder and vice chairman Steve Neeleman, MD, who lobbied for the passage of the legislation that created HSAs. “HealthEquity has been advocating for HSAs as the solution to America’s healthcare problems since our inception. We are proactively working with employers to provide their employees with the best options possible to pay for healthcare.”
HealthEquity supports efforts to help as many people as possible take advantage of the benefits that come from an HSA as they work to build health savings.
We respectfully encourage you to write your representatives in Congress and let them know you support the Health Savings for Seniors Act.
House of Representatives: https://www.house.gov/representatives
Feel free to borrow from the template below to send your message:
(I am writing to encourage you to support and vote for the Health Savings for Seniors Act. As someone who benefits from a health savings account (HSA), I believe opening up the benefits of an HSA to seniors enrolled in Medicare will help them pay for medical bills through their HSA and spend their fixed income on other necessities. By building health savings with an HSA, Medicare recipients, more than 57 million strong, will also be able to contribute funds to prepare for future medical expenses. Please support the Health Savings for Seniors Act.)
You can also help spread the word about this new legislation by including #MedicareHSA in social media posts.
Our mission at HealthEquity is to transform healthcare and help Americans better save and spend their healthcare dollars by empowering health savings. The Health Savings for Seniors Act has the potential to benefit millions of Americans and help them keep more of their hard-earned savings, and that is something we fully support.
1. HSAs are never taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states recognize HSA funds as tax-free with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.
2. Bureau of Labor Force Statistics https://www.bls.gov/webapps/legacy/cpswktab3.htm
3. Motley Fool “Here’s the Average American’s Annual Medicare Bill” https://www.fool.com/retirement/2017/02/05/heres-the-average-americans-annual-medicare-bill.aspx
4. Federal income tax calculator https://smartasset.com/taxes/income-taxes#pLQtE7xqGP
5. Retirement & Survivors Benefits: Life Expectancy Calculator https://www.ssa.gov/oact/population/longevity.html
Nothing in this communication is intended as legal, tax, financial, or medical advice. Always consult a professional when making life-changing decisions.