Time for Congress to give seniors access to health savings accounts

Time for Congress to give seniors access to health savings accounts
© Getty Images

Medicare is an important lifeline for millions, including me, and always will be. But we all know it can be improved. One promising way to improve Medicare is to make health savings accounts (HSAs) available to seniors. Right now, the only Americans who are legally prevented from enjoying the benefits of this special kind of tax-free savings account are the 58 million Americans on Medicare. That’s unfair. You can have an HSA if you’re under 65, but the minute you enroll in Medicare, you can no longer put money into it. That makes no sense.

Allowing Medicare HSAs would give seniors a new and better Medicare option that offers the same freedom that Americans under 65 enjoy to make their own decisions about their health care. It would give people on Medicare greater choice, flexibility, control, and peace of mind. What exactly is an HSA? It’s a special kind of financial account that you can use to help pay your personal medical expenses — things like copays, deductibles, and prescription drug purchases — tax-free.

The money in the account is yours. You own it. You control it. You can spend it on just about any kind of health care item or service you like. And it’s never taxed. The money rolls over year to year, so it can grow, tax-free. You can keep it as a rainy-day fund, or even invest it in, for example, a mutual fund of your choice. And when you die, you can leave the money to your loved ones. And an HSA is a wonderful tool for people with chronic conditions (like diabetes, for example) who have a lot of predictable medical expenses, and who have to manage their own care, day to day.

The basic requirement of an HSA is that you must pair the account with an HSA-qualified health insurance plan. That’s to ensure you have sufficient financial protection for major medical expenses. There are limits on how much you can contribute to your HSA each year. In 2017, the limit for people over age 54 is $4,400 for an individual and $7,750 for a family. Established in their current form in 2003, HSAs today benefit more than 20 million Americans. Allowing them in Medicare would give seniors the freedom to choose the health care that’s best for them.

Consider the benefits, if you’re a senior on Medicare. You can use your HSA to pay for things Medicare doesn’t cover, like dental care, eyeglasses, smoking cessation, weight-loss programs, and so on. Once you’ve reached your annual deductible (the amount of money you must pay before your insurance kicks in, which is currently about $3,500 on average), Medicare will cover 100 percent of your Medicare benefits from there on out. And if you’re low-income, Medicare will fund the account for you.

How much would this new option cost taxpayers? The answer is nothing, if it’s structured correctly. Indeed, Medicare HSAs could even save taxpayer money. Recently, the American Bankers Association’s HSA Council, which is the trade association representing HSA-sponsoring banks and health plans, commissioned a study that estimates the federal government could actually save $72 billion over ten years by letting working seniors contribute to an HSA, provided they also have an HSA-qualified health plan through their employer and pay for all of their own medical costs below the deductible. Insurance would only cover costs above the deductible.

That last point is the key to the power of the HSA. When people are spending their own money, they spend more carefully and waste less. This fact is well documented, going back to national studies done by the Rand Corporation in the 1970s. Just think of buying a meal on an expense account. You order differently than if you are paying for it yourself.

Why should Congress should establish Medicare HSAs? Because seniors want and deserve a new and better Medicare option. Because they can save taxpayers money. And most importantly, because discriminating against seniors is unfair and pointless. It’s time to let seniors save tax-free for their own health care, just like other Americans. It’s time for Medicare HSAs.

Bill Archer represented Texas in Congress for 30 years and was chairman of the House Ways and Means Committee from 1995 to 2001. He is a consultant to the American Bankers Association’s HSA Council.