GOP healthcare plans push health savings account expansion

As Republicans struggle to coalesce around an ObamaCare replacement plan, they generally agree on one thing: It should expand access to health savings accounts. 

HSAs — special accounts for medical expenses that come with tax breaks — have long been a cornerstone of Republican healthcare plans. 

They argue giving people more direct control over their medical expenses will drive down healthcare costs.

{mosads}“What if 30 percent of the public had health savings accounts?” Sen. Rand Paul (R-Ky.) asked.

 “What do you do when you use your own money? You call up doctors and ask the price. … If you create a real marketplace, you drive prices down.”

HSAs were created in 2003 to allow people to save money, tax-free, for medical expenses that are not covered by health insurance, like co-pays and deductibles.  

They’re usually paired with high-deductible insurance plans. 

All of the replacement plans, including ones proposed by Paul and another by Sens. Susan Collins (R-Maine) and Bill Cassidy (R-La.), would expand HSAs in some way. 

It’s unclear what changes Republicans will include in their replacement, but leadership has supported increasing the maximum contribution limit.

Paul’s plan would eliminate the requirement that the accounts be tied to high-deductible health plans, increase the amount of money users are allowed to add to their HSA each year and allow people to use their accounts to pay for deductibles and premiums, which currently is not allowed.

However, critics argue they wouldn’t do much for low-income people who don’t have the extra money to save and who often don’t pay enough in taxes to experience the tax benefits. 

“It is a common theme you see in the replacement proposals,” notes Karen Pollitz, a senior fellow at the Kaiser Family Foundation.

But, she said, “Low-income people can’t afford to put any money away, and if they had extra money, they’re not getting many tax benefits from it at all.”

Paul’s plan would also come with an optional $5,000 tax credit.

But critics say that for those with little or no tax liability, a $5,000 tax credit wouldn’t help them much.  

Paul acknowledged that.

“Even though the tax credit may not help everybody, driving prices down will,” he said.

In fact, expanding access to HSAs is most likely to benefit the wealthy, Pollitz said.

“That’s not all that surprising because that’s who would have money laying around that they could put in an HSA and that’s who the tax deduction would benefit,” she said.

A 2006 study conducted by the nonpartisan Government Accountability Office found that 51 percent of tax filers reporting HSA contributions made $75,000 or more in 2004. About 20 percent made between $50,000 and $74,999 and about 15 percent made under $30,000.

The proposed changes would “just make it easier for higher income people to open these accounts and use them for a tax shelter purpose.”

Linda Blumberg, a senior fellow at the Urban Institute, said lifting some of the current restrictions on HSAs would only create savings for healthy people.

And if Republicans don’t lift the requirement that HSAs be tied to high-deductible health plans, low-income people under those plans could find themselves paying out of pocket for medical care. 

“The fewer the rules around [HSAs], we’ll see a larger percentage of healthcare costs being pushed back on the people who need medical care,” she said.

Tags Rand Paul Susan Collins
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