By Ryan Ellis
When it comes to any issue, especially healthcare, there is very little bipartisan commonsense cooperation in Washington these days. That’s too bad, because there are a lot of areas in healthcare where the parties substantively agree but can’t get past the “gotcha” stage. H.R. 3796, the Health Savings for Seniors Act, co-sponsored by Reps. Jason Smith, a Republican from Missouri, and Ami Bera, a Democrat from California, is a rare exception. In a Congress in which legislating takes a back seat to posturing, H.R. 3796 deserves to become law.
The Health Savings for Seniors Act is simple in concept. It would allow any senior enrolled in Medicare to contribute to a health savings account. Under current law, seniors are prohibited from contributing to an HSA once they enroll in Medicare at age 65, even if they maintain HSA-qualified health insurance independent of Medicare.
What would this mean for seniors? In 2020, a single retiree could contribute $4,550 to an HSA, and a married senior couple could contribute $8,100 to an HSA. This money would be tax deductible, meaning that seniors would pay that much less tax on Social Security benefits, pension payments, IRA distributions, interest, dividends, and capital gains. The money, once deposited, grows tax free. HSA distributions for out-of-pocket medical expenses are also tax free. HSAs are a triple tax benefit.
Seniors need access to this type of savings to pay for medical costs. Fidelity Investments projects that the average Medicare-enrolled senior will spend about $5,000 per year on healthcare expenses. The Health Savings for Seniors Act would essentially make those costs tax deductible, whereas today Medicare patients usually need to meet these obligations with after-tax dollars.
This “coverage gap” in Medicare is serious for older Americans. Medicare does not cover the cost of routine dental care, eyeglasses, hearing aids, and long-term care (including custodial care). Even if a Medicare senior buys a “Medigap” supplemental plan or enrolls in an integrated Medicare Advantage plan that covers some of these services, they are still subject to costly large deductibles, copays, and coinsurance. There is no avoiding out of pocket costs for most seniors.
Tax-deductible, tax-deferred, and tax-free HSA dollars would be able to be used to pay for these out-of-pocket expenses under the Health Savings for Seniors Act. If you’re a senior, imagine being able to get a hearing aid, or meet a co-pay at the drug store, or get a new pair of eyeglasses, using tax-free money. Right next to the Medicare card in your wallet or purse would be your HSA debit card, tied directly to your account and waiting to be used for any unexpected out-of-pocket costs. For seniors on a fixed income, that’s a very big deal.
The Health Savings for Seniors Act is not just about older folks, either. About 22 million Americans under the age of 65 currently have an HSA-qualified plan. Many are building up HSA savings every year and will take pre-tax HSA dollars with them into retirement. Under current law, they are forced to stop contributing to these plans just by celebrating their 65th birthday. Under H.R. 3796, they can continue funding these accounts, ensuring that they won’t run out of money to pay for their healthcare needs in retirement. Unlike promises of Medicare, which ebb and flow with each new Congress, an HSA is owned and controlled by the patient herself. It’s her money, it will always be available to pay for expenses, and no politician can ever take it away.
Unlike most healthcare issues, which bring more heat than light and often divide Americans across partisan lines, the Health Savings for Seniors Act is popular. A recent poll by Luntz Global found that 82% of respondents favored allowing Medicare patients to contribute to HSAs. The same poll found that healthcare is the most important issue for voters by a long shot — nearly half rate it as their top concern, versus a quarter who choose immigration. Passing H.R. 3796 would be a pretty popular move for Democrats and Republicans alike. Imagine being able to tell seniors that you made the high cost of their prescription medicines tax deductible.
Congress has a choice on healthcare. They can posture and preen and scare people. They can make threats and empty promises. They can come up with plans drafted in think tanks most Americans have never heard of and don’t care about. Or they can enact a simple, commonsense, bipartisan idea that tangibly helps the lot of senior citizen taxpayers.
Ryan Ellis (@RyanLEllis) is president of the Center for a Free Economy
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