In one fell swoop, incumbent members of Congress could save consumers money, drive down health care costs and burnish their bipartisan credentials before the midterms.
How? By scrapping an Obamacare provision that prohibits roughly 3 million people from opening health savings accounts, which can save patients hundreds or even thousands of dollars a year.
Expanding access to HSAs should be one of Congress’ priorities.
HSAs are “triple tax-advantaged.” Savers don’t pay any tax on the money they deposit into the accounts. If they choose to invest that money, they pay no tax on capital gains or dividends. Withdrawals are tax-free too if they’re spent on qualified medical expenses such as doctor visits and prescription drugs. This year, individuals and families can contribute up to $3,450 and $6,900, respectively, to their HSAs.
But eligibility is limited. Individuals must be enrolled in a health plan with a minimum deductible of $1,350 and an out-of-pocket maximum of no more than $6,650. For family plans, those figures double.
In Nevada, more than 65,000 people are enrolled in HSA-compatible high deductible health plans.
People have an incentive to spend HSA money wisely. It’s their money, after all. So they’re more likely to shop around for the best price on prescription drugs and non- emergency procedures.
Costs decline as a result. Families who switched to HSA-eligible plans spent 21 percent less in the first year than families who remained in traditional plans with lower deductibles. One-third of those savings came from spending less per episode of care.
A 2015 National Bureau of Economic Research paper found that workers who switched to HSA-eligible plans spent 15 percent less on health care in each of the next three years. They didn’t use any additional emergency or inpatient care, which suggests they cut spending without endangering their health.
It’s no wonder, then, that HSAs have become increasingly popular in recent years. In 2017, more than 22 million Americans had HSAs, an 11 percent increase from the previous year.
This growth, however, might soon slow. Many Obamacare-compliant plans sold in the individual market aren’t HSA-eligible. For instance, the average 2018 individual “bronze”-level plan features an out-of-pocket maximum of nearly $7,000, more than the $6,650 cut-off for HSAs.
That makes little sense. Patients with the highest out-of-pocket spending would benefit the most from HSAs. Here in Nevada, where patients spend an average of $683 out of pocket, HSAs could provide enormous relief.
The Health Savings Act would adjust federal law to allow bronze plan enrollees to open HSAs. A bipartisan group of 23 members of the House Ways and Means Committee has already green-lighted the legislation.
Congress shouldn’t stop there. The Senate has a Health Savings Act of its own to consider. The bill would expand access to HSAs to those on Medicare. Beneficiaries don’t have to pay premiums for hospital or skilled nursing coverage. But they are responsible for a $1,340 deductible and a co-insurance payment of at least $335 per day for any hospital stays longer than 60 days.
Allowing seniors to put money away in an HSA would help them afford any future hospitalizations. That would prove very beneficial to Nevada’s 453,000 Medicare enrollees. The bill would also raise HSA contribution limits to the sum of a plan’s annual deductible and the level of out-of-pocket expenses permitted by law for a high-deductible health plan. It would also allow all people to pay insurance premiums with HSA funds.
Expanding access to HSAs would inject a dose of consumerism into the health care marketplace and thus drive down overall health care costs. If half of the 150 million Americans with employer-sponsored coverage switched to HSA-eligible plans, annual health care spending would drop by $57 billion, according to a 2012 RAND study.
Nevadans — and people all over the country — want lower health care costs. Expanding access to HSAs would deliver them.
Sally C. Pipes, a Thomas W. Smith fellow in health care policy, is president and CEO of the Pacific Research Institute. Her latest book is “The False Promise of Single-Payer Health Care.” Follow her on Twitter @sallypipes.