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.
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