The House of Representatives returns to Washington this week. Some of the chamber’s Republicans have begun to make noise about health reform.
In a recent opinion piece for The Hill, Rep. Michael Burgess, a medical doctor from Texas, and co-author Eric Hargan, an official at the Department of Health and Human Services during the Trump administration, detailed several health policy changes that they hope to see Republicans advance.
Among them are faster approval of treatments, making health insurance portable across jobs, and expanding access to Health Savings Accounts.
That last reform is perhaps the most crucial point on Republicans’ agenda. HSAs give Americans control over their healthcare dollars—and help them save and pay for the care they need. In so doing, they inject some much-needed competition into the healthcare sector. Over time, this will drive costs down and quality up.
HSAs allow holders to set aside pre-tax dollars for later use covering copays, deductibles, and other qualified medical expenses. This year, individuals can contribute up to $3,850 to HSAs, and families can deposit up to $7,750.
Last year, Americans held around $100 billion in assets across 34 million HSAs, a marked increase on both fronts from the previous year.
HSAs provide what accountants call a “triple tax advantage.” Holders are not taxed on contributions, the savings earn interest tax-free, and patients are not taxed when they ultimately withdraw the funds.
Thirty-four million HSAs may sound like a lot. But it’s equivalent to just one-tenth of the U.S. population.
HSAs have struggled to take off in part because people must be enrolled in a high-deductible health plan, or HDHP, to open or contribute to one. These are plans with at least a $1,400 deductible for individuals and a $2,800 deductible for families. Total out-of-pocket expenses for high-deductible policies are not permitted to exceed $7,050 for individuals or $14,010 for families.
Forbidding contributions to HSAs by people without high-deductible plans limits the accounts’ appeal—and their ability to foster greater competition in the market for health care. Republicans have proposed to break that link—and allow people to put even more money aside for future healthcare expenses.
In January, Rep. Andy Biggs of Arizona introduced the “Freedom For Families Act,” which would raise the yearly contribution caps to $9,000 for individuals and $18,000 for families—and end the requirement that HSA contributions necessitate an HDHP.
Rep. Ami Bera, D-Calif., has introduced legislation that expands access to HSAs among seniors by enabling Medicare beneficiaries to contribute to the accounts. The bill, cosponsored with Republican Rep. Jason Smith of Missouri, shows that HSAs can have bipartisan appeal.
For decades, the healthcare sector has resisted the market forces that have driven down costs and improved quality in other sectors of our economy. Government picks up the tab for almost half of our nation’s health spending. Much of the rest is covered by third-party payers like private insurers. So patients have little incentive to shop around, and providers have little incentive to compete for individual patients’ business.
HSAs disrupt this dynamic. They grant patients an incentive to spend their healthcare dollars wisely. After all, it’s their money. Providers, meanwhile, can’t count on a steady stream of patients captive to the insurance networks they participate in. They have to earn and retain patients’ business.
By expanding access to HSAs, Congress can make health care more affordable at negligible cost to taxpayers. Perhaps House Republicans can even get some more Democrats in addition to Rep. Bera on board.
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