NCPA - National Center for Policy Analysis


October 15, 2008

Health Savings Accounts (HSAs) may turn out to be early victims of the Democratic health care regime.  They won't be rolled up overnight -- that's hard to do when more than 6 million Americans, according to insurance industry data, were covered by HSAs and related high-deductible health plans at the start of 2008.  But their growth is likely to be crimped by new limits on who can open them and how easily they can be used, says Investor's Business Daily (IBD).

The tax-deductibility of annual HSA contributions is a natural target for Democrats:

  • Anyone, no matter how high their income, can take the deduction now.
  • This makes HSAs something of an IRA substitute for high-income earners who don't get the IRA tax break.
  • It would not be surprising if a Democratic Congress and White House capped the deductibility at, say, $60,000 for joint filers.

This would slow the growth but probably not kill HSAs.  However, there's another way to kill a program: Make it so hard to use that no one cares if it survives.  HSA money now can be spent tax-free on medical care without having to file a lot of paperwork.  Earlier this year, however, the House passed a bill that would have set up a system to review and verify every HSA outlay as a legitimate expense.

That measure could have regulated HSAs out of existence, but insurers and other HSA advocates raised an outcry, and it died in the Senate.  A similar bill might not be stopped so easily if the Democrats have a filibuster-proof Senate majority and hold the presidency, says IBD.

Source: Editorial, "Health Savings Accounts' Last Chance?" Investor's Business Daily, October 14, 2008.


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