There is much debate over what should be in and what should be out of the tax title of the Budget Reconciliation bill, more commonly known today as the Big Beautiful Bill. One provision that was added by the House but dropped by the Senate Finance Committee was a provision that expands Health Savings Accounts (HSAs). This provision is a good one and the Senate has an opportunity to restore the measure before it reaches President Donald Trump’s desk.
The Senate is working on their version of the budget reconciliation measure that includes the big-ticket items of making the 2017 Trump tax cuts permanent and strengthening border security. The bill passed the House and is now being considered by the Senate and there are significant differences. One huge contrast is in the sections that implement essential reforms and expansion of HSAs. These provisions are critical to improve Americans’ access to quality medical care while restoring health care decision making to the health care consumer.
Expanding access to care should be the goal for any health policy reform. Both sides of the political aisle support universal care for all Americans, the challenges (and differences) are in the details – more government intervention or more competition and innovation. For the GOP and conservatives, they should support proposals that prioritizes patients over bureaucrats – away from the government making decisions and toward consumer driven care. The Trump administration and House Republicans support that idea.
Health Savings Accounts are a tool for consumers because they allow a savings account to be a tax-deductible landing spot for the taxpayer. They also aid employers by allowing them to park money for health care expenses in one of these accounts providing employees with better health care choices. An HSA is a savings account, and the growth of the account is not taxable. Furthermore, an account holder is not punished with a tax when withdrawing the money and using the cash to pay for approved care. These are amazing tools to put decisions in the hands of consumers and away from government bureaucrats.
The House of Representatives passed their version of the budget reconciliation measure with provisions that expanded the definition of a qualified HSA to include a new way for these plans to qualify for tax deductions. The Bronze and Catastrophic plans, high-deductible plans offered in health care exchanges, were made eligible for HSAs by the House. Also, Medicare Part A plans were permitted to be beneficiaries of the change in law for seniors enrolled in those plans. Individuals in direct primary care arrangements would now be permitted to have an account. The Senate stripped all these provisions out of the budget reconciliation measure.
The expansion makes sense to empower more Americans to have private plans that they, not the government, control. The House passed bill goes a long way to expand the list of qualified expenses for HSAs from doctor care, bills from hospitals to medical travel using either direct payments or copay deductible care. Included now are gym memberships and personal trainers with limits on expenditures for those services.
According to a Harvard CAPS/Harris poll from June, the HSA provisions have wide support from Democrats, Republicans, and Independents. A poll conducted by Frank Luntz found 83% support from seniors. One reason why seniors and workers are polling as strongly supportive of HSAs is because they will lose out on their employer contribution as they try to save for health care costs in retirement.
The House reforms are the right and sensible next step for HSAs. Ryan Ellis at National Review concluded that “many of us in the conservative movement have been working on these reforms for decades. Getting these coverage, contribution, and distribution expansions signed into law clears the decks and allows the next generation of consumer-driven HSA reforms to begin to ripen on Capitol Hill. The Senate should restore the HSA reforms contained in the original House tax reform bill.”
The Senate should add back the HSA reforms because it means better health outcomes and greater access to care for all Americans. It’s good policy and good politics.
