A bipartisan bill in Congress would allow seniors to save for tax-free healthcare expenses throughout retirement.
Earlier this month, Rep. Ami Bera (D-Calif.) — who is also a medical doctor — and Jason Smith (R-Mo.) reintroduced HR 3796, the Seniors Health Savings Act. The legislation would allow seniors with Medicare to save money in health savings accounts, or HSAs.
As it stands, seniors with Medicare can use their existing HSA funds to pay for healthcare costs, but cannot make new contributions to an HSA or start a new HSA if they do not have already have an existing account.
In a press release, Bera says:
“HSAs would especially help seniors pay for services such as dental and vision care that are not currently covered by Medicare, leading to healthier, happier lives and a more dignified retirement.”
Smith says today’s soaring inflation makes it even more important to give older people more flexibility in how they pay for out-of-pocket health care expenses.
How HSAs Can Save You Money on Medical Bills
As we’ve said many times, health savings accounts offer one of the best tax benefits in the entire tax code:
“With an HSA, however, you get a tax deduction for the money you put in the account. Then the earnings grow tax-free. And, as long as you use it for health care expenses health benefits, you don’t pay tax on the money you take out of the account. It’s truly tax-free.
This means that if the Health Savings for Seniors Act became federal law, seniors could save money by avoiding federal tax on money they set aside for health care expenses. health.
For seniors who pay a 12% federal income tax rate, for example, this essentially equates to saving up to 12% on every medical bill they pay with their HSA funds.
To learn more about the benefits of HSAs, check out “3 Ways a Health Savings Account Can Improve Your Finances.”
The disadvantages of the new bill
The Seniors Health Savings Act is not all good news for seniors. It has two notable drawbacks.
The law project :
- Exclude health insurance premiums as eligible medical expenses. This would mean that seniors with HSAs could no longer use their HSA funds to pay Medicare premiums.
- Repeal the exception that currently allows seniors to avoid the penalty for using HSA funds on things other than qualifying medical expenses. This means that seniors who spend HSA funds on non-medical expenses should be penalized.
What happens next?
Although the Health Savings for Seniors Act enjoys bipartisan support, its enactment is far from a sure thing. It is expected to pass the House and Senate before it even arrives at President Joe Biden’s office. And Biden should sign the bill into law.
It should be noted that this bill was also introduced in 2019 and failed to become law – or even pass – in this session of Congress.
To let your members of Congress know what you think of the legislation, contact them.
If you are not enrolled in Medicare and have a high-deductible health insurance plan, you may be eligible to contribute to a health savings account today.
To find out more, see “Am I eligible for a health savings account?”
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