A healthcare solution both parties can support

 
By Janet Trautwein
Guest columnist
Updated 7/23/2018 4:17 PM
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  • Janet Trautwein

    Janet Trautwein

Over 20 million Americans may soon pay less in taxes and medical bills. Lawmakers recently introduced a bipartisan bill that would expand the utility of "health savings accounts."

HSAs allow people to save money for future medical expenses tax-free. And they incentivize people to secure care from the health care providers that give them the biggest bang for their buck. The bill would expand HSAs so that they cover more medical expenses, such as chronic and preventive care.

This common-sense bill -- the Bipartisan HSA Improvement Act -- deserves the support of everyone in Congress. Advancing these important HSA reforms into law this year will save patients and the nation's health care system a significant amount of money.

HSAs are "triple tax-advantaged" -- contributions are tax-deductible, the accounts accrue interest, dividends, and capital gains tax-free, and withdrawals are not taxed as long as they're spent on health care. Individuals can put away up to $3,450 per year tax-free; for families, the contribution cap is $6,850.

Unlike flexible spending accounts, there's no "use-it-or-lose-it" requirement or limits on rollovers. At the end of 2016, more than 90 percent of HSAs held funds that rolled over to the next year.

Money in an HSA stays with the account-holder even if he or she gets a new health plan or job. That's especially valuable, given that half of consumers change health coverage every three years.

These advantages have made HSAs popular. By the end of 2016, approximately 20 million HSAs held nearly $37 billion in assets. In 2018, HSA assets will likely exceed $53 billion.

One issue that some health care consumers take with HSAs is the fact that you can only open an HSA after enrolling in a high-deductible health insurance plan. High-deductible plans feature lower premiums. But individuals must cover at least the first $1,350 of their health care expenses out-of-pocket. Families must pay at least $2,700 before insurance kicks in.

Some individuals aren't used to assuming responsibility for a few thousand dollars in health costs, especially after a lifetime of counting on their insurer to pick up the tab.

But high deductibles are a powerful way to battle America's health cost crisis. Since patients have to spend their own money -- typically, from their HSA -- on care, they're more likely to shop around for better prices on routine procedures or to insist upon cheaper generic drugs instead of expensive brand-name ones. Consumers who switch from traditional plans to HSA-eligible plans spend 21 percent less, according to a RAND study.

Critics claim that HSAs reduce spending by discouraging people from seeking medically necessary care. That's not true. The RAND study found that much of the savings resulted from consumers spending less "per episode of care."

In other words, patients stopped visiting overpriced health care providers and opted instead for those that offered better value.

A separate study conducted by Mercer Consulting and the state of Indiana confirms that HSA enrollees are savvy spenders. HSA participants spent only $65 for every $100 spent by people with traditional coverage. The study found no evidence that these savings stemmed from HSA patients deferring needed or preventive care.

The Bipartisan HSA Improvement Act would enable more people to share in these savings. Introduced by Rep. Mike Kelly, a Pennsyvlania Republican, and Earl Blumenauer, an Oregon Democrat, the bill would allow high-deductible plans to cover the cost of routine primary care checkups, medications for chronic conditions, and preventive tests before enrollees hit their deductibles. It also would allow people to use HSA funds to cover gym memberships and various fitness classes and sports programs.

The bill also would amend the definition of dependent in the tax code to mean children through age 26. That would allow parents to use their HSA funds to pay medical expenses for their older children.

These changes would make high-deductible HSA plans more consumer friendly -- and more attractive to more people. That means more savings for consumers and downward pressure on prices as more people shop around for high-value care.

The bill would offer millions more families the benefits of HSAs. It's time for members of both parties to support it.

Janet Trautwein is the CEO of the National Association of Health Underwriters.

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