HSA for Seniors on Medicare?

From our friend and elder-law attorney Ira Leff (used with permission).

32 million Americans currently maintain Health Spending Accounts (HSAs). These accounts provide three types of tax benefits: contributions are tax-deductible, earnings are tax-free, and withdrawals are not subject to taxation if they are used to pay qualified medical expenses.

As of the end of 2021, there was $98 billion in these accounts! In order to be eligible to use an HSA you must also participate in a high-deductible health plan. For an individual, the deductible must be at least $1,400. Families must have a deductible of at least $2,800. And, the annual maximum out-of-pocket exposure cannot exceed $7,050 for an individual or $14,100 for a family.

What happens when HSA participants reach 65 and go on Medicare? Under current law, they lose the ability to create or fund an HSA since Medicare does not qualify as a high-deductible plan.

However, there is a bill which was introduced last month in the U.S. House of Representatives which would allow Medicare beneficiaries to contribute to HSAs. It is called the Health Savings for Seniors Act. This is not the first attempt to pass such legislation.

If you have a strong opinion concerning this legislation, I encourage you to contact your Washington representatives.