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Under a bill pending in Congress, Medicare beneficiaries will be allowed to deposit money into health savings accounts – something they are currently unable to do.
However, it would also change some of the benefits that come with HSA for anyone 65 and older.
The bipartisan bill (HR 7435), called the Health Care for the Elderly Act and recently introduced in the House of Representatives, is reviving past legislative efforts to allow individuals at Medicare to contribute to the HSA. Because many workers use these accounts in conjunction with their employer’s health plan, more people are likely to reach age 65 – by the time you get eligible for Medicare – with HSA in tow.
“Many clients who have created HSA accounts think they can continue to fund past HSA records at Medicare,” said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans. “They’re usually surprised to learn they can’t.”
Compromises in the bill? This would make it impossible to use HSA withdrawals to pay for Medicare premiums – something that is currently allowed. It will also get rid of penalties for non-medical costs in the crowd of 65 and older, as is now allowed.
At the end of 2021 there were 32 million such accounts – 8% more than in 2020 – a total of $ 98 billion, according to a report by investment adviser Devenir. The company expects that by the end of 2024, the number of accounts with assets of $ 150 billion will grow to 38 million.
Annual contributions to HSAs (for 2022) are limited to $ 3,650 for individual coverage and $ 7,300 for family insurance. (Limits next year will be higher). People 55 and older can put in an extra $ 1,000 a year.
The HSA has triple tax benefits: contributions are not taxable, income is not taxed, and withdrawals are also not taxed as long as they are used to cover qualified medical expenses. Approximately 28% of employees are enrolled in such a plan, compared to 17% in 2011, according to a 2021 study by the Kaiser Family Foundation.
However, you can only contribute to HSA if you have a so-called high-deductible health plan – and Medicare does not go beyond that category. Beneficiaries may use their HSA funds to pay for medical expenses, but may not create a new HSA or contribute to it.
While people who are still working can sign up for Medicare at age 65, many choose continue to use your employer’s health plan together with part A of Medicare (hospital coverage) and possibly part B (outpatient care). If the employer’s plan is a high deductible combined with the HSA, they can continue to make these contributions before paying taxes on the account only if they completely defer registration with Medicare.
“A lot more companies are switching to high-level franchise plans, and a lot more people are working longer,” said Kathleen Holt, deputy director of the Center for Health Protection. “And they come across these rules around HSA.”
In 2022, a high-deductible health plan is a plan with a deductible of at least $ 1,400 per person or $ 2,800 for family insurance with a maximum annual cost (excluding premiums) of no more than $ 7,050 (for an individual). ) and $ 14,100 (family plan). This eliminates offline costs.
The Medicare program has something similar to the HSA, called medical savings accounts, although they are not widely used – about 5,600 beneficiaries were in health plans that used them in 2019, according to the Kaiser Family Foundation.
These so-called MSAs are combined with a high-deductible Medicare Advantage plan (chosen by some beneficiaries), but individuals cannot contribute to the account. The insurer who offers the plan makes contributions – an amount that can vary from year to year – and you can withdraw tax-free to cover medical expenses.
In addition, MSA plans do not include coverage for prescription drugs in Part D, according to the Medicare Centers and Medicaid Services.
It is uncertain whether the bill will receive the House of Representatives. Although the 2019 version accumulated co-authors, it never left the commission.