Tax Proposals and Health Savings Accounts (HSAs)

GAO Study Again Confirms Health Savings Accounts Primarily Benefit High-Income Individuals

A new Government Accountability Office report indicates that Health Savings Accounts are used disproportionately by affluent households.  Its findings also suggest that HSAs are being used extensively as tax shelters.

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Background

Some proposals to reform the health care system seek to achieve this goal through changes in the tax code, such as expansion of Health Savings Accounts (HSAs) — individual accounts in which individuals who have a high-deductible health policy can save money to pay out-of-pocket health expenses.  Contributions to HSAs are tax deductible and may be placed in stocks, bonds, or other investment vehicles, with the earnings accruing on a tax-free basis.  Withdrawals from HSAs also are tax exempt as long as they are used for out-of-pocket medical costs.

HSAs suffer from several serious problems.  Most notably, they could actually increase the number of uninsured by weakening the system of employer-based coverage through which the vast majority of Americans receive health insurance.

By the Numbers

Graphic: Tax Filers Making HSA Contributions Are Disproportionately Higher Income
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