Center on Budget and Policy Priorities

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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Of Interest

A Brief Overview of the Major Flaws With Health Savings Accounts

Would Tax Incentives Be An Effective Way To Expand Health Coverage For Low-Income Children And Families?

Health Savings Accounts Unlikely to Significantly Reduce Health Care Spending

Analyses

Curbing Flexible Spending Accounts Could Help Pay For Health Care Reform

Revised June 10, 2009
Statement: Robert Greenstein to Health Reform Financing Roundtable of the Senate Finance Committee

May 12, 2009
New Georgia and Florida Health Plans Unlikely to Reduce Ranks of Uninsured

July 1, 2008
GAO Study Again Confirms Health Savings Accounts Primarily Bneedit High-Income Individuals

May 19, 2008
Martinez Bill Would Weaken Children’s Health Coverage

November 5, 2007

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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.