Established under the 2003 Medicare drug legislation, Health Savings Accounts (HSAs) are individual accounts in which individuals who have a high-deductible health policy can save money to pay out-of-pocket health expenses.

A Brief Overview of the Major Flaws With Health Savings Accounts
This overview examines several serious problems inherent in recent HSA proposals:

Benefits of Administrationís HSA Proposals
Skewed to Higher-Income Households

 

A Family Making:
 

 

$15,000
 

$40,000
 

$180,000
 

Contribution to HSA
 

$1,000

$1,000

$1,000

$10,500

Tax Bracket
 

0%

15%

28%

28%

Value of HSA Deduction
 

$0

$150

$280

$2,940

Value of Tax Credit
 

$153

$153

$153

$1,607

Total Tax Subsidy
 

$153

$303

$433

$4,547

A family making $180,000 would receive more than twice as large a tax subsidy from the Administrationís new HSA proposals as a family making $15,000 if both families contributed the same amount ($1,000) to an HSA.  Moreover, higher-income families could afford to contribute much more to HSAs than less-affluent families, and thus could reap much larger tax benefits from the Administrationís proposal to raise the annual HSA contribution limits to $10,500 per family.

 

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