Don’t Target HSAs – They Can Work for Everyone
It’s been two decades since Congress created health savings accounts, vehicles that enable people to set aside money tax-free for future health expenses.
They’ve injected a dose of consumerism into the medical marketplace — and empowered millions of people to take greater control of their care. But many millions more still lack access to them.
That may soon change.
The budget reconciliation bill wending its way through Congress would allow more people to open and contribute to HSAs — and loosen restrictions on how the funds within them can be spent. The House passed the bill by a one-vote margin on May 22; the Senate will take the measure up this month.
The upper chamber should seize the opportunity to further expand access to HSAs.
These accounts are among the most powerful financial planning tools around. They’re triple tax-advantaged. People can deposit money pre-tax. Funds grow tax-free and can be carried forward year after year. And withdrawals are tax-free, provided they go toward qualified medical expenses.
But the benefits of HSAs go beyond their tax treatment.
By giving patients greater freedom to shop around for the highest-value care — to spend their healthcare dollars as they see fit — these accounts help our healthcare market function more efficiently.
They do so by forcing providers to compete against one another for patients’ business. And in the long run, competition leads to better quality goods and services at lower cost.
The problem is HSAs have been hemmed in for years by a host of restrictions. Individuals are only allowed to contribute $4,300 to their HSAs in 2025.
For family plans, the contribution limit is $8,550.
Moreover, only people with private, high-deductible health plans can contribute to an HSA. And only certain out-of-pocket health expenses can be paid for with HSA dollars.
So it is to the credit of House Republicans that their recently passed reconciliation bill pares back some of these rules and restrictions.
For instance, the bill would allow Medicare Part A beneficiaries to contribute to an HSA, provided they are enrolled in a high-deductible health plan.
Americans who rely on direct primary care arrangements — wherein they pay a flat monthly fee for primary care services — would also have the option of contributing to an HSA.
Starting at age 55, spouses would be free to make catch-up contributions to one another’s accounts — instead of being limited to their own HSAs.
The House bill would also deem all bronze and catastrophic plans sold through Obamacare’s exchanges HSA-compliant — and thus allow people with these policies to contribute to HSAs.
It would effectively double the annual HSA contribution limits for Americans earning below $75,000 — and for families with income below $150,000.
Finally, the bill would permit patients to pay for certain fitness-related expenses —including gym memberships — with money from their HSAs. The same would go for expenses from on-site workplace health clinics.
The result of these changes will be to make HSAs more versatile, more attractive, and more accessible.
But the bill doesn’t go far enough.
Senate Republicans ought to consider allowing people to opt out of Medicaid, the public health insurance program for low-income Americans, and into HSA-compatible private plans.
For example, the federal government could encourage states to seek waivers that enable Medicaid funds to be deposited into HSAs owned by beneficiaries.
Enrollees could then use the funds to buy care of their choosing — rather than enduring the long waits common in Medicaid.
Those waits often compel Medicaid beneficiaries to seek care in the high-cost emergency room. Empowering these folks with HSAs could allow them to get better care faster — and save taxpayers money.
As it tackles the reconciliation bill this month, the Senate would be well served to ask not which restrictions on HSAs should be lifted, but which deserve to stay in place.
Expanding access to these accounts is an effective way to bring about better care at lower long-term cost.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is “The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It” (Encounter 2025). Follow her on X @sallypipes. Read Sally Pipes’ Reports — More Here.
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