House Obamacare Repeal Bill Limits HSAs for Millions of Americans

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Hand Holding Cash ca. 1998

The House Republican American Health Care Act Managers Amendment would not allow Americans to use their tax credits to fund an HSA. Instead of using their tax credit/HSA to pay for doctor visits, prescriptions and OTC drugs, Americans will only be allowed to use their credit for insurance. This is a big mistake – and a giveaway to insurers. Millions more Americans would have an HSA if the proposed $2,000 to $4,000 tax credits were automatically deposited into individuals’ HSAs for use on health insurance premiums, copays, cost-sharing and paying for direct care.

If allowed to do so, many people may even decide to forgo health insurance coverage and use the HSA to pay directly for medical care. For most people (well over half the population), an HSA with $2,000 to $4,000 would be sufficient to fund their entire health care needs in cash. Not allowing funds (or excess funds after insurance premiums) to be deposited into an HSA will take away HSAs from millions of Americans, increase their out-of-pocket costs and lower their access to primary care in the process.

This latest amendment is baffling. The Obama Administration and numerous public health advocates have long hated HSAs because they view the ability to stockpile health care funds for yourself – for later use – violates the tenants of solidarity. Left wingers want everybody to pay into the system so those with medical needs can withdraw from the system. That’s socialism and that’s what Obamacare has done: millions of Americans now have health insurance coverage with deductibles so high that it pays little if any of their routine medical bills. But all plans are required have no annual limits or lifetime limits on benefits. Stated another way, people are required to buy health coverage that is not expected to pay for their own care; rather it’s designed to pay for someone else’s catastrophic medical needs. There is nothing wrong with pooling risk, but Obamacare goes far beyond pooling risk.

The key to reining-in runaway health costs is not to boost coverage to more and more people as Obamacare did. The key to slowing the growth in health care spending is to make more and more people care about their medical spending. To this end, it would actually be better for the system if millions of Americans decided to forgo insurance and used their tax credits on direct primary care. That is something that most policy wonks fail to understand. Increasing health insurance coverage and making it sky-is-the-limit does not reduce health care expenditures; starving the beast would though.

Purportedly the change in the language in the managers amendment preventing individuals from depositing funds from their tax credit into HSAs was designed to appease those who do not want anyone to have the ability to use their tax credit for an abortion. I can hardly think of a more short-sighted decision. The odds of that happening is so small as to be on-existent. Besides, money is fungible.

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