Health Savings Accounts Could Cure Cost Crunch For Seniors

by Quin Hillyer, originally posted on the Washington Examiner

A new, bipartisan effort in Congress wisely aims to reduce out-of-pocket medical costs for senior citizens without requiring a complicated, systemic revamping of the whole Medicare system. Here’s hoping the Health Care Savings for Seniors Act, co-authored by Democrat Ami Bera of California and Republican Jason Smith of Missouri, gains momentum and finds its way into law.

Also co-sponsored by Republican Mike Kelly of Pennsylvania and Democrat Lucille Roybal-Allard of California, H.R. 3796 would implement a very simple change that could reduce effective out-of-pocket costs by 25%. It would correct a foolish deficiency in present Medicare rules. Right now, Medicare recipients are not allowed to keep contributing to, or to start, health savings accounts. The Bera-Smith bill would allow seniors to do so.

The effect would be to allow out-of-pocket expenses to be treated on a pre-tax, rather than post-tax, basis. For seniors paying the rough average of about $6,000 in such medical expenses each year, the result if their effective income-tax rate is 25% would be a savings of $1,500 annually.

Sponsors also note that this could be especially (but of course not solely) beneficial to women. Women tend to have lower earnings through the course of their lifetimes with which to build retirement nest eggs, but their life expectancy is longer than that of men. A reduction in their effective healthcare costs (or a boost in their ability to save, depending on how one looks at it) could make a big difference for them in their last years when their needs are greatest, but their savings are the most depleted…