Enrolling in Medicare and Want to Keep Your HSA? Good News May Be on the Horizon.
If you are an upcoming Medicare beneficiary with a Health Saving Account (HSA) you wish to retain (or if you wish to start a new one), there may be a glimmer of hope after all. A new bill has recently been presented to members of Congress that would allow Medicare beneficiaries to keep their HSA through enrollment, or potentially even start a new one, through the enrollment process.
This development, which seniors have been clamoring for quite some time, appears to be closer to reality than ever before, as the newly introduced legislature is garnering some bipartisan support.
The new bill, which is known as the Health Savings for Seniors Act, is something of a breath of fresh air for many Medicare enrollees who were forced by current Medicare law to stop contributing to their HSAs once they become Medicare beneficiaries. Still, the new proposal is not without its drawbacks.
What Does a Health Savings Account Have to Do with Medicare Enrollment?
For many seniors, a Health Savings Account provides another way to handle copays and other related costs for medical services. It’s like most any other savings account that you contribute money to, but your savings may be used primarily to pay for healthcare expenses.
Under current law, seniors may only contribute to an HSA account if they are also enrolled in a high-deductible health insurance plan. Since Medicare does not fall under the category of a high-deductible plan, one cannot contribute to an HSA or enroll in a new one as an existing Medicare beneficiary.
This may be part of the reason why many individuals who are age 65 and eligible for Medicare, yet are still working, opt to delay enrolling until retirement. In many circumstances, these workers can only be contributing to their HSA* if they delay signing up for Medicare altogether.
*Annual contributions to HSA accounts are limited. As of 2022, individuals with individual coverage can contribute up to $3,650, and those with family coverage can contribute up to $7,300. Individuals 55 and older can contribute an extra $1,000 per year.
Understanding H.R. 3796, or, the Health Savings for Seniors Act.
Many members of Congress have been working for some time on a variety of Medicare reforms, yet many of the proposed bills end up being met with some resistance once they hit Capitol Hill. Still, public and political support for Medicare reform seems to be at an all-time high.
Most famously, President Joe Biden recently publicly stated his support for Medicare prescription drug cost negotiation as well as a $35 per month cap on insulin prices. The latter proposal has recently passed in the House of Representatives, marking another leap forward in government support of Medicare reform.
As for the Health Savings for Seniors Act, Representatives Ami Bera, M.D. (D-CA) and Jason Smith (R-MO) reintroduced this bill to the floor in April of this year, citing its goal of allowing seniors to continue making regular contributions to their Health Savings Account (or start a new account) even while actively enrolled in the federal government’s health insurance program, something that is currently prohibited by Medicare law.
If H.R. 3796 does pass, the bill would almost certainly allow HSA accounts to act as another helpful supplement for seniors who regularly struggle to pay for medical services and treatment, even if they are already enrolled in Original Medicare Parts A and B. Representatives Bera and Brown estimate that the passage of the bill could help seniors save approximately 12 percent on every medical cost that is at least partially paid for by an HSA.
What are the Potential Drawbacks of the Health Savings for Seniors Act?
Unfortunately, no bill is perfect, and that’s also true of H.R. 3796. The original version of this bill was first introduced to Congress in July of 2019 but was unfortunately never advanced during that congressional session. Although the bill has seen increased political and public support in the fallout of the COVID-19 pandemic, its chances of becoming law this year are most likely still quite slim.
Other potential downsides of the bill, specifically for the seniors it is meant to support, include:
- Excluding Medicare premiums as a qualified medical expense for HSAs
- Repealing the exception that allows seniors to avoid paying a penalty for using HSA contributions on anything other than qualified medical expenses
Can’t Start or Maintain an HSA? You Still Have Options!
While Medicare currently doesn’t allow beneficiaries to make regular contributions to an HSA, there are still options that can help you pay for what Original Medicare doesn’t. If you’ve never considered Medicare Advantage, Medigap supplemental, or Part D Prescription Drug plans, you’re passing up a lot of help toward covering your medical expenses.
It’s always a great idea to learn about and compare Medicare Advantage plans in your area. These plans can be of great assistance to you when it comes to paying for things that Original Medicare will not. If you’re interested in learning more, don’t hesitate to contact our friends at MedicareInsurance.com by calling (800) 950-0608 and speaking with a friendly, experienced, licensed agent today.