In a congress addicted to bad ideas and swollen expenses – something we saw again last week – it is rare to find a tax policy with large bipartite support which is also a good policy. Health savings accounts, known as HSAS, are one of these rare jewels. They promote individual responsibility, reduce health care costs and benefit from overwhelming support for voters through the political spectrum.
The good news is that for all its faults, the “great beautiful bill” which has just been signed by the president includes several extensions to the program.
In a perfect world, we would not need health savings accounts protected by taxes. The Tax Code would not punish an economy in the first place. Revenues would only be imposed once and not a second time thanks to taxes on the declarations generated by savings. Families could reserve money for future expenses without being affected by additional penalties.
But this is not the tax system we have. The double taxation of savings discourage people from preparing for medical costs and others.
Ideally, individuals would also be able to make their own health decisions. But during the last century, the Congress used the tax code to put pressure on workers to accept the employer’s controlled health insurance by penalizing those of us who choose the opposite. As Michael F. Cannon of Cato Institute has demonstrated, this system effectively strips control workers About 1 dollars billion of their income. Imagine the possibilities if we could each demand more value and responsibility for our part.
The HSA offer a partial solution to these two problems. They can house a small part of the income And Allow people to make their own decisions concerning certain health care purchases without the government penalizing them. Since their creation in 2003, the HSA has become a lifeline for almost 40 million account holders.
The accounts are with three tax advantages: the contributions are free of tax, develop in tax deductible and can be withdrawn in tax deductible for qualified medical costs. They reward frugality, encourage prices sensitivity (in a way that most health insurance plans do not) and allow families to save health after year.
However, the HSA only took advantage of a small segment of workers. To really cause the individual freedom of health care, it is essential that Congress develops them to everyone and end the preferential tax treatment for coverage based on the employer. And to give a credit where it is due, the congress has actually delivered at least part of this program.
The version of the budget house included HSA reforms expected for a long time, including a solution to a particularly exasperating and regressive characteristic of the current law: if you are a elder who is working who is to claim social security at 65 to reach both ends, you are automatically registered in Medicare Part A – and disqualified to contribute to an HSA. A richer colleague who delays retirement can continue to benefit from tax franchise contributions. Same work. Same employer. Different treatments based solely on wealth.
In addition to abolishing this injustice by allowing the elderly who work in part A to remain eligible for HSA contributions, the Bill of the Chamber law has expanded the menu of health care options that can be paid with HSA funds. He made subscriptions to the gymnasium, personal training, preventive care and well -being among the new options – an intelligent and targeted reform.
Unfortunately, the Senate has stripped numerous chamber reforms, but enough have been kept in the final version of the bill to extend access to HSA and make a significant difference.
From January 1, 2026, the Americans registered with plans of the Act respecting affordable bronze or catastrophic care can contribute to the HSA – around 7.3 million people who previously lacked access in 2025. The bill also enables HSA funds to pay direct subscriptions in primary care – modernize the way Americans can save and manage health expenses – and make the capacity of high health plans permanent to assume the session visits.
According to some measures, these could be the most popular tax provisions of the entire package. Like Cannon has notedThe vast majorities of Democrats (73%), Republicans (74%) and self -employed (65%) have shown supporting support for HSA. A LUNTZ survey found that 83% support for the elderly working on Medicare are authorized to contribute to the HSA.
In other words, it was not only an intelligent policy, it was a political lay-up.
There is still a lot of work to be done, such as fully delivering the HSA eligibility for high plans, expanding the contribution limits and eliminating obstacles to all the beneficiaries of Medicare. These movements would further reduce the distortions of the tax code and strengthen a health system rooted in the choice and responsibility.
Nevertheless, the HSA reform is an example of the “great beautiful bill” producing a good and popular policy.
Veronique de Rugy is main researcher at the George Mason University Mercatus Center. This article was produced in collaboration with the union creators.
