Experts assess Trump’s 7-point healthcare plan
4. Allow individuals to use health savings accounts (HSAs).
Expanding HSAs places the responsibility for healthcare choices on consumers by creating a reward to the consumer for getting less care and spending less money, according to Johnson.
“Trump’s plan allows withdraws tax-free and upon death,” he says. “Money in an HSA would be passed on to the deceased’s heirs. While not unique, they are solid market-based ideas.”
HSA’s are a double-edged sword though, Johnson explains. “For example, if a high-deductible HSA leads a cost-sensitive individual to skip important routine care for diabetes or other chronic disease, then we shouldn’t be surprised if a $20,000 to $50,000 hospital admission occurs because someone wanted to preserve a few hundred dollars in their HSA.”
Contributions to an HSA today are tax-advantaged to be used for the purchase of a high-deductible health insurance plan. “A high-deductible health plan is defined as one with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses do not exceed $6,450 for self-only coverage or $12,900 for family coverage,” says Hoagland. “Trump’s proposal does not address these definitions.”
This proposal raises several issues and questions for Mack:
“First, if an individual is eligible to participate in their employer’s health plan, then the state or federal [ERISA] laws would have to be changed to allow contributions to be made instead to the HSAs,” he says. “If employed, does the employer or individual get the tax benefit of the contribution? Is the contribution considered income by the employer if it does not obtain a tax benefit? Can HSAs be comingled among family members without tax or other penalties? Are healthcare costs no longer deductible when paid yearly?”