Key Takeaways
- A new provision in the GOP-proposed budget reconciliation bill would allow Medicare Part A enrollees to also contribute to a Health Savings Account, which currently isn’t allowed.
- This change could allow older Americans to pool and optimize their savings to cover health care expenses like deductibles, copays, and coinsurance throughout retirement.
- However, Medicare Part A enrollees would not be able to use distributions from their HSA to pay for health insurance under this new provision.
The Republican-proposed budget reconciliation bill has many health care implications, but one could benefit retirees who want to save more money for medical expenses.
A provision in the bill passed last week in the House of Representatives allows Medicare Part A enrollees 65 and older to contribute to a Health Savings Account (HSA). The bill now moves on to the Senate, where it could be changed before being signed into law.
Currently, once someone turns 65 and enrolls in Medicare, they are no longer able to contribute to an HSA. They are, however, able to use distributions from an HSA to pay for Medicare costs, like health insurance premiums, just not for supplemental insurance.
Under the budget proposal, enrollees can contribute to individual HSAs—they just won’t be able to use distributions from their HSA to pay for health insurance.
This change could give seniors a place to pool savings to cover health care expenses throughout retirement, including deductibles, copays, and coinsurance. HSA funds roll over from year to year and remain in the account until spent.
After setting aside HSA funds for future medical expenses, the funds can be invested tax-free, optimizing savings and potentially expanding a retiree’s cushion for a medical emergency.
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