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The Corner

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Hsas



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Bush made some solid HSA proposals. Increasing HSA contribution limits would allow even the chronically ill to build up HSA savings (otherwise, they’d burn through their HSA funds and have nothing left when insurance kicked in). He’d also allow people to purchase health insurance tax-free with HSA funds; that’ll help people who are between jobs. And here comes that first surprise I mentioned. Bush proposed a tax credit for the payroll taxes paid on HSA contributions. Why? If your employer puts money in your HSA, it avoids income and payroll taxes. But if someone doesn’t have an employer putting money in there, the deposits only avoid income taxes. The tax credit is designed to level the playing field between employer-based coverage and individual-based coverage. It’s more complex thanthe way I’d do it, but it’s an innovative idea. (Someone over there is using their noodle. I have my guess.) But the biggest problem is that the president seems insistent that people purchase only the approved type of health coverage: “qualified” high-deductible health plans. Economists from the left (Karen Davis) and the right (John Cogan, Dan Kessler, and Glenn Hubbard) support letting individuals couple an HSA with any type of coverage. Other HSA supporters need to shed this unseemly slice of paternalism.



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