15 September 2016

The Health Savings Act of 2016 (H.R. 4469) – Medicare & Health Savings Accounts

The Health Savings Act of 2016 (H.R. 4469) was introduced in the U.S. House of Representatives on February 4th, 2016 by Rep. Erik Paulsen of Minnesota.  The bill’s summary and full text can be accessed here.  So, why is this relevant?  Because this proposed bill has one very slight amendment to the federal tax code that has a large, positive impact on Medicare-eligible Americans who contribute to a Health Savings Account (HSA).  This bill would enable those enrolled only in Medicare Part A to still contribute to a HSA!


You’re probably thinking, “I thought you can’t contribute to a HSA when you turn 65 anyway?”.  Well, that’s not accurate.  Indeed, you can’t contribute to a HSA if you are actually “enrolled” in a portion of Medicare (i.e. Part A, Part B, Part D).  But if you don’t enroll in any portion of Medicare, and continue working at an employer with a health plan that includes a HSA, you can continue contributing to your HSA beyond the age of 65.


Here’s the problem…

Just like we outlined in our previous blog post, you can run into issues when delaying Medicare enrollment in hopes of taking advantage of HSA contributions beyond age 65.  Additionally, if you delay Social Security retirement benefits to your full retirement age (age 66 currently), you will be automatically enrolled in Medicare Part A — there is no choice.


In our opinion, it is counter-intuitive to force someone to accept Medicare Part A when it might not provide any value while you are in an employer-provided group health insurance plan.  This would especially be the case when you work for an employer with 20 or more employees, as the group health plan would continue to be primary coverage for a Medicare beneficiary eligible based on turning 65.


Many Americans are choosing to work beyond age 65, especially since their Social Security full retirement age is 66 now.  And when the decision is made to begin Social Security retirement benefits (even while still working), the automatic enrollment in Part A only becomes a problem when a HSA is involved.


Implementing the Health Savings Act of 2016 would enable Medicare beneficiaries to avoid a lot of hassle when it comes to their HSA contributions once turning 65.  We hope that the two houses of Congress can come together on this very positive change, and make the adjustments internally at the Social Security Administration to allow the amendment to be implemented.

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