It won’t take long for the Republican congress to use every trick in the book to defund, defang, and repeal The Affordable Care Act. The only question is, what comes next. President-elect Donald Trump and his GOP cohorts promise something wonderful. But the devil is in the details. And so far, all they are offering is a spit-polished version of the old, broken system we had pre-Obamacare. In other words, they’re promising nothing.
And the biggest “nothing” in their fantasy plan is Health Savings Accounts (HSAs).
Just to be clear, when Trump or Speaker of the House Paul Ryan say they want to replace Obamacare with Health Savings Accounts, they are saying they want to replace health insurance with YOU paying for your healthcare. That means YOU pay for chemotherapy… YOU pay for all your surgeries and hospitalization… YOU pay for all your family’s doctor visits, urgent care, ER visits, and prescription drugs out-of-our-pocket. A Health Savings Account is just a tax-free way for you to save up money to pay for your own medical bills. So if you are paying off college loans, or saving for a house downpayment, or simply living paycheck to paycheck, guess what — a Health Savings Account does you no good, because you have no discretionary funds to deposit into it.
But let’s say you’re lucky enough to be able to squirrel away $1,200 a year into a tax-free HSA. Almost half of Americans pay no federal income tax, so they will get no tax savings. If you pay 5-10% of your adjusted gross income in taxes, that’s all you save. Let me do the math for you: 5-10% of $1,200 is $60 to $120 a year. That’s your entire tax savings. A typical general practitioner charges $125 for an out-of-pocket office visit or wellness checkup. So your entire year’s tax savings is wiped out in one visit for one family member. That’s what the Trump Administration wants to give you in return for you paying ALL your out-of-pocket medical expenses on the full walk-in fees for your doctor visits and full retail price on your prescription drugs. Helluva deal, huh?
If you do manage to save up five grand or ten grand in an HSA over several years, that could all get wiped out in a single hospital visit for you or a family member. Then you are back to square zero again.
Even if you can supplement your HSA with an affordable catastrophic insurance plan, the money you deposit into your HSA will be eating away at money that you should be investing for your retirement or your kids’ college tuition. Only the top 5-10% of Americans can save enough for retirement, college tuition AND their own out-of-pocket medical expenses. Therefore, the tax benefits of HSA’s only help those people.
So when you hear Trump or Ryan touting Health Savings Accounts, think “shell game.” They are playing Three Card Monte with your health and finances.
And believe me, when the cards are all face up, you will lose.