House Megabill to Expand Health Savings Account Eligibility and Benefits

More health plans would qualify under new rules, but income thresholds limit who can take advantage.

Medications are stored on shelves at a pharmacy in Los Angeles on May 12, 2025. Eric Thayer/Getty Images

The One Big Beautiful Bill Act, passed by the House of Representatives on May 22 and currently being debated in the Senate, contains an additional tax benefit designed to help Americans pay for medical expenses.

This provision expands eligibility for health savings accounts (HSAs), which allow Americans to use pre-tax money to pay for certain medical costs. Contributions to HSAs have so-called “triple tax advantages,” according to Bank of America: Contributions to HSAs are tax-deductible, funds in the account can be invested without taxes on gains, and withdrawals for qualified medical expenses are also not taxed.

In addition, HSAs do not have the required minimum distributions that 401(k) plans have, and funds in an HSA can be used at any time during the account holder’s life, including for non-medical expenses once the holder reaches the age of 65 (although non-medical spending is subject to income tax).

While the House budget bill expands eligibility and increases caps for contributing to HSAs, and adds additional things that HSA funds can be spent on, it will likely only apply to a subset of Americans.

“This is not something that’s revolutionary; it’s more marginal,” Jake Spiegel, research associate at the Employee Benefit Research Institute (EBRI), told The Epoch Times. “It’s not going to affect a ton of people in very meaningful ways.”

However, he said, “People on the margins could benefit significantly.”

The EBRI keeps a database of more than 14 million HSA account holders, and calculates that about half of them live in ZIP codes with median incomes of about $75,000 or less, which is the threshold to qualify for benefits provided in the House budget bill, Spiegel said. However, among those who use HSAs, only about 10 percent max out on permitted contributions.

One significant requirement that prevents many from using or maximizing HSAs is that one must be enrolled in a high-deductible insurance plan in order to qualify. Another issue, Spiegel said, is that “if you’re at the $75,000 income level, you’re going to have a little bit of trouble also saving for retirement.”

Expanding HSA Eligibility

Under current law, only those who are enrolled in a qualified high-deductible health plan, are not enrolled in Medicare, do not have a spouse with a flexible spending account (FSA), and do not have any other disqualifying health coverage may contribute to an HSA.

The new House budget bill, however, would allow Americans enrolled in some Medicare plans to also use an HSA, according to Buchanan, a law firm that conducts policy analysis. It will also allow those enrolled in bronze-level and catastrophic plans under the Affordable Care Act, as well as those whose spouses have FSAs, to contribute to HSAs.

The added HSA benefits in the House budget bill phase out for Americans who earn more than $75,000 for individuals, or $150,000 for joint filers. In theory, the new provision that allows Medicare Part A recipients to contribute to HSAs means that retirees older than 65 who earn less than $75,000 could receive tax deductions on required minimum distributions or other income sources by contributing to HSAs.

However, Spiegel suggested that it might be better for retirees older than 65 to pay the extra premiums for Medicare Advantage, Medigap, or other plans that could cover medical expenses not covered by Medicare Part A, rather than stashing funds away in an HSA.

The House bill also doubles the annual amounts that can be paid into HSAs (currently $4,300 for individuals and $8,550 for families). And it expands what HSA funds can be used for, to include fitness expenses and gym memberships, up to a cap of $500 for individuals and $1,000 for joint filers.

In addition, two types of health plans that are currently disqualifying regarding HSAs would now be permitted: direct primary care arrangements and qualified discounted health services available through an employer’s on-site clinic. These changes would take effect starting Jan. 1, 2026.

While the HSA provisions are narrowly targeted toward low- and middle-income Americans who have high-deductible health insurance plans, a substantial percentage of retirees will likely struggle to meet the rising cost of health care, even taking Medicare benefits into account.

Health Care a ‘Huge Surprise Cost’ for Retirees

“Medicare covers a lot less than people usually think,” Heather Evans, a financial advisor with Merrill Lynch, stated in a report on HSAs. “It can be a huge surprise cost—and your quality of life is going to depend on what you can afford.”

One large exposure to health care costs stems from the fact that many Medicare plans have no cap on out-of-pocket payments.

“If somebody is only enrolled in Medicare Part A and Part B, there is technically no out-of-pocket maximum like there would be for somebody who’s used to having group health insurance [through a company],” Spiegel said. “If you’re 70 years old and you come down with cancer and have to go through many rounds of expensive chemotherapy, you are going to be on the hook for a percentage of that.”

A 2022 study by the Medicare Payment Advisory Commission, calculated that Medicare covers on average only about 66 percent of seniors’ medical costs.

And according to a 2024 report by the EBRI, even taking Medicare into account, the average man will need to have $184,000 saved up at retirement just to afford insurance premiums, deductibles, and prescription drugs; and the average woman will need $217,000. For retirees with chronic conditions, the costs are significantly higher.

For those who need long-term care in a nursing home, the costs can easily exceed $100,000 per year. Even the cost of at-home care, although cheaper, consumed on average 83 percent of the entire income of a typical, elderly middle-income family in 2021, according to an AARP report.