Congress keeps finding ways to include certain healthcare provisions into federal spending bills. A temporary spending bill passed in January included a suspension or delay of the Cadillac Tax, health insurer tax and medical device tax. Another temporary spending bill passed in February closes the Medicare Part D donut hole a year earlier than expected.

 

Now, in the latest budget proposal for fiscal year 2019, the White House is calling for a new option that would allow Medicare beneficiaries to make contributions to Health Savings Accounts (HSAs). Under current rules, anyone enrolled in Medicare Part A and/or B is ineligible to contribute to an HSA.

 

The proposal provides no specific details on how this would work, and it’s not clear if there will be enough support in Congress to include this provision in a final spending bill. However, according to an annual statistic released by Fidelity, a 65-year-old couple retiring in 2017 can expect to pay an average of $275,000 on healthcare costs during retirement.   

 

HSAs can provide some relief to retirees since contributions are tax-deductible, interest earned on contributions is tax-deferred and money can be withdrawn tax-free to pay for qualified medical expenses. Current rules also allow anyone age 55 or older to contribute an extra $1,000 to their HSA. Additionally, HSA funds can be used to pay for any Medicare premium with tax-free dollars (other than a Medicare Supplement plan). Long-term care premiums and expenses up to certain limits are also eligible HSA expenses. 

 

The latest spending bill that was passed in February funds the federal government until March 23, 2018. If Congress is to avoid another shutdown, they must work out a deal by this date. We’ll have to wait and see if the final bill includes this new provision for Medicare beneficiaries.