ArcaMax

In a Congress addicted to bad ideas and bloated spending -- something we saw again last week -- it's rare to find a tax policy with broad, bipartisan support that also happens to be good policy. Health savings accounts are one of those rare gems. They promote individual responsibility, reduce health care costs and enjoy overwhelming support from voters across the political spectrum.

The good news is that for all its flaws, the "Big Beautiful Bill" that was just signed by the president includes several expansions to the program.

In a perfect world, we wouldn't need tax-protected health care savings accounts. The tax code wouldn't punish saving in the first place. Income would only be taxed once and not a second time after we save it and it generates returns. Families could set aside money for future expenses without being hit with additional penalties.

But that's not the tax system we have. The double taxation of saving discourages people from preparing for medical and other costs.

Ideally, individuals would also be able to make their own decisions about health. But for the past century, Congress has used the tax code to pressure workers into accepting employer-controlled health insurance by penalizing those of us who choose otherwise. As Michael F. Cannon of the Cato Institute has demonstrated, this system effectively strips workers of control over roughly $1 trillion of their income. Imagine the possibilities if we could each demand more value and accountability for our share.

HSAs offer a partial solution to both of these problems. They can shelter a small portion of income and allow people to make their own decisions about some health care purchases without the government penalizing them. Since their creation in 2003, HSAs have become a lifeline for nearly 40 million account holders.

The accounts are triple tax-advantaged: Contributions go in tax-free, grow tax-free and can be withdrawn tax-free for qualified medical expenses. They reward frugality, encourage price sensitivity (in a way most health-insurance plans do not) and allow families to build health-related savings year after year.

Still, HSAs have benefited only a small segment of workers. To truly bring about individual health care freedom, it is essential that Congress expand them to everyone and end the preferential tax treatment for employer-based coverage. And to give credit where it's due, Congress did indeed deliver on at least part of this agenda.

The House version of the budget included long-overdue HSA reforms, most notably a fix to a particularly maddening and regressive feature of current law: If you're a working senior who needs to claim Social Security at 65 to make ends meet, you're automatically enrolled in Medicare Part A -- and disqualified from contributing to an HSA. A wealthier colleague who delays retirement can continue to enjoy tax-free contributions. Same job. Same employer. Different treatments based purely on wealth.

In addition to abolishing this injustice by allowing working seniors enrolled in Part A to remain eligible for HSA contributions, the House bill expanded the menu of health care options that can be paid for with HSA funds. It made gym memberships, personal training, preventive care and wellness among the new options -- a smart, targeted reform.

Unfortunately, the Senate stripped many of the House's reforms, but enough were retained in the final version of the bill for it to expand access to HSAs and make a significant difference.

Starting Jan. 1, 2026, Americans enrolled in Bronze or Catastrophic Affordable Care Act plans may contribute to HSAs -- around 7.3 million people who previously lacked access in 2025. The bill also allows HSA funds to pay for direct primary care memberships -- modernizing how Americans can save for and manage health care expenses -- and makes permanent the ability of high-deductible health plans to waive the deductible for telehealth visits.

By some measures, these might be the most popular tax provisions in the entire package. As Cannon has pointed out, large majorities of Democrats (73%), Republicans (74%) and independents (65%) have shown past support for HSAs. A Luntz poll found 83% support for working seniors on Medicare to be allowed to contribute to HSAs.

In other words, this wasn't just smart policy, it was a political layup.

There is still a lot of work to be done, such as delinking HSA eligibility from high-deductible plans entirely, expanding contribution limits and eliminating barriers for all Medicare recipients. These moves would further reduce tax-code distortions and reinforce a health care system rooted in choice and accountability.

Nevertheless, HSA reform is one instance of the Big Beautiful Bill producing good and popular policy.

Veronique de Rugy is the George Gibbs Chair in Political Economy and a senior research fellow at the Mercatus Center at George Mason University. To find out more about Veronique de Rugy and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate webpage at www.creators.com.

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