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Congress

The 'Big Beautiful Bill' Expands Health Savings in a Rare Policy Win

In a bill packed with spending, one provision offers real gains for health care choice and savings.

Veronique de Rugy | 7.10.2025 10:14 AM

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A piggy bank next to a jar of cash with a label that says "H.S.A." | Zimmytws | Dreamstime.com
(Zimmytws | Dreamstime.com)

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 (HSA) 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The accounts are triple tax-advantaged: Contributions go in tax-free, grow tax-free, and can be withdrawn tax-free for qualified medical expenses.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 January 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 percent), Republicans (74 percent), and independents (65 percent) have shown past support for HSAs. A Frank Luntz poll found 83 percent 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, the HSA reform is one instance of the Big Beautiful Bill producing good and popular policy.

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Veronique de Rugy is a contributing editor at Reason. She is a senior research fellow at the Mercatus Center at George Mason University.

CongressReformHealth CarePolicySenate
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  1. sarcasmic   18 hours ago

    tReason never gives credit to Trump for anything. That means this article does not exist. Move along. Nothing to see here. Just ignore it and it will go away.

    Log in to Reply
    1. JesseAz (Prime Meanster of Sarcasia)   17 hours ago

      Thanks king strawman. Ironically you dont see the hypocrisy of this article and her last 2 about BBB.

      Now that reason isnt fighting against it they can pretend to be slightly libertarian again.

      Log in to Reply
    2. Super Scary   16 hours ago

      He said the thing again! Yaaay *clap clap clap*

      Log in to Reply
  2. But SkyNet is a Private Company   18 hours ago

    The Federal Budget bill was ful of spending?!?
    NO WAY

    Log in to Reply
    1. Social Justice is neither   17 hours ago

      As opposed to every Democrat bill (they don't do budgets) that is full of "investment".

      Log in to Reply
    2. sarcasmic   17 hours ago

      Democrats invented government spending.

      Log in to Reply
      1. InsaneTrollLogic (Muting Sarc like he mutes us)   16 hours ago

        Outside of wartime, oddly, in an American context, you nailed it.

        Log in to Reply
        1. TJJ2000   5 hours ago

          Indeed +10000000. That rare moment of truth sarc speaks when he thinks he's being sarcastic.

          Log in to Reply
  3. Eeyore   17 hours ago

    No. Fk this special carve out sht. Just cut taxes and spending. The need for healthcare savings accounts is a symptom of a disease.

    Log in to Reply
    1. TJJ2000   5 hours ago

      True. But as others have said wisely. Don't let perfect become the enemy of better.

      Log in to Reply
  4. JesseAz (Prime Meanster of Sarcasia)   17 hours ago

    So savings on taxes is good now? But you had multiple articles about how not raising income taxes was bad the last month.

    Log in to Reply
  5. Uncle Jay   14 hours ago

    "In a bill packed with spending, one provision offers real gains for health care choice and savings."

    Here's a few ways to save on healthcare for the taxpayers.
    1. Terminate Obamacare.

    2. No free government healthcare for members of Congress, senators or members of the SCOTUS.

    3. No Medicare or Medicaid for anyone whose annual income is over $75,000.

    4. Eliminate all the onerous regulations regarding healthcare and their providers.

    Oh, wait.
    All of this makes sense.
    So, we can be rest assured such reforms will never see the light of day.

    Log in to Reply
    1. See.More   13 hours ago

      All of this makes sense.

      But, more important as to why they won't happen, is that your proposals restore (some) power to the people and remove it from government.

      Log in to Reply
  6. jimc5499   12 hours ago

    I quit using HSA's when legitimate expenses were denied because I didn't purchase them through the Company that ran the HSA. I had foot sugary in 2024. I had to use special dressings and medications that were over the counter. I submitted the receipts for reimbursement but, I was turned down even though they were allowed legally. A few days later I got a letter stating that I could buy them through the HSA's Pharmacy using the funds from my HSA at about a 30% markup.

    Log in to Reply
    1. JesseAz (Prime Meanster of Sarcasia)   8 hours ago

      My HSA manager is Fidelity. They've even allowed non medical items to go through at checkout at drug stores. Had to stop using them because CVS doesn't mark items as HSA eligible or not so just charges everything.

      Log in to Reply
  7. Davy C   7 hours ago

    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.

    That's bad, but pressuring workers into putting money into special restricted accounts which can only buy things the government wants you to buy is good. Apparently.

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