Proposal to Make Health Savings Accounts (HSAs) Available from Birth for U.S. Citizens

Health
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Executive Summary

This proposal advocates for the policy change to make Health Savings Accounts (HSAs) available to every child born in the United States, regardless of income or family status. The goal is to establish a health savings infrastructure that ensures early access to healthcare funds for all citizens, promotes long-term financial health, and incentivizes responsible healthcare spending from an early age. By allowing HSAs from birth, we aim to empower families to proactively manage their healthcare expenses, reduce the financial burden on government healthcare programs, and enhance the financial security of future generations.

Background and Rationale

Health Savings Accounts (HSAs) are tax-advantaged accounts that allow individuals to save for qualified medical expenses. Currently, HSAs are available only to individuals enrolled in high-deductible health plans (HDHPs) and generally become accessible after an individual turns 18. However, the importance of healthcare access and financial literacy from an early age cannot be overstated. Making HSAs available to all citizens at birth aligns with the following objectives:

  1. Early Financial Responsibility: Encouraging families to save for their children’s health from birth fosters early financial literacy and responsibility.
  2. Reduced Healthcare Costs: With a growing trend of healthcare expenses, an early start in saving for medical costs can help families avoid financial stress later in life.
  3. Promoting Preventive Care: HSA holders can use the funds to cover preventive health measures, ensuring better health outcomes and potentially reducing future healthcare costs.
  4. Strengthening Healthcare Security: By providing every citizen with an HSA from birth, the government can encourage long-term savings that will reduce reliance on public healthcare programs as individuals age.

Proposal Overview

We propose the following actions to make Health Savings Accounts available from birth for all U.S. citizens:

  1. Automatic HSA Enrollment for Newborns:
  • Every child born on U.S. soil will automatically be enrolled in an HSA, with the account receiving an initial government contribution of $500.
  • This initial contribution will be made available immediately, allowing parents or guardians to use the funds for eligible health expenses such as doctor visits, vaccinations, and other medical costs.
  1. Account Management:
  • The accounts will be managed similarly to 401(k) accounts, with a variety of investment options available to allow the funds to grow over time.
  • The growth will come from interest accumulation, tax-free capital gains, and investment earnings within the account. Parents or guardians will have access to manage the account and choose investment strategies suited to their risk preferences.
  1. Tax-Free Contributions:
  • Parents or guardians will be allowed to contribute up to $5,000 per year tax-free into the HSA to help cover the child’s ongoing medical expenses or save for future healthcare needs.
  • Other family members, friends, or organizations can also contribute to the child’s HSA, and these contributions will also be tax-free up to the annual limit.
  • These contributions will continue to be tax-advantaged, allowing for long-term growth and future flexibility in managing healthcare expenses.
  1. Redirecting Public Benefits for Low-Income Families:
  • For families who are unable to work due to disability, illness, or financial hardship, this proposal includes a mechanism for redirecting certain public benefits into the child’s HSA.
  • Redirected Benefits: Individuals receiving government assistance such as Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), or unemployment benefits will be able to allocate a portion of these funds toward their child’s HSA.
  • The redirection of these benefits would be voluntary, and eligible families could choose to direct up to a certain percentage of their benefits (e.g., 25%-50%) toward the child’s HSA. This will ensure that families facing financial challenges still have an opportunity to build long-term healthcare savings for their children.
  • Additionally, the government could provide matching contributions for low-income families, offering an extra incentive to encourage savings and assist with meeting healthcare needs.
  1. Eligible Medical Expenses:
  • The funds in the HSA can be used for a wide range of qualified medical expenses, including but not limited to doctor’s visits, vaccinations, prescription medications, vision and dental care, and other healthcare services.
  • Similar to adult HSAs, the funds can also be used for other health-related expenses as defined by the IRS, such as health insurance premiums, co-pays, and certain medical equipment or supplies.
  1. Long-Term Benefits and Flexibility:
  • The funds in the HSA will grow over time, benefiting from compounded interest, tax-free growth, and the ability to invest in different asset classes such as stocks, bonds, or mutual funds.
  • The funds remain with the child and continue to grow as they age, providing financial security for future healthcare needs. At the age of 18, the child can take control of the account and begin to use it for their own medical expenses, while still benefitting from the tax advantages.

Financial Considerations and Equality

  1. Government Funding:
  • The initial $500 contribution to each child’s HSA will be funded through existing government healthcare savings or reallocated funds from programs like Medicaid, with minimal disruption to current services.
  • The annual tax-free contributions by parents (up to $5,000) and others will ensure that there are ample funds to cover future medical expenses, reducing the reliance on government healthcare programs.
  1. Equality and Access:
  • This program will be designed to ensure equality across income levels. For low-income families, the ability to redirect benefits like SSI, TANF, and unemployment into the child’s HSA ensures that even those without regular income can participate.
  • Additionally, the government will provide matching contributions to encourage savings for these families, which can be tailored based on family size and income level.
  • Programs can be created to ensure that families in need, regardless of their employment status, can benefit from this program.
  1. Long-Term Sustainability:
  • By empowering individuals and families to save for their healthcare needs from birth, this initiative will help reduce long-term pressure on public healthcare systems by promoting responsible spending and financial planning.
  • As the population of HSA participants grows over time, it is expected that individuals will have sufficient funds to cover their healthcare needs, further decreasing dependency on government-provided healthcare assistance.

Conclusion

Making Health Savings Accounts available to every child born in the U.S. would mark a transformative step toward building long-term financial security for future generations, while encouraging early financial literacy and responsibility. With the initial government contribution and the ability for parents and others to contribute tax-free, this proposal would provide every child with the resources needed to manage their healthcare expenses as they grow, ensuring that every citizen has the financial tools necessary to prioritize their health. The option for low-income families and individuals who cannot work to redirect their public benefits into the child’s HSA ensures that all citizens, regardless of financial status, have the opportunity to benefit from this initiative.

We urge President Trump and RFK Jr. as future policy leaders beginning in 2025 to please onsider this proposal and take action toward creating a healthier, more financially secure future for all U.S. citizens.

Jason R