Tax-Advantaged Accounts for Health Care Expenses: Side-by-Side Comparison

Publication Date: November 2003

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance; Health

Type:

Abstract:

The conference agreement on the Medicare prescription drug bill (H.R. 1) includes new tax-advantaged accounts for health care expenses called health savings accounts (HSAs). These accounts had been included in the original House-passed bill, but they were not in the Senate amendment. Other tax-advantaged accounts in the original House-passed bill, health savings security accounts (HSSAs), were not included in the conference agreement.

The new accounts in conference agreement might be considered an expanded form of Archer medical savings accounts (MSAs) that are authorized under current law. Both HSAs and MSAs ought to be distinguished from two other health care accounts authorized also under current law, health care flexible spending accounts (FSAs) and health reimbursement accounts (HRAs). While the four accounts have some features and objectives in common, they differ in important respects. Keeping the accounts straight can be difficult, especially when they are discussed informally using alternative names.

This report provides brief summaries and background information about the four accounts and then compares them with respect to characteristics such as eligibility, contribution limits, and use of funds. The report will be updated to reflect legislative developments and may be expanded to include additional topics and perspectives.