Large Health Savings Accounts: A Step toward Tax Neutrality for Health Care

摘要

The creation of tax-free health savings accounts presents a new opportunity to reduce thendistortions created by federal tax preferences for health-related expenditures that ultimately couldnhelp eliminate those distortions. This paper proposes changes to current law that would allow mostnworkers to receive the full amount that they and their employer spend on their health benefits asna tax-free cash contribution to the worker’s health savings account. Restructuring the exclusionnfor employer-sponsored health benefits in this way would enable more individuals to obtain healthninsurance that matches their preferences, would increase efficiency in the health care sector, andncould reduce inequities created by the exclusion. These changes also offer a means of limitingnthe currently unlimited tax exclusion for employer-sponsored health benefits that may be morenpolitically feasible than past proposals.