APPLIED PROJECT Research Paper Example | Topics and Well Written Essays - 2500 words

APPLIED PROJECT - Research Paper Example Health Savings Accounts Introduction Health care is one of the basic needs and therefore every person is entitled to proper health care. The government may fund medical expenses but that is only to certain limit. This places the responsibility of better and advanced health care in the hands of the individual. In the US, taxpayers enrolled in High Deductible Health Plan (HDHP) have an advantage of benefiting from HSA, a custodial account or tax-advantaged/ tax-exempted medical savings account (Feldstein, 2006). Description of HSA At the time of deposit, funds contributed to HSA are exempted from federal income tax. Unlike the Health Reimbursement Arrangements (HRAs) which are company owned, HSAs are owned by individuals. A qualified trustee for example an insurance company, a bank or anybody who has already been approved by the Individual Retirement Arrangements (IRAs), is required for the setting up of an HSA. Currently, funds in the HSAs can be used to fund qualified medical expense s at any moment without penalty or federal tax liability (Heffley and Miceli, 1997). HSA is important in enhancing the efficiency of the general health care system and reducing growth in the costs of health care (Ozanna, 1996). This account also encourages individuals to save money that will be used for future medical expenses hence they are able to receive the kind of medical care at any time. This means no one can limit the benefits they are allowed to enjoy at any time. It makes people to see the cost of medical procedures or doctors and this motivates them to shop for healthcare and ask related questions just as they do in other expenses. Withdrawals made from the HSA for non-medical expenses done after retirement provide tax advantages just as those in the IRA but if taken earlier, they incur penalties. The attractive advantages provided by HSA have led to its increased consumption. Since the passage of federal legislation that offer incentives to individuals who choose such pl ans as HSA, there has been a boost in consumer driven health care (CDHC) in the US since 2003. This has led to an increase in the annual consumption of HSA. This is indicated by the consumer surveys data of 2010 and that of 2011 that supports the acceptance of HSA in the US one of the mainstream healthcare options (Tables 1 and 2) (IRS, 2010 and IRS 2011). It is also supported by 2004-2011 contribution limits that indicate a general upward trend for all the years as seen in Table 3. The consumer survey data also indicates that individuals with a health care plan that is compatible with HSA have similar characteristics as those with traditional health care plans like PPQs and HMOs. These include age, income and health. Consumer survey revealed that 59.8% were aged 45 years and above, the annual household income for 42.1% of the consumers ranged between $50,000 and $100,000 and 95.8% considered themselves to be of better or average health (Feldstein, 2006). In terms of annual growth, HSA has been experiencing a general positive growth. As of January 2007, 4.5 Americans were covered by health plans that are HSA-qualified. This was indicated by data from survey conducted by America’s Health Insurance Plans (AHIP) on health insurers. This represented a 1.3 million increase since January 2006. Among the 4.5 million people 3.4 were covered through plans that were sponsored by their employers while the