Older Adults Are Missing Out on Health Savings Accounts, Poll Finds

Many Older Adults Missing Out on Health Savings Opportunities, New Survey Reveals

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A significant number of older adults are not taking full advantage of tax-advantaged savings tools designed to offset rising healthcare costs, according to a recent survey.

Key Findings from the Survey

• In 2020, 13% of adults aged 50 to 80 postponed medical care due to cost concerns.

• Only 29% of these individuals had saved money in advance for healthcare expenses.

• Health savings options like HSAs, FSAs, and HRAs remain underutilized by older adults, despite their potential financial benefits.

Rising Healthcare Costs Continue to Burden Aging Adults

Healthcare expenses in the U.S. have soared in recent years, with average per-person spending exceeding $11,500 in 2019. As individuals age, their medical needs and expenses typically increase. A study from the University of Michigan’s National Poll on Healthy Aging found that 18% of adults between 50 and 80 felt uncertain about affording future medical bills.

Health Savings Accounts Are Falling Short in Usage

The survey, published in September, revealed a major underuse of tax-free health savings tools among adults who could benefit from them most. Dr. Jeffrey Kullgren, associate professor of internal medicine at the University of Michigan, noted that out-of-pocket medical costs have increased significantly over the years due to rising deductibles and cost-sharing practices.

HSA vs. FSA: What’s the Difference?

The poll, which surveyed 2,023 adults aged 50 to 80, found the following:

• 13% delayed healthcare due to cost.

• 12% needed care but couldn’t afford it.

While savings tools like HSAs and FSAs are designed to reduce this burden, they’re often used less by individuals with lower incomes, limited education, or poorer health.

Tax-Advantaged Accounts That Can Help You Save

There are three primary types of tax-advantaged accounts that can assist with healthcare expenses:

• Health Savings Account (HSA): Lets individuals contribute pre-tax dollars for qualified medical expenses. Funds roll over annually and can be used into retirement.

• Flexible Spending Account (FSA): Allows employees to set aside pre-tax income to pay for medical expenses within the calendar year. Unused funds are forfeited at year-end.

• Health Reimbursement Arrangement (HRA): Employer-funded plans that reimburse employees tax-free for medical expenses up to a set limit.

Survey results showed that among adults aged 50 to 80:

• 7% had an HSA

• 12% had an FSA

• 5% had an HRA

Pros and Cons of Different Health Savings Accounts

Each savings vehicle has distinct advantages and drawbacks. For FSAs, the biggest downside is the “use it or lose it” rule. Many participants hesitate to contribute because they fear forfeiting unused funds.

HSAs, on the other hand, roll over annually and offer a triple tax benefit. According to Amy O’Meara Chambers, JD, COO of HealthBridge, HSAs allow for tax-free contributions, earnings, and withdrawals for qualified expenses. Additionally, funds can be used in retirement, making them an effective long-term savings tool.

What Happens to My HSA If I Change Jobs?

HSAs are individually owned, meaning they are portable and remain accessible even if you leave your job. In contrast, HRAs are owned and funded by the employer, though some may offer rollover options depending on the plan.

Expanding Access to Health Savings Tools

Kullgren emphasized the need for policy reforms to expand eligibility for HSAs beyond just those with high-deductible plans. This could allow more Americans—especially those struggling with healthcare costs—to access valuable savings options.

Summary: Take Control of Your Future Medical Costs

If you’re enrolled in a high-deductible health plan, contributing to an HSA can be a smart financial move. These accounts not only reduce your taxable income but also help you prepare for future medical needs. Policymakers and employers alike should consider ways to make these resources more accessible to vulnerable populations.