or medicines, you can set up a health savings account with up to
$2,600 a year for an individual, or up to $5,150 for a family.
Now, contributions to these accounts are tax-free. The earnings in
these accounts—in other words, if you don't spend all the money, and
you got that money invested—the earnings are tax-free, and when you
withdraw them to pay for routine medical expenses, the withdrawals
are tax-free. In other words, there are incentives built in for people to
put money aside to meet routine medical expenses, expenses other
than costly catastrophic expenses or high hospitalization expenses.
Because the HSA is tax-free, it will save the American—the Americans
between 10 to 35 percent of out-of-pocket medical expenses,
depending on a person's tax bracket.
Not only does the HSA start to empower you to make decisions, it
actually provides tax relief at the same time. Whatever you don't
spend, by the way, in a year—you put $2,600 in, you don't use all that
money, that can be saved for future medical bills. In other words, you
start to save money and accumulate money. So instead of sending all
your health dollars to an insurance company, you and your employer
can use an HSA to lower your insurance premiums, to cover major
medical bills, and to keep the savings to cover routine costs, and to
save for future issues you may have to deal with.
When more Americans sign up for these HSAs we'll see positive effects
for our families and the economy this way: First, many American
families who choose HSAs will pay less overall for their health care.
People behind me, who have chosen HSAs, will testify that that's the
case. I'm going to testify on their behalf here, in a minute. (Laughter.)
Insurance premiums will be lower and people will be able to draw from
tax-free money to pay for routine expenses.
Secondly, HSAs will encourage people to spend wisely for their routine
medical expenses. If you put in $2,600 tax-free, that $2,600 is yours;
and if you spend unwisely, you're spending your own money unwisely,
and you begin to see the consequences as the savings for that
particular—or the contribution for that year begins to dwindle. When
people consider the true costs of their medical care, they will push
health care providers to offer better services and better prices. When
it's your money you're spending, you see it, you write the check, you
have the tendency to demand better service. If somebody else is
spending the money for you, there's no cost control because the
demand—the decision-making process has been taken out of the
economic equation.
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