Washington, D.C.—Oversight and Government Reform Committee Chairman Henry A. Waxman (D-CA) and Ways and Means Health Subcommittee Chairman Pete Stark (D-CA), today released a Government Accountability Office (GAO) report finding that Health Savings Accounts (HSAs) are used more often as a tax shelter by wealthy individuals rather than as a mechanism to help working families obtain needed health care.

Specifically, the report finds that instead of being used by low and middle-income Americans most likely to be without health insurance, HSAs are increasingly a popular tax shelter option for wealthy taxpayers.

“The GAO confirms that HSAs are not the way to meet the health care needs of most Americans. Instead, they are an effective tax shelter for people whose average incomes are nearly triple that of average tax filers,” said Rep. Pete Stark.

Rep. Waxman echoed Rep. Stark’s remarks.  “HSAs clearly are attractive to higher income people who are looking for tax shelters.  But they aren’t the answer for providing adequate health insurance coverage for the average American.  This report provides further evidence that we need to reexamine whether this is the right way to use the Government’s resources to address our health care needs.”

GAO’s findings are bolstered by HSA advocates’ extreme opposition to legislation passed earlier this month in the House (HR 5719) that would require HSA enrollees to substantiate that HSA withdrawals were used for allowable medical expenses. Data from at least one company indicate that HSA funds appear to have been spent on escort services, at casinos and bowling facilities and in other non-health related areas.  Flexible Spending Accounts, a different tax-preferred health account with fewer tax breaks than HSAs, require substantiation.  In addition, the federal government requires far more onerous verification standards to qualify for Medicaid and for Part D low-income subsidy.

“How can anyone seriously oppose minimal verification standards for wealthier people who get tax breaks that are supposed to be for health care when we have far more burdensome requirements on people with incomes near the poverty level?," asked Stark.

For example, the Part D low-income subsidy, which covers individuals earning less than $15,600 a year, requires applicants to provide detailed financial information on income and assets. That information is verified against data from the IRS and other federal, state and local records. 

The findings of the GAO in this report include:

• The average adjusted gross income was about $139,000 for Health Savings Accounts enrollees compared to $57,000 for all other filers.

• The total value of all Health Savings Accounts contributions reported to IRS in 2005 was about twice that of withdrawals -- $754 million compared to $366 million – suggesting an interest in it more as a shelter than vehicle to obtain needed health care or supplement inadequate coverage.

• Significant enrollment growth in Health Savings Account (HSA) plans.  Between 2004 and 2007, participation grew from 438,000 to approximately 4.5 million.

To view the full report, click here.