Let’s take a break from wringing our hands about how confusing and complicated the Medicare Part D prescription drug benefit is for our “needy” seniors (the wealthiest generation in the history of mankind), and examine a healthier offspring of the Medicare Modernization Act of December 2003: Health Savings Accounts (HSAs). President Bush’s State of the Union speech on January 31 will likely propose expanding the flexibility of this powerful tool that patients are using to take control of their own health care.

HSAs are accounts, held at financial institutions, into which employers or employees deposit pre-tax dollars. The concept of HSAs was first presented in a polished form in 1992 by a couple of scholars, John C. Goodman and Gerald Musgrave. In order to open an HSA, a person must have a health insurance policy with a high deductible. For 2006, the policy must have a minimum deductible of $1,050 for an individual or $2,100 for a family, and maximum out-of-pocket costs of $5,250 and $10,500. The maximum contributions are the lesser of $2,700 and $5,450, or the amount of the deductible if it is lower than that.

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