The healthcare reform that pays for itself: Why HSA expansion reduces costs

By Scott Cutler | Originally posted in The Washington Times

OPINION:

Washington rarely sees healthcare reform that doesn’t rely on massive new federal spending or expanded entitlements. Health Savings Accounts (HSAs) are a notable exception.

As an administrator of HSAs for more than 10 million Americans, we have direct visibility into how consumers use and manage their healthcare dollars and we set out to better understand their experiences and decision-making. Our survey of over 600 employed Americans reveals something budget models consistently miss: when people control their own healthcare dollars, they spend smarter and waste less. The downstream savings can exceed the upfront tax expenditure over time.

Expanded HSA contributions reduce near-term tax revenue. But that cost is outweighed by measurable, recurring savings when consumers have real financial skin in the game. This isn’t theory — it’s measurable behavior we observe daily across millions of transactions.

The Behavioral Economics Are Clear

HSA holders demonstrate fundamentally different consumption patterns. They comparison-shop, ask pricing questions before procedures, choose higher-value care and avoid unnecessary utilization.

We also found that HSA holders are 12.5% more likely to be prepared for routine healthcare costs and 16% more likely to have significant emergency savings. Most tellingly, they’re markedly less likely to skip preventive services when facing financial pressure — behavior that drives up long-term costs.

The reason is straightforward: it’s their money. HSA dollars don’t disappear at year-end or belong to someone else. When consumers know they benefit directly from smart decisions today, they protect their own financial future. The data illustrates that HSA-holders are more likely to be prepared for routine medical bills and less likely to cut back on essential preventive care and treatment.

Healthcare costs are projected to jump 9% in 2026, among the steepest increases in more than a decade. Middle-income families, along with their employers, already spend nearly $27,000 annually on healthcare, while half of American adults can’t cover a $500 medical bill. At the same time, 31 million Americans report they had to borrow an estimated total of $74 billion to pay for healthcare for themselves or a household member.

HSAs are already helping address this gap. Americans now hold more than $159 billion in HSAs across over 40 million accounts. Last year alone, HSA members spent $42 billion on medical expenses using their own saved dollars. Roughly 4 million accounts invest their HSA funds, giving them balances nearly 9 times larger than non-investing accounts and far greater capacity to absorb future healthcare costs without public assistance.

What’s more difficult to capture is behavior. When consumers ask about pricing, providers are incentivized to compete. Unnecessary tests are declined. Generic drugs get chosen when clinically appropriate. Urgent care replaces expensive ER visits. Preventive care increases, allowing health problems to be caught before they require hospitalization.

These are not marginal effects. They compound over time.