H.R. 4177, "a bill to amend the Internal Revenue Code of 1986 to allow Medicare beneficiaries participating in a Medicare Advantage MSA to contribute their own money to their MSA"

This bill, introduced by Rep. Erik Paulsen (R-MN), would amend the Internal Revenue Code to remove restrictions on who can contribute to a Medicare Advantage (MA) medical savings accounts (MSA, also known as an “Archer MSA”), effectively allowing MA beneficiaries to contribute their own money to their MSAs.  Currently, contributions to MSAs are only allowed to be made by (1) Medicare or (2) a transfer from one MSA to another MSA, held by the same beneficiary.  H.R. 4177 would encourage healthier and wealthier people to switch from comprehensive, low-deductible coverage to high-deductible health plans for tax sheltering purposes, worsening the risk pool for those remaining in comprehensive coverage.  

Earnings in MSAs and HSAs grow tax-free and withdrawals are tax-free as long as they are spent on out-of-pocket medical expenses.  Higher-income people disproportionately benefit from MSAs and HSAs because they receive a larger tax break for each dollar they put into them than lower-income people do because they are in a higher tax bracket.  For example, someone in the 35-percent tax bracket saves 35 cents in taxes for each dollar he or she puts into an MSA or HSA, while someone who is in the zero, 10-percent, or 15-percent bracket saves no more than 15 cents in taxes for each dollar put into the account.  In addition, lower income people cannot afford to contribute as much to MSAs or HSAs as higher-income people generally can, which makes them even more valuable to upper income individuals.  Furthermore, MSAs could deter the use of needed care among beneficiaries enrolled in such plans.