National Poll on Healthy Aging: Saving for Future Health Care Expenses

Most older adults are not using tax-advantaged savings accounts to save for future health expenses, a new poll of people age 50 to 80 suggests, and those who do are more likely to have high incomes and education levels, and to be in good health and under Medicare eligibility age.

At the same time, 18% of people age 50 to 80 are not at all confident that they’ll have enough money to pay their share of health costs in the next year, and 15% have had trouble paying for health care in the past year, according to a new report from the National Poll on Healthy Aging. Some said that worries about costs made them delay seeking care in 2020 (13%), or kept them from seeking care they needed (12%).

In all, 29% of older adults say they’re specifically saving money for future health costs. Among those who aren’t, 40% say they have enough to pay for health costs without having to set aside money just for this purpose, but 27% said they can’t afford to save for future health costs.

Most of the older adults who are saving for health costs say they’re using a regular bank account, which doesn’t offer a tax advantage for health-related spending. Just 12% said they have a flexible spending account, or FSA, which allows tax-free savings and withdrawals for health costs. Less than half (45%) of those who may qualify to open a tax-free health savings account, or HSA, because of the high deductible on their health insurance plan had actually opened one.

Having an FSA was much more common among those age 50-64, those with incomes over $100,000, and those with at least a four-year college degree compared with those over 65, with incomes under $30,000, and with a high school diploma or less. Similar trends were seen for HSAs and Health Reimbursement Accounts, another tax-free option offered by some employers. People who said they were in fair or poor health were less likely to have either.

The findings suggest that more should be done to help older adults understand and use accounts that, if they qualify to open one, can save them money by reducing taxes on the dollars they use for health care. The authors also note that other efforts, such as insurance coverage for essential services before a person meets the deductible on their plan, could be needed to remove cost-related barriers to care for the lowest-income older adults.