A health savings account (HSA) is a type of tax-exempt trust created for the exclusive purpose of paying for qualified medical expenses of an account beneficiary.^[1] An eligible employee may allocate a limited amount of funds to the HSA, pre-tax, for current and future medical expenses. The pre-tax contribution may even qualify as a pre-employment tax contribution, not simply pre-ordinary income tax like the commonly used Individual Retirement Account (IRA) or 401(k) savings plan.  Funds contributed to the HSA grow tax deferred and potentially tax free.  Funds withdrawn from the trust to cover qualified medical expenses are exempt from ordinary income tax.  Funds withdrawn for non-qualified reasons are generally subject to a penalty tax as well as ordinary income tax.  However, funds withdrawn for non-medical expenses after the age of Medicare eligibility are exempt from penalties and simply subject to ordinary income tax, making the HSA similar to a retirement account with the added benefit of paying medical expenses pre-tax.  So funds contributed to the HSA are pre-ordinary income tax and possibly pre-employment tax depending on the employer’s plan, the HSA grows tax free, and funds from the HSA may be withdrawn for qualified medical expenses tax free.  Because of this “triple tax benefit,” the HSA provides substantial savings opportunities that other retirement vehicles simply cannot provide, making the HSA a significant employee benefit that is often overlooked or misunderstood.  The following sections and examples review the fundamentals of the HSA and demonstrate the advantages the HSA may have when used as a financial planning tool for well-advised professionals of all ages.

Eligibility Requirements

HSA trust accounts were authorized in 2003 under the Health Savings and Affordability Act of 2003, which was a section of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.[2]  The bill was signed by President George W. Bush and was an effort by the legislature to improve and modernize Medicare and health care in general.^[3]  Specifically, the bill amended the “Internal Revenue Code (IRC) of 1986 to allow a deduction to individuals for amounts contributed to health savings security accounts and health savings accounts,” codified in Section 223 of the IRC.^[4]

The HSA eases the financial burden of rising health care costs.  However, certain criteria must be met before an individual is eligible to set up an HSA.  An individual must be covered by a high deductible health insurance plan and may not be covered by any other non-high deductible health plan.^[5]  An individual may not be enrolled in Medicare and is disqualified if claimed as a dependent on another person’s tax return.^[6]

In 2017, a high deductible health insurance plan is a health plan with an annual deductible of at least $1,300 for an individual plan and $2,600 for a family plan.  These limits are adjusted yearly subject to a cost-of-living adjustment.^[7]  A deductible is the amount a person is responsible for paying for medical expenses before insurance begins to cover those expenses. The high deductible health plan must not have an out-of-pocket maximum above a certain threshold for HSA eligibility. In 2017, the maximum out-of-pocket amount annually is $6,550 for an individual plan and $13,100 for a family plan.^[8]  Thus, in order for a health plan to qualify as HSA eligible, the total amount paid for medical expenses cannot exceed the annual maximums.

Eligibility also affects contribution limits.  Contribution limits are determined monthly by an individual’s eligibility as of the first day of each month.^[9]  In other words, if an individual becomes eligible on July 15, the individual will qualify for contributions to the HSA starting in August, as determined by the first day of the month.  However, “although the contribution ceiling is determined monthly, the maximum contribution may be made at any time before the deadline, [which is generally April 15 of the following year for calendar-year taxpayers].”^[10]

“Pre-Tax” Contributions for Qualified Medical Expenses

Once eligible, an individual may set up an HSA and start making contributions to the account for qualified medical expenses not covered by an insurance policy.  Qualified medical expenses are the same medical expenses that would be deductible on an individual’s tax return.^[11] They include costs incurred by an individual, an individual’s spouse, or any dependent.^[12]  Contributions to the HSA are made pre-ordinary income tax.^[13]  When withdrawn for qualified medical expenses, the funds are not includible in gross income and are thus potentially never taxed.^[14]  The ability to pay for all non-covered medical expenses with pre-tax dollars incentivizes individuals to contribute to the HSA in order to cover present and future medical expenses with pre-tax dollars.  However, there is a particularly rewarding incentive for employees who have the option to contribute funds to an HSA as part of a cafeteria plan offered by an employer.  A cafeteria plan allows an employee to choose certain benefits from a larger group of benefits offered, and the employee pays for the benefits pre-tax through salary reductions.^[15]  Examples of benefits under a cafeteria plan may include health insurance, life insurance, child care reimbursements, and medical expense reimbursements.^[16]

An employer’s contribution to an employee’s HSA is considered “employer-provided coverage for medical expenses under an accident or health plan” and is excluded from wages and exempt from employment taxes so long as the contributions are within the limits authorized.^[17] Wages, as defined for purposes of employment (FICA) and unemployment (FUTA) taxes and withholdings, excludes “any payment made to or for the benefit of an employee if at the time of such payment it is reasonable to believe that the employee will be able to exclude such payment” as employer-provided coverage for medical expenses.^[18]  Thus, the employer’s contributions to the HSA are not wages and not subject to FICA or FUTA taxes.^[19]  However, the employer must report the contributions on the employee’s W-2, and the employee may not deduct the employer’s contributions on an individual return.^[20]

While this incentivizes the employer to compensate in the form of HSA contributions, it also increases the incentives to employees to make elective contributions when the HSA is offered as part of a cafeteria plan because of the characterization of employee contributions. “Contributions [in the form of a section 125 cafeteria plan] ultimately achieve similar income tax treatment for both the employer and the employee, including deduction for the employer and exclusion from the employee's gross income.”^[21]  Thus when an employer has a cafeteria plan which allows employees to make elective contributions to an HSA, the employee’s elective contributions are treated as if the contributions were made by the employer and are not subject to employment taxes (FICA) or ordinary income taxes.  This is a significant benefit for employees with an adjusted gross income (AGI) at or below $118,500, which is the Social Security wage base cap, because an employee’s responsibility for the FICA tax generally consists of 7.65% in 2017 (Social Security @ 6.2% and Medicare @ 1.45%).^[22]  In other words, an employee with an AGI at or below $118,500 who contributes funds under a cafeteria plan avoids 7.65% in FICA taxes on amounts contributed to the HSA and the employer also pays 7.65% less in FICA taxes as a result of the employee’s elective contribution.^[23]  Conversely, however, an employee whose HSA is not offered through a cafeteria plan simply gets pre-ordinary income tax treatment, similar to contributions made to a traditional IRA or 401(k) plan.^[24]  Therefore, given the FICA tax advantages, both the employer and the employee have incentives to utilize a cafeteria plan to fully employ the benefits of the HSA.^[25]

Consider the following example: Employer X is considering whether to pay an employee an extra $3,400 in cash (the annual contribution limit for an individual with a high deductible health plan) or whether to contribute $3,400 to the employee’s HSA as additional compensation.  If the employee receives the cash as wages, both the employer and employee must pay the 7.65% FICA tax, or $260.10 each for a total tax cost of $520.20, excluding ordinary income taxes.  Thus, the after-tax effect of paying the $3,400 as wages to the employee would cost the employer $3,660.10 ($3,400 + $260.10 in additional FICA tax) and the employee $260.10, leaving the employee with a net $3,139.90 increase.  However, if the employer makes a contribution to the employee’s HSA, the employee receives $3,400 in value and it only costs the employer $3,400, saving 15.3% (Total FICA for employer and employee) of value that is otherwise lost when paid as wages.  Thus a contribution of $3,400 to the HSA makes both the employer and employee better off with regard to cost and receipt, respectively.  Moreover, the ability to pay medical expenses with pre-tax dollars enhances the value of the account.  This approach to compensation could be extremely valuable if the contribution limits are increased as proposed in several legislative bills.  Currently the contribution limits are low enough that the tax savings may not outweigh the costs of offering HSAs as part of a cafeteria plan.  However, 15.3% in joint savings on HSA contributions across a workforce may certainly be significant.

HSA Belongs to the Employee and Does Not Expire at Year End

Another benefit of the HSA is that there is no “use it or lose it” provision at the end of the year, which is unlike a flexible spending account (FSA), which is better known than the HSA. “The interest of an individual in the balance in his [HSA] account is nonforfeitable” and such interest does not expire at the end of the year.^[26]  Again, the HSA is a trust administered by a third party for the benefit of the beneficiary or employee and is “exclusively for the purpose of paying the qualified medical expenses of the account beneficiary.”^[27]  The employer has no right to the funds in the account.  Moreover, because the interest in the HSA is individually owned, the account is portable and not subject to loss when employment ends.^[28]  “Thus, if the individual...later changes employers or leaves the work force, the HSA does not stay behind with the former employer, but stays with the individual. An employer has no right to recoup any portion of its contributions to an employee’s HSA, even if, for example, it makes a contribution for a year on the expectation that the employee will be employed for the entire year and the employee leaves the employer’s service before year-end.”^[29]

HSA may Lack Protection from Creditors

            One of the disadvantages of an HSA as compared to a traditional retirement plan is the different degree of protection from creditors.  Employer-sponsored retirement plans, such as a 401(k) savings plan, are governed by the Employee Retirement Income Savings Act (ERISA), which adds protections to employees’ welfare benefit plans and pension plans.^[30]  Plans within the scope of ERISA are also generally exempt from creditors.^[31] An IRA is also afforded some degree of protection, but an IRA is not an employer-sponsored retirement plan and is not entirely exempt from creditors.  IRAs and Roth IRAs are individual accounts and exempt from creditors up to $1,283,025. ^[32]  HSAs, however, are not covered under ERISA statute or exempted under federal bankruptcy exemptions and may not benefit from the same creditor protections.^[33]

A federal bankruptcy court in Idaho observed that the HSA was not in existence when most exemption statutes were written, thus falling “into a gap in the legislation.”^[34]  Rather than read the HSA into the Idaho exemption statute, the Idaho court simply said that it could “not enact exemption law where none exists,” and implied the legislature had responsibility to incorporate protections for the HSA if intended.^[35]  More recently, the Colorado Supreme Court held that an HSA is not a “retirement plan” exempt from creditors despite having similar characteristics to traditional retirement plans.^[36]  The court noted several differences between an IRA and an HSA. First, the name alone distinguishes the two. An HSA is a “health savings” account, not a “retirement” account.^[37]  Second, funds in an HSA are primarily for medical expenses, not to act as a substitute for the loss of wages upon retirement.^[38]  Third, any individual may qualify for an IRA whereas only individuals on high deductible health plans may qualify for an HSA.^[39]  The court read the statute narrowly to exclude HSAs from falling within the definition of a “retirement account."

As a result of this uncertainty, “numerous states have passed legislation to exempt deposits into HSA accounts from property of a debtor's bankruptcy estate, thereby allowing the debtor to retain the funds therein to the exclusion of their creditors.”^[40]  Some states that have explicitly exempted the HSA from creditor reach include Virginia, Washington, Oregon, Texas, Florida, Tennessee, Mississippi and Indiana.^[41]  While some states have moved in the direction of exempting HSAs from creditor reach, many states have not directly addressed the issue, leaving uncertainty in many jurisdictions.  Thus absent explicit state law protections, an HSA may not have the same creditor protections as either an ERISA-covered retirement plan or an IRA.

HSA Distributions

What happens when funds are withdrawn from the account?  When funds are distributed from an HSA, the purpose of such distribution determines the potential tax liability.  Any amount paid or distributed out of the HSA exclusively to pay for qualified medical expenses of any of the HSA beneficiaries is not includible in gross income.^[42]  Qualified medical expenses for individuals who have reached the age of Medicare eligibility (65) also includes “premiums for Medicare, Part A or Part B, premiums for a Medicare HMO, and the employee share of premiums for employer-sponsored health insurance, including premiums for employer-sponsored retiree health insurance.”^[43]  Having the ability to pay both medical expenses and premiums in retirement with pre-tax dollars is significant.

Conversely, any amount paid or distributed out of the HSA which is not exclusively used to pay for qualified medical expenses of any of the HSA beneficiaries is includible in gross income.^[44]  Amounts includible in gross income due to non-qualified distributions from the HSA are subject to a 20% penalty, exclusive of the ordinary income tax due.^[45]  An important exception to the penalty assessed for non-qualified distributions is for individuals that have reached the age of Medicare eligibility at 65 years old.^[46]  In other words, non-medical distributions from the HSA after age 65 are simply includible in gross income and the distributions are not subject to any additional penalty, which makes the HSA look more like a retirement account, with the option to pay for all medical expenses with pre-tax dollars. Moreover, an individual who benefits from an HSA offered via a cafeteria plan will never have to pay the FICA taxes, regardless of the ultimate distribution use.  This gives retirees significant flexibility to use the HSA as a retirement account with the option to pay medical expenses pre-tax.  Given that health costs during retirement will likely consume a large portion of a retiree’s income, it may make sense to fund an HSA to cover those costs, including the costs for premiums, with pre-tax dollars that have also grown tax free, not simply tax deferred.

HSA Contribution Limits

With the prospect of deferring and even avoiding taxation altogether, Congress imposed limits on HSA contributions.  Deductions for such contributions to the HSA are “allowed in determining AGI (above-the-line) and may thus be taken whether or not an individual itemizes deductions.”^[47]  The first important limitation on contributions is that contributions must be cash contributions by either the employer or the employee. ^[48]  However, once the cash is contributed to the HSA, the trust may purchase and hold certain assets.  Another limitation is the annual contribution dollar amount.  In 2017, annual contributions to an HSA are limited to $3,400 when on an individual high deductible health plan and $6,750 when on a family high deductible health plan.^[49]  These limits are increased yearly according to a cost-of-living adjustment, rounded to the nearest $50.^[50] However, an individual who is 55 years old or older also qualifies for an additional $1,000 catch-up provision.^[51] Despite the annual contribution limits, however, there is still the potential to accumulate an extensive asset balance in the HSA over time with consistent, annual contributions.

HSA Treatment upon Beneficiary’s Death

What happens when the beneficiary dies? Upon death, any balance remaining in the HSA goes to the designated beneficiary.^[52]  If the designated beneficiary is the spouse, the HSA becomes the spouse’s HSA, subject to the same rules governing the original HSA.^[53]  In other words, the HSA is treated like the original HSA and the spouse is subject to income tax on distributions if the distributions are for non-qualified medical expenses.^[54]

If the designated beneficiary is not the account beneficiary’s spouse, the HSA “ceases to be an HSA as of the date of the account beneficiary's death, and the person is required to include in gross income the fair market value of the HSA assets as of the date of death.”^[55]  In other words, if the beneficiary of the account beneficiary is not the spouse, the HSA is no longer an HSA and the beneficiary will incur income tax on the value of the account.  This may be an excellent estate planning option because one can defer a portion of one’s salary, which may be exempt from FICA taxes, and the non-spouse beneficiary simply includes the value of the HSA in his/her gross income, which may be in a lower tax bracket.  However, if the successor is the beneficiary’s estate because no beneficiary was selected, the fair market value of the assets in the HSA are includible in the decedent’s gross income.^[56]  This may be beneficial if the decedent is in a lower tax bracket than an ultimate estate beneficiary.

Retirement Savings Portfolio Maximized by the HSA

Remember, the HSA qualifies for what has been coined the “triple tax benefit.”  First, funds contributed to an HSA are pre-ordinary income tax and potentially pre-FICA tax.  Second, the HSA grows tax free through investments held in the account.  Third, when the funds in the HSA are withdrawn to pay for medical expenses, the withdrawals are exempt from ordinary income tax.  However, the HSA is limited as to investments authorized.  “An HSA may be invested in any investment that is permissible for an individual retirement account (IRA), including bank accounts, annuities, certificates of deposit, stocks, mutual funds, and bonds. HSAs, like IRAs, may not invest in collectibles, including art works, antiques, metals, gems, stamps, coins, and alcoholic beverages. An HSA trust or custodial agreement may also restrict investments to particular types, such as specified mutual funds.”^[57]

One common misconception is that HSAs must be spent within the taxable year or the balance is forfeited.  The HSA is a trust that is non-forfeitable and stays with the beneficiary even after leaving an employer.^[58]  There is no forfeiture at the end of the year.  Rather, the account simply rolls over year to year and remains the account of the beneficiary.

Another significant benefit to recall is the ability to withdraw funds from an HSA for any non-health related reasons after age 65 without incurring any penalty tax.^[59]  An individual simply pays ordinary income tax similar to a 401(k) or IRA.^[60]  In essence, an HSA is just like a 401(k) or IRA except that funds contributed to an HSA may be entirely exempt from FICA taxes, and funds withdrawn for medical expenses are never subject to a penalty tax or ordinary income tax. However, funds withdrawn for non-medical expenses prior to age 65 are penalized with a hefty 20% tax in addition to being considered taxable distributions.^[61]  An IRA and 401(k) distribution is subject to only a 10% penalty for non-qualified distributions in addition to being considered taxable distributions.^[62]

Reimbursements for Qualified Medical Expenses

With many of the benefits already discussed, it is also important to reemphasize that funds from an HSA plan can be withdrawn at any time to pay for medical expenses incurred after the HSA is established and is excludable whether or not the account beneficiary is currently eligible to make contributions.^[63]  “An excludable distribution may be made to reimburse a qualified medical expense incurred during a prior year, as long as the HSA existed when the expense was incurred.”^[64]

Many participants either pay directly from the HSA or reimburse themselves with pre-tax money immediately after incurring medical expenses.  The only problem is the participants do not benefit from the potential tax-free growth from compounded interest.  If an individual can afford to pay for medical expenses out-of-pocket, the HSA balance can grow into a sizeable sum. Then, after years of allowing the HSA to grow tax free, one can be reimbursed for prior out-of-pocket expenses so long as the medical expenses were incurred after the time the HSA plan was established, even if incurred when not on a high deductible health plan.^[65]  In other words, an individual can withdraw funds from an HSA for reimbursement of costs incurred and paid out-of-pocket many years prior, all tax free so long as the individual can show that it is “reimbursement for a qualified medical expense that has not otherwise been reimbursed and has not been taken as an itemized deduction” and the expense was incurred after the HSA was established.^[66]

There is, however, a risk to not maintaining adequate records to substantiate any potential tax return audit.  Treasury Regulations specify that claims for qualified medical expenses must be substantiated with the “name and address of each person to whom payment for medical expenses was made and the amount and date of the payment thereof in each case.”^[67] The expenses must also be substantiated with, upon request, “a statement or itemized invoice from the individual or entity to which payment for medical expenses was made showing the nature of the service rendered, and to or for whom rendered; the nature of any other item of expense and for whom incurred and for what specific purpose, the amount paid therefor and the date of the payment thereof; and by such other information as the district director may deem necessary.”^[68] Thus, it is important to maintain adequate records when planning to receive reimbursements for prior and current medical expenses in the event of an audit.

Examples Demonstrating the Benefits of the HSA

Consider the following application: A, who is married, has a salary of $100,000 and decides to utilize two IRAs (an IRA for each spouse given the contribution limit of $5,500 per spouse under the age of 55).  Considering A’s after-tax income needs, A can allocate a total of $500 per month to the accounts for the next 30 years.  A is willing to assume risk and expects a return of 8% compounded monthly. At the end of 30 years, A’s IRAs consist of a portfolio valued at $745,180.

Alternatively, if A qualifies for an HSA under a cafeteria plan, A is able to allocate an additional amount to the HSA and still be in the same after-tax position because contributions to the HSA under a cafeteria plan are exempt from the FICA tax. Instead of $500, A allocates $541.42 ($500 divided by 1 – FICA tax rate of 7.65%) to A’s HSA without affecting A’s after-tax income needs.  At the end of 30 years, A’s HSA consists of a portfolio valued at $806,910, roughly $60,000 more than A’s account balance using the IRAs.

Now suppose at retirement in 30 years, A and A’s spouse will incur $21,000 worth of family medical expenses, including Medicare premiums, which may be a low estimate based on a normal inflation rate.  Assume an effective tax rate of 20% on ordinary income.^[69]  If A uses the IRAs to cover the medical expenses of $21,000 every year, A will pay income tax on the IRS withdrawals. A will have to withdraw $26,250 every year, $21,000 to cover the medical expenses and $5,250 to cover the income tax of 20% on the withdrawal. Thus, A’s balance of $745,180 will be drawn down by $26,250 until the portfolio is depleted, which will last 28 years.

Alternatively, if A uses an HSA, A will receive much better tax treatment.  Unlike an IRA, when funds are withdrawn from an HSA to cover medical-related expenses, the withdrawals are not subject to ordinary income tax.  A simply withdraws $21,000 every year to cover the medical expenses.  While A’s portfolio under the IRAs would be depleted after 28 years, A’s HSA portfolio balance of $806,910 would have a remaining balance of about $220,000 after the 28 years.

Even if A’s HSA was not offered under a cafeteria plan, A would still be in a better position using an HSA in the above example.  If A’s contributions to the HSA were not pre-FICA tax, the portfolio balances of the HSA and IRA’s would be the same, $745,180. However, when A withdraws $21,000 from the HSA every year to cover medical expenses, A does not have to make additional withdrawals to cover ordinary income taxes. A would still have a remaining balance of about $157,000 after the 28 years with the HSA.^[70]

Given the significant benefits to covering medical costs with pre-tax dollars, it is also important to remember the exception for withdrawals after the age of 65.  After age 65, a beneficiary may withdraw funds from an HSA for non-medical expenses and simply pay ordinary income tax on the withdrawal.  This benefit makes the HSA look a lot like a traditional retirement account with the added benefit to withdraw funds for medical expenses tax free.  With medical costs consuming large portions of retirement portfolios, the HSA gives retirees flexibility and considerable tax savings opportunities.

Legislative Bills Proposed

Congress recently proposed increasing the HSA contribution limits to the sum of the annual deductible and out-of-pocket expense limits, which would more than double the current contribution limits.^[71] Senator Jeff Flake, in addition to increasing the contribution limits, is advocating to repeal the high deductible health care plan requirement, which would dramatically expand the potential use of HSAs.^[72] However, the likelihood of these proposals passing is uncertain and will have to be followed closely. If the contribution limits are increased and the HSA made more available, the HSA will likely become increasingly important as a financial planning tool. Under the proposals, the HSA contribution limits of $3,550 for an individual with a high deductible health plan and $6,750 for a family with a high deductible health plan would jump to $7,850 for an individual high deductible health plan ($1,300 deductible + $6,550 maximum out-of-pocket limit) and $15,700 for a family high deductible health plan ($2,600 deductible + $13,100 maximum out-of-pocket limit). Substituting these proposed limits for the contribution amounts in the examples provided above would make the potential for growing wealth in an HSA significant.

Another proposal would allow both spouses to make catch-up contributions to the same HSA upon the attainment of ages 55 by both spouses.^[73] As mentioned prior, an individual age 55 may make an additional contribution of $1,000 to the HSA. The proposed bill would allow an additional $1,000 for the spouse if also over age 55. Considering the potential increase to the contributions and the additional catch-up provision for a spouse, a couple later in life could still make substantial contributions to an HSA and accumulate a significant portfolio.

One last important proposal would repeal the increase to a 20% penalty for non-qualified distributions back to a 10% penalty, which is consistent with non-qualified distributions from IRA and 401(k) plans.^[74] Consider the difference between a 401(k) and an HSA for an unqualified distribution. Both would incur a 10% penalty for non-qualified distributions under the proposed change. However, those individuals who utilize an HSA under a cafeteria plan avoid the up-front cost of paying 7.65% in FICA taxes, making the penalty less significant. For example, suppose A contributes $1,000 to a 401(k) plan and B contributes $1,000 to an HSA (part of a cafeteria plan). A year later A and B withdraw the $1,000 to cover a vacation that is not a qualified distribution. A’s contribution of $1,000 to the 401(k) was subject to 7.65% in FICA taxes totaling $76.50. Additionally, A will pay a penalty tax of 10% or $100 for the non-qualified withdrawal. A’s total tax costs, excluding ordinary income tax, is $176.50. On the other hand, B will only pay the 10% penalty tax or $100. In essence, B is realistically only paying a penalty tax of 2.35% (penalty tax of 10% less the 7.65% in FICA taxes avoided) in comparison to the tax penalty under a 401(k) plan.

Conclusion

As health-related costs continue to rise, HSAs provide important financial planning opportunities for eligible employees to save for retirement in a way that allows for the payment of medical costs in a tax-efficient way.  The HSA allows individuals to make pre-tax contributions to pay for current and future medical-related expenses.  The HSA may also be withdrawn for non-medical expenses without incurring penalties after the beneficiary reaches the age of 65.  So funds contributed are pre-tax, the HSA grows tax free, and funds withdrawn from the HSA to cover qualified medical expenses are exempt from ordinary income tax.  Because of this “triple tax benefit,” the HSA may provide significantly higher value to employees than other retirement vehicles.  Moreover, if Congress increases HSA contribution limits as proposed in several legislative bills, the planning opportunities will increase substantially.  Therefore, knowing that medical costs will likely consume at least some portion of a retiree’s portfolio during retirement, it seems logical to approach these future medical costs in an efficient manner using the tax-favored HSA.