When her 8-year-old son broke his arm on a school playground in rural Georgia last fall, Sarah Mitchell drove straight to the nearest emergency room. The bill came to $4,200. Mitchell, a part-time warehouse worker enrolled in a high-deductible health plan through her employer, had $340 in her Health Savings Account. Within 90 days, the balance she couldn’t cover landed in collections.
“They told me the HSA was supposed to help,” Mitchell said. “Help with what? I can’t save money I don’t have.”
(Sarah Mitchell is a pseudonym. She agreed to share her experience on the condition that her real name and her son’s name not be published to protect their privacy.)
Her story cuts to the center of a health policy fight playing out on Capitol Hill this spring. Republican lawmakers are pushing to expand HSAs as a cornerstone of their health care agenda, packaging the accounts as a way to hand consumers more control over medical spending. But for the roughly 100 million Americans who have carried some form of medical debt, according to KFF research, the core question is whether a tax-advantaged savings tool can reach people who have almost nothing to save.
What Republicans are proposing
HSA expansion has been a GOP priority for over a decade. The current push has gained fresh momentum inside the broader budget reconciliation package moving through Congress in spring 2026. Its legislative roots trace to the House Ways and Means Committee, which approved two bills, H.R. 5688 and H.R. 5687, in September 2023, according to an official committee press release. Those measures would have broadened HSA eligibility by letting account holders use funds for direct primary care arrangements, permitting contributions alongside worksite clinic participation, adjusting contribution limits upward, and allowing spouses to maintain flexible spending accounts without disqualifying the HSA holder.
Both bills expired with the 118th Congress, but their core provisions have resurfaced in the current session as part of the reconciliation framework. As of May 2026, the specific legislative text of the reconciliation package’s HSA provisions has not been made public in final form, though Republican leaders have signaled the framework closely mirrors the 2023 bills. They have framed the expansion as helping Americans “better afford health care expenses” by pairing lower monthly premiums with pretax savings.
The structural catch: to open an HSA, a person must be enrolled in a high-deductible health plan. For 2026, the IRS defines that as a plan with a minimum deductible of $1,700 for an individual or $3,400 for a family. That means the tax benefit is available only to people willing and able to absorb significant upfront costs before insurance coverage kicks in.
The medical debt landscape
The scale of medical debt in the United States is staggering and unevenly distributed. The Urban Institute’s credit bureau panel, which draws on credit bureau records, the Census Bureau’s American Community Survey, and CMS Provider of Services files, tracks medical debt in collections across every U.S. county from 2011 through 2023. The data reveals sharp geographic disparities: communities in the South and in rural areas consistently carry higher shares of residents with medical collections than urban centers in the Northeast or on the West Coast.
KFF’s research has found that about 3 in 10 adults with health insurance still report difficulty affording out-of-pocket costs, with high-deductible plan enrollees reporting the steepest barriers. Among adults earning less than $40,000 a year, medical debt is a leading driver of collection calls and a common reason people deplete savings or skip medications.
For households in that income range, an HSA with a $4,300 annual contribution limit offers theoretical value but limited practical relief. The median HSA balance for accounts open fewer than three years sits below $2,000, and lower-income account holders contribute and withdraw far less than higher earners, according to 2023 data from the Employee Benefit Research Institute’s HSA database.
“The people who benefit most from HSAs are the people who need them least,” said Sara Collins, vice president for health care coverage and access at the Commonwealth Fund, who has studied the relationship between high-deductible plans and financial hardship. “If you can’t fund the account, the tax advantage is meaningless.”
A credit protection that collapsed
While Congress has focused on the savings side of the equation, a parallel effort to shield consumers from the credit consequences of medical debt has fallen apart. The Consumer Financial Protection Bureau finalized a rule in January 2025 to remove medical bills from standard credit reports, as described in the agency’s official announcement. The rule was vacated months later by the U.S. District Court for the Eastern District of Texas in American Hospital Association v. CFPB. The bureau has not indicated plans to appeal or re-propose it.
The practical fallout: unpaid medical bills can still appear on consumer credit reports, dragging down scores and affecting everything from mortgage applications to apartment rentals. For Mitchell, whose son’s ER bill went to collections, the credit damage compounds the financial hit. She now carries a lower score that has made it harder to refinance her car loan at a manageable rate.
“I didn’t choose to go to the emergency room for fun,” she said. “But my credit report treats it like I skipped out on a credit card.”
The CFPB’s diminished enforcement posture under the current administration has left consumer advocates uncertain about any near-term federal action. State-level efforts to limit medical debt reporting vary widely. Colorado, New York, and a handful of other states have passed laws restricting how medical collections appear on credit files, but most states offer no such protection.
The gap neither party has closed
Critics of HSA expansion, including several Democratic members of the Ways and Means Committee, argue that the accounts primarily benefit higher-income households that can afford to maximize contributions and invest the balance over time. Rep. Lloyd Doggett of Texas, the panel’s ranking Democrat, has called HSAs “a tax shelter disguised as health policy.”
Republicans counter that broadening eligibility, particularly for direct primary care and worksite clinics, would make HSAs more practical for working families by covering routine visits outside the deductible. Rep. Jason Smith of Missouri, the committee chair, said during the 2023 markup that the bills would “put patients back in the driver’s seat.”
What neither side has produced is household-level data connecting high-deductible plan enrollment to medical debt outcomes. The Urban Institute’s data tracks collections geographically but does not isolate insurance type. The IRS does not publish HSA contribution and withdrawal figures broken down by income bracket in a way that lets researchers measure whether the accounts reduce financial hardship for lower earners. Researchers at KFF and the Commonwealth Fund have called for better federal data collection on exactly this question.
Notably absent from the Republican proposal is any mechanism to lower the deductibles themselves or to expand cost-sharing reductions, the federal subsidies available through the Affordable Care Act marketplace that reduce out-of-pocket costs for lower-income enrollees. Democrats have not introduced competing legislation in the current session that would directly address the deductible gap either, leaving the policy vacuum intact.
Without stronger evidence, the debate operates partly on competing theories. Proponents believe tax-free savings encourage price-conscious health care decisions and build a financial cushion over time. Opponents believe high deductibles block access for people without savings, leading to delayed care and eventual collections. Both arguments are plausible. Neither has been proven at scale.
What working families face as the reconciliation vote approaches
For the millions of Americans already enrolled in high-deductible plans, the policy debate is anything but abstract. Roughly 30 percent of workers with employer-sponsored insurance are now in HDHPs, according to KFF’s 2024 employer health benefits survey, a share that has grown steadily over the past decade as employers shift cost-sharing onto their workforce.
If Congress expands HSAs without addressing the underlying cost of deductibles or strengthening protections against aggressive medical debt collection, the benefits are likely to concentrate among households with enough disposable income to save in advance. Families living paycheck to paycheck, those most vulnerable to a surprise ER visit or an unexpected diagnosis, may find the expanded tax advantage irrelevant to their immediate crisis.
Blocking HSA reforms without offering an alternative, though, leaves workers in high-deductible plans with fewer tools to manage costs they already face. The status quo is not neutral: deductibles keep climbing, medical debt keeps landing on credit reports, and the federal safety net for out-of-pocket costs remains thin.
Mitchell said she is not following the congressional debate. She is focused on a payment plan with the hospital and hoping the collection agency will agree to remove the mark from her credit file once she pays it off.
“I just need the bill to go away,” she said. “I don’t need another account I can’t put money into.”
