Health Savings Accounts (HSAs) were created by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and signed into law by President Bush on December 8, 2003. These accounts are designed to help individuals save for future medical and retiree health expenses on a tax-advantaged basis.

An HSA permits eligible individuals, who are not enrolled in Medicare, to pay for current medical expenses as well as to save for future "qualified" medical and retiree health expenses that are not covered by insurance on a tax-advantaged basis. (Note that qualified expenses include the cost of many non-prescription drugs.) See the section What Are Qualified Medical Expenses? for more information about what kind of expenses can be paid by an HSA. These accounts may be offered through employers. However, HSAs are independent of employment so that any eligible individual can establish an HSA with any eligible financial institution.