Practice Test: Reading Comprehension - 46 | 100 RCs for GMAT PDF Download

Directions: Read the given passage carefully and answer the questions as follows:

After a slow start, Health Savings Accounts (HSAs)—tax-free savings accounts designed to help people save for their and their dependents’ medical needs—have become increasingly popular with individuals who buy their own insurance, and with employers who provide it. The advantages of HSAs are fairly easy to understand: Funds placed into an HSA are sheltered from taxation, just as is the case with money put into Individual Retirement Accounts (IRAs). Unlike funds in IRAs, however, funds in HSAs (and earnings they have acquired through investments) are also exempt from taxation (and penalty) when they are taken out at any time, as long as the funds are used for medical purposes.

An HSA, however, must be combined with a high-deductible health plan. In addition, the amount that can be contributed annually to the account is restricted. Currently, an individual must have a deductible of at least $1,050 to participate, and can contribute as much as $2,700 per year. For families, the figures are higher. Because of the high deductible, out-of-pocket expenses can be substantial, though premiums are relatively low, making HSAs especially attractive to people who don’t expect to need much medical care.

This last point is not lost on those who claim that low-income individuals with serious health issues are unlikely to derive any benefit from HSAs. If you don’t make much, you will not be able to contribute much to the account. And because the deductible is so high, low earners will pay for a good deal of medical care before the deductible takes over. As a result, people who can’t afford (in any sense) to gamble with their health may forego a trip to the doctor. Furthermore, since HSAs are increasingly perceived as attractive to relatively healthy and wealthy Americans, companies that provide traditional insurance may lose business and attempt to make up for this loss by raising their premiums or cutting benefits to low-income clients. Another argument against HSAs is the swelling effect that tax-free accounts will have on the national budget deficit.

No single initiative can solve this nation’s health care problems. Many factors, including malpractice insurance, high-tech research costs, an aging population, and yes, old-fashioned greed, play a role in the rising cost of medical care. HSAs represent a move in the right direction, but they will almost certainly need to be adjusted and supplemented to make it easier for all individuals to get access to competent health care.