[House Report 112-516]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 112-516
======================================================================
RESTORING ACCESS TO MEDICATION ACT OF 2012
_______
June 5, 2012.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Camp, from the Committee on Ways and Means,
submitted the following
R E P O R T
together with
DISSENTING AND ADDITIONAL VIEWS
[To accompany H.R. 5842]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 5842) to amend the Internal Revenue Code of 1986 to
repeal the amendments made by the Patient Protection and
Affordable Care Act which disqualify expenses for over-the-
counter drugs under health savings accounts and health flexible
spending arrangements, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
CONTENTS
Page
I. Summary and Background...........................................2
II. Explanation of Provision.........................................3
A. Repeal of the Disqualification of Expenses for Over-
the-Counter Medicine Under Health Savings Accounts,
Archer MSAs, Health Flexible Spending Arrangements,
and Health Reimbursement Arrangements (sec. 2 of
the bill and secs. 106, 220, and 223 of the Code).. 3
III. Votes of the Committee...........................................6
IV. Budget Effects of the Provision..................................7
V. Other Matters To Be Discussed Under the Rules of the House......13
VI. Changes in Existing Law Made by the Bill, as Reported...........17
VII. Dissenting Views................................................19
VIII.Additional Views................................................20
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Restoring Access to Medication Act of
2012''.
SEC. 2. REPEAL OF DISQUALIFICATION OF EXPENSES FOR OVER-THE-COUNTER
DRUGS UNDER CERTAIN ACCOUNTS AND ARRANGEMENTS.
(a) HSAs.--Subparagraph (A) of section 223(d)(2) of the Internal
Revenue Code of 1986 is amended by striking the last sentence.
(b) Archer MSAs.--Subparagraph (A) of section 220(d)(2) of such Code
is amended by striking the last sentence.
(c) Health Flexible Spending Arrangements and Health Reimbursement
Arrangements.--Section 106 of such Code is amended by striking
subsection (f).
(d) Effective Date.--The amendments made by this section shall apply
to expenses incurred after December 31, 2012.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 5842, as reported by the Committee on Ways
and Means, repeals the limitations on the use of certain tax-
advantaged accounts and arrangements for the purchase of over-
the-counter medicine.
B. Background and Need for Legislation
Millions of Americans currently use tax-advantaged accounts
and arrangements to save for ``qualified'' medical expenses, as
defined by the Internal Revenue Code (``IRC''). Contributions
to and distributions from these accounts and arrangements are
generally tax-favored and may be used for unreimbursed medical
expenses such as deductibles and co-payments. Approximately 33
million Americans are currently in families with Flexible
Spending Arrangements (``FSAs''), which are offered by 29
percent of small businesses and 85 percent of large employers.
Over 13 million Americans currently hold or maintain a Health
Savings Account (``HSA'').
As a result of the Patient Protection and Affordable Care
Act (Pub. L. No. 111-148), beginning in January 2011, the
nearly 45 million Americans enrolled in an FSA, HSA, Archer
Medical Savings Account (``MSA'') or Health Reimbursement
Arrangement (``HRA'') could no longer purchase over-the-counter
(``OTC'') medicines, other than insulin, without a doctor's
prescription with funds from these accounts or arrangements.
Americans must now purchase non-prescribed OTC medications with
after-tax dollars, resulting in a tax increase on American
families.
The limitation on the use of HSA, FSA, HRA and Archer MSA
funds for OTC medicine is directly at odds with the goal of
lowering health care costs and increasing access to primary
care physicians. A 2010 study by Booz & Co. concluded that
every dollar spent by consumers on OTC medicines saves $6 to $7
for the U.S. healthcare system as a whole. According to a
survey completed for the Consumer Healthcare Products
Association, 63 percent of physicians believe the limitation on
OTC purchases will increase the burden on medical
professionals. In addition, 47 percent of patients surveyed
said they would seek a doctor's prescription for their OTC
medications.
Repealing the OTC medicine limitation will lower health
care costs for millions of Americans, and relieve burdens
placed on physicians by the Patient Protection and Affordable
Care Act.
C. Legislative History
Background
H.R. 5842 was introduced on May 18, 2012, and was referred
to the Committee on Ways and Means.
Committee action
The Committee on Ways and Means marked up H.R. 5842 on May
31, 2012, and ordered the bill, as amended, favorably reported
(with a quorum being present).
Committee hearings
The Subcommittee on Oversight of the Committee on Ways and
Means held a public hearing on April 25, 2012, on the impact of
limitations on the use of tax-advantaged accounts for the
purchase of over-the-counter medicine.
II. EXPLANATION OF PROVISION
A. Repeal of the Disqualification of Expenses for Over-the-Counter
Medicine Under Health Savings Accounts, Archer MSAs, Health Flexible
Spending Arrangements, and Health Reimbursement Arrangements (sec. 2 of
the bill and secs. 106, 220, and 223 of the Code)
PRESENT LAW
Individual deduction for medical expenses
Expenses for medical care, not compensated for by insurance
or otherwise, are deductible by an individual under the rules
relating to itemized deductions to the extent the expenses
exceed 7.5 percent (generally 10 percent for years after 2012)
of adjusted gross income (``AGI'').\1\ Medical care generally
is defined broadly as amounts paid for diagnoses, cure,
mitigation, treatment or prevention of disease, or for the
purpose of affecting any structure of the body.\2\
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\1\Sec. 213(a). The 7.5 percent of AGI threshold increases to 10
percent for taxable years beginning after December 31, 2012. However,
this increase in the percentage does not apply until taxable years
beginning after December 31, 2016 with respect to any taxpayer if the
taxpayer or the taxpayer's spouse has attained age 65 before the close
of the taxable year.
\2\Sec. 213(d). There are certain limitations on the general
definition including a rule that cosmetic surgery or similar procedures
are generally not medical care.
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Under an explicit limitation, any amount paid during a
taxable year for medicine or drugs is deductible as a medical
expense only if the medicine or drug is a prescribed drug or
insulin.\3\ The term prescribed drug means a drug or biological
which requires a prescription of a physician for its use by an
individual.\4\ Thus, any amount paid for medicine available
without a prescription (``over-the-counter medicine'') is not
deductible as a medical expense, including any medicine
prescribed or recommended by a physician.\5\
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\3\Sec. 213(b).
\4\Sec. 213(d)(3).
\5\Rev. Rul. 2003-58, 2003-1 CB 959.
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Exclusion for employer-provided health care
Employees are not taxed on (that is, may exclude from gross
income) the value of employer-provided health coverage under an
accident or health plan.\6\ In addition, any reimbursements
under an employer-provided accident or health plan for medical
care expenses for employees, their spouses, their dependents,
and adult children under age 27 generally are excludible from
gross income.\7\ An employer may agree to reimburse expenses
for medical care of its employees (and their spouses and
dependents), not covered by a health insurance plan, through a
flexible spending arrangement (``FSA'') which allows
reimbursement not in excess of a specified dollar amount. The
amounts available for reimbursement must be exclusively for
reimbursement for medical care because the exclusion does not
apply to amounts which the employee would be entitled to
irrespective of whether he or she incurs expenses for medical
care.\8\
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\6\Sec 106.
\7\Sec. 105(b).
\8\Treas. Reg. sec. 1.105-2.
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Such dollar amount is either elected by an employee under a
cafeteria plan (``Health FSA'') or otherwise specified by the
employer under a health reimbursement arrangement (``HRA'').
Reimbursements under these arrangements are also excludible
from gross income as reimbursements for medical care under
employer-provided health coverage.
Health savings accounts
An individual with a high deductible health plan (and no
other health plan other than a plan that provides certain
permitted insurance or permitted coverage) may establish a
health savings account (``HSA''). In general, HSAs provide tax-
favored treatment for current medical expenses as well as the
ability to save on a tax-favored basis for future medical
expenses. In general, HSAs are tax-exempt trusts or custodial
accounts created exclusively to pay for the qualified medical
expenses of the account holder and his or her spouse and
dependents. Thus, earnings on amounts in HSAs are not taxable.
Subject to limits,\9\ contributions made to an HSA by an
employer, including contributions made through a cafeteria plan
through salary reduction, are excludible from income (and from
wages for payroll tax purposes). Contributions made by
individuals are deductible for income tax purposes, regardless
of whether the individuals itemize. Distributions from an HSA
that are used for qualified medical expenses are excludible
from gross income. Distributions from an HSA that are not used
for qualified medical expenses are includible in gross income
and are subject to an additional tax of 20 percent. The 20-
percent additional tax does not apply if the distribution is
made after death, disability, or the individual attains the age
of Medicare eligibility (i.e., age 65). Similar rules apply for
another type of medical savings arrangement called an Archer
medical savings account (``Archer MSA'').\10\
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\9\For 2012, the maximum aggregate annual contribution that can be
made to an HSA is $3,100 in the case of self-only coverage and $6,250
in the case of family coverage. The annual contribution limits are
increased by $1,000 for individuals who have attained age 55 by the end
of the taxable year (referred to as ``catch-up contributions'').
Contributions, including catch-up contributions, cannot be made once an
individual is enrolled in Medicare.
\10\Sec. 220.
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Medical care for excludible reimbursements
For purposes of the exclusion for reimbursements under
employer-provided accident and health plans (including under
Health FSAs and HRAs), and for distributions from HSAs and
Archer MSAs used for qualified medical expenses, the definition
of medical care is generally the same as the definition that
applies for the itemized deduction for the cost of medical
care. However, prior to the enactment of the Patient Protection
and Affordable Care Act (referred to as the ``Affordable Care
Act''),\11\ the limitation (applicable to the itemized
deduction) that only prescription medicines or drugs and
insulin are taken into account did not apply. Thus, for
example, amounts paid from a Health FSA or HRA, or funds
distributed from an HSA to reimburse a taxpayer for
nonprescription drugs, such as nonprescription aspirin, allergy
medicine, antacids, or pain relievers, were excludible from
income even though, if the taxpayer paid for such amounts
directly (without such reimbursement), the expenses could not
be taken into account in determining the itemized deduction for
medical expenses.\12\
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\11\Pub. L. No 111-148. Various provisions of the Affordable Care
Act are amended by the Health Care and Education Reconciliation Act of
2010, Pub. L. No. 111-152.
\12\Rev. Rul. 2003-102, 2993-2 C.B. 559, now obsolete by Rev. Rul.
2010-23, 2010-39 I.R.B. 388.
---------------------------------------------------------------------------
For years beginning after December 31, 2010, the Affordable
Care Act changed the definition of medical care for purposes of
the exclusion for reimbursements for medical care under
employer-provided accident and health plans and for
distributions from HSAs and Archer MSAs used for qualified
medical expenses to require that over-the-counter medicine
(other than insulin) be prescribed by a physician in order for
the medicine to be medical care for these purposes.\13\ Thus,
under present law, a Health FSA or an HRA is only permitted to
reimburse an employee for the cost of over-the-counter medicine
if the medicine is prescribed by a physician and distributions
from an HSA or an Archer MSA used to purchase over-the-counter
medicine is not a qualified medical expense unless the medicine
is prescribed by a physician.
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\13\Sec. 9003 of the Affordable Care Act. Notice 2010-59, 2010-39
I.R.B. 388, provides guidance on this change to the definition of
medical care for these purposes.
---------------------------------------------------------------------------
REASONS FOR CHANGE
The Committee observes that the requirement that over-the-
counter medicine requires a prescription in order to be an
eligible expense for individuals and families covered by an
FSA, HSA, HRA, or MSA has left these consumers with three
options: (1) seek an unnecessary appointment with a doctor to
obtain a prescription, and then submit the purchase for
reimbursement under an FSA account; (2) purchase the OTC
medicine out-of-pocket, which significantly increases the
after-tax cost to the consumer; or (3) forego treatment
entirely and suffer from the symptoms of the condition. The
Committee notes that all three options increase costs to the
consumer and to our healthcare system. The Committee therefore
believes that the provision of the Affordable Care Act that
disqualified expenses for over-the-counter medicine (unless
obtained with a prescription) from being medical expenses under
Health FSAs, HRAs, HSAs, and Archer HSAs should be repealed.
EXPLANATION OF PROVISION
The provision repeals the change to the definition of
medical care made by the Affordable Care Act for purposes of
the exclusion for reimbursements for medical care under
employer-provided accident and health plans and for
distributions from HSAs or Archer MSAs used for qualified
medical expenses that requires that over-the-counter medicine
(other than insulin) be prescribed by a physician in order for
the medicine to be medical care for these purposes. Thus, for
example, amounts paid from a Health FSA or HRA, or funds
distributed from an HSA or an Archer MSA to reimburse a
taxpayer for nonprescription drugs, such as nonprescription
aspirin, allergy medicine, antacids, or pain relievers, are
excludible from income even though, if the taxpayer paid for
such amounts directly (without such reimbursement), the
expenses could not be taken into account in determining the
itemized deduction for medical expenses.
EFFECTIVE DATE
The provision is effective with respect to expenses
incurred after December 31, 2012.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the votes of the Committee on Ways and Means in its
consideration of H.R. 5842.
MOTION TO REPORT RECOMMENDATION
The bill H.R. 5842, as amended, was ordered favorably
reported by a rollcall vote of 24 yeas to 9 nays (with a quorum
being present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp....................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Herger..................... X ........ ......... Mr. Rangel....... ........ ........ .........
Mr. Johnson.................... ........ ........ ......... Mr. Stark........ ........ X .........
Mr. Brady...................... X ........ ......... Mr. McDermott.... ........ ........ .........
Mr. Ryan....................... X ........ ......... Mr. Lewis........ ........ X .........
Mr. Nunes...................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Tiberi..................... X ........ ......... Mr. Becerra...... ........ X .........
Mr. Davis...................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Reichert................... X ........ ......... Mr. Thompson..... ........ X .........
Mr. Boustany................... X ........ ......... Mr. Larson....... ........ X .........
Mr. Roskam..................... X ........ ......... Mr. Blumenauer... ........ X .........
Mr. Gerlach.................... X ........ ......... Mr. Kind......... X ........ .........
Mr. Price...................... X ........ ......... Mr. Pascrell..... ........ ........ .........
Mr. Buchanan................... X ........ ......... Ms. Berkley...... X ........ .........
Mr. Smith...................... X ........ ......... Mr. Crowley...... X ........ .........
Mr. Schock..................... X ........ .........
Ms. Jenkins.................... X ........ .........
Mr. Paulsen.................... X ........ .........
Mr. Marchant................... X ........ .........
Mr. Berg....................... X ........ .........
Ms. Black...................... X ........ .........
Mr. Reed....................... X ........ .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE PROVISION
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the revenue provisions
of the bill, H.R. 5842 as reported.
The bill is estimated to have the following effects on
budget receipts for fiscal years 2013-2022:
FISCAL YEARS
[Millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Item
-----------------------------------------------------------------------------------------------------------------------------------------------
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013-17 2013-22
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Repeal the limitation on reimbursement of over- -223 -305 -332 -361 -390 -419 -448 -479 -511 -544 -1,611 -4,012
the-counter medications from health FSAs, HRAs,
HSAs, and Archer MSAs\1\.......................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.
\1\Estimate includes the following off-budget effects:
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013-17 2013-22
-----------------------------------------------------------------------------------------------------------------------------------------------------------
-54 -73 -80 -87 -94 -100 -108 -115 -123 -130 -387 -963
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee further states that the revenue-reducing tax
provisions involve increased tax expenditures.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by the CBO is
provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 4, 2012.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 5842, the
Restoring Access to Medication Act of 2012.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Pamela Green.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 5842--Restoring Access to Medication Act of 2012
Summary: H.R. 5842 would amend the Internal Revenue Code to
repeal the provisions that disqualify expenses for over-the-
counter medicine under health savings accounts (HSAs), Archer
medical savings accounts (Archer MSAs), health flexible
spending arrangements (FSAs), and health reimbursement
arrangements (HRAs). The bill would thus allow costs for over-
the-counter medications to be eligible for reimbursement by
funds in those tax-favored accounts.
The staff of the Joint Committee on Taxation (JCT)
estimates that enacting H.R. 5842 would reduce revenues by
about $4 billion over the 2012-2022 period. Of that reduction,
about $3 billion would result from changes in on-budget
revenues, and about $1 billion would result from changes in
off-budget revenues (from Social Security payroll taxes, which
are categorized as off-budget). Pay-as-you-go procedures apply
because enacting the legislation would affect on-budget
revenues.
JCT has determined that the bill contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act (UMRA).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 5842 is shown in the following table.
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By fiscal year, in millions of dollars--
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012-2017 2012-2022
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CHANGES IN REVENUES
Estimated Revenues............................... 0 -223 -305 -332 -361 -390 -419 -448 -479 -511 -544 -1,611 -4,012
On-budget.................................... 0 -169 -232 -252 -274 -296 -319 -340 -364 -388 -414 -1,224 -3,049
Off-budget................................... 0 -54 -73 -80 -87 -94 -100 -108 -115 -123 -130 -387 -963
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding.
Basis of estimate: H.R. 5842 would allow taxpayers to be
reimbursed for purchases of over-the-counter drugs from their
HSAs, Archer MSAs, FSAs and HRAs. Under current law, expenses
for over-the-counter medications are not eligible for
reimbursement from these accounts unless the medicine is
prescribed by a physician. The bill would expand the expenses
eligible for reimbursement under these health accounts, which
provide tax-favored treatment for medical expenses. JCT
estimates that enacting H.R. 5842 would reduce on-budget
revenues by about $3 billion and off-budget revenues by about
$1 billion between 2013 and 2022, thereby increasing federal
budget deficits by about $4 billion over that period.
Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in revenues that are subject to those
pay-as-you-go procedures are shown in the following table. Only
on-budget changes to outlays or revenues are subject to pay-as-
you-go procedures.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS OF H.R. 5842, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON MAY 31, 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012-2017 2012-2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN THE ON-BUDGET DEFICIT
Statutory Pay-As-You-Go Impact. 0 169 232 252 274 296 319 340 364 388 414 1,224 3,049
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intergovernmental and private-sector impact: JCT has
determined that the bill contains no intergovernmental or
private-sector mandates as defined in UMRA.
Estimate prepared by: Pamela Greene.
Estimate approved by: Frank Sammartino, Assistant Director
for Tax Analysis.
D. Macroeconomic Impact Analysis
In compliance with clause 3(h)(2) of rule XIII of the Rules
of the House of Representatives, the following statement is
made by the Joint Committee on Taxation with respect to the
provisions of the bill amending the Internal Revenue Code of
1986: the effects of the bill on economic activity are so small
as to be incalculable within the context of a model of the
aggregate economy.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee advises that it was as a result of the
Committee's review of the potential impact of the limitations
on the use of certain tax-advantaged accounts and arrangements
for the purchase of over-the-counter medicine and the
provisions of H.R. 5842 that the Committee concluded that it is
appropriate to report the bill, as amended, favorably to the
House of Representatives with the recommendation that the bill
do pass.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for any
measure authorizing funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the reported bill does
not contain any Federal private sector mandates within the
meaning of Public Law No. 104-4, the Unfunded Mandates Reform
Act of 1995. The costs required to comply with each Federal
private sector mandate generally are no greater than the
aggregate estimated budget effects of the provision.
The Committee has determined that the bill does not impose
a private sector mandate, and has determined that the bill does
not impose a Federal intergovernmental mandate on State, local,
or tribal governments.
D. Applicability of House Rule XXI 5(b)
Clause 5(b) of rule XXI of the Rules of the House of
Representatives provides, in part, that ``A bill or joint
resolution, amendment, or conference report carrying a Federal
income tax rate increase may not be considered as passed or
agreed to unless so determined by a vote of not less than
three-fifths of the Members voting, a quorum being present.''
The Committee has carefully reviewed the provisions of the
bill, and states that the provisions of the bill do not involve
any Federal income tax rate increases within the meaning of the
rule.
E. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses. Pursuant to clause 3(h)(1) of rule XIII of the
Rules of the House of Representatives, for each such provision
identified by the staff of the Joint Committee on Taxation, a
summary description of the provision is provided along with a
discussion regarding the relevant complexity and administrative
issues. Below is a summary description of the provision and
discussion regarding the relevant complexity and administrative
issues provided by the Internal Revenue Service with which the
staff of the Joint Committee on Taxation concurs.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter B--Computation of Taxable Income
* * * * * * *
PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
* * * * * * *
SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.
(a) * * *
* * * * * * *
[(f) Reimbursements for Medicine Restricted to Prescribed
Drugs and Insulin.--For purposes of this section and section
105, reimbursement for expenses incurred for a medicine or a
drug shall be treated as a reimbursement for medical expenses
only if such medicine or drug is a prescribed drug (determined
without regard to whether such drug is available without a
prescription) or is insulin.]
* * * * * * *
PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS
* * * * * * *
SEC. 220. ARCHER MSAS.
(a) * * *
* * * * * * *
(d) Archer MSA.--For purposes of this section--
(1) * * *
(2) Qualified medical expenses.--
(A) In general.--The term ``qualified medical
expenses'' means, with respect to an account
holder, amounts paid by such holder for medical
care (as defined in section 213(d)) for such
individual, the spouse of such individual, and
any dependent (as defined in section 152,
determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof) of such
individual, but only to the extent such amounts
are not compensated for by insurance or
otherwise. [Such term shall include an amount
paid for medicine or a drug only if such
medicine or drug is a prescribed drug
(determined without regard to whether such drug
is available without a prescription) or is
insulin.]
* * * * * * *
SEC. 223. HEALTH SAVINGS ACCOUNTS.
(a) * * *
* * * * * * *
(d) Health Savings Account.--For purposes of this section--
(1) * * *
(2) Qualified medical expenses.--
(A) In general.--The term ``qualified medical
expenses'' means, with respect to an account
beneficiary, amounts paid by such beneficiary
for medical care (as defined in section 213(d)
for such individual, the spouse of such
individual, and any dependent (as defined in
section 152, determined without regard to
subsections (b)(1), (b)(2), and (d)(1)(B)
thereof) of such individual, but only to the
extent such amounts are not compensated for by
insurance or otherwise. [Such term shall
include an amount paid for medicine or a drug
only if such medicine or drug is a prescribed
drug (determined without regard to whether such
drug is available without a prescription) or is
insulin.]
* * * * * * *
VII. DISSENTING VIEWS
We voted against this bill because it costs $4 billion in
lost tax revenues and this revenue loss is not offset. When
combined with the three other health care measures under
consideration at the Markup, the total cost for all bills is
nearly $42 billion--and the Majority has not set forth any
options to pay for this cost. Not one option was set forth at
the Markup. It is simply unacceptable in this time of fiscal
austerity to not pay the cost of these bills. It is
irresponsible to add nearly $42 billion to the deficit.
This Markup continues the Majority's attempt to repeal the
Affordable Care Act (ACA) without offering a replacement. In
January of 2009, the Majority voted to repeal and replace the
ACA. If their replacement solution is expanded access to Health
Flexible Spending Accounts and Health Savings Accounts, then it
falls far short of the needs of American families. Neither
Health Flexible Spending Accounts nor Health Savings Accounts
provide health coverage to participants. They only provide tax
breaks for certain health costs. They are not real solutions to
the problems facing our nation with respect to health care and
insurance coverage.
Sander M. Levin.
Charles B. Rangel.
Fortney Pete Stark.
Jim McDermott.
John Lewis.
Xavier Becerra.
Earl Blumenauer.
VIII. ADDITIONAL VIEWS
The legislation reported by the Committee repeals a
prohibition on the use of Health Savings Accounts (HSAs),
Flexible Spending Accounts (FSAs), and Health Reimbursement
Arrangements (HRAs) for purchasing over-the-counter drugs
without a prescription. In addition to this statutory barrier,
we are concerned that the Internal Revenue Service (IRS) is
imposing additional restrictions on the use of these tax-
advantaged savings accounts through its interpretation of the
definition of ``medical care'' in Section 213(d) of the Code.
Specifically, we understand that the IRS is currently
preventing individuals and families from using HSAs, FSAs,
HRAs, or the deduction for medical expenses exceeding 7.5% of
adjusted gross income, for private umbilical cord blood banking
unless a transplant need is imminently probable at the time of
banking.
As medical technology moves increasingly toward
personalized cellular therapies, families that choose to bank
their child's umbilical cord blood are making an investment in
their child's healthcare that, in our view, clearly falls
within the definition of ``prevention of disease.'' Further,
the methodology that the IRS is currently using is
contradictory. Expenses associated with a cord blood stem cell
transplant are considered ``medical care'' and qualify for use
with a tax-advantaged healthcare account or the medical expense
deduction. However, expenses associated with collecting,
processing and storing cord blood stem cells at the time of
birth so they can be used for such a future transplant are not.
Since umbilical cord blood stem cells must be collected,
processed and stored prior to transplantation, whether such a
transplant occurs imminently or in the future, we believe the
current IRS interpretation of the law is conflicting and
incorrect.
We urge the IRS to closely review and consider changing its
classification of private umbilical cord blood banking so that
individuals and families may use HSAs, FSAs, HRAs or the
deduction for medical expenses exceeding 7.5% of adjusted gross
income, for expenses associated with the collection, processing
and storage of umbilical cord blood stem cells.
Wally Herger.
Ron Kind.