[Congressional Record Volume 145, Number 97 (Monday, July 12, 1999)]
[Senate]
[Pages S8268-S8269]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Torricelli):
  S. 1350. A bill to amend the Internal Revenue Code of 1986 to expand 
the availability of medical savings accounts; to the Committee on 
Finance.


            medical savings account improvement act of 1999

  Mr. GRASSLEY. Mr. President, today, on behalf of myself and my 
colleague, Senator Torricelli, I am introducing legislation, the 
Medical Savings Account Improvement Act of 1999, which would make it 
possible for any individual to purchase a medical savings account and 
which would liberalize existing law authorizing medical savings 
accounts in a number of other respects.
  Medical savings accounts are a good idea, Mr. President. They are 
basically IRAs--an idea everybody understands--which must be used for 
payment of medical expenses.
  The widespread use of medical savings accounts should have several 
beneficial consequences.
  They should reduce health care costs. Administrative costs should be 
lower. Consumers with MSAs should use health care services in a more 
discriminating manner. Consumers with MSAs should be more selective in 
choosing providers. This should cause those providers to lower their 
prices to attract medical savings account holders as patients.
  Medical savings accounts can also help to put the patient back into 
the health care equation. Patients should make more cost-conscious 
choices about routine health care. Patients with MSAs would have 
complete choice of provider.
  Medical savings accounts should make health care coverage more 
dependable. MSAs are completely portable. MSAs are still the property 
of the individual even if they change jobs. Hence, for those with MSAs, 
job changes do not threaten them with the loss of health insurance.
  Medical savings accounts should increase health care coverage. 
Perhaps as many as half of the more than 40 million Americans who are 
uninsured at

[[Page S8269]]

any point in time are without health insurance only for four months or 
less. A substantial number of these people are uninsured because they 
are between jobs. Use of medical savings accounts should reduce the 
number of the uninsured by equipping people to pay their own health 
expenses while unemployed.
  Medical savings accounts should promote personal savings. Since pre-
tax monies are deposited in them, there should be a strong tax 
incentive to use them.
  Mr. President, our bill would do several things:
  First, it would repeal the limitations on the number of MSAs that can 
be established.
  Second, it stipulates that the availability of these accounts is not 
limited to employees of small employers and self-employed individuals.
  Third, it increases the amount of the deduction allowed for 
contributions to medical savings accounts to 100 percent of the 
deduction.
  Fourth, it permits both employees and employers to contribute to 
medical savings accounts.
  Fifth, it reduces the permitted deductibles under high deductible 
plans from $1,500 in the case of individuals to $1,000 and from $3,000 
in the case of couples to $2,000.
  Finally, the bill would permit medical savings accounts to be offered 
under cafeteria plans.
  Mr. President, I ask unanimous consent that the text of our bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1350

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Medical Savings Account 
     Improvement Act of 1999''.

     SEC. 2. EXPANSION OF AVAILABILITY OF MEDICAL SAVINGS 
                   ACCOUNTS.

       (a) Repeal of Limitations on Number of Medical Savings 
     Accounts.--
       (1) In general.--Subsections (i) and (j) of section 220 of 
     the Internal Revenue Code of 1986 are hereby repealed.
       (2) Conforming amendments.--
       (A) Paragraph (1) of section 220(c) of such Code is amended 
     by striking subparagraph (D).
       (B) Section 138 of such Code (relating to Medicare+Choice 
     MSA) is amended by striking subsection (f).
       (b) Availability Not Limited To Accounts for Employees of 
     Small Employers and Self-Employed Individuals.--
       (1) In general.--Section 220(c)(1)(A) of the Internal 
     Revenue Code of 1986 (relating to eligible individual) is 
     amended to read as follows:
       ``(A) In general.--The term `eligible individual' means, 
     with respect to any month, any individual if--
       ``(i) such individual is covered under a high deductible 
     health plan as of the 1st day of such month, and
       ``(ii) such individual is not, while covered under a high 
     deductible health plan, covered under any health plan--

       ``(I) which is not a high deductible health plan, and
       ``(II) which provides coverage for any benefit which is 
     covered under the high deductible health plan.''

       (2) Conforming amendments.--
       (A) Section 220(c)(1) of such Code is amended by striking 
     subparagraph (C).
       (B) Section 220(c) of such Code is amended by striking 
     paragraph (4) (defining small employer) and by redesignating 
     paragraph (5) as paragraph (4).
       (C) Section 220(b) of such Code is amended by striking 
     paragraph (4) (relating to deduction limited by compensation) 
     and by redesignating paragraphs (5), (6), and (7) as 
     paragraphs (4), (5), and (6), respectively.
       (c) Increase in Amount of Deduction Allowed for 
     Contributions to Medical Savings Accounts.--
       (1) In general.--Paragraph (2) of section 220(b) of such 
     Code is amended to read as follows:
       ``(2) Monthly limitation.--The monthly limitation for any 
     month is the amount equal to \1/12\ of the annual deductible 
     (as of the first day of such month) of the individual's 
     coverage under the high deductible health plan.''.
       (2) Conforming amendment.--Clause (ii) of section 
     220(d)(1)(A) of such Code is amended by striking ``75 percent 
     of''.
       (d) Both Employers and Employees May Contribute to Medical 
     Savings Accounts.--Paragraph (4) of section 220(b) of such 
     Code, as redesignated by subsection (b)(2)(C), is amended to 
     read as follows:
       ``(4) Coordination with exclusion for employer 
     contributions.--The limitation which would (but for this 
     paragraph) apply under this subsection to the taxpayer for 
     any taxable year shall be reduced (but not below zero) by the 
     amount which would (but for section 106(b)) be includible in 
     the taxpayer's gross income for such taxable year.''.
       (e) Reduction of Permitted Deductibles Under High 
     Deductible Health Plans.--
       (1) In general.--Subparagraph (A) of section 220(c)(2) of 
     such Code (defining high deductible health plan) is amended--
       (A) by striking ``$1,500'' and inserting ``$1,000'', and
       (B) by striking ``$3,000'' in clause (ii) and inserting 
     ``$2,000''.
       (2) Conforming amendment.--Subsection (g) of section 220 of 
     such Code is amended--
       (A) by striking ``1998'' and inserting ``1999''; and
       (B) by striking ``1997'' and inserting ``1998''.
       (f) Medical Savings Accounts May Be Offered Under Cafeteria 
     Plans.--Subsection (f) of section 125 of such Code is amended 
     by striking ``106(b),''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

  Mr. TORRICELLI. Mr. President, I rise today, along with my 
distinguished colleague from Iowa, Senator Grassley, to introduce 
legislation that will provide Americans more choices and control in 
their health care decisions.
  Since becoming available in 1996, medical savings accounts (MSA's) 
have proven to be an effective solution for Americans who are self-
employed, unsatisfied with their current health plan or working for a 
company unable to provide health insurance. By allowing consumers to 
save money tax-free to cover medical expenses, MSA's have ensured that 
people who previously were unable to acquire health coverage, such as 
single parents, the self-employed, small businesses and their 
employees, and working families, now have affordable medical coverage. 
In fact, since MSA's became available, the General Accounting Office 
reports that 37 percent of all MSA's have been purchased by people who 
were previously uninsured.
  Due to current restrictions, however, the size of the market is 
limited. Congress must allow the benefits from MSA's to reach more 
Americans.
  Our bill, the Medical Savings Account Effectiveness Act of 1999, will 
make MSA's a permanent health care option for all Americans by 
expanding enrollment beyond the current cap. This legislation will 
allow both employers and employees to contribute to an MSA and will 
allow policyholders to fully fund the deductible. In addition, it will 
lower the individual deductible to $1,000 and the family deductible to 
$2,000. Finally, it will allow MSA's to be offered through ``cafeteria 
plans.''
  By expanding MSA's, this legislation will give policyholders direct 
control over medical expenditures, offer them a new freedom to select 
the physician or specialist of their choice, and make insurance 
affordable for millions of Americans.
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