[Congressional Record (Bound Edition), Volume 149 (2003), Part 12]
[House]
[Pages 16322-16337]
[From the U.S. Government Publishing Office, www.gpo.gov]




              HEALTH SAVINGS AND AFFORDABILITY ACT OF 2003

  Mr. THOMAS. Mr. Speaker, pursuant to House Resolution 299, I call up 
the bill (H.R. 2596) to amend the Internal Revenue Code of 1986 to 
allow a deduction to individuals for amounts contributed to health 
savings security accounts and health savings accounts, to provide for 
the disposition of unused health benefits in cafeteria plans and 
flexible spending arrangements, and for other purposes, and ask for its 
immediate consideration.
  The Clerk read the title of the bill.
  The text of H.R. 2596 is as follows:

                               H.R. 2596

       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 ``Health Savings and 
     Affordability Act of 2003''.

     SEC. 2. HEALTH SAVINGS SECURITY ACCOUNTS AND HEALTH SAVINGS 
                   ACCOUNTS.

       (a) In General.--Part VII of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to additional 
     itemized deductions for individuals) is amended by 
     redesignating section 223 as section 225 and by inserting 
     after section 222 the following new sections:

     ``SEC. 223. HEALTH SAVINGS SECURITY ACCOUNTS.

       ``(a) Deduction Allowed.--In the case of an individual who 
     is an eligible individual for any month during the taxable 
     year, there shall be allowed as a deduction for the taxable 
     year an amount equal to the aggregate amount paid in cash 
     during such taxable year by such individual to a health 
     savings security account of such individual.
       ``(b) Limitations.--
       ``(1) In general.--The amount allowable as a deduction 
     under subsection (a) to an individual for the taxable year 
     shall not exceed the sum of the monthly limitations for 
     months during such taxable year that the individual is an 
     eligible individual.
       ``(2) Monthly limitation.--The monthly limitation for any 
     month is \1/12\ of--
       ``(A) $2,000, in the case of an eligible individual who--
       ``(i) has self-only coverage under a minimum deductible 
     plan as of the first day of such month, or

[[Page 16323]]

       ``(ii) is uninsured as of the first day of such month and 
     is not described in subparagraph (B)(ii) with respect to the 
     taxable year which includes such month,
       ``(B) $4,000, in the case of an eligible individual who--
       ``(i) has family coverage under a minimum deductible plan 
     as of the first day of such month, or
       ``(ii) is uninsured as of the first day of such month and, 
     with respect to the taxable year which includes such month--

       ``(I) is entitled to a deduction for a dependent under 
     section 151(c) (or would be so entitled but for paragraph (2) 
     or (4) of section 152(e)), or
       ``(II) files a joint return, and

       ``(C) zero in any other case.
       ``(3) Additional contributions for individuals 55 or 
     older.--
       ``(A) In general.--In the case of an individual who has 
     attained the age of 55 before the close of the taxable year, 
     paragraph (2) shall be applied by increasing the $2,000 
     amount in paragraph (2)(A) and the $4,000 amount in paragraph 
     (2)(B) by the additional contribution amount.
       ``(B) Additional contribution amount.--For purposes of this 
     section, the additional contribution amount is the amount 
     determined in accordance with the following table:

``For taxable years                                      The additional
beginning in:                                   contribution amount is:
  2004........................................................$500 ....

  2005........................................................$600 ....

  2006........................................................$700 ....

  2007........................................................$800 ....

  2008........................................................$900 ....

  2009 and thereafter.......................................$1,000.....

       ``(4) Limitation based on adjusted gross income.--
       ``(A) Self-only coverage.--The dollar amount in paragraph 
     (2)(A) (as increased under paragraph (3)) shall be reduced 
     (but not below zero) by an amount which bears the same ratio 
     to such dollar amount as--
       ``(i) the amount (if any) by which the taxpayer's adjusted 
     gross income for such taxable year exceeds $75,000 ($150,000 
     in the case of a joint return), bears to
       ``(ii) $10,000 ($20,000 in the case of a joint return).
       ``(B) Family coverage.--The dollar amount in paragraph 
     (2)(B) (as increased under paragraph (3)) shall be reduced 
     (but not below zero) by an amount which bears the same ratio 
     to such dollar amount as--
       ``(i) the amount (if any) by which the taxpayer's adjusted 
     gross income for such taxable year exceeds $150,000, bears to
       ``(ii) $20,000.
       ``(C) No reduction below $200 until complete phase-out.--No 
     dollar amount shall be reduced below $200 under subparagraph 
     (A) or (B) unless (without regard to this subparagraph) such 
     limitation is reduced to zero.
       ``(D) Rounding.--Any amount determined under this paragraph 
     which is not a multiple of $10 shall be rounded to the next 
     lowest $10.
       ``(E) Adjusted gross income.--For purposes of this 
     paragraph, adjusted gross income shall be determined--
       ``(i) without regard to this section or section 911, and
       ``(ii) after application of sections 86, 135, 137, 219, 
     221, 222, and 469.
       ``(5) Coordination with other 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 sum of--
       ``(A) the aggregate amount paid during such taxable year to 
     Archer MSAs of such individual,
       ``(B) the aggregate amount paid during such taxable year to 
     health savings accounts of such individual, and
       ``(C) the aggregate amount paid during such taxable year to 
     health savings security accounts of such individual by 
     persons other than such individual.
       ``(6) Special rules for married individuals, dependents, 
     and medicare eligible individuals.--Rules similar to the 
     rules of paragraphs (3), (6), and (7) of section 220(b) shall 
     apply for purposes of this section.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible individual.--
       ``(A) In general.--The term `eligible individual' means, 
     with respect to any month, any individual unless such 
     individual is covered, as of the first day of such month, 
     under any health plan which is not a minimum deductible plan.
       ``(B) Certain coverage disregarded.--Subparagraph (A) shall 
     be applied without regard to--
       ``(i) coverage for any benefit provided by permitted 
     insurance, and
       ``(ii) coverage (whether through insurance or otherwise) 
     for accidents, disability, dental care, vision care, or long-
     term care.
       ``(2) Minimum deductible plan.--
       ``(A) In general.--The term `minimum deductible plan' means 
     a health plan--
       ``(i) in the case of self-only coverage, which has an 
     annual deductible which is not less than $500, and
       ``(ii) in the case of family coverage, which has an annual 
     deductible which is not less than twice the dollar amount in 
     clause (i) (as increased under subparagraph (B)).
       ``(B) Cost-of-living adjustment for annual deductibles.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2004, the $500 amount in 
     subparagraph (A)(i) shall be increased by an amount equal 
     to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which such taxable 
     year begins by substituting `calendar year 2003' for 
     `calendar year 1992' in subparagraph (B) thereof.

       ``(ii) Rounding.--If any increase under clause (i) is not a 
     multiple of $50, such increase shall be rounded to the 
     nearest multiple of $50.
       ``(C) Special rules.--
       ``(i) Exclusion of certain plans.--Such term does not 
     include a health plan if substantially all of its coverage is 
     coverage described in paragraph (1)(B).
       ``(ii) Safe harbor for absence of preventive care 
     deductible.--A plan shall not fail to be treated as a minimum 
     deductible plan by reason of failing to have a deductible for 
     preventive care.
       ``(3) Uninsured.--An individual shall be treated as 
     uninsured if such individual is not covered by insurance 
     which constitutes medical care. The preceding sentence shall 
     be applied without regard to the coverage described in 
     paragraph (1)(B).
       ``(4) Permitted insurance.--The term `permitted insurance' 
     has the meaning given such term in section 220(c)(3).
       ``(5) Family coverage.--The term `family coverage' has the 
     meaning given such term in section 220(c)(5).
       ``(6) Archer msa.--The term `Archer MSA' has the meaning 
     given such term in section 220(d).
       ``(7) Health Savings Account.--The term `health savings 
     account' has the meaning given such term in section 224(d).
       ``(d) Health Savings Security Account.--For purposes of 
     this section--
       ``(1) In general.--The term `health savings security 
     account' means a trust created or organized in the United 
     States as a health savings security account exclusively for 
     the purpose of paying the qualified medical expenses of the 
     account beneficiary, but only if the written governing 
     instrument creating the trust meets the following 
     requirements:
       ``(A) Except in the case of a rollover contribution from an 
     Archer MSA, or a health savings security account, which is 
     not includible in gross income, no contribution will be 
     accepted--
       ``(i) unless it is in cash and is contributed by--

       ``(I) the account beneficiary,
       ``(II) a member of the family of the account beneficiary, 
     or
       ``(III) an employer of the account beneficiary, and

       ``(ii) to the extent such contribution, when added to 
     previous contributions to the trust for the calendar year, 
     exceeds the highest annual limitation which could apply to an 
     individual under subsection (b) for a taxable year beginning 
     in such calendar year.
       ``(B) The trustee is a bank (as defined in section 408(n)), 
     an insurance company (as defined in section 816), or another 
     person who demonstrates to the satisfaction of the Secretary 
     that the manner in which such person will administer the 
     trust will be consistent with the requirements of this 
     section.
       ``(C) No part of the trust assets will be invested in life 
     insurance contracts.
       ``(D) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(E) The interest of an individual in the balance in his 
     account is nonforfeitable.
       ``(2) Member of the family.--The term `member of the 
     family' has the meaning given such term in section 
     2032A(e)(2).
       ``(3) Qualified medical expenses.--The term `qualified 
     medical expenses' has the meaning given such term in section 
     220(d)(2), except that--
       ``(A) subparagraph (B)(i) thereof shall not apply to--
       ``(i) insurance which constitutes a minimum deductible plan 
     if no portion of the cost of such insurance is paid by an 
     employer or former employer of the account beneficiary or the 
     spouse of such beneficiary, and
       ``(ii) any health insurance (other than health insurance 
     substantially all of its coverage is coverage described in 
     subsection (c)(1)(B)) if the account beneficiary has attained 
     age 65, and
       ``(B) subparagraph (C) thereof shall not apply for purposes 
     of this section.
       ``(4) Account beneficiary.--The term `account beneficiary' 
     means the individual on whose behalf the health savings 
     security account was established.
       ``(5) Certain rules to apply.--Rules similar to the 
     following rules shall apply for purposes of this section:
       ``(A) Section 219(d)(2) (relating to no deduction for 
     rollovers).
       ``(B) Section 219(f)(3) (relating to time when 
     contributions deemed made).
       ``(C) Except as provided in section 106(d), section 
     219(f)(5) (relating to employer payments).
       ``(D) Section 408(g) (relating to community property laws).
       ``(E) Section 408(h) (relating to custodial accounts).

[[Page 16324]]

       ``(6) Contributions from flexible spending accounts treated 
     as made by the employer.--Any contribution from a flexible 
     spending account to a health savings security account which 
     is not includible in the gross income of the employee by 
     reason of section 125(h) shall be treated as a contribution 
     made by the employer for purposes of this section.
       ``(e) Tax Treatment of Accounts.--
       ``(1) In general.--A health savings security account is 
     exempt from taxation under this subtitle unless such account 
     has ceased to be a health savings security account. 
     Notwithstanding the preceding sentence, any such account is 
     subject to the taxes imposed by section 511 (relating to 
     imposition of tax on unrelated business income of charitable, 
     etc. organizations).
       ``(2) Account terminations.--Rules similar to the rules of 
     paragraphs (2) and (4) of section 408(e) shall apply to 
     health savings security accounts, and any amount treated as 
     distributed under such similar rules shall be treated as not 
     used to pay qualified medical expenses.
       ``(f) Tax Treatment of Distributions.--
       ``(1) Amounts used for qualified medical expenses.--Any 
     amount paid or distributed out of a health savings security 
     account which is used exclusively to pay qualified medical 
     expenses of any account beneficiary shall not be includible 
     in gross income.
       ``(2) Inclusion of amounts not used for qualified medical 
     expenses.--
       ``(A) In general.--Any amount paid or distributed out of a 
     health savings security account which is not used exclusively 
     to pay the qualified medical expenses of the account 
     beneficiary shall be included in the gross income of such 
     beneficiary in the manner provided under section 72.
       ``(B) Special rules for applying section 72.--For purposes 
     of applying section 72 to any amount described in 
     subparagraph (A)--
       ``(i) all health savings security accounts shall be treated 
     as 1 contract,
       ``(ii) all distributions during any taxable year shall be 
     treated as 1 distribution,
       ``(iii) the value of the contract, income on the contract, 
     and investment in the contract shall be computed as of the 
     close of the calendar year in which the taxable year begins, 
     and
       ``(iv) such distributions shall be treated as made from 
     contributions from members of the family of the account 
     beneficiary to the extent that such distribution, when added 
     to all previous distributions from the health savings 
     security account taken into account under this clause, do not 
     exceed the aggregate contributions from members of such 
     family.
       ``(3) Excess contributions returned before due date of 
     return.--
       ``(A) In general.--If any excess contribution is 
     contributed for a taxable year to any health savings security 
     account of an individual, paragraph (2) shall not apply to 
     distributions from the health savings security accounts of 
     such individual (to the extent such distributions do not 
     exceed the aggregate excess contributions to all such 
     accounts of such individual for such year) if--
       ``(i) such distribution is made on or before the last day 
     prescribed by law (including extensions of time) for filing 
     the account beneficiary's return for such taxable year,
       ``(ii) no deduction is allowed under this section with 
     respect to such contribution,
       ``(iii) such distribution is accompanied by the amount of 
     net income attributable to such excess contribution, and
       ``(iv) such distribution satisfies the requirements of 
     subparagraph (B).
       ``(B) Rules related to ordering.--
       ``(i) Distributions limited to contributions.--Subparagraph 
     (A) shall apply to distributions to a person only to the 
     extent of the contributions of such person to such accounts 
     during such taxable year.
       ``(ii) Classes of contributors.--Subparagraph (A) shall 
     apply only to distributions of such contributions which are 
     made in the following order:

       ``(I) first, to members of the family of the account 
     beneficiary,
       ``(II) second, to the account beneficiary,
       ``(III) third, to employers of the account beneficiary with 
     respect to contributions under section 125(h), and
       ``(IV) fourth, to employers of the account beneficiary with 
     respect to contributions under section 106(d).

       ``(iii) Last-in first-out.--If distributions could be made 
     to more than one person under any subclause of clause (ii), 
     subparagraph (A) shall not apply to any such distribution 
     unless such distribution is of the most recent excess 
     contribution which has not been distributed to the 
     contributor.
       ``(C) Treatment of net income.--Any net income described in 
     subparagraph (A)(iii) shall be included in the gross income 
     of the person receiving the distribution for the taxable year 
     in which received.
       ``(D) Excess contribution.--For purposes of subparagraph 
     (A), the term `excess contribution' means any contribution 
     (other than a rollover contribution from another health 
     savings security account, or from an Archer MSA, which is not 
     includible in gross income) to the extent such contribution 
     results in the aggregate contributions to health savings 
     security accounts of the account beneficiary for the taxable 
     year to be in excess of the limitation under subsection (b) 
     (determined without regard to paragraph (5)(C) thereof) which 
     applies to such beneficiary for such year.
       ``(4) Additional tax on distributions not used for 
     qualified medical expenses.--
       ``(A) In general.--The tax imposed by this chapter on the 
     account beneficiary for any taxable year in which there is a 
     payment or distribution from a health savings security 
     account of such beneficiary which is includible in gross 
     income under paragraph (2) shall be increased by 15 percent 
     of the amount which is so includible.
       ``(B) Exception for disability or death.--Subparagraph (A) 
     shall not apply if the payment or distribution is made after 
     the account beneficiary becomes disabled within the meaning 
     of section 72(m)(7) or dies.
       ``(C) Exception for distributions after medicare 
     eligibility.--Subparagraph (A) shall not apply to any payment 
     or distribution after the date on which the account 
     beneficiary attains the age specified in section 1811 of the 
     Social Security Act.
       ``(5) Rollover contribution.--
       ``(A) In general.--Paragraph (2) shall not apply to any 
     amount paid or distributed from a health savings security 
     account to the account beneficiary to the extent the amount 
     received is paid into a health savings security account, or a 
     health savings account, for the benefit of such beneficiary 
     not later than the 60th day after the day on which the 
     beneficiary receives the payment or distribution.
       ``(B) Limitation.--This paragraph shall not apply to any 
     amount described in subparagraph (A) received by an 
     individual from a health savings security account if, at any 
     time during the 1-year period ending on the day of such 
     receipt, such individual received any other amount described 
     in subparagraph (A) from a health savings security account 
     which was not includible in the individual's gross income 
     because of the application of this paragraph.
       ``(6) Special rules.--Rules similar to the rules of 
     paragraphs (6), (7), and (8) of section 220(f) shall apply 
     for purposes of this section.
       ``(g) Reports.--The Secretary may require the trustee of a 
     health savings security account to make such reports 
     regarding such account to the Secretary and to the account 
     beneficiary with respect to contributions, distributions, and 
     such other matters as the Secretary determines appropriate. 
     The reports required by this subsection shall be filed at 
     such time and in such manner and furnished to such 
     individuals at such time and in such manner as may be 
     required by the Secretary.
       ``(h) Regulations.--The Secretary may issue regulations to 
     carry out the purposes of this section, including regulations 
     regarding the proper treatment of distributions described in 
     subsection (f)(3) and nondeductible contributions by members 
     of the family of the account beneficiary.

     ``SEC. 224. HEALTH SAVINGS ACCOUNTS.

       ``(a) Deduction Allowed.--In the case of an individual who 
     is an eligible individual for any month during the taxable 
     year, there shall be allowed as a deduction for the taxable 
     year an amount equal to the aggregate amount paid in cash 
     during such taxable year by such individual to a health 
     savings account of such individual.
       ``(b) Limitations.--
       ``(1) In general.--The amount allowable as a deduction 
     under subsection (a) to an individual for the taxable year 
     shall not exceed the sum of the monthly limitations for 
     months during such taxable year that the individual is an 
     eligible individual.
       ``(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.
       ``(3) Coordination with other 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 sum of--
       ``(A) the aggregate amount paid during such taxable year to 
     Archer MSAs of such individual,
       ``(B) the aggregate amount paid during such taxable year to 
     health savings security accounts of such individual, and
       ``(C) the aggregate amount paid during such taxable year to 
     health savings accounts of such individual by persons other 
     than such individual.
       ``(4) Special rules for married individuals, dependents, 
     and medicare eligible individuals.--Rules similar to the 
     rules of paragraphs (3), (6), and (7) of section 220(b) shall 
     apply for purposes of this section.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible individual.--
       ``(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.

[[Page 16325]]

       ``(B) Certain coverage disregarded.--Subparagraph (A)(ii) 
     shall be applied without regard to--
       ``(i) coverage for any benefit provided by permitted 
     insurance, and
       ``(ii) coverage (whether through insurance or otherwise) 
     for accidents, disability, dental care, vision care, or long-
     term care.
       ``(2) High deductible health plan.--
       ``(A) In general.--The term `high deductible health plan' 
     means a health plan--
       ``(i) in the case of self-only coverage, which has an 
     annual deductible which is not less than $1,000 and not more 
     than $2,250,
       ``(ii) in the case of family coverage, which has an annual 
     deductible which is not less than $2,000 and not more than 
     $4,500, and
       ``(iii) the annual out-of-pocket expenses required to be 
     paid under the plan (other than for premiums) for covered 
     benefits does not exceed--

       ``(I) $3,000 for self-only coverage, and
       ``(II) $5,500 for family coverage.

       ``(B) Cost-of-living adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 1998, each dollar amount 
     in subparagraph (A) shall be increased by an amount equal 
     to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which such taxable 
     year begins by substituting `calendar year 1997' for 
     `calendar year 1992' in subparagraph (B) thereof.

       ``(ii) Special rules.--In the case of the $1,000 amount in 
     subparagraph (A)(i) and the $2,000 amount in subparagraph 
     (A)(ii), subclause (i)(II) shall be applied by substituting 
     `calendar year 2002' for `calendar year 1997'.
       ``(iii) Rounding.--If any increase under clause (i) or (ii) 
     is not a multiple of $50, such increase shall be rounded to 
     the nearest multiple of $50.
       ``(C) Special rules.--
       ``(i) Exclusion of certain plans.--Such term does not 
     include a health plan if substantially all of its coverage is 
     coverage described in paragraph (1)(B).
       ``(ii) Safe harbor for absence of preventive care 
     deductible.-- A plan shall not fail to be treated as a high 
     deductible health plan by reason of failing to have a 
     deductible for preventive care.
       ``(D) Treatment of network services.--
       ``(i) In general.--In the case of a health plan which is a 
     preferred provider organization plan and which would (without 
     regard to services provided outside such organization's 
     network of providers described in clause (iii)(I)) be a high 
     deductible health plan, such plan shall not fail to be a high 
     deductible health plan because--

       ``(I) the annual deductible for services provided outside 
     such network exceeds the applicable maximum dollar amount in 
     clause (i) or (ii) of subparagraph (A), or
       ``(II) the annual out-of-pocket expenses required to be 
     paid for services provided outside such network exceeds the 
     applicable dollar amount in subparagraph (A)(iii).

       ``(ii) Annual deductible.--The annual deductible taken into 
     account under subsection (b)(2) with respect to a plan which 
     is a high deductible health plan by reason of clause (i) 
     shall be the annual deductible for services provided within 
     such network.
       ``(iii) Preferred provider organization plan defined.--In 
     this subparagraph, the term `preferred provider organization 
     plan' means a health plan that--

       ``(I) has a network of providers that have agreed to a 
     contractually specified reimbursement for covered benefits 
     with the organization offering the plan,
       ``(II) provides for reimbursement for all covered benefits 
     regardless of whether such benefits are provided within such 
     network of providers, and
       ``(III) is offered by an organization that is not licensed 
     or organized under State law as a health maintenance 
     organization.

       ``(3) Permitted insurance.--The term `permitted insurance' 
     has the meaning given such term in section 220(c)(3).
       ``(4) Family coverage.--The term `family coverage' has the 
     meaning given such term in section 220(c)(5).
       ``(5) Archer msa.--The term `Archer MSA' has the meaning 
     given such term in section 220(d).
       ``(6) Health savings security account.--The term `health 
     savings security account' has the meaning given such term in 
     section 223(d).
       ``(d) Health Savings Account.--For purposes of this 
     section--
       ``(1) In general.--The term `health savings account' means 
     a trust created or organized in the United States as a health 
     savings account exclusively for the purpose of paying the 
     qualified medical expenses of the account beneficiary, but 
     only if the written governing instrument creating the trust 
     meets the following requirements:
       ``(A) Except in the case of a rollover contribution from an 
     Archer MSA, a health savings security account, or a health 
     savings account, which is not includible in gross income, no 
     contribution will be accepted--
       ``(i) unless it is in cash and is contributed by--

       ``(I) the account beneficiary, or
       ``(II) an employer of the account beneficiary, and

       ``(ii) to the extent such contribution, when added to 
     previous contributions to the trust for the calendar year, 
     exceeds the highest annual limitation which could apply to an 
     individual under subsection (b) for a taxable year beginning 
     in such calendar year.
       ``(B) The trustee is a bank (as defined in section 408(n)), 
     an insurance company (as defined in section 816), or another 
     person who demonstrates to the satisfaction of the Secretary 
     that the manner in which such person will administer the 
     trust will be consistent with the requirements of this 
     section.
       ``(C) No part of the trust assets will be invested in life 
     insurance contracts.
       ``(D) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(E) The interest of an individual in the balance in his 
     account is nonforfeitable.
       ``(2) Qualified medical expenses.--The term `qualified 
     medical expenses' has the meaning given such term in section 
     220(d)(2).
       ``(3) Account beneficiary.--The term `account beneficiary' 
     means the individual on whose behalf the health savings 
     account was established.
       ``(4) Certain rules to apply.--Rules similar to the 
     following rules shall apply for purposes of this section:
       ``(A) Section 219(d)(2) (relating to no deduction for 
     rollovers).
       ``(B) Section 219(f)(3) (relating to time when 
     contributions deemed made).
       ``(C) Except as provided in section 106(d), section 
     219(f)(5) (relating to employer payments).
       ``(D) Section 408(g) (relating to community property laws).
       ``(E) Section 408(h) (relating to custodial accounts).
       ``(6) Contributions from flexible spending accounts treated 
     as made by the employer.--Any contribution from a flexible 
     spending account to a health savings account which is not 
     includible in the gross income of the employee by reason of 
     section 125(h) shall be treated as a contribution made by the 
     employer for purposes of this section.
       ``(e) Tax Treatment of Accounts.--
       ``(1) In general.--A health savings account is exempt from 
     taxation under this subtitle unless such account has ceased 
     to be a health savings account. Notwithstanding the preceding 
     sentence, any such account is subject to the taxes imposed by 
     section 511 (relating to imposition of tax on unrelated 
     business income of charitable, etc. organizations).
       ``(2) Account terminations.--Rules similar to the rules of 
     paragraphs (2) and (4) of section 408(e) shall apply to 
     health savings accounts, and any amount treated as 
     distributed under such rules shall be treated as not used to 
     pay qualified medical expenses.
       ``(f) Tax Treatment of Distributions.--
       ``(1) Amounts used for qualified medical expenses.--Any 
     amount paid or distributed out of a health savings account 
     which is used exclusively to pay qualified medical expenses 
     of any account beneficiary shall not be includible in gross 
     income.
       ``(2) Inclusion of amounts not used for qualified medical 
     expenses.--Any amount paid or distributed out of a health 
     savings account which is not used exclusively to pay the 
     qualified medical expenses of the account beneficiary shall 
     be included in the gross income of such beneficiary.
       ``(3) Excess contributions returned before due date of 
     return.--
       ``(A) In general.--If any excess contribution is 
     contributed for a taxable year to any health savings account 
     of an individual, paragraph (2) shall not apply to 
     distributions from the health savings accounts of such 
     individual (to the extent such distributions do not exceed 
     the aggregate excess contributions to all such accounts of 
     such individual for such year) if--
       ``(i) such distribution is made on or before the last day 
     prescribed by law (including extensions of time) for filing 
     the account beneficiary's return for such taxable year,
       ``(ii) no deduction is allowed under this section with 
     respect to such contribution,
       ``(iii) such distribution is accompanied by the amount of 
     net income attributable to such excess contribution, and
       ``(iv) such distribution satisfies the requirements of 
     subparagraph (B).
       ``(B) Rules related to ordering.--
       ``(i) Distributions limited to contributions.--Subparagraph 
     (A) shall apply to distributions to a person only to the 
     extent of the contributions of such person to such accounts 
     during such taxable year.
       ``(ii) Classes of contributors.--Subparagraph (A) shall 
     apply only to distributions of such contributions which are 
     made in the following order:

       ``(I) first, to the account beneficiary,
       ``(II) second, to employers of the account beneficiary with 
     respect to contributions under section 125(h), and
       ``(III) third, to employers of the account beneficiary with 
     respect to contributions under section 106(d).

       ``(iii) Last-in first-out.--If distributions could be made 
     to more than one person under any subclause of clause (ii), 
     subparagraph (A) shall not apply to any such distribution 
     unless such distribution is of the most recent excess 
     contribution which has not been distributed to the 
     contributor.
       ``(C) Treatment of net income.--Any net income described in 
     subparagraph (A)(iii)

[[Page 16326]]

     shall be included in the gross income of the person receiving 
     the distribution for the taxable year in which received.
       ``(D) Excess contribution.--For purposes of subparagraph 
     (A), the term `excess contribution' means any contribution 
     (other than a rollover contribution from another health 
     savings account, from a health savings security account, or 
     from an Archer MSA, which is not includible in gross income) 
     to the extent such contribution results in the aggregate 
     contributions to health savings accounts of the account 
     beneficiary for the taxable year to be in excess of the 
     limitation under subsection (b) (determined without regard to 
     paragraph (3)(C) thereof) which applies to such beneficiary 
     for such year.
       ``(4) Additional tax on distributions not used for 
     qualified medical expenses.--
       ``(A) In general.--The tax imposed by this chapter on the 
     account beneficiary for any taxable year in which there is a 
     payment or distribution from a health savings account of such 
     beneficiary which is includible in gross income under 
     paragraph (2) shall be increased by 15 percent of the amount 
     which is so includible.
       ``(B) Exception for disability or death.--Subparagraph (A) 
     shall not apply if the payment or distribution is made after 
     the account beneficiary becomes disabled within the meaning 
     of section 72(m)(7) or dies.
       ``(C) Exception for distributions after medicare 
     eligibility.--Subparagraph (A) shall not apply to any payment 
     or distribution after the date on which the account 
     beneficiary attains the age specified in section 1811 of the 
     Social Security Act.
       ``(5) Rollover contribution.--
       ``(A) In general.--Paragraph (2) shall not apply to any 
     amount paid or distributed from a health savings account to 
     the account beneficiary to the extent the amount received is 
     paid into a health savings account for the benefit of such 
     beneficiary not later than the 60th day after the day on 
     which the beneficiary receives the payment or distribution.
       ``(B) Limitation.--This paragraph shall not apply to any 
     amount described in subparagraph (A) received by an 
     individual from a health savings account if, at any time 
     during the 1-year period ending on the day of such receipt, 
     such individual received any other amount described in 
     subparagraph (A) from a health savings account which was not 
     includible in the individual's gross income because of the 
     application of this paragraph.
       ``(6) Special rules.--Rules similar to the rules of 
     paragraphs (6), (7), and (8) of section 220(f) shall apply 
     for purposes of this section.
       ``(g) Reports.--The Secretary may require the trustee of a 
     health savings account to make such reports regarding such 
     account to the Secretary and to the account beneficiary with 
     respect to contributions, distributions, and such other 
     matters as the Secretary determines appropriate. The reports 
     required by this subsection shall be filed at such time and 
     in such manner and furnished to such individuals at such time 
     and in such manner as may be required by the Secretary.''.
       (b) Deduction Allowed Whether or Not Individual Itemizes 
     Other Deductions.--Subsection (a) of section 62 of such Code 
     is amended by inserting after paragraph (18) the following 
     new paragraphs:
       ``(19) Health savings security accounts.--The deduction 
     allowed by section 223.
       ``(20) Health savings accounts.--The deduction allowed by 
     section 224.''.
       (c) Coordination With Archer MSAs.--
       (1) Rollovers from archer msas permitted.--Subparagraph (A) 
     of section 220(f)(5) of such Code (relating to rollover 
     contribution) is amended by inserting ``, a health savings 
     security account (as defined in section 223(d)), or a health 
     savings account (as defined in section 224(d)),'' after 
     ``paid into an Archer MSA''.
       (2) Reduction in archer msa limitation for contributions to 
     health savings security accounts and health savings 
     accounts.--Subsection (b) of section 220 of such Code 
     (relating to limitations) is amended by adding at the end the 
     following new paragraph:
       ``(8) Coordination with health savings security accounts 
     and health savings accounts.--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 sum of--
       ``(A) the aggregate amount paid during such taxable year to 
     health savings security accounts of such individual, and
       ``(B) the aggregate amount paid during such taxable year to 
     health savings accounts of such individual.''.
       (d) Exclusions for Employer Contributions to Health Savings 
     Security Accounts and Health Savings Accounts.--
       (1) Exclusion from income tax.--Section 106 of such Code 
     (relating to contributions by employer to accident and health 
     plans) is amended by adding at the end the following new 
     subsections:
       ``(d) Contributions to Health Savings Security Accounts.--
       ``(1) In general.--In the case of an employee who is an 
     eligible individual, amounts contributed by such employee's 
     employer to any health savings security account of such 
     employee shall be treated as employer-provided coverage for 
     medical expenses under an accident or health plan to the 
     extent such amounts do not exceed the limitation under 
     section 223(b) (determined without regard to this subsection) 
     which is applicable to such employee for such taxable year.
       ``(2) Special rules.--Rules similar to the rules of 
     paragraphs (2), (3), (4), and (5) of subsection (b) shall 
     apply for purposes of this subsection.
       ``(3) Definitions.--For purposes of this subsection, the 
     terms `eligible individual' and `health savings security 
     account' have the respective meanings given to such terms by 
     section 223.
       ``(4) Cross reference.--

  ``For penalty on failure by employer to make comparable contributions 
to the health savings security accounts of comparable employees, see 
section 4980G.

       ``(e) Contributions to Health Savings Accounts.--
       ``(1) In general.--In the case of an employee who is an 
     eligible individual, amounts contributed by such employee's 
     employer to any health savings account of such employee shall 
     be treated as employer-provided coverage for medical expenses 
     under an accident or health plan to the extent such amounts 
     do not exceed the limitation under section 224(b) (determined 
     without regard to this subsection) which is applicable to 
     such employee for such taxable year.
       ``(2) Special rules.--Rules similar to the rules of 
     paragraphs (2), (3), (4), and (5) of subsection (b) shall 
     apply for purposes of this subsection.
       ``(3) Definitions.--For purposes of this subsection, the 
     terms `eligible individual' and `health savings account' have 
     the respective meanings given to such terms by section 224.
       ``(4) Cross reference.--

  ``For penalty on failure by employer to make comparable contributions 
to the health savings accounts of comparable employees, see section 
4980G.''.

       (2) Exclusion from employment taxes.--
       (A) Railroad retirement tax.--Subsection (e) of section 
     3231 of such Code is amended by adding at the end the 
     following new paragraph:
       ``(11) Health savings security account and health savings 
     account contributions.--The term `compensation' shall not 
     include any payment made to or for the benefit of an employee 
     if at the time of such payment it is reasonable to believe 
     that the employee will be able to exclude such payment from 
     income under subsection (d) or (e) of section 106.''.
       (B) Unemployment tax.--Subsection (b) of section 3306 of 
     such Code is amended by striking ``or'' at the end of 
     paragraph (16), by striking the period at the end of 
     paragraph (17) and inserting ``; or'', and by inserting after 
     paragraph (17) the following new paragraph:
       ``(18) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under subsection (d) or (e) of section 
     106.''.
       (C) Withholding tax.--Subsection (a) of section 3401 of 
     such Code is amended by striking ``or'' at the end of 
     paragraph (20), by striking the period at the end of 
     paragraph (21) and inserting ``; or'', and by inserting after 
     paragraph (21) the following new paragraph:
       ``(22) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under subsection (d) or (e) of section 
     106.''
       (3) Employer contributions required to be shown on w-2.--
     Subsection (a) of section 6051 of such Code is amended by 
     striking ``and'' at the end of paragraph (10), by striking 
     the period at the end of paragraph (11) and inserting a 
     comma, and by inserting after paragraph (11) the following 
     new paragraphs:
       ``(12) the amount contributed to any health savings 
     security account (as defined in section 223(d)) of such 
     employee or such employee's spouse, and
       ``(13) the amount contributed to any health savings account 
     (as defined in section 224(d)) of such employee or such 
     employee's spouse.''.
       (4) Penalty for failure of employer to make comparable 
     health savings account contributions.--
       (A) In general.--Chapter 43 of such Code is amended by 
     adding after section 4980F the following new section:

     ``SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COMPARABLE HEALTH 
                   SAVINGS ACCOUNT CONTRIBUTIONS.

       ``(a) General Rule.--In the case of an employer who makes a 
     contribution to the health savings security account or the 
     health savings account of any employee during a calendar 
     year, there is hereby imposed a tax on the failure of such 
     employer to meet the requirements of subsection (b) for such 
     calendar year.
       ``(b) Rules and Requirements.--Rules and requirements 
     similar to the rules and requirements of section 4980E shall 
     apply for purposes of this section.
       ``(c) Regulations.--The Secretary shall issue regulations 
     to carry out the purposes

[[Page 16327]]

     of this section, including regulations providing special 
     rules for employers who make contributions to more than one 
     of the following types of accounts during the calendar year:
       ``(1) An Archer MSA.
       ``(2) A health savings security account.
       ``(3) A health savings account.''.
       (B) Clerical amendment.--The table of sections for chapter 
     43 of such Code is amended by adding after the item relating 
     to section 4980F the following new item:

``Sec. 4980G. Failure of employer to make comparable health savings 
              account contributions.''.

       (e) Tax on Excess Contributions.--Section 4973 of such Code 
     (relating to tax on excess contributions to certain tax-
     favored accounts and annuities) is amended--
       (1) by striking ``or'' at the end of paragraph (3) of 
     subsection (a),
       (2) by inserting after paragraph (4) of subsection (a) the 
     following new paragraphs:
       ``(5) a health savings security account (within the meaning 
     of section 223(d)), or
       ``(6) a health savings account (within the meaning of 
     section 224(d))'', and
       (4) by adding at the end the following new subsections:
       ``(g) Excess Contributions to Health Savings Security 
     Accounts.--For purposes of this section, in the case of 
     health savings security accounts (within the meaning of 
     section 223(d)), the term `excess contributions' means the 
     sum of--
       ``(1) the aggregate amount contributed for the taxable year 
     to the accounts (other than a rollover contribution from 
     another health savings security account, or from an Archer 
     MSA, which is not includible in gross income) which is in 
     excess of the limitation under section 223(b) (determined 
     without regard to paragraph (5)(C) thereof), and
       ``(2) the amount determined under this subsection for the 
     preceding taxable year, reduced by the sum of--
       ``(A) the distributions out of the accounts which were 
     included in gross income under section 223(f)(2), and
       ``(B) the excess (if any) of--
       ``(i) the sum of limitations described in paragraph (1), 
     over
       ``(ii) the amount contributed to the accounts for the 
     taxable year.

     For purposes of this subsection, any contribution which is 
     distributed out of the health savings security account in a 
     distribution to which section 223(f)(3) applies shall be 
     treated as an amount not contributed.
       ``(h) Excess Contributions to Health Savings Accounts.--For 
     purposes of this section, in the case of health savings 
     accounts (within the meaning of section 224(d)), the term 
     `excess contributions' means the sum of--
       ``(1) the aggregate amount contributed for the taxable year 
     to the accounts (other than a rollover contribution from 
     another health savings account, a health savings security 
     account, or from an Archer MSA, which is not includible in 
     gross income) which is in excess of the limitation under 
     section 224(b) (determined without regard to paragraph (3)(C) 
     thereof), and
       ``(2) the amount determined under this subsection for the 
     preceding taxable year, reduced by the sum of--
       ``(A) the distributions out of the accounts which were 
     included in gross income under section 224(f)(2), and
       ``(B) the excess (if any) of--
       ``(i) the sum of limitations described in paragraph (1), 
     over
       ``(ii) the amount contributed to the accounts for the 
     taxable year.

     For purposes of this subsection, any contribution which is 
     distributed out of the health savings account in a 
     distribution to which section 224(f)(3) applies shall be 
     treated as an amount not contributed.''.
       (f) Tax on Prohibited Transactions.--
       (1) Section 4975 of such Code (relating to tax on 
     prohibited transactions) is amended by adding at the end of 
     subsection (c) the following new paragraphs:
       ``(6) Special rule for health savings security accounts.--
     An individual for whose benefit a health savings security 
     account (within the meaning of section 223(d)) is established 
     shall be exempt from the tax imposed by this section with 
     respect to any transaction concerning such account (which 
     would otherwise be taxable under this section) if, with 
     respect to such transaction, the account ceases to be a 
     health savings security account by reason of the application 
     of section 223(e)(2) to such account.
       ``(7) Special rule for health savings accounts.--An 
     individual for whose benefit a health savings account (within 
     the meaning of section 224(d)) is established shall be exempt 
     from the tax imposed by this section with respect to any 
     transaction concerning such account (which would otherwise be 
     taxable under this section) if, with respect to such 
     transaction, the account ceases to be a health savings 
     account by reason of the application of section 224(e)(2) to 
     such account.''.
       (2) Paragraph (1) of section 4975(e) of such Code is 
     amended by redesignating subparagraphs (E) and (F) as 
     subparagraphs (G) and (H), respectively, and by inserting 
     after subparagraph (D) the following new subparagraphs:
       ``(E) a health savings security account described in 
     section 223(d),
       ``(F) a health savings account described in section 
     224(d),''.
       (g) Failure To Provide Reports on Health Savings 
     Accounts.--Paragraph (2) of section 6693(a) of such Code 
     (relating to reports) is amended by redesignating 
     subparagraphs (C) and (D) as subparagraphs (E) and (F), 
     respectively, and by inserting after subparagraph (B) the 
     following new subparagraphs:
       ``(C) section 223(g) (relating to health savings security 
     accounts),
       ``(D) section 224(g) (relating to health savings 
     accounts),''.
       (h) Exception From Capitalization of Policy Acquisition 
     Expenses.--Subparagraph (B) of section 848(e)(1) of such Code 
     (defining specified insurance contract) is amended by 
     striking ``and'' at the end of clause (iii), by striking the 
     period at the end of clause (iv) and inserting a comma, and 
     by adding at the end the following new clauses:
       ``(v) any contract which is a health savings security 
     account (as defined in section 223(d)), and''.
       ``(vi) any contract which is a health savings account (as 
     defined in section 224(d)).''.
       (i) Health Savings Security Accounts and Health Savings 
     Accounts May Be Offered Under Cafeteria Plans.--Paragraph (2) 
     of section 125(d) (relating to cafeteria plan defined) is 
     amended by adding at the end the following new subparagraph:
       ``(D) Exception for health savings accounts.--Subparagraph 
     (A) shall not apply to a plan to the extent of amounts which 
     a covered employee may elect to have the employer pay as 
     contributions to a health savings security account, or a 
     health savings account, established on behalf of the 
     employee.''.
       (j) Information Reporting by Providers of Health 
     Insurance.--Subpart B of part III of subchapter A of chapter 
     61 of such Code is amended by adding at the end the following 
     new section:

     ``SEC. 6050U. RETURNS RELATING TO PROVIDERS OF HEALTH 
                   INSURANCE.

       ``(a) Requirement of Reporting.--Under regulations 
     prescribed by the Secretary, every person who provides any 
     individual with coverage under a plan which constitutes 
     medical care shall, at such time as the Secretary may 
     prescribe, make the return described in subsection (b) with 
     respect to such individual.
       ``(b) Form and Manner of Returns.--A return is described in 
     this subsection if such return--
       ``(1) is in such form as the Secretary may prescribe, and
       ``(2) contains such information as the Secretary 
     prescribes.
       ``(c) Statements To Be Furnished to Individuals With 
     Respect to Whom Information Is Required.--Every person 
     required to make a return under subsection (a) shall furnish 
     to each individual whose name is required to be set forth in 
     such return a written statement showing--
       ``(1) the name and address of the person required to make 
     such return and the phone number of the information contact 
     for such person, and
       ``(2) the information required to be shown on the return 
     with respect to such individual.

     The written statement required under the preceding sentence 
     shall be furnished on or before January 31 of the year 
     following the calendar year for which the return under 
     subsection (a) is required to be made.''.
       (k) Conforming Amendments.--
       (1) The table of sections for part VII of subchapter B of 
     chapter 1 of such Code is amended by striking the last item 
     and inserting the following:

``Sec. 223. Health savings security accounts.
``Sec. 224. Health savings accounts.
``Sec. 225. Cross reference.''.

       (2)(A) Sections 86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A), 
     219(g)(3)(A)(ii), and 221(b)(2)(C)(i) are each amended by 
     inserting ``223,'' after ``222,''.
       (B) Section 222(b)(2)(C)(i) is amended by inserting 
     ``223,'' before ``911''.
       (C) Section 469(i)(3)(F)(iii) is amended by striking ``and 
     222'' and inserting ``222, and 223''.
       (l) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 3. DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA 
                   PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.

       (a) In General.--Section 125 of the Internal Revenue Code 
     of 1986 (relating to cafeteria plans) is amended by 
     redesignating subsections (h) and (i) as subsections (i) and 
     (j), respectively, and by inserting after subsection (g) the 
     following:
       ``(h) Contributions of Certain Unused Health Benefits.--
       ``(1) In general.--For purposes of this title, a plan or 
     other arrangement shall not fail to be treated as a cafeteria 
     plan solely because qualified benefits under such plan 
     include a health flexible spending arrangement under which 
     not more than $500 of unused health benefits may be--
       ``(A) carried forward to the succeeding plan year of such 
     health flexible spending arrangement,

[[Page 16328]]

       ``(B) to the extent permitted by sections 223 and 224, 
     contributed on behalf of the employee to a health savings 
     security account (as defined in section 223(d)), or a health 
     savings account (as defined in section 224(d)), maintained 
     for the benefit of such employee, or
       ``(C) contributed to a qualified retirement plan (as 
     defined in section 4974(c)), or an eligible deferred 
     compensation plan (as defined in section 457(b)) of an 
     eligible employer described in section 457(e)(1)(A), but only 
     to the extent such amount would not be allowed as a deduction 
     under--
       ``(i) section 223 if made directly by the employee to a 
     health savings security account of the employee (determined 
     without regard to any other contributions made by the 
     employee), and
       ``(ii) section 224 if made directly by the employee to a 
     health savings account of the employee (determined without 
     regard to any other contributions made by the employee).
       ``(2) Special rules for treatment of contributions to 
     retirement plans.--For purposes of this title, contributions 
     under paragraph (1)(C)--
       ``(A) shall be treated as elective deferrals (as defined in 
     section 402(g)(3)) in the case of contributions to a 
     qualified cash or deferred arrangement (as defined in section 
     401(k)) or to an annuity contract described in section 
     403(b),
       ``(B) shall be treated as employer contributions to which 
     the employee has a nonforfeitable right in the case of a plan 
     (other than a plan described in subparagraph (A)) which is 
     described in section 401(a) which includes a trust exempt 
     from tax under section 501(a),
       ``(C) shall be treated as deferred compensation in the case 
     of contributions to an eligible deferred compensation plan 
     (as defined in section 457(b)), and
       ``(D) shall be treated in the manner designated for 
     purposes of section 408 or 408A in the case of contributions 
     to an individual retirement plan.
       ``(3) Health flexible spending arrangement.--For purposes 
     of this subsection, the term `health flexible spending 
     arrangement' means a flexible spending arrangement (as 
     defined in section 106(c)) that is a qualified benefit and 
     only permits reimbursement for expenses for medical care (as 
     defined in section 213(d)(1) (without regard to subparagraphs 
     (C) and (D) thereof).
       ``(4) Unused health benefits.--For purposes of this 
     subsection, with respect to an employee, the term `unused 
     health benefits' means the excess of--
       ``(A) the maximum amount of reimbursement allowable to the 
     employee during a plan year under a health flexible spending 
     arrangement, taking into account any election by the 
     employee, over
       ``(B) the actual amount of reimbursement during such year 
     under such arrangement.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 4. EXCEPTION TO INFORMATION REPORTING REQUIREMENTS 
                   RELATED TO CERTAIN HEALTH ARRANGEMENTS.

       (a) In General.--Section 6041 (relating to information at 
     source) is amended by adding at the end the following new 
     subsection:
       ``(f) Section Does Not Apply to Certain Health 
     Arrangements.--This section shall not apply to any payment 
     for medical care (as defined in section 213(d)) made under--
       ``(1) a flexible spending arrangement (as defined in 
     section 106(c)(2)), or
       ``(2) a health reimbursement arrangement which is treated 
     as employer-provided coverage under an accident or health 
     plan for purposes of section 106.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to payments made after December 31, 2002.

                              {time}  1715

  The SPEAKER pro tempore (Mr. Sweeney). Pursuant to House Resolution 
299, the gentleman from California (Mr. Thomas) and the gentleman from 
New York (Mr. Rangel) each will control 30 minutes.
  The Chair recognizes the gentleman from California (Mr. Thomas).
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  This is an important day regarding all Americans' health care needs. 
Most people are focused on our seniors and the Medicare legislation, 
which will be before us shortly. We have before us now the Health 
Savings and Affordability Act, and I first want to thank my colleague, 
the gentleman from Illinois (Mr. Lipinski), for working with us in 
producing a bipartisan piece of legislation, which is extremely 
important to seniors accompanying the Medicare legislation, but really 
to all Americans, and especially those Americans who, through no fault 
of their own, today have no health insurance available to them.
  This legislation creates two new savings accounts, a health savings 
account and a health savings security account. The basic idea is that 
people ought to be able to put their own money away, individuals, 
relatives, or otherwise who wish to help them put money away, and in 
particular instances, employers who adopt particular kinds of health 
care plans for their employees assist in putting money away for health 
care needs. These accounts will accumulate tax free and can be expended 
for any health needs.
  Here is the really exciting and important new twist. There is no age 
limit at which you have to make all of the contributions paid out of 
the health savings account. It is literally lifetime assistance. Why is 
that important? Because today, as we pass the new Medicare 
modernization with prescription drug program, we will add tremendous 
new benefits, but there are other costs associated with the bill, both 
in acquiring prescription drugs and in making sure that seniors can pay 
for those additional costs.
  It is not right to say that every additional benefit provided to 
seniors should be paid for by taxpayers. We are already in the midst of 
the greatest intergenerational transfer of wealth in the history of the 
world. But it is also not fair to say to hardworking Americans that 
when they retire they should pay out of their own pockets if we have 
not provided an easily affordable method to accumulate those dollars.
  That is exactly what we have in front of us today: A health savings 
account that has a multiple number of ways in which money can be placed 
in to be paid for health needs not only while you are working but when 
you retire. There is no absolute payout. And if there is money in it 
when the senior passes, then it becomes part of an estate and that 
money, in its transfer, is taxable. There is no possibility of 
gimmicking the system.
  The real concern is that we have told Americans oftentimes that they 
have to pay for particular costs, and yet we do not provide an easy and 
affordable way for them to do so. One of the big concerns we have today 
is chronic or long-term care costs for seniors. Time value of money is 
the best way to address a problem that is going to face most Americans. 
That is exactly what health savings accounts allow you to do. It is 
clearly an affordable health care cost if you have planned for it.
  Unfortunately, too often today's seniors did not plan. There was not 
a program convenient and easy for them to plan. This allows them, in a 
prudent way, to put money away. Oftentimes we may want to help our 
parents, senior children. This is a way, through a health savings 
account, that they can place money available for seniors to be readily 
used for health savings accounts that provide a positive, tax-free 
environment for accumulating those dollars.
  In so many ways, Mr. Speaker, this particular program will blend not 
only with the Medicare changes that we are going to be making but in 
terms of meeting the needs of today's workers as well. It is completely 
portable, it is a fund that accumulates tax free, and it belongs to the 
individual. They can take it with them wherever they may want to work.
  Mr. Speaker, I ask unanimous consent that the control of the balance 
of my time be by the gentleman from Wisconsin (Mr. Ryan).
  The SPEAKER pro tempore. Without objection, the gentleman from 
Wisconsin (Mr. Ryan) will control the balance of the time.
  There was no objection.
  Mr. RYAN of Wisconsin. Mr. Speaker, I reserve the balance of my time.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  The chairman of the Committee on Ways and Means connected this bill 
with senior citizens' inability to plan for their future. Well, I am 
glad he is sending them a signal, because after what they intend to do 
with seniors with the Medicare bill, somebody might have planned for 
their futures.
  I remember in the good old days when Republicans used to say that 
they were going to travel around the country and pull the Tax Code up 
by the roots. That meant they were going to close loopholes, get rid of 
shelters, and to have a system that people did not have to hire 
accountants and lawyers in order to know what their tax liability would 
be. I even volunteered to

[[Page 16329]]

drive around with them on these buses to see just how they intended to 
put back a Code that was more equitable and fair and one could 
understand.
  But while the gentleman from California (Mr. Stark) still thinks that 
some of them are on the level as relates to health, I asked for the 
opportunity to at least open up this debate just so that people who are 
not on the floor would understand that this has nothing to do with 
health. It has a heck of a lot to do with wealth and more to do with 
shelter. They have to find ways to make certain that the deficit gets 
larger and that there is no money in the Treasury to take care of the 
problems that we used to say was a Federal responsibility. How do you 
do it? Just being creative.
  Why, they do not even need a chairman of a Committee on the Budget 
because there are no budget restrictions. Last night, this bill was 
supposed to be going over to the Committee on Rules at a cost of $71 
billion over 10 years. What imagination. What creativity, when just 
overnight they found out that the bill really costs $171 billion. How 
can Republicans be so smart that just overnight, without hearings, 
without checking with Treasury, without talking with OMB they can find 
$100 billion?
  Now, what is the cost of $171 billion? It is simple: It means that 
people who make up to $150,000 and are well do not have to pay taxes on 
storing away $4,000 in a tax shelter. So if you are working for someone 
and you make up to $150,000, you never have to pay taxes on the money, 
whether you are sick or whether or not you retire with the money. This 
is really just a tax-free grant to some of the people who are friendly 
to people on the other side.
  But what about the people that do not have the $4,000? Now, that is 
the problem, because you are not eligible for this unless you do not 
have expenses that will be paid for for $1,000. So if an employer 
really cares for you and wants to have you eligible for this tax 
shelter, the best favor he can do for you is to take away your health 
insurance. And, of course, you make the killing on your savings by not 
paying taxes. And so once he does you this favor, he has to do it for 
the lesser-income people, and lo and behold, we will find that those 
who cannot afford to stash away this money, because they do not have 
disposable income, end up with no insurance and no savings account.
  Oh, one might say this is cruel, but sensitivity never bothered the 
majority party, because at the end of the game they want to know how 
much of the people's money did you leave with them. Or to put it 
another way, how much did you take away from the Federal Government so 
that we cannot provide basic services.
  So the gentleman from California (Mr. Stark) need not worry. This 
savings account has nothing to do with health. It has everything to do 
with shelter.
  Mr. Speaker, I ask unanimous consent that the balance of my time be 
turned over to the gentleman from California (Mr. Stark) and that he be 
given the authority to allocate time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New York?
  There was no objection.
  The SPEAKER pro tempore. The gentleman from California (Mr. Stark) 
reserves the balance of his time.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I just heard the ranking member say this is not a health 
bill, that this is a tax shelter. I beg to differ. Number one, what we 
are talking about here is really novel and revolutionary. We are saying 
that employers and employees can together contribute to their own 
savings account with pre-tax dollars, with tax- deductible dollars to 
purchase health care spending and to have a catastrophic plan.
  The gentleman from New York said, what about the people who do not 
have $4,000 to put in their health security savings account? Well, 
their employer can put $4,000 into their account. The purpose of this 
reform, Mr. Speaker, is to get at some of the big issues that are 
really hurting this country, and that is the cost of health insurance, 
the affordability, and the accessibility of health insurance.
  So what this reform does is it equips the individual in the family 
with the ability to go out into the health care marketplace with tax-
deductible dollars to act like good consumers and buy their health 
insurance. It gives incentives. It actually requires, on health savings 
accounts, that employers provide catastrophic health insurance, or 
individuals who have their own health savings accounts have 
catastrophic health insurance. So it makes sure that people have health 
insurance if they really run into problems. But it allows people to 
manage their health care expenditures themselves.
  You know, it is often said that we spend more time shopping for cars 
or computers than we do for our own health insurance. Well, the reforms 
in this bipartisan Thomas-Lipinski bill give us those incentives to act 
like good consumers so we can watch our health care dollars. Health 
care inflation is out of control. Health care spending is out of 
control. Premium increases facing small businesses and individuals are 
out of control. We need to give consumers the ability to get it under 
control. That is what this legislation does.
  I am also interested in the argument that this is somehow fiscally 
irresponsible. I find that kind of a unique argument, given the fact 
that the gentleman from New York is about to bring a prescription drug 
substitute amendment to the floor that spends $600 billion more than 
the Republican plan does; a trillion dollar bill that spends a trillion 
dollars on his prescription drug bill versus the $400 billion that was 
paid for in the House budget resolution, as is this health savings 
account legislation.
  Mr. Speaker, I reserve the balance of my time so that the other side 
can yield time.
  Mr. STARK. Mr. Speaker, I yield myself 3 minutes.
  Mr. STARK. Mr. Speaker, I will start with an apology to all my 
Republican colleagues. For, oh, at least the 30 years or so I have been 
here, I have been accusing the Republicans of not being inclusive, just 
dealing with the rich and forgetting about the minorities and the 
working people in this country. With this bill they have become broadly 
inclusive. Later on tonight, they are going to take the first step in 
destroying health care for seniors, and then, because they are being so 
inclusive with this bill, they are going to screw everybody. They are 
going to destroy health care for the employees who get their health 
insurance from employers.
  As the distinguished ranking member of our committee pointed out, 
$100 billion was added to this in the middle of the night, and the bill 
will be funded by borrowing, by increasing the national debt and 
worsening deficits. And all it really does, if you cut through all the 
Mickey Mouse that they have talked about, high-deductible insurance, is 
that it creates some new tax-exempt savings accounts. Tax shelters for 
the wealthy and the healthy. And it advances the objective of 
undercutting employer-provided health coverage.
  It is no secret that the distinguished chairman of the Committee on 
Ways and Means has expressed his desire to dismantle the employment-
linked health insurance system, and he has noted that he believes it 
encourages overutilization of health care because individuals are 
shielded from knowing the true cost.

                              {time}  1730

  Now, the argument that the bill will assist the uninsured is not 
true. Most of the uninsured have incomes too low to be eligible for any 
tax benefits contained in H.R. 2596. And as was stated earlier, few, if 
any, have the $4,000 a year in additional savings required to utilize 
the benefits contained. There is nothing in this bill that requires the 
employers to give the employees any money to make up for that gap that 
will be created by the higher deductibles. It merely gives them the 
opportunity, if they have any money, to add to savings accounts.
  Not surprisingly, the same 6 million families who were deliberately 
excluded by the Republicans from the recent tax bill for child tax 
credit are the

[[Page 16330]]

same families that they are excluding from benefiting in this bill. So 
for families with insurance, it provides tax benefits only if the 
insurance requires them to pay the first thousand dollars; and 
employers will be encouraged by this nonsense to increase health 
insurance deductibles, which lowers their costs and lowers the benefits 
for most of their employees' health insurance.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield 2 minutes to the 
gentlewoman from Washington (Ms. Dunn), a member of the Committee on 
Ways and Means.
  Ms. DUNN. Mr. Speaker, I am very happy that we have this bill on the 
floor finally. I think it serves a real need, and it provides total 
flexibility to people who want to provide for the coverage of their 
health care expenses.
  One particular provision that appeals to me is one that we used to 
refer to as a catch-up health savings account contribution. We now call 
it a health savings security account, and these are accounts that are 
designed particularly for people who are age 55 or older. It gives them 
the right to contribute additional dollars every year into their health 
savings accounts because of particular situations they might have faced 
in the past.
  The flexibility of HSAs is widely known. These dollars can be used 
for any health-related expense as long as it is not reimbursed. For 
example, they can be used to pay for long-term care or for health 
coverage policy or doctors' bills or for prescription drugs; but what 
is special about the health savings security accounts is in the way it 
applies to people like me. Many people, particularly women, during 
their child-raising years took time away from the workplace and often 
did not add money into accounts like IRAs, or actually Social Security 
accounts, and ended up with big goose eggs when the time came to 
calculate their benefits.
  In this case, the health savings accounts provide for folks who took 
time off during their child-raising years, or to look after an ill 
parent; and it allows them to add up to 25 percent in additional 
dollars each year to their health savings accounts. This will begin in 
operation as soon as this bill is enacted. An individual age 55 or 
older can contribute $500 a year in addition to the total health 
savings account. That amount will grow to $1,000 in 2009, and I think 
it is a very sensitively written provision to help folks who have been 
away from the workforce or need this additional provision.
  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from 
Michigan (Mr. Levin), a member of the Committee on Ways and Means who 
understands that with this $174 billion that we are wasting in this 
bill, we could help States maintain Medicaid coverage as they weather 
their fiscal crisis.
  Mr. LEVIN. Mr. Speaker, this came out of the wee hours of this 
morning, but I want Members to realize how radical a move this is. We 
are going to have later today a radical effort to dismantle Medicare. 
What this is is a radical effort to dismantle our employer-based system 
in this country. So now we are going to take a step toward a kind of 
voucher for health insurance in the form of a tax credit. That is what 
we are going to do.
  Those who can afford to use the tax credit will have that voucher, 
and they will go out into the marketplace. The consumer, each 
individual one, is going to try to swim as best as they can. But for 
those who do not have the money to put in this account, who have no 
benefit from the tax credit, they are going to continue not to swim as 
an individual consumer, but to sink. That is what is going to happen. 
That is why this is so radical.
  Now, the other side of the aisle said we want to add money into 
Medicare in the prescription drug proposal. They are darn right. We did 
not create this deep deficit. Their answer to a deficit that is deep is 
to dig it deeper. In the middle of the night or early morning, you add 
$100 billion to the deficit; and I want to quickly read what this looks 
like.
  We were supposed to have with the March baseline a deficit of $377 
billion. We added $484 billion through what was called a technical 
reestimate. Then through legislation, we added what was it, 700 to $800 
billion. Now the projected deficit, $1.5 trillion, four times what was 
projected a few months ago, and this does not include the bill that is 
going to be brought up later or additional military expenditures. It 
does not include this $100 billion. I tell the gentleman from Wisconsin 
(Mr. Ryan), this is fiscally irresponsible. You Republicans have zero 
fiscal responsibility in your political veins. Zero. This is radical 
because it is going to dismantle the employer-based system.


                         Parliamentary Inquiry

  Mr. HAYWORTH. Parliamentary inquiry, Mr. Speaker.
  The SPEAKER pro tempore (Mr. Sweeney). Does the gentleman from 
Michigan (Mr. Levin) yield for a parliamentary inquiry?
  Mr. LEVIN. No, Mr. Speaker, I will not yield for a parliamentary 
inquiry.
  Mr. Speaker, as I was saying, you are not only going to dismantle 
Medicare later as a first step, and now try to dismantle the employer-
based health care system in this country; but what you are doing is 
digging a deeper, deeper hole of debt in this country. This is a 
radical proposal on all accounts, and it should be rejected.


                         Parliamentary Inquiry

  Mr. HAYWORTH. Mr. Speaker, parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman will state it.
  Mr. HAYWORTH. Mr. Speaker, is it appropriate for a Member to address 
his comments directly to another Member, or should those comments be 
directed through the Chair addressing the Member?
  The SPEAKER pro tempore. All remarks should be directed through the 
Chair.
  Mr. HAYWORTH. Was it true that the preceding gentleman addressed a 
Member directly?
  The SPEAKER pro tempore. All remarks in debate should be directed to 
the Chair.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, to respond to a couple of comments from the last 
speaker, I would say, number one, we are going to keep hearing this 
rhetoric, that this undermines or destroys employer-sponsored health 
care. Actually, it is far from that. It is the opposite of that. This 
makes it easier for employers to offer health care to their employees. 
What this does is it makes it easier because employers can offer less-
costly catastrophic coverage and give their employees money, pretax 
money in their accounts, to purchase health care. This will lower the 
cost of health insurance and make it cheaper for employers to offer 
health care.
  Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from Arizona 
(Mr. Hayworth), an esteemed member of the Committee on Ways and Means.
  Mr. HAYWORTH. Mr. Speaker, again, as we come to the well this 
evening, we see a very vast difference in our visions of health care 
and visions of America.
  Our friends on the left who later tonight will offer a $1 trillion 
government command-and-control approach to prescription drugs now take 
strong objection, to put it diplomatically, about a plan that, yes, 
initially is expensive. I would grant Members that billions are real 
dollars here, but it substantially supplements and expands the ability 
of people to have health insurance.
  As the gentleman from Wisconsin (Mr. Ryan) mentioned, it gives 
employers more options to provide that type of insurance by embracing 
catastrophic plans and freeing up dollars to go to employees, and as we 
see in the case of health savings security accounts, and this is the 
key, and I would urge my colleagues to understand this, as so many have 
come to the well of this House on both sides of the aisle and lamented 
the numbers of uninsured Americans, not the medically indigent with 
whom we try to deal through Medicaid, but those who are working people 
who do not have insurance, this provides an option to those people to 
embrace insurance. To realize savings, yes, does require a modicum of 
personal responsibility, undoubtedly.
  But, Mr. Speaker, certainly we have not degenerated to the point 
where we

[[Page 16331]]

absolutely forsake a notion of personal responsibility in savings. What 
we do is offer options that will supplement health care; and despite 
the cat calls and poisonous partisan rhetoric, it is worth noting that 
this is bipartisan legislation.
  So again a cautionary note to my friends on the left. If you believe 
you are indicting one party, stop and think; many of your colleagues 
who share both the party label and broad-based philosophy, as my 
friends on the left share in many different areas, join with us in this 
legislation because they understand it opens opportunity for health 
insurance, it opens opportunity for individuals, it opens opportunity 
for employers, and it will lead to more people seeking the insurance we 
all want to see them have. Vote ``yes'' on this legislation.
  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from 
Washington (Mr. McDermott) who realizes that with this $176 billion we 
could insure every one of the 9 million uninsured children in this 
country.
  Mr. McDERMOTT. Mr. Speaker, I think it is important to realize that 
last night a miracle occurred in this body, a bill that left the 
committee costing $73 billion sometime after midnight suddenly became 
$173 billion. An actual miracle in the Committee on Rules.
  The fact is Members have to understand why that happened. All Members 
make $150,000 a year. They were not covered by this bill. It only went 
up to $65,000; but in the Committee on Rules they said, let us put 
ourselves in this bill, so they raised it up to $150,000 so that we 
could take benefit of this. Now that was a thoughtful thing for them to 
be doing, but did they think about the people in your district?
  My employees at Boeing, they get $65,000 a year. It is a pretty good 
paying job, and they get good benefits from their company. What is to 
stop their company tomorrow from saying, We are going to give you a 
$10,000 deductible policy, and we will put $500 into your account, you 
put $3,500 in, and you will have it all for yourself? They can do that. 
They can end a defined benefit package at Boeing tomorrow and give a 
defined contribution. Give employees a voucher, and say they are on 
their own. Do Members want them to strike over that?
  Mr. Speaker, how about the woman making $30,000 teaching school. We 
all know those school teachers are rich people. You end the school 
program, the State governments are in trouble, they could say let us 
stop giving insurance to the teachers, let us just give them a $10,000 
deductible policy, put $500 in their savings account and say to the 
$30,000-a-year teacher, they can come up with $3,500 to put into their 
account.

                              {time}  1745

  I love to hear people who make $150,000 talk about what it is like to 
be in this country making $30,000, which is the average pay. Or the 
people making $18,000. They work every day. They have no insurance. Do 
you think they have $3,500 to put into a savings account?
  This is for rich people. That is why it went up $100 billion 
miraculously between a $65,000 income limit and $150,000. It only cost 
74 for all the people at the bottom, but it cost 100 for us. This is a 
bad bill.
  What it does, also, it says people are going to get out of the pool. 
People who are rich and healthy are going to get out of the pool, and 
they are going to leave the sick and the poor in the pool. And what 
happens to the premiums for the average person? They go up. The idea of 
insurance is to spread the risk, and you are letting the wealthy and 
healthy get out of the pool.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield myself 15 seconds to 
respond just briefly only to say that health care is voluntary by 
businesses. Mr. Speaker, Boeing could drop their health care right now, 
today, to their employees. And, Mr. Speaker, that is what is happening 
today. Millions of businesses are making those kinds of decisions to 
drop health care. We are trying to make it more affordable. We are 
trying to keep it so that businesses can still offer health insurance 
at an affordable price to their employees.
  Mr. Speaker, I yield 2 minutes to the gentleman from California (Mr. 
Royce).
  Mr. ROYCE. Mr. Speaker, I thank the gentleman for yielding me this 
time. This measure will make it easier for employers to offer health 
care to their employees. It is also going to help Americans save for 
their medical expenses, to gain greater access to quality health care. 
I particularly support the provision in this bill that would prevent a 
portion of the unused balances and flexible spending arrangements from 
being forfeited at the end of the year. Right now there is a use-it-or-
lose-it provision that applies to workers. I have been working for 
several years to allow individuals to accumulate unused balances from 
their flexible spending arrangements to save for health care expenses. 
In this Congress I introduced H.R. 176 to allow individuals to 
accumulate $2,000 annually from these FSAs, as we call them.
  Right now we have over 30 million workers in the United States that 
have these FSAs available to them. Employees and employers can set 
aside pretax money which can be used to pay for out-of-pocket health 
care expenses and copayments and deductibles. Under the current system, 
unfortunately, employees forfeit money not used at the end of the year. 
Currently, this encourages wasteful health care spending because 
employees, knowing that they will forfeit unused account balances, 
engage in end-of-the-year spending sprees on services they may not need 
like extra eyeglasses, shades or unnecessary exams. So eliminating the 
use-it-or-lose-it provision solves this problem because then the 
employee will be able to roll over the balance from year to year. That 
is the attempt in this bill on that provision.
  Preventing some forfeiture also increases the savings rate by 
increasing the disposable income of those employees in the program, and 
it also empowers them to make their own health care decisions. I urge 
my colleagues to pass this legislation.
  Mr. STARK. Mr. Speaker, I yield myself 30 seconds. I have a couple of 
letters, one from the AFL-CIO which suggests that this legislation 
would establish an enormous tax shelter for wealthy individuals and at 
the same time undermine employer-based health coverage and shift costs 
onto workers. I have a letter from Families USA which, among other 
things, says that this bill also threatens the employer-provided health 
insurance system particularly among smaller employers who will be able 
to take deductions in the top brackets and who will then no longer be 
interested in providing coverage for their employees.
  Mr. Speaker, I include both letters for the Record.

         American Federation of Labor and Congress of Industrial 
           Organizations,
                                    Washington, DC, June 26, 2003.
       Dear Representative: The AFL-CIO opposes H.R. 2351, the 
     Health Savings Account Availability Act. This legislation 
     would establish an enormous tax shelter for wealthy 
     individuals and at the same time undermine employer-based 
     health coverage and shift more cost onto workers. Despite 
     proponents' claims, this bill would fail to expand coverage 
     to the uninsured and would be especially harmful to those 
     low-income, older and sicker workers who now have 
     comprehensive coverage.
       Under H.R. 2351, employers could offer Health Savings 
     Accounts as long as they are provided in conjunction with 
     high-deductible health insurance policies, defined as at 
     least $500 for an individual policy and $1,000 for a family 
     plan. This will encourage employers to abandon more generous 
     coverage and offer instead less comprehensive policies that 
     shift significant costs onto workers. The Joint Committee on 
     Taxation has estimated that 30 million such accounts would be 
     established by 2013 and the majority of employers would 
     modify their health plans to meet the high-deductible 
     guidelines of the legislation.
       In addition, this shift in coverage would harm most those 
     workers who need health care. Low-income workers who are the 
     intended beneficiaries of these plans' preferred tax 
     treatment are not likely to get back enough in taxes to 
     offset the greater out-of-pocket costs they are likely to 
     incur with these high-deductible plans.
       Furthermore, those workers and other insured individuals 
     who have traditional, more

[[Page 16332]]

     comprehensive coverage will see their premiums rise. Younger, 
     healthier workers will likely choose the less-comprehensive 
     coverage, leaving older and sicker workers and those who earn 
     too little to pay taxes in traditional coverage. As a result, 
     costs for this coverage will rise, leaving workers with no 
     choice but to enroll in the high-deductible coverage this 
     bill seeks to promote.
       This legislation was slipped through the Ways and Means 
     committee last week, and made worst late last night in the 
     Rules Committee. Among the changes made in Rules, the income 
     threshold has been raised to $175,000 for joint filers. The 
     cost of the revised bill is estimated to be $174 over ten 
     years--more than twice the estimated cost of the bill that 
     passed Ways and Means last week--and makes clear that this 
     legislation is first and foremost another tax shelter, not a 
     bill to cover the uninsured.
       H.R. 2351 was raised just last week with little notice and 
     certainly without any hearings, despite the bill's far-
     reaching implications and significant cost. And now the House 
     leadership has called for it to be joined with the Medicare 
     prescription drug legislation before the House. I urge you to 
     vote against H.R. 2351.
           Sincerely,
                                                   William Samuel,
     Director, Department of Legislation.
                                  ____



                                                  Families USA

                                    Washington, DC, June 26, 2003.
     Hon. Charles Rangel,
     Rayburn House Office Building,
     Washington, DC.
       Dear Representative Rangel, On behalf of Families USA, the 
     national advocacy group for health care consumers, I am 
     writing to oppose the Health Savings and Affordability act of 
     2003 (H.R. 2596). Implementation of the Health Savings 
     Accounts (HSAs) and Health Savings Security Accounts (HSSAs) 
     will do little to expand health insurance coverage to the 41 
     million Americans who are uninsured.
       This bill creates two programs loosely modeled after 
     existing Archer Medical Savings Accounts (MSAs). Rather than 
     targeting limited federal funds to provide help for the 
     lowest-income uninsured, this bill creates tax-free accounts, 
     the HSSA's, which can be accessed by families with incomes up 
     to $150,000 before starting to phase-out. The total cost of 
     this bill is over $169 billion over ten years--a huge federal 
     investment that will do little or nothing to cover the low-
     income uninsured. The people who deserved to be helped in any 
     health legislation are being ignored by this legislation. If 
     this huge commitment of resources were applied to an 
     expansion of the Children's Health Insurance Program or to 
     Medicaid, we could cover every uninsured child in America 
     (about 8.5 million) with excellent care and have money left 
     over to help their mothers! To casually, and with so little 
     debate, spend these huge resources on so many higher-income 
     individuals is a travesty of the legislative process.
       This bill also threatens the employer-provided health 
     insurance system, particularly among smaller employers who 
     will be able to take deductions in the top brackets for their 
     personal insurance and who will then no longer be interested 
     in providing coverage for their employees.
       We look forward to working under your leadership to reject 
     this bill, and instead to work for real and meaningful 
     mechanisms to expand coverage to the uninsured in this 
     country. Thank you for your continued commitment to this 
     issue and to reducing the number of uninsured Americans.
           Sincerely,
                                                Ronald E. Pollack,
                                               Executive Director.

  Mr. STARK. Mr. Speaker, I yield 3 minutes to the distinguished 
gentleman from Wisconsin (Mr. Kleczka).
  Mr. KLECZKA. Mr. Speaker, let me thank the gentleman from California 
for yielding me this time.
  Mr. Speaker, I really do not know where to start, to start answering 
some of the critics and the proponents of this legislation. This bill 
started out about a week ago or so in the Committee on Ways and Means, 
which I serve on, and the cost was $14 billion. Then the day the bill 
came up, the cost rose to $72 billion. And then last night the cost 
went to $173 billion. Mr. Speaker, let us pass this bill quickly, 
because I am afraid it is going to continue to grow. But that does not 
make it a good bill.
  What is going on here, my friends, is this is the demise of the 
employer-sponsored health care system in this country. The employers do 
not like it. They want to get out of it. Members of the committee, 
including the chairman, have indicated that their desire is to 
dismantle the employer-based health care system. This bill does it.
  How does it do it? It gives the employer an option. It says, Mr. and 
Mrs. Employee, we are changing your health policy. I am going to give 
you one starting next month that will provide for a $2,000 deduction on 
your health care costs. Start saving, because the Congress passed a 
bill where you can save and then you pay the first $2,000.
  It sounds fine in principle, but here is the problem, my friends. 
Working families in this country have to first of all pay the mortgage 
so they do not lose the home, pay for the car so he can get to work, 
feed the kids and clothe them and send them to school, and then this 
Congress has already told you that the past generation has been 
irresponsible, they did not plan for their future and you better. So 
put money away for your retirement in an IRA and a 401(k). And you say, 
yes, because Social Security probably will not be enough, I will do 
that. Then this Congress said, college education is going up, mom and 
dad, start saving for your kids' education. And so you say, yeah, I 
will put a couple of thousand away a year for Johnny's and Sally's 
education.
  Now we are saying to you, after all this, we have got another one, 
start saving for your health care. Then you say, Mr. Republican 
Congressman, I am out of money. I do not make that much. I do not have 
any more disposable income. And so when your employer changes your 
health plan and you do not put the $2,000 or $4,000 away when you get 
sick, you are out of luck. That is what is going on here. Make no 
mistake about it.
  Mr. STARK. Mr. Speaker, I yield 4 minutes to the distinguished 
gentleman from Texas (Mr. Doggett), a member of the Committee on Ways 
and Means.
  Mr. DOGGETT. Mr. Speaker, once again Republicans insist on a fiscally 
irresponsible bill that will benefit the wealthiest and in this case 
the healthiest at the cost of at least $174 billion added to our 
already soaring national debt.
  Mr. Speaker, despite the bright sunshine outside, it really is a dark 
day for so many Americans who are working hard just to make ends meet. 
This bill is the natural companion to a measure written by the same 
folks that are presenting this bill, which previously denied a child 
tax credit to poor working folks. Tax cuts, no matter what the economic 
conditions, no matter how pressing are the other priorities we have in 
our country, such as protecting our families from terrorism, tax cuts, 
we are always told, can cure any ill in our society, unless of course 
you are poor and working, in which case your kids are not worthy of a 
child tax credit.
  Thanks to the intransigence of the House Republican leadership, there 
are now 6 million working American families, they are folks like 
cafeteria workers and teachers' aides, nursing home employees, those 
working at our hospitals doing the tough work, they will receive no 
check for their children this year like other Americans. Their bid to 
gain a little economic independence, to share in the economic benefits 
of the American Dream, it will come and go on July 4 unfulfilled 
because of the refusal of this House Republican leadership and their 
desire to go on recess not only for July 4 but to continue their recess 
from reality.
  For these same families that were deliberately excluded from the 
recent tax cut as well as for many other working families, House 
Republicans add more insult to injury by encouraging employers to 
terminate or to weaken any group health insurance coverage through 
which some of these employees may be covered. This bill is also the 
natural companion to the next bill that we are about to take up, the 
bill to repeal Medicare as we have known it, since President Lyndon B. 
Johnson signed it into law. We know this is not new. They have opposed 
Medicare since before President Johnson wrote his signature to make it 
a reality. Newt Gingrich wanted it to wither on the vine. Earlier this 
month, Mr. Gingrich declared, much as our colleagues are here today, 
using the very same words that they got from Newt Gingrich, that it was 
an ``obsolete government monopoly.''
  Only yesterday we heard the same language from the sponsor of this 
measure: ``To those who say that the bill would end Medicare as we know 
it, our answer is, `We certainly hope so.'''

[[Page 16333]]

  ``Old-fashioned Medicare isn't very good,'' said Bill Thomas, the 
sponsor of this legislation and the companion measure to repeal 
Medicare tonight.
  Some of us think old-fashioned Medicare has worked pretty well for 
the millions of Americans that it has served since 1965, and we want to 
strengthen it, not see it undermined through into privatization.
  The bill before us this afternoon does something very similar to what 
the later bill proposes to do to Medicare and, that is, to weaken, at 
great cost to our Treasury, our employer-based health care system. By 
totally excluding employees unless they are in plans that deny any 
assistance on at least the first $1,000 or $2,000 in medical bill 
coverage, this bill will encourage even higher deductibles. And it will 
be a struggle for a cafeteria worker to pay their first $1,000 or their 
first $2,000 or more-thousand under these new high-deductible plans.
  The same plans will encourage more small employers to stop providing 
coverage at all and to protect themselves individually through these 
MSAs and to terminate costly health insurance for their other 
employees. It will encourage group health plans to reduce covered 
services, increase copayments.
  In short, through these three bills, we see Republican indifference 
from cradle to grave for children, for workers, for seniors.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield 3 minutes to the 
gentleman from Pennsylvania (Mr. English) to talk about this 
legislation that we are debating, health savings accounts.
  Mr. ENGLISH. Mr. Speaker, I really wish more of the American public 
were watching this debate because they would be able to fully 
appreciate how marginal the left has become to any serious debate about 
the problems facing this country. What we are going to be doing tonight 
is not voting to repeal Medicare, but instead voting to pass this bill, 
which is a bill that would provide more medical security for uninsured 
Americans as well as many low- and middle-income workers.
  This legislation actually creates two new instruments to meet health 
care needs by rewarding Americans who open either type of account with 
tax advantages and maximum flexibility, so as the other side has noted, 
even the healthy can have a greater role in managing their own health 
care. Encouraging individuals to enroll in these new savings vehicles 
has multiple benefits. First, this is a big step to make health 
insurance more affordable and help reduce the growing number of 
Americans without health insurance. The tax-preferred nature of the 
health savings security accounts offers a powerful incentive for 
uninsured workers to take advantage of these accounts. The 
contributions to the accounts are deductible; the investment earnings 
within the accounts tax-free; and the distributions are also tax-free 
when used for health insurance. Many, including the self-employed, 
would find this enormously valuable. This results in significant 
savings on health insurance, an economic benefit that is certain to 
encourage many uninsured Americans to utilize these accounts.
  Second, insured workers with high-deductible plans will also see 
similar incentives. Both savings vehicles give individuals a potent 
incentive to save for health care costs that do not fit within their 
deductible, giving them another option and perhaps some peace of mind 
about unanticipated medical expenses. The medical expenses that qualify 
for tax-free distributions are very far reaching and include expenses 
from preventive care to long-term care. When individuals use their own 
hard-earned dollars for health care, they will ask more questions, 
further inform themselves, and become better consumers of health care 
products. This bill undoubtedly promotes an educated and wise consumer 
of health care services and will result in all-around better health 
care decisions.
  Our current Tax Code puts a punitive burden on working families who 
save their own money for medical and other expenses. The health savings 
accounts ease that burden by providing two simple and flexible savings 
mechanisms for working families.

                              {time}  1800

  This is commonsense legislation that makes health insurance and 
health care more affordable and tax advantaged for Americans. It does 
not destroy our health care system and it does not dismantle Medicare. 
Accordingly, I urge my colleagues to give workers control of their own 
health care and vote for the creation of health savings accounts.
  The SPEAKER pro tempore (Mr. Sweeney). The Chair advises Members that 
the gentleman from California (Mr. Stark) has 9 minutes remaining and 
the gentleman from Wisconsin (Mr. Ryan) has 12\1/4\ minutes remaining.
  Mr. STARK. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from New Jersey (Mr. Pallone), who understands that we could 
cover the parents of low-income children who are eligible for Medicaid 
and CHIP with the same amount of money.
  Mr. PALLONE. Mr. Speaker, I just do not know how many tricks or 
hoaxes the Republican leadership is going to play on us tonight and on 
the American people. It is unbelievable. I listened to the gentleman 
from Pennsylvania. He said there is going to be Medicare reform 
tonight. There is not going to be Medicare reform. It is just going to 
be an effort to kill Medicare and destroy Medicare. And then they say 
they are going to bring up a prescription drug benefit tonight that 
really is not any meaningful benefit that forces one into HMOs, that 
denies them of choices of doctors and hospitals. And now this one, the 
ultimate trick, which I guess we did not really even know about until 
today, that basically tries to undercut employer-based health 
insurance.
  When does it end? When are the Republicans going to end what they are 
trying to do to destroy the health care system?
  Mr. Speaker, although we would like to provide health coverage for 
those who are uninsured, this bill does little or nothing to help the 
low-income uninsured. Individuals eligible for the tax credit under the 
Thomas bill would have to be uninsured or in high deductible plans, but 
according to the bill, starting in 2004, those individuals could set 
aside up to $2,000 tax free into a new health savings account to 
supposedly help pay for health insurance. But the argument that the 
bill will assist the uninsured is simply not true. Most uninsured have 
incomes that are too low to owe Federal income tax liability, let alone 
have $2,000 to set aside for this purpose. In addition, self-employed 
individuals, the other large segment of the uninsured, may already 
deduct 100 percent of the health insurance costs.
  The only consequence of this bill is to undercut the provision of 
employer-sponsored health care coverage by encouraging employers to 
raise deductibles or potentially drop their coverage and raise the cost 
of health care for low income, older and sick workers with higher co-
payments and premiums.
  And, lastly, as many of the speakers on our side have said, this 
legislation will cost the government over $173 billion, another in a 
series of fiscally irresponsible tax cuts passed by the House. The 
entire cost of the bill will be funded by borrowing, increasing the 
national debt.
  Where does this end? We have a national debt 4-, $500 billion. Where 
is it going to end?
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield 2 minutes to the 
gentleman from Nebraska (Mr. Terry).
  Mr. TERRY. Mr. Speaker, when will it end? I am saddened by the 
arguments from the left that fail to recognize that there are more 
people in America that want to have choices. They do not want just the 
offering of a government program one size fits all. Not everyone thinks 
that the government is the answer to everything. So I am proud to 
support bills that allow the market to provide opportunities and 
choices, and that is what tonight is about. I am wondering sitting here 
listening to the debate what some of our Founding Fathers would think 
of today's debate. Think about the people that started this country 
that left

[[Page 16334]]

their countries to set sail on a venture unknown to come to a new land 
for what? Freedom. Trying to escape the government powers that were 
controlling their lives. And now 200 or 300 years later from those 
first people that landed on our shores, our debate is how far 
government is going to control their health and their lives. Not 
everybody wants bureaucrats running their health care. So I am proud to 
stand in favor of the HSAs.
  Mr. Speaker, in today's world us baby boomers, and, yes, I am on the 
tail-end, there are a few others that are nearing their entry into 
Medicare, but we are facing a crisis too. Our parents need help in 
today's world. At the same time that we worry about our parents' health 
and their futures and what our role is as their children will be in 
helping them in their golden years, we are also raising our children, 
trying to save for their college and their future. This is one pro-
family tax item. It allows me, as the child of a father who had a 
stroke last October, to help my parents with their health care costs. 
So this is one great pro-family tax measure, and I urge my colleagues 
to support it.
  Mr. STARK. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Illinois (Mr. Emanuel).
  Mr. EMANUEL. Mr. Speaker, I thank my colleague from California for 
yielding me this time.
  Earlier the speaker before me talked about choice. In the 
prescription drug debate we are having, I have talked about choice and 
I have an amendment, a bipartisan amendment, to offer people choice 
between generic versus name brand drugs that would reduce prices so 
people could pick cheaper drugs. Also part of the provision allows 
individuals, government, private sector, to buy medications anywhere in 
the G-8 countries and have competition so they can get drugs cheaper in 
Germany or France or Canada or Italy. That would drive prices down.
  I too agree with competition. The free market would drive prices 
down. So those of us who embrace the free market wonder why sometimes 
our colleagues on the other side are so scared of the free market. I 
have seen that the benefits of the free market work. I would like to 
see it come to the discussion we have on a prescription drug bill 
because if we bring that competition of the free market to the debate 
about prescription drugs, we will make medications more affordable to 
all Americans of all ages.
  The interesting thing is there are two issues that are driving health 
care inflation at 25, 30 percent for the public. One is the cost of 
prescription drugs. Two is the 42 million uninsured who show up in our 
emergency rooms, driving up hospital costs which insurance companies 
pass on to employers and employers pass on to employees. And if we 
wanted to insure the uninsured, we can do it for a lot less money than 
this. Expand Kid Care. In Illinois we have a program known as Kid Care, 
insurance for the children of working parents, that expands the kid 
care to family care.
  What is most interesting about this debate is that we have a 
prescription drug bill coverage for Members of Congress that is far 
more generous than the one that we are about to provide for our 
elderly. Those are the wrong values. Those are not the values that we 
came here to represent.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield 30 seconds to the 
gentleman from Louisiana (Mr. McCrery), from the committee.
  Mr. McCRERY. Mr. Speaker, the immediate preceding speaker, the 
gentleman from Illinois (Mr. Emanuel), spoke about the free market and 
letting free market forces work with respect to prescription drugs, and 
his solution is either import drugs from other countries and sell them 
here of course at lower prices or let us adopt the prices that are paid 
in those other countries here in our country, and he calls that the 
free market.
  What he failed to point out is those drugs and those prices that he 
would be importing or adopting the prices out here are set by 
government price controls, not the free market.
  Mr. EMANUEL. Mr. Speaker, will the gentleman yield?
  Mr. McCRERY. I yield to the gentleman from Illinois.
  Mr. EMANUEL. Mr. Speaker, the fact is we would have competition. It 
is a Gutknecht-Emanuel bill with a number of the gentleman's colleagues 
on his side and a number of colleagues on my side. The three provisions 
to this bill, A, allow generics to come to market quicker so name brand 
pharmaceutical companies could not be involved in frivolous lawsuits.
  Mr. McCRERY. Mr. Speaker, reclaiming my time, the issue of generics 
is addressed in the underlying bill that we will be debating later 
tonight, but the gentleman spoke about bringing drugs in from other 
countries and selling them at prices that have been imposed by 
governments, not by the free market.
  Mr. STARK. Mr. Speaker, I reserve the balance of my time.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield 2 minutes to the 
gentleman from Texas (Mr. Burgess).
  Mr. BURGESS. Mr. Speaker, I thank the gentleman from Wisconsin for 
yielding me this time.
  H.R. 2596 will increase access to consumer-based health coverage to 
all Americans regardless of income. Under H.R. 2596 the availability of 
health savings accounts will assist those that live without health 
coverage and give Americans more options when it comes to their health. 
Health savings accounts will promote savings and more direct health 
purchasing.
  The character of these accounts will also simplify the doctor-patient 
relationship. As a physician, I know firsthand the difficulty some 
patients have working through their insurance companies and trying to 
figure out what services are covered by their policies. With a health 
savings account, patients can focus their attention on their medical 
care. They can discuss their needs with their doctors frankly and 
honestly, and they can proceed with appropriate medical treatments that 
they need.
  My colleagues on the other side of the aisle are more prepared to 
force people into a one-size-fits-all solution instead of giving 
individuals the choice or the purchasing power to make decisions for 
themselves.
  I myself have had a medical saving account since 1997, that is, until 
I came to Congress, and it was coverage that I made available to 
everyone in my practice as a choice. It was not a requirement. If 
someone wanted the chance to be in charge of their medical decisions 
and a chance to build wealth in one of these accounts for future 
medical expenses, I thought it was only prudent as an employer to 
provide that opportunity.
  Mr. Speaker, we talk about the evils of HMOs, and the Members on the 
other side of the aisle are frequently mentioning the evils of HMOs, 
but this is the anti-HMO. Put the purchasing power back in the hand of 
the patient.
  These plans are centered on the concept of personal choice. These 
accounts make more money available to purchase health coverage. We need 
to be serious about the solutions when addressing the problems of the 
uninsured in this country. An individual will make rational decisions 
when they have the ability to spend their own money on their health 
services.
  I ask my colleagues, I implore my colleagues, not to stand in the 
way. Give Americans the freedom to make this decision.
  Mr. STARK. Mr. Speaker, I yield 2 minutes to the gentleman from 
Washington (Mr. Inslee).
  Mr. INSLEE. Mr. Speaker, in regard to the Medicare bill we will be 
considering this evening, I thought about coming down to the House and 
asserting that this bill was a Trojan horse, but I think it is worse 
than a Trojan horse. I do not think it would be fair to the Trojan 
horse metaphor to call this a Trojan horse. And the reason is, is when 
the Athenians sent the horse to the Trojans, they did not announce in 
advance that the horse was full of soldiers that were going to attack 
the city. They kind of kept that a secret. But the Republicans have not 
kept any secrets about this horse at all because if we look at what the 
gentleman from California (Mr. Thomas) said, ``To

[[Page 16335]]

those who say that the Medicare bill would end Medicare as we know it, 
our answer is we certainly hope so.''
  If the Athenians had announced that the gift, the alleged gift, they 
were sending was going to destroy the city they were attacking, no one 
would have bought that old nag. And it is the same situation here. We 
should not buy this old nag of a bill with the expressed intent of 
destroying Medicare over the next 10 years. And, yes, it is complicated 
on how that is going to happen. And, yes, it is a little bit chaotic in 
explaining it. But the Members can rest assured that America's senior 
citizens are going to figure this out. They are going to figure out 
this is worse than a Trojan horse because they see it coming. We should 
reject this and adopt the Democratic substitute.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield 2 minutes to the 
gentlewoman from Florida (Ms. Harris).
  Ms. HARRIS. Mr. Speaker, today the House of Representatives stands at 
the threshold of passing landmark legislation that protects and 
improves Medicare while providing our seniors with a real prescription 
drug benefit. While the debate remains properly focused upon this moral 
obligation to our seniors, I wish to highlight another exciting 
component of health care reform that we will address today.
  H.R. 2596, the Health Savings and Affordability Act of 2003, 
authorizes the creation of health savings accounts which will enable 
every American to pay their basic medical expenses from tax-free money. 
In almost every purchase of goods and services except health care, 
individuals bargain directly with vendors and providers.

                              {time}  1815

  Assuming an adequately competitive market, suppliers will not charge 
more than buyers are willing and able to pay for very long.
  The structure of our current health care system pushes consumers to 
the sidelines. Big insurance companies negotiate prices with big health 
care conglomerates, producing a distorted market and more expensive 
health care, prescription drugs, and health insurance premiums for the 
uninsured and self-employed.
  H.R. 2596 allows Americans, particularly Medicare-eligible seniors, 
to use health care savings accounts to pay for medical expenses, 
prescription drug costs, retiree health insurance expenses, long-term 
care service, and COBRA coverage. It permits family members and 
employers to make tax-free contributions to these accounts.
  The nature and uncertainty of health care expenses will always 
require critical programs such as Medicare and an efficiently-operating 
insurance industry. That is why the reforms that we will adopt in H.R. 
1 are so vital.
  Nevertheless, through the magic of the free market, H.R. 2596 will 
reduce costs that many Americans pay for the most basic health care 
needs, while forcing our entire health care system to become more 
efficient.
  Mr. STARK. Mr. Speaker, I am delighted to yield the balance of our 
time to the distinguished gentleman from California (Mr. George 
Miller), the ranking member of the Committee on Education and the 
Workforce.
  Mr. GEORGE MILLER of California. Mr. Speaker, I thank the gentleman 
for yielding me this time.
  Mr. Speaker, in the next few hours, the Republicans in the Congress 
will engage in the greatest raid and diminishment on middle-class 
health care benefits in the history of this country. Benefits that have 
been built up over the last 50 or 60 years in this country that have 
enabled middle-class individuals to have some health security, to have 
some access to prescription drugs, to have access to the health care 
that they and their families need, will come under assault. It begins 
with this legislation, medical savings accounts, where millions of 
Americans who now have good health care plans, where they share the 
payment of those plans with their employers, between employers and 
employees, will find out that those plans are going to be substituted 
by high-threshold, high-cost, high-deductible plans, and the theory is 
that they can pay for that out of their medical savings accounts.
  Millions of Americans are going to wake up and find out that the 
health care plans that they have available to them today will not be 
available to them tomorrow.
  Just as with the passage of the Medicare bill, the prescription drug 
bill that we will do later tonight, some 30 percent of the people who 
have prescription drug benefits will wake up and find out that they 
will get a lesser benefit under the Medicare prescription drug benefit 
than they are currently getting today. Millions of senior citizens will 
discover that they have lost their prescription drug benefit as they 
know it, and they will have to accept something much less than that.
  When we come back from the Fourth of July break, we will complete 
this trifecta assault on middle-class health care plans when the 
Committee on Education and the Workforce reports out the Association 
Health Care Plan proposal. Because the CBO, the Congressional Budget 
Office tells us that over 8 million Americans will lose the health care 
they have today, and what will be substituted will be a health care 
plan that is much less comprehensive than they have today. Mr. Speaker, 
8 million Americans, 8 million middle-class Americans. And the answer 
that the Republicans suggest to us is we can all just save and pay for 
that ourselves.
  Well, if we look who is paying into 401(k)s, we know that most 
Americans do not have that disposable income. That is why they have 
employer-based health care systems.
  But starting tonight, that employer-based health care system, that 
system that has done so much to keep people healthy, to keep people out 
of poverty, to keep them from losing their homes, is about to be 
shredded; and the assault is complete and it's comprehensive, and it 
runs from the seniors to new and young families trying to raise 
children. All of these people will find out. If my colleagues do not 
think it is going to happen, just look at the employers who are 
announcing that these cutbacks are going to come who are supporting the 
association health care plans, who are supporting medical savings 
accounts, these health savings accounts tonight, and who are supporting 
prescription drugs. Because they are lining up to get rid of their 
obligations for prescription drugs, for health care for young families, 
health care for older families, all in the name of their cost savings. 
But that will dramatically change the middle class in this country and 
what they have come to know as health care security.
  But for the elderly it is going to be even more dramatic. When we 
look at the prescription drug benefit, it is interesting that the 
largest elderly group in the country, AARP, everything that they say is 
essential to protect senior citizens, and a prescription drug benefit 
is not in this bill. Read their letter. It is not in this bill. They 
wish it was, they hope it will be, but it is not here tonight.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield myself the remaining 
time.
  I would like to begin my closing by saying that the gentleman from 
California is a person who has worked in health care for many, many 
years; and I know that he is sincere in trying to do what he thinks is 
best to give access to people who need health care. I believe everyone 
who came to the floor and into the well who spoke on this bill today 
cares about health care.
  Mr. Speaker, I am relatively new to this body; but one thing I have 
learned is that if you are running out of arguments, the oldest trick 
in the book is to impugn the other person's motives. Tell them that all 
we want to do is help the rich and hurt the poor, that what we are 
trying to do is destroy employer-sponsored health care.
  Well, Mr. Speaker, two of the Nation's leading organizations who 
represent small employers, the people who are really facing these high 
premium hikes, the National Association of Manufacturers, the National 
Federation of Independent Businesses, this is one of their key 
priorities. They endorse this bill.
  What this does, Mr. Speaker, is it makes it easier for employers to 
offer health care to their employees. It helps us continue employer-
sponsored health care.

[[Page 16336]]

  Another thing that we have been hearing, that this is fiscally 
irresponsible and adds to the deficit.
  Mr. Speaker, what is fiscally irresponsible is the substitute 
prescription drug bill that the minority is bringing to the floor which 
costs $600 billion more than the budget resolution allows. The budget 
resolution that passed this House balances the budget within the term 
of the budget resolution, within 10 years. And this is paid for and 
budgeted for in the budget resolution.
  Mr. Speaker, at the end of the day, after we have heard all of these 
arguments, it kind of comes down to two things, two different 
philosophies: socialism versus consumerism. They want socialized 
medicine. They want power to go to Washington where Washington can 
allocate the benefits, where Washington can ration the health care. We 
want power to go to the people. We want power to go to the consumers. 
We want people to have more choices. They want to restrict those 
choices.
  This does not take anything away from anybody, Mr. Speaker. This 
gives people more choices. This says to people, if you are having a 
hard time saving for your health care, we are going to make it easier 
for you to do that. If you are a small business and you cannot afford 
health care for your employees right now, we are giving you a new 
option to do just that.
  We are going to give employers the ability to say, look, you can put 
money in an account that you can deduct it from in your employee's 
name. Your employees contribute to this account. If you do it, you have 
to buy catastrophic health care coverage for them. So we are making 
sure with health care savings accounts that there is health insurance. 
And the beautiful part of this proposal, Mr. Speaker, is that this is 
the employee's money; it is their money that is at stake when they go 
out and buy health care. They are going to act like real consumers. 
They can take this money with them when they leave their job and go to 
another job. They can take this money with them into retirement 
throughout the rest of their life; and when they die, this money can go 
to their spouse. This money becomes the individual's money.
  One of the big problems we have in health care today is we do not act 
like consumers. We have third-party payers paying the bills, and so 
when we go and pay for health care, someone else is paying the bills, 
so we really do not care how much it costs. That is one of the reasons 
why the costs of health care are going up through the roof.
  This puts in place 280 million brains on behalf of bringing down 
health care costs and 280 million sets of eye balls watching this 
industry to make sure that doctors are charging the right kinds of 
prices, that hospitals are not overcharging, and that they are getting 
the best quality for their dollar.
  Mr. Speaker, it is about giving power to consumers versus giving 
power to bureaucrats in Washington. Let us give Americans more freedom, 
let us give consumers more power, and let us help bring down health 
care costs.
  Mr. Speaker, I urge passage of this bill.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, it used to be that the most 
challenging part of my job here was finding meaningful ways of 
improving quality of life for the people in my district. Now it seems 
the most challenging part is trying to figure out how the Republican 
leadership will next try to deny those same people the lives they and 
their families deserve. Today's bill is one of the more creative 
approaches I have seen by the Republicans to advance their goals of 
giving their rich political donors big tax cuts, and denying the poor 
and middle classes healthcare and the services they need.
  This bill serves no one that really needs it, and will actually 
undermine the health insurance benefits received by millions of 
Americans now. It is confusing and complex, and makes a mess of a 
system that needs to be fine-tuned, not destroyed. The majority of 
Americans now receive health insurance through employers. This bill 
will offer a tax break to people who do not have health insurance 
coverage, and those whose coverage has a deductible of over $1,000. It 
sounds good, until you think about it. This bill will serve to 
encourage businesses to cut their health insurance programs, or raise 
deductibles on their employees. Low- to moderate-income employees and 
those who are uninsured pay all kinds of taxes: payroll taxes, sales 
taxes, property taxes. However, they tend to not pay enough income 
taxes to take advantage of this new Republican-give-to-the-rich scheme. 
So the exact people who are not being left out of our healthcare 
system, and who need relief, are being left out of this bill.
  The underlying goal of this bill is to dismantle the employer-based 
health insurance system that the Chairman of the Ways and Means 
Committee hates. He has stated that he does not like employer-based 
health insurance because it shields people from the cost of healthcare 
and thus enables people to use healthcare too much. I don't see that 
Americans have made themselves too healthy. I want to increase access 
to care not decrease it, so I will vote against this bill.
  Not only is this a bad bill, it is an expensive one. It will cost $71 
billion over the next ten years--all money borrowed from our children 
and grandchildren. In the later years of the budget window, this bill 
will cost in excess of $10 billion per year, and will accelerate just 
at the time when the baby boom generation retires, denying resources to 
meet our commitments to the Social Security and Medicare systems.
  Again, it seems this bill was crafted to specifically target and 
destroy the elements of our healthcare system that people know and 
trust: Medicare and Employer-sponsored coverage--and use the savings to 
give to CEOs, the healthy, and the wealthy. It is not surprising to 
find that due to the structure of this bill, the same people whose 
children were denied the benefits of a child tax credit, will also not 
receive any benefits from this bill.
  Of course they will be allowed to help pay the interest on the 
booming debt that it adds to.
  I will oppose this bill and encourage my colleagues to do the same.
  Mr. RYAN of Wisconsin. Mr. Speaker, I yield back the balance of my 
time.
  The SPEAKER pro tempore (Mr. Sweeney). All time for debate has 
expired.
  Pursuant to House Resolution 299, the bill is considered read for 
amendment and the previous question is ordered.
  The question is on the engrossment and third reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.
  The SPEAKER pro tempore. The question is on the passage of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Mr. STARK. Mr. Speaker, I object to the vote on the ground that a 
quorum is not present and make the point of order that a quorum is not 
present.
  The SPEAKER pro tempore. Evidently a quorum is not present.
  The Sergeant at Arms will notify absent Members.
  The vote was taken by electronic device, and there were--yeas 237, 
nays 191, not voting 7, as follows:

                             [Roll No. 328]

                               YEAS--237

     Aderholt
     Akin
     Alexander
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Berkley
     Biggert
     Bilirakis
     Bishop (GA)
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Boyd
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Cardoza
     Carter
     Case
     Chabot
     Chocola
     Coble
     Cole
     Collins
     Cox
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis (TN)
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     DeMint
     Deutsch
     Diaz-Balart, L.
     Diaz-Balart, M.
     Dooley (CA)
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     English
     Everett
     Feeney
     Ferguson
     Flake
     Fletcher
     Foley
     Forbes
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Hall
     Harris
     Hart
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hooley (OR)
     Hostettler
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Janklow
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (IA)
     King (NY)

[[Page 16337]]


     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     Lipinski
     LoBiondo
     Lucas (KY)
     Lucas (OK)
     Manzullo
     McCotter
     McCrery
     McHugh
     McKeon
     Mica
     Miller (FL)
     Miller (MI)
     Miller, Gary
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Neugebauer
     Ney
     Northup
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schrock
     Scott (GA)
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Sullivan
     Sweeney
     Tancredo
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Upton
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)

                               NAYS--191

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berman
     Berry
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Carson (IN)
     Carson (OK)
     Castle
     Clay
     Clyburn
     Conyers
     Cooper
     Costello
     Cramer
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Dicks
     Dingell
     Doggett
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Houghton
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lofgren
     Lowey
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Slaughter
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                             NOT VOTING--7

     Brown-Waite, Ginny
     Gephardt
     McInnis
     Ros-Lehtinen
     Smith (WA)
     Vitter
     Young (FL)


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Sweeney) (during the vote). Members are 
advised that there are 2 minutes remaining in this vote.

                              {time}  1855

  Mr. STRICKLAND and Mr. GUTIERREZ changed their vote from ``yea'' to 
``nay.''
  Mr. BISHOP of Georgia changed his vote from ``nay'' to ``yea.''
  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.

                          ____________________