[House Report 112-516]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-516

======================================================================



 
               RESTORING ACCESS TO MEDICATION ACT OF 2012

                                _______
                                

  June 5, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

            Mr. Camp, from the Committee on Ways and Means, 
                        submitted the following

                              R E P O R T

                             together with

                    DISSENTING AND ADDITIONAL VIEWS

                        [To accompany H.R. 5842]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 5842) to amend the Internal Revenue Code of 1986 to 
repeal the amendments made by the Patient Protection and 
Affordable Care Act which disqualify expenses for over-the-
counter drugs under health savings accounts and health flexible 
spending arrangements, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
  I. Summary and Background...........................................2
 II. Explanation of Provision.........................................3
          A. Repeal of the Disqualification of Expenses for Over-
              the-Counter Medicine Under Health Savings Accounts, 
              Archer MSAs, Health Flexible Spending Arrangements, 
              and Health Reimbursement Arrangements (sec. 2 of 
              the bill and secs. 106, 220, and 223 of the Code)..     3
III. Votes of the Committee...........................................6
 IV. Budget Effects of the Provision..................................7
  V. Other Matters To Be Discussed Under the Rules of the House......13
 VI. Changes in Existing Law Made by the Bill, as Reported...........17
VII. Dissenting Views................................................19
VIII.Additional Views................................................20


    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Restoring Access to Medication Act of 
2012''.

SEC. 2. REPEAL OF DISQUALIFICATION OF EXPENSES FOR OVER-THE-COUNTER 
                    DRUGS UNDER CERTAIN ACCOUNTS AND ARRANGEMENTS.

  (a) HSAs.--Subparagraph (A) of section 223(d)(2) of the Internal 
Revenue Code of 1986 is amended by striking the last sentence.
  (b) Archer MSAs.--Subparagraph (A) of section 220(d)(2) of such Code 
is amended by striking the last sentence.
  (c) Health Flexible Spending Arrangements and Health Reimbursement 
Arrangements.--Section 106 of such Code is amended by striking 
subsection (f).
  (d) Effective Date.--The amendments made by this section shall apply 
to expenses incurred after December 31, 2012.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 5842, as reported by the Committee on Ways 
and Means, repeals the limitations on the use of certain tax-
advantaged accounts and arrangements for the purchase of over-
the-counter medicine.

                 B. Background and Need for Legislation

    Millions of Americans currently use tax-advantaged accounts 
and arrangements to save for ``qualified'' medical expenses, as 
defined by the Internal Revenue Code (``IRC''). Contributions 
to and distributions from these accounts and arrangements are 
generally tax-favored and may be used for unreimbursed medical 
expenses such as deductibles and co-payments. Approximately 33 
million Americans are currently in families with Flexible 
Spending Arrangements (``FSAs''), which are offered by 29 
percent of small businesses and 85 percent of large employers. 
Over 13 million Americans currently hold or maintain a Health 
Savings Account (``HSA'').
    As a result of the Patient Protection and Affordable Care 
Act (Pub. L. No. 111-148), beginning in January 2011, the 
nearly 45 million Americans enrolled in an FSA, HSA, Archer 
Medical Savings Account (``MSA'') or Health Reimbursement 
Arrangement (``HRA'') could no longer purchase over-the-counter 
(``OTC'') medicines, other than insulin, without a doctor's 
prescription with funds from these accounts or arrangements. 
Americans must now purchase non-prescribed OTC medications with 
after-tax dollars, resulting in a tax increase on American 
families.
    The limitation on the use of HSA, FSA, HRA and Archer MSA 
funds for OTC medicine is directly at odds with the goal of 
lowering health care costs and increasing access to primary 
care physicians. A 2010 study by Booz & Co. concluded that 
every dollar spent by consumers on OTC medicines saves $6 to $7 
for the U.S. healthcare system as a whole. According to a 
survey completed for the Consumer Healthcare Products 
Association, 63 percent of physicians believe the limitation on 
OTC purchases will increase the burden on medical 
professionals. In addition, 47 percent of patients surveyed 
said they would seek a doctor's prescription for their OTC 
medications.
    Repealing the OTC medicine limitation will lower health 
care costs for millions of Americans, and relieve burdens 
placed on physicians by the Patient Protection and Affordable 
Care Act.

                         C. Legislative History


Background

    H.R. 5842 was introduced on May 18, 2012, and was referred 
to the Committee on Ways and Means.

Committee action

    The Committee on Ways and Means marked up H.R. 5842 on May 
31, 2012, and ordered the bill, as amended, favorably reported 
(with a quorum being present).

Committee hearings

    The Subcommittee on Oversight of the Committee on Ways and 
Means held a public hearing on April 25, 2012, on the impact of 
limitations on the use of tax-advantaged accounts for the 
purchase of over-the-counter medicine.

                      II. EXPLANATION OF PROVISION


  A. Repeal of the Disqualification of Expenses for Over-the-Counter 
 Medicine Under Health Savings Accounts, Archer MSAs, Health Flexible 
Spending Arrangements, and Health Reimbursement Arrangements (sec. 2 of 
           the bill and secs. 106, 220, and 223 of the Code)


                              PRESENT LAW

Individual deduction for medical expenses

    Expenses for medical care, not compensated for by insurance 
or otherwise, are deductible by an individual under the rules 
relating to itemized deductions to the extent the expenses 
exceed 7.5 percent (generally 10 percent for years after 2012) 
of adjusted gross income (``AGI'').\1\ Medical care generally 
is defined broadly as amounts paid for diagnoses, cure, 
mitigation, treatment or prevention of disease, or for the 
purpose of affecting any structure of the body.\2\
---------------------------------------------------------------------------
    \1\Sec. 213(a). The 7.5 percent of AGI threshold increases to 10 
percent for taxable years beginning after December 31, 2012. However, 
this increase in the percentage does not apply until taxable years 
beginning after December 31, 2016 with respect to any taxpayer if the 
taxpayer or the taxpayer's spouse has attained age 65 before the close 
of the taxable year.
    \2\Sec. 213(d). There are certain limitations on the general 
definition including a rule that cosmetic surgery or similar procedures 
are generally not medical care.
---------------------------------------------------------------------------
    Under an explicit limitation, any amount paid during a 
taxable year for medicine or drugs is deductible as a medical 
expense only if the medicine or drug is a prescribed drug or 
insulin.\3\ The term prescribed drug means a drug or biological 
which requires a prescription of a physician for its use by an 
individual.\4\ Thus, any amount paid for medicine available 
without a prescription (``over-the-counter medicine'') is not 
deductible as a medical expense, including any medicine 
prescribed or recommended by a physician.\5\
---------------------------------------------------------------------------
    \3\Sec. 213(b).
    \4\Sec. 213(d)(3).
    \5\Rev. Rul. 2003-58, 2003-1 CB 959.
---------------------------------------------------------------------------

Exclusion for employer-provided health care

    Employees are not taxed on (that is, may exclude from gross 
income) the value of employer-provided health coverage under an 
accident or health plan.\6\ In addition, any reimbursements 
under an employer-provided accident or health plan for medical 
care expenses for employees, their spouses, their dependents, 
and adult children under age 27 generally are excludible from 
gross income.\7\ An employer may agree to reimburse expenses 
for medical care of its employees (and their spouses and 
dependents), not covered by a health insurance plan, through a 
flexible spending arrangement (``FSA'') which allows 
reimbursement not in excess of a specified dollar amount. The 
amounts available for reimbursement must be exclusively for 
reimbursement for medical care because the exclusion does not 
apply to amounts which the employee would be entitled to 
irrespective of whether he or she incurs expenses for medical 
care.\8\
---------------------------------------------------------------------------
    \6\Sec 106.
    \7\Sec. 105(b).
    \8\Treas. Reg. sec. 1.105-2.
---------------------------------------------------------------------------
    Such dollar amount is either elected by an employee under a 
cafeteria plan (``Health FSA'') or otherwise specified by the 
employer under a health reimbursement arrangement (``HRA''). 
Reimbursements under these arrangements are also excludible 
from gross income as reimbursements for medical care under 
employer-provided health coverage.

Health savings accounts

    An individual with a high deductible health plan (and no 
other health plan other than a plan that provides certain 
permitted insurance or permitted coverage) may establish a 
health savings account (``HSA''). In general, HSAs provide tax-
favored treatment for current medical expenses as well as the 
ability to save on a tax-favored basis for future medical 
expenses. In general, HSAs are tax-exempt trusts or custodial 
accounts created exclusively to pay for the qualified medical 
expenses of the account holder and his or her spouse and 
dependents. Thus, earnings on amounts in HSAs are not taxable.
    Subject to limits,\9\ contributions made to an HSA by an 
employer, including contributions made through a cafeteria plan 
through salary reduction, are excludible from income (and from 
wages for payroll tax purposes). Contributions made by 
individuals are deductible for income tax purposes, regardless 
of whether the individuals itemize. Distributions from an HSA 
that are used for qualified medical expenses are excludible 
from gross income. Distributions from an HSA that are not used 
for qualified medical expenses are includible in gross income 
and are subject to an additional tax of 20 percent. The 20-
percent additional tax does not apply if the distribution is 
made after death, disability, or the individual attains the age 
of Medicare eligibility (i.e., age 65). Similar rules apply for 
another type of medical savings arrangement called an Archer 
medical savings account (``Archer MSA'').\10\
---------------------------------------------------------------------------
    \9\For 2012, the maximum aggregate annual contribution that can be 
made to an HSA is $3,100 in the case of self-only coverage and $6,250 
in the case of family coverage. The annual contribution limits are 
increased by $1,000 for individuals who have attained age 55 by the end 
of the taxable year (referred to as ``catch-up contributions''). 
Contributions, including catch-up contributions, cannot be made once an 
individual is enrolled in Medicare.
    \10\Sec. 220.
---------------------------------------------------------------------------

Medical care for excludible reimbursements

    For purposes of the exclusion for reimbursements under 
employer-provided accident and health plans (including under 
Health FSAs and HRAs), and for distributions from HSAs and 
Archer MSAs used for qualified medical expenses, the definition 
of medical care is generally the same as the definition that 
applies for the itemized deduction for the cost of medical 
care. However, prior to the enactment of the Patient Protection 
and Affordable Care Act (referred to as the ``Affordable Care 
Act''),\11\ the limitation (applicable to the itemized 
deduction) that only prescription medicines or drugs and 
insulin are taken into account did not apply. Thus, for 
example, amounts paid from a Health FSA or HRA, or funds 
distributed from an HSA to reimburse a taxpayer for 
nonprescription drugs, such as nonprescription aspirin, allergy 
medicine, antacids, or pain relievers, were excludible from 
income even though, if the taxpayer paid for such amounts 
directly (without such reimbursement), the expenses could not 
be taken into account in determining the itemized deduction for 
medical expenses.\12\
---------------------------------------------------------------------------
    \11\Pub. L. No 111-148. Various provisions of the Affordable Care 
Act are amended by the Health Care and Education Reconciliation Act of 
2010, Pub. L. No. 111-152.
    \12\Rev. Rul. 2003-102, 2993-2 C.B. 559, now obsolete by Rev. Rul. 
2010-23, 2010-39 I.R.B. 388.
---------------------------------------------------------------------------
    For years beginning after December 31, 2010, the Affordable 
Care Act changed the definition of medical care for purposes of 
the exclusion for reimbursements for medical care under 
employer-provided accident and health plans and for 
distributions from HSAs and Archer MSAs used for qualified 
medical expenses to require that over-the-counter medicine 
(other than insulin) be prescribed by a physician in order for 
the medicine to be medical care for these purposes.\13\ Thus, 
under present law, a Health FSA or an HRA is only permitted to 
reimburse an employee for the cost of over-the-counter medicine 
if the medicine is prescribed by a physician and distributions 
from an HSA or an Archer MSA used to purchase over-the-counter 
medicine is not a qualified medical expense unless the medicine 
is prescribed by a physician.
---------------------------------------------------------------------------
    \13\Sec. 9003 of the Affordable Care Act. Notice 2010-59, 2010-39 
I.R.B. 388, provides guidance on this change to the definition of 
medical care for these purposes.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee observes that the requirement that over-the-
counter medicine requires a prescription in order to be an 
eligible expense for individuals and families covered by an 
FSA, HSA, HRA, or MSA has left these consumers with three 
options: (1) seek an unnecessary appointment with a doctor to 
obtain a prescription, and then submit the purchase for 
reimbursement under an FSA account; (2) purchase the OTC 
medicine out-of-pocket, which significantly increases the 
after-tax cost to the consumer; or (3) forego treatment 
entirely and suffer from the symptoms of the condition. The 
Committee notes that all three options increase costs to the 
consumer and to our healthcare system. The Committee therefore 
believes that the provision of the Affordable Care Act that 
disqualified expenses for over-the-counter medicine (unless 
obtained with a prescription) from being medical expenses under 
Health FSAs, HRAs, HSAs, and Archer HSAs should be repealed.

                        EXPLANATION OF PROVISION

    The provision repeals the change to the definition of 
medical care made by the Affordable Care Act for purposes of 
the exclusion for reimbursements for medical care under 
employer-provided accident and health plans and for 
distributions from HSAs or Archer MSAs used for qualified 
medical expenses that requires that over-the-counter medicine 
(other than insulin) be prescribed by a physician in order for 
the medicine to be medical care for these purposes. Thus, for 
example, amounts paid from a Health FSA or HRA, or funds 
distributed from an HSA or an Archer MSA to reimburse a 
taxpayer for nonprescription drugs, such as nonprescription 
aspirin, allergy medicine, antacids, or pain relievers, are 
excludible from income even though, if the taxpayer paid for 
such amounts directly (without such reimbursement), the 
expenses could not be taken into account in determining the 
itemized deduction for medical expenses.

                             EFFECTIVE DATE

    The provision is effective with respect to expenses 
incurred after December 31, 2012.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the votes of the Committee on Ways and Means in its 
consideration of H.R. 5842.

                    MOTION TO REPORT RECOMMENDATION

    The bill H.R. 5842, as amended, was ordered favorably 
reported by a rollcall vote of 24 yeas to 9 nays (with a quorum 
being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp.......................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Herger.....................        X   ........  .........  Mr. Rangel.......  ........  ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Stark........  ........        X   .........
Mr. Brady......................        X   ........  .........  Mr. McDermott....  ........  ........  .........
Mr. Ryan.......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Becerra......  ........        X   .........
Mr. Davis......................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Boustany...................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Gerlach....................        X   ........  .........  Mr. Kind.........        X   ........  .........
Mr. Price......................        X   ........  .........  Mr. Pascrell.....  ........  ........  .........
Mr. Buchanan...................        X   ........  .........  Ms. Berkley......        X   ........  .........
Mr. Smith......................        X   ........  .........  Mr. Crowley......        X   ........  .........
Mr. Schock.....................        X   ........  .........
Ms. Jenkins....................        X   ........  .........
Mr. Paulsen....................        X   ........  .........
Mr. Marchant...................        X   ........  .........
Mr. Berg.......................        X   ........  .........
Ms. Black......................        X   ........  .........
Mr. Reed.......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                  IV. BUDGET EFFECTS OF THE PROVISION


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the revenue provisions 
of the bill, H.R. 5842 as reported.
    The bill is estimated to have the following effects on 
budget receipts for fiscal years 2013-2022:

                                                                                          FISCAL YEARS
                                                                                      [Millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Item
                                                 -----------------------------------------------------------------------------------------------------------------------------------------------
                                                     2013        2014        2015        2016        2017        2018        2019        2020        2021        2022       2013-17     2013-22
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Repeal the limitation on reimbursement of over-        -223        -305        -332        -361        -390        -419        -448        -479        -511        -544      -1,611      -4,012
 the-counter medications from health FSAs, HRAs,
 HSAs, and Archer MSAs\1\.......................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.
\1\Estimate includes the following off-budget effects:


                                            2013         2014         2015         2016         2017         2018         2019         2020         2021         2022      2013-17      2013-22
                                     -----------------------------------------------------------------------------------------------------------------------------------------------------------
                                             -54          -73          -80          -87          -94         -100         -108         -115         -123         -130         -387         -963


B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee further states that the revenue-reducing tax 
provisions involve increased tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by the CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, June 4, 2012.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5842, the 
Restoring Access to Medication Act of 2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Pamela Green.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 5842--Restoring Access to Medication Act of 2012

    Summary: H.R. 5842 would amend the Internal Revenue Code to 
repeal the provisions that disqualify expenses for over-the-
counter medicine under health savings accounts (HSAs), Archer 
medical savings accounts (Archer MSAs), health flexible 
spending arrangements (FSAs), and health reimbursement 
arrangements (HRAs). The bill would thus allow costs for over-
the-counter medications to be eligible for reimbursement by 
funds in those tax-favored accounts.
    The staff of the Joint Committee on Taxation (JCT) 
estimates that enacting H.R. 5842 would reduce revenues by 
about $4 billion over the 2012-2022 period. Of that reduction, 
about $3 billion would result from changes in on-budget 
revenues, and about $1 billion would result from changes in 
off-budget revenues (from Social Security payroll taxes, which 
are categorized as off-budget). Pay-as-you-go procedures apply 
because enacting the legislation would affect on-budget 
revenues.
    JCT has determined that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 5842 is shown in the following table.


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      By fiscal year, in millions of dollars--
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
                                                      2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       CHANGES IN REVENUES

Estimated Revenues...............................          0       -223       -305       -332       -361       -390       -419       -448       -479       -511       -544     -1,611     -4,012
    On-budget....................................          0       -169       -232       -252       -274       -296       -319       -340       -364       -388       -414     -1,224     -3,049
    Off-budget...................................          0        -54        -73        -80        -87        -94       -100       -108       -115       -123       -130       -387      -963
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding.

    Basis of estimate: H.R. 5842 would allow taxpayers to be 
reimbursed for purchases of over-the-counter drugs from their 
HSAs, Archer MSAs, FSAs and HRAs. Under current law, expenses 
for over-the-counter medications are not eligible for 
reimbursement from these accounts unless the medicine is 
prescribed by a physician. The bill would expand the expenses 
eligible for reimbursement under these health accounts, which 
provide tax-favored treatment for medical expenses. JCT 
estimates that enacting H.R. 5842 would reduce on-budget 
revenues by about $3 billion and off-budget revenues by about 
$1 billion between 2013 and 2022, thereby increasing federal 
budget deficits by about $4 billion over that period.
    Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in revenues that are subject to those 
pay-as-you-go procedures are shown in the following table. Only 
on-budget changes to outlays or revenues are subject to pay-as-
you-go procedures.

            CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS OF H.R. 5842, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON MAY 31, 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         By fiscal year, in millions of dollars--
                                ------------------------------------------------------------------------------------------------------------------------
                                   2012     2013     2014     2015     2016     2017     2018     2019     2020     2021     2022   2012-2017  2012-2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          NET INCREASE IN THE ON-BUDGET DEFICIT

Statutory Pay-As-You-Go Impact.        0      169      232      252      274      296      319      340      364      388      414     1,224      3,049
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: JCT has 
determined that the bill contains no intergovernmental or 
private-sector mandates as defined in UMRA.
    Estimate prepared by: Pamela Greene.
    Estimate approved by: Frank Sammartino, Assistant Director 
for Tax Analysis.

                    D. Macroeconomic Impact Analysis

    In compliance with clause 3(h)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made by the Joint Committee on Taxation with respect to the 
provisions of the bill amending the Internal Revenue Code of 
1986: the effects of the bill on economic activity are so small 
as to be incalculable within the context of a model of the 
aggregate economy.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the potential impact of the limitations 
on the use of certain tax-advantaged accounts and arrangements 
for the purchase of over-the-counter medicine and the 
provisions of H.R. 5842 that the Committee concluded that it is 
appropriate to report the bill, as amended, favorably to the 
House of Representatives with the recommendation that the bill 
do pass.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for any 
measure authorizing funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the reported bill does 
not contain any Federal private sector mandates within the 
meaning of Public Law No. 104-4, the Unfunded Mandates Reform 
Act of 1995. The costs required to comply with each Federal 
private sector mandate generally are no greater than the 
aggregate estimated budget effects of the provision.
    The Committee has determined that the bill does not impose 
a private sector mandate, and has determined that the bill does 
not impose a Federal intergovernmental mandate on State, local, 
or tribal governments.

                D. Applicability of House Rule XXI 5(b)

    Clause 5(b) of rule XXI of the Rules of the House of 
Representatives provides, in part, that ``A bill or joint 
resolution, amendment, or conference report carrying a Federal 
income tax rate increase may not be considered as passed or 
agreed to unless so determined by a vote of not less than 
three-fifths of the Members voting, a quorum being present.'' 
The Committee has carefully reviewed the provisions of the 
bill, and states that the provisions of the bill do not involve 
any Federal income tax rate increases within the meaning of the 
rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
staff of the Joint Committee on Taxation (in consultation with 
the Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses. Pursuant to clause 3(h)(1) of rule XIII of the 
Rules of the House of Representatives, for each such provision 
identified by the staff of the Joint Committee on Taxation, a 
summary description of the provision is provided along with a 
discussion regarding the relevant complexity and administrative 
issues. Below is a summary description of the provision and 
discussion regarding the relevant complexity and administrative 
issues provided by the Internal Revenue Service with which the 
staff of the Joint Committee on Taxation concurs.


  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *


PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME

           *       *       *       *       *       *       *



SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.

  (a) * * *

           *       *       *       *       *       *       *

  [(f) Reimbursements for Medicine Restricted to Prescribed 
Drugs and Insulin.--For purposes of this section and section 
105, reimbursement for expenses incurred for a medicine or a 
drug shall be treated as a reimbursement for medical expenses 
only if such medicine or drug is a prescribed drug (determined 
without regard to whether such drug is available without a 
prescription) or is insulin.]

           *       *       *       *       *       *       *


PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

           *       *       *       *       *       *       *



SEC. 220. ARCHER MSAS.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Archer MSA.--For purposes of this section--
          (1) * * *
          (2) Qualified medical expenses.--
                  (A) In general.--The term ``qualified medical 
                expenses'' means, with respect to an account 
                holder, amounts paid by such holder for medical 
                care (as defined in section 213(d)) for such 
                individual, the spouse of such individual, and 
                any dependent (as defined in section 152, 
                determined without regard to subsections 
                (b)(1), (b)(2), and (d)(1)(B) thereof) of such 
                individual, but only to the extent such amounts 
                are not compensated for by insurance or 
                otherwise. [Such term shall include an amount 
                paid for medicine or a drug only if such 
                medicine or drug is a prescribed drug 
                (determined without regard to whether such drug 
                is available without a prescription) or is 
                insulin.]

           *       *       *       *       *       *       *


SEC. 223. HEALTH SAVINGS ACCOUNTS.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Health Savings Account.--For purposes of this section--
          (1) * * *
          (2) Qualified medical expenses.--
                  (A) In general.--The term ``qualified medical 
                expenses'' means, with respect to an account 
                beneficiary, amounts paid by such beneficiary 
                for medical care (as defined in section 213(d) 
                for such individual, the spouse of such 
                individual, and any dependent (as defined in 
                section 152, determined without regard to 
                subsections (b)(1), (b)(2), and (d)(1)(B) 
                thereof) of such individual, but only to the 
                extent such amounts are not compensated for by 
                insurance or otherwise. [Such term shall 
                include an amount paid for medicine or a drug 
                only if such medicine or drug is a prescribed 
                drug (determined without regard to whether such 
                drug is available without a prescription) or is 
                insulin.]

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

    We voted against this bill because it costs $4 billion in 
lost tax revenues and this revenue loss is not offset. When 
combined with the three other health care measures under 
consideration at the Markup, the total cost for all bills is 
nearly $42 billion--and the Majority has not set forth any 
options to pay for this cost. Not one option was set forth at 
the Markup. It is simply unacceptable in this time of fiscal 
austerity to not pay the cost of these bills. It is 
irresponsible to add nearly $42 billion to the deficit.
    This Markup continues the Majority's attempt to repeal the 
Affordable Care Act (ACA) without offering a replacement. In 
January of 2009, the Majority voted to repeal and replace the 
ACA. If their replacement solution is expanded access to Health 
Flexible Spending Accounts and Health Savings Accounts, then it 
falls far short of the needs of American families. Neither 
Health Flexible Spending Accounts nor Health Savings Accounts 
provide health coverage to participants. They only provide tax 
breaks for certain health costs. They are not real solutions to 
the problems facing our nation with respect to health care and 
insurance coverage.

                                   Sander M. Levin.
                                   Charles B. Rangel.
                                   Fortney Pete Stark.
                                   Jim McDermott.
                                   John Lewis.
                                   Xavier Becerra.
                                   Earl Blumenauer.

                         VIII. ADDITIONAL VIEWS

    The legislation reported by the Committee repeals a 
prohibition on the use of Health Savings Accounts (HSAs), 
Flexible Spending Accounts (FSAs), and Health Reimbursement 
Arrangements (HRAs) for purchasing over-the-counter drugs 
without a prescription. In addition to this statutory barrier, 
we are concerned that the Internal Revenue Service (IRS) is 
imposing additional restrictions on the use of these tax-
advantaged savings accounts through its interpretation of the 
definition of ``medical care'' in Section 213(d) of the Code. 
Specifically, we understand that the IRS is currently 
preventing individuals and families from using HSAs, FSAs, 
HRAs, or the deduction for medical expenses exceeding 7.5% of 
adjusted gross income, for private umbilical cord blood banking 
unless a transplant need is imminently probable at the time of 
banking.
    As medical technology moves increasingly toward 
personalized cellular therapies, families that choose to bank 
their child's umbilical cord blood are making an investment in 
their child's healthcare that, in our view, clearly falls 
within the definition of ``prevention of disease.'' Further, 
the methodology that the IRS is currently using is 
contradictory. Expenses associated with a cord blood stem cell 
transplant are considered ``medical care'' and qualify for use 
with a tax-advantaged healthcare account or the medical expense 
deduction. However, expenses associated with collecting, 
processing and storing cord blood stem cells at the time of 
birth so they can be used for such a future transplant are not. 
Since umbilical cord blood stem cells must be collected, 
processed and stored prior to transplantation, whether such a 
transplant occurs imminently or in the future, we believe the 
current IRS interpretation of the law is conflicting and 
incorrect.
    We urge the IRS to closely review and consider changing its 
classification of private umbilical cord blood banking so that 
individuals and families may use HSAs, FSAs, HRAs or the 
deduction for medical expenses exceeding 7.5% of adjusted gross 
income, for expenses associated with the collection, processing 
and storage of umbilical cord blood stem cells.

                                   Wally Herger.
                                   Ron Kind.

                                  
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