[House Report 115-851]
[From the U.S. Government Publishing Office]


115th Congress }                                          { REPORT
                        HOUSE OF REPRESENTATIVES
  2d Session   }                                          { 115-851

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

THE ``ALLOWING WORKING SENIORS TO KEEP THEIR HEALTH SAVINGS ACCOUNT ACT 
                               OF 2018''

                                _______
                                

 July 19, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                        [To accompany H.R. 6309]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 6309) to amend the Internal Revenue Code of 1986 to 
allow individuals only enrolled in Medicare Part A to 
contribute to health savings accounts, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.




115th Congress }                                          { REPORT
                        HOUSE OF REPRESENTATIVES
  2d Session   }                                          { 115-851

======================================================================
 
 ALLOWING WORKING SENIORS TO KEEP THEIR HEALTH SAVINGS ACCOUNTS ACT OF 
                                  2018

                                _______
                                

 July 19, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Brady of Texas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 6309]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 6309) to amend the Internal Revenue Code of 1986 to 
allow individuals entitled to Medicare Part A by reason of 
being over age 65 to contribute to health savings accounts, 
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............................................3
II. EXPLANATION OF THE BILL...........................................4
        A. Individuals Entitled to Part A of Medicare by Reason 
            of Age Allowed to Contribute to Health Savings 
            Accounts.............................................     4
III.VOTES OF THE COMMITTEE............................................6

IV. BUDGET EFFECTS OF THE BILL........................................7
        A. Committee Estimate of Budgetary Effects...............     7
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures Budget Authority........................     9
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................     9
 V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE........9
        A. Committee Oversight Findings and Recommendations......     9
        B. Statement of General Performance Goals and Objectives.     9
        C. Information Relating to Unfunded Mandates.............     9
        D. Applicability of House Rule XXI 5(b)..................    10
        E. Tax Complexity Analysis...............................    10
        F. Congressional Earmarks, Limited Tax Benefits, and 
            Limited Tariff Benefits..............................    10
        G. Duplication of Federal Programs.......................    10
        H. Disclosure of Directed Rule Makings...................    10
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............11
        B. Changes in Existing Law Proposed by the Bill, as 
            Reported.............................................    11

    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 ``Allowing Working Seniors to Keep Their 
Health Savings Accounts Act of 2018''.

SEC. 2. INDIVIDUALS ENTITLED TO PART A OF MEDICARE BY REASON OF AGE 
                    ALLOWED TO CONTRIBUTE TO HEALTH SAVINGS ACCOUNTS.

  (a) In General.--Section 223(c)(1)(B) of the Internal Revenue Code of 
1986 is amended by striking ``and'' at the end of clause (ii), by 
striking the period at the end of clause (iii) and inserting ``, and'', 
and by adding at the end the following new clause:
                          ``(iv) entitlement to hospital insurance 
                        benefits under part A of title XVIII of the 
                        Social Security Act by reason of section 226(a) 
                        of such Act.''.
  (b) Conforming Amendment.--Section 223(b)(7) of such Code is amended 
by inserting ``(other than an entitlement to benefits described in 
subsection (c)(1)(B)(iv))'' after ``Social Security Act''.
  (c) Effective Date.--The amendments made by this section shall apply 
to months beginning after December 31, 2018, in taxable years ending 
after such date.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill H.R. 6309, as reported by the Committee on Ways 
and Means, expands access to Health Savings accounts (HSAs) for 
working seniors enrolled in Medicare Part A.

                 B. Background and Need for Legislation

    Individuals and families who enroll in a high-deductible 
health plan (HDHP) that meets certain requirements are able to 
make contributions to an HSA. These accounts allow for pre-tax 
contributions, tax-free investment earnings, and tax-free 
distributions for future qualified medical expenses. Anyone 
enrolled in any part of Medicare is prohibited from 
contributing to an HSA, even if their primary source of health 
insurance is an HDHP.
    According to a survey of 52 health insurers conducted by 
America's Health Insurance Plans (AHIP), 21.8 million people 
were covered by a HDHP with an HSA as of January 2017. These 
plans and accounts are an increasingly popular option for 
workers and enrollment growth shows no sign of slowing. A 
survey of employer-sponsored health benefits found that 17 
percent of all employers offered a HDHP with an HSA in 2017 
compared to 2 percent in 2005.
    HSA account holders are diverse. According to WageWorks, 
Inc., the administrator of benefits for more than 7 million 
people, the median household income for an HSA accountholder is 
$57,060. In addition, a JCT analysis found that of the tax 
returns that took an HSA deduction in 2015, 71 percent of the 
returns reported an income of $200,000 or less, and 28 percent 
reported an income of $75,000 or less. Account holders are also 
distributed across age groups, with nearly a third between the 
ages of 25-44 and another third of account holders between the 
ages 45-64.
    Most critically, research has consistently found that such 
coverage, which empowers individuals and families to be more 
engaged health care consumers, is capable of significantly 
reducing health care costs.

                         C. Legislative History


Background

    H.R. 6309 was introduced on July 6, 2018, and was referred 
to the Committee on Ways and Means.

Committee action

    The Committee on Ways and Means marked up H.R. 6309, the 
``Allowing Working Seniors to Keep Their Health Savings Account 
Act of 2018,'' on July 11, 2018, and ordered the bill, as 
amended, favorably reported (with a quorum being present).

Committee hearings

    The policy issues associated with Health Savings Accounts 
(HSAs) and need for legislative response were discussed at the 
following Ways and Means hearings during the 114th and 115th 
Congresses:
           Full Committee Hearing on the Tax Treatment 
        of Health Care (April 14, 2016)
           Subcommittee on Health Member Day Hearing on 
        Tax-Related Proposals to Improve Health Care (May 17, 
        2016)
           Subcommittee on Health Hearing on Rising 
        Health Insurance Premiums Under the Affordable Care Act 
        (July 12, 2016)
           Subcommittee on Health Hearing on Lowering 
        Costs and Expanding Access to Health Care through 
        Consumer-Directed Health Plans (June 6, 2018)

                      II. EXPLANATION OF THE BILL


A. Individuals Entitled to Part A of Medicare by Reason of Age Allowed 
                to Contribute to Health Savings Accounts


                              PRESENT LAW

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'').\1\ Subject to limits, 
contributions to an HSA made by or on behalf of an eligible 
individual are deductible in determining adjusted gross income 
of the individual (that is, an ``above-the-line'' deduction). 
Contributions to an HSA by an employer for an employee 
(including salary reduction contributions made through a 
cafeteria plan) are excludible from income and from wages for 
employment tax purposes.
---------------------------------------------------------------------------
    \1\Sec. 223.
---------------------------------------------------------------------------
    HSA contributions are subject to annual limits that are 
adjusted to reflect annual cost-of-living increases. For 2018, 
the limit on annual contributions that can be made to an HSA is 
$3,450 in the case of self-only coverage and $6,900 in the case 
of family coverage.\2\ 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.
---------------------------------------------------------------------------
    \2\The 2018 limitation for family coverage was revised by the IRS 
to permit taxpayers to disregard the $6,850 limitation under the 
modified inflation adjustment of Pub. L. No. 115-97. Rev. Rul. 2018-27, 
2018-20 I.R.B. 591, May 14, 2018.
---------------------------------------------------------------------------

Individuals eligible for HSAs

    Individuals eligible for HSAs are individuals who are 
covered by a high deductible health plan and no other health 
plan that (1) is not a high deductible health plan and (2) 
provides coverage for any benefit which is covered under the 
high deductible health plan. After an individual has attained 
age 65 and becomes enrolled in Medicare benefits, contributions 
can no longer be made to the individual's HSA.\3\ That is the 
rule whether the individual may still be working and 
participating in an employer-sponsored high deductible health 
plan or whether that person has forgone Parts B, C, and D of 
Medicare and purchased their own high deductible health plan in 
the individual market.
---------------------------------------------------------------------------
    \3\See sec. 223(b)(7), as interpreted by Notice 2004-2, 2004-2 
I.R.B. 269 (December 22, 2003) corrected by Announcement 2004-67, 2004-
36 I.R.B. 459 (September 7, 2004) (``After an individual has attained 
age 65 and becomes enrolled in Medicare benefits, contributions, 
including catch-up contributions, cannot be made to an individual's 
HSA.''). See also Notice 2004-50, 2004-33 I.R.B. 1 (August 9, 2004), 
Q&A-2 (``Thus, an otherwise eligible individual under section 223(c)(1) 
who is not actually enrolled in Medicare Part A or Part B may 
contribute to an HSA until the month that individual is enrolled in 
Medicare.'') and Notice 2008-59, 2008-29 I.R.B. 123 (June 25, 2008), 
Q&A-5 and Q&A-6 (``[A]n individual is not an eligible individual under 
section 223(c)(1) in any month during which such individual is both 
eligible for benefits under Medicare and enrolled to receive benefits 
under Medicare,'' including Part D (or any other Medicare benefit).).
---------------------------------------------------------------------------
    An individual who is receiving retirement benefits from 
Social Security or the Railroad Retirement Board is 
automatically enrolled in both Medicare Part A and Part B 
starting the first day of the month in which he or she turns 
65.\4\
---------------------------------------------------------------------------
    \4\42 U.S.C. 426(a).
---------------------------------------------------------------------------
    When an individual is automatically enrolled in Medicare at 
age 65, the amount that can be deducted by that individual for 
contributions to the HSA drops to zero for the first month (and 
each subsequent month) that the individual is entitled to 
Medicare benefits.\5\
---------------------------------------------------------------------------
    \5\Sec. 223(b)(7).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes connecting consumers to their health 
care dollars through consumer-directed health plans, including 
high deductible health plans, reduces health care costs. The 
Committee further believes that HSAs are an important tool used 
in conjunction with high deductible health plans to permit 
consumers to set aside funds and provide such consumers the 
choice on how to spend those funds to pay for medical care.
    An individual with a high deductible health plan who has 
other coverage, including entitlement to Part A of Medicare by 
reason of his or her age is not allowed to contribute to a 
health savings account. The Committee believes that the rules 
for HSAs should be expanded to permit individuals who 
participate in high deductible health plans but who only become 
entitled to Part A of Medicare by reason of attaining a 
particular age be able to contribute to HSAs so that they may 
continue to set aside funds to pay for their medical care.

                        EXPLANATION OF PROVISION

    Under the provision, with respect to an individual who is 
Medicare eligible but enrolled only in Medicare Part A hospital 
insurance benefits, the allowable deduction for contributions 
to an HSA does not become zero during any month for such 
individual. Such an individual is also considered as not having 
a health plan or other coverage that the high deductible health 
plan also provides that would cause that individual to fail to 
be an eligible individual for purposes of making contributions 
to an HSA. Thus, an individual eligible for Medicare by reason 
of being age 65 or over but enrolled only in Medicare Part A 
would not fail to be treated as eligible to make HSA 
contributions merely by reason of such enrollment in Medicare 
Part A.

                             EFFECTIVE DATE

    The provision applies to months beginning after December 
31, 2018, in taxable years ending after such date.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 6309, the ``Allowing Working Seniors to 
Keep Their Health Savings Account Act of 2018,'' on July 12, 
2018.
    H.R. 6309 was ordered favorably reported to the House of 
Representatives as amended by an amendment in the nature of a 
substitute offered by Chairman Brady by a roll call vote of 23 
yeas to 16 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady..........................       X  ......  .........  Mr. Neal.............  ......       X  .........
Mr. Johnson........................       X  ......  .........  Mr. Levin............  ......       X  .........
Mr. Nunes..........................       X  ......  .........  Mr. Lewis............  ......       X  .........
Mr. Reichert.......................       X  ......  .........  Mr. Doggett..........  ......       X  .........
Mr. Roskam.........................       X  ......  .........  Mr. Thompson.........  ......       X  .........
Mr. Buchanan.......................       X  ......  .........  Mr. Larson...........  ......       X  .........
Mr. Smith (NE).....................       X  ......  .........  Mr. Blumenauer.......  ......       X  .........
Ms. Jenkins........................  ......  ......  .........  Mr. Kind.............  ......       X  .........
Mr. Paulsen........................       X  ......  .........  Mr. Pascrell.........  ......       X  .........
Mr. Marchant.......................       X  ......  .........  Mr. Crowley..........  ......       X  .........
Ms. Black..........................       X  ......  .........  Mr. Davis............  ......       X  .........
Mr. Reed...........................       X  ......  .........  Ms. Sanchez..........  ......       X  .........
Mr. Kelly..........................       X  ......  .........  Mr. Higgins..........  ......       X  .........
Mr. Renacci........................       X  ......  .........  Ms. Sewell...........  ......       X  .........
Ms. Noem...........................       X  ......  .........  Ms. DelBene..........  ......       X  .........
Mr. Holding........................       X  ......  .........  Ms. Chu..............  ......       X  .........
Mr. Smith (MO).....................       X  ......  .........
Mr. Rice...........................       X  ......  .........
Mr. Schweikert.....................       X  ......  .........
Ms. Walorski.......................       X  ......  .........
Mr. Curbelo........................       X  ......  .........
Mr. Bishop.........................       X  ......  .........
Mr. LaHood.........................       X  ......  .........
Mr. Wenstrup.......................       X  ......  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               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 bill, H.R. 6309, as 
reported.
    The bill, as reported, is estimated to have the following 
effect on Federal fiscal year budget receipts for the period 
2019-2028:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Fiscal Years [Millions of Dollars]
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                            Item                                 2019       2020       2021       2022       2023       2024       2025       2026       2027       2028     2019-23    2019-28
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Allow Individuals Entitled to Medicare Part A by Reason of         -112       -263       -372       -461       -527       -584       -643       -750       -855       -934     -1,735     -5,500
 Being Age 65 or Over to Contribute to Health Savings
 Accounts 12................................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.
1Estimate provided by the staff of the Joint Committee on Taxation and the Congressional Budget Office.


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2019       2020       2021       2022       2023       2024       2025       2026       2027       2028     2019-23    2019-28
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2 Estimate includes the following off-budget effects........        -37        -87       -122       -150       -172       -190       -209       -229       -250       -272       -567     -1,717
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Pursuant to clause 8 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 gross 
budgetary effect (before incorporating macroeconomic effects) 
in any fiscal year is less than 0.25 percent of the current 
projected gross domestic product of the United States for that 
fiscal year; therefore, the bill is not ``major legislation'' 
for purposes of requiring that the estimate include the 
budgetary effects of changes in economic output, employment, 
capital stock and other macroeconomic variables.

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 
provision involves no new tax expenditure.

      C. Cost Estimate Prepared by the Congressional Budget Office

    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 bill, H.R. 6138, as 
reported. As of the filing of this report, the Committee had 
not received an estimate prepared by the Congressional Budget 
Office (CBO).

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


          A. Committee Oversight Findings and Recommendations

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated into 
the description portions of this report.

        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 which 
any measure authorizes 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 bill does not contain 
Federal mandates on the private sector. The Committee 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)

    Rule XXI 5(b) 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 bill and states that the bill does 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 
Restructuring and Reform Act of 1998 (``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 of 1986 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, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Internal Revenue 
Code of 1986 and that have ``widespread applicability'' to 
individuals or small businesses, within the meaning of the 
rule.

  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.

                   G. Duplication of Federal Programs

    In compliance with Sec. 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program, (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Pub. L. No. 111-139, or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to section 6104 of 
title 31, United States Code.

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee advises that the bill requires no 
directed rule makings within the meaning of such section.

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


      B. Changes in Existing Law Proposed by the Bill, as Reported

    In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed 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 italics, existing law in 
which no change is proposed is shown in roman):

         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, and 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 VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

           *       *       *       *       *       *       *



SEC. 223. 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 or on behalf of 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 \1/12\ of--
                  (A) in the case of an eligible individual who 
                has self- only coverage under a high deductible 
                health plan as of the first day of such month, 
                $2,250.
                  (B) in the case of an eligible individual who 
                has family coverage under a high deductible 
                health plan as of the first day of such month, 
                $4,500.
          (3) Additional contributions for individuals 55 or 
        older.--
                  (A) In general.--In the case of an individual 
                who has attained age 55 before the close of the 
                taxable year, the applicable limitation under 
                subparagraphs (A) and (B) of paragraph (2) 
                shall be increased 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:


 
------------------------------------------------------------------------
                                     The additional contribution amount
  For taxable years beginning in:                    is:
------------------------------------------------------------------------
2004                                $500
2005                                $600
2006                                $700
2007                                $800
2008                                $900
2009 and thereafter                 $1,000.
------------------------------------------------------------------------

          (4) Coordination with other contributions.--The 
        limitation which would (but for this paragraph) apply 
        under this subsection to an individual for any taxable 
        year shall be reduced (but not below zero) by the sum 
        of--
                  (A) the aggregate amount paid for such 
                taxable year to Archer MSAs of such individual,
                  (B) the aggregate amount contributed to 
                health savings accounts of such individual 
                which is excludable from the taxpayer's gross 
                income for such taxable year under section 
                106(d) (and such amount shall not be allowed as 
                a deduction under subsection (a)), and
                  (C) the aggregate amount contributed to 
                health savings accounts of such individual for 
                such taxable year under section 408(d)(9) (and 
                such amount shall not be allowed as a deduction 
                under subsection (a)).
        Subparagraph (A) shall not apply with respect to any 
        individual to whom paragraph (5) applies.
          (5) Special rule for married individuals.--In the 
        case of individuals who are married to each other, if 
        either spouse has family coverage--
                  (A) both spouses shall be treated as having 
                only such family coverage (and if such spouses 
                each have family coverage under different 
                plans, as having the family coverage with the 
                lowest annual deductible), and
                  (B) the limitation under paragraph (1) (after 
                the application of subparagraph (A) and without 
                regard to any additional contribution amount 
                under paragraph (3))--
                          (i) shall be reduced by the aggregate 
                        amount paid to Archer MSAs of such 
                        spouses for the taxable year, and
                          (ii) after such reduction, shall be 
                        divided equally between them unless 
                        they agree on a different division.
          (6) Denial of deduction to dependents.--No deduction 
        shall be allowed under this section to any individual 
        with respect to whom a deduction under section 151 is 
        allowable to another taxpayer for a taxable year 
        beginning in the calendar year in which such 
        individual's taxable year begins.
          (7) Medicare eligible individuals.--The limitation 
        under this subsection for any month with respect to an 
        individual shall be zero for the first month such 
        individual is entitled to benefits under title XVIII of 
        the Social Security Act (other than an entitlement to 
        benefits described in subsection (c)(1)(B)(iv)) and for 
        each month thereafter.
          (8) Increase in limit for individuals becoming 
        eligible individuals after the beginning of the year.--
                  (A) In general.--For purposes of computing 
                the limitation under paragraph (1) for any 
                taxable year, an individual who is an eligible 
                individual during the last month of such 
                taxable year shall be treated--
                          (i) as having been an eligible 
                        individual during each of the months in 
                        such taxable year, and
                          (ii) as having been enrolled, during 
                        each of the months such individual is 
                        treated as an eligible individual 
                        solely by reason of clause (i), in the 
                        same high deductible health plan in 
                        which the individual was enrolled for 
                        the last month of such taxable year.
                  (B) Failure to maintain high deductible 
                health plan coverage.--
                          (i) In general.--If, at any time 
                        during the testing period, the 
                        individual is not an eligible 
                        individual, then--
                                  (I) gross income of the 
                                individual for the taxable year 
                                in which occurs the first month 
                                in the testing period for which 
                                such individual is not an 
                                eligible individual is 
                                increased by the aggregate 
                                amount of all contributions to 
                                the health savings account of 
                                the individual which could not 
                                have been made but for 
                                subparagraph (A), and
                                  (II) the tax imposed by this 
                                chapter for any taxable year on 
                                the individual shall be 
                                increased by 10 percent of the 
                                amount of such increase.
                          (ii) Exception for disability or 
                        death.--Subclauses (I) and (II) of 
                        clause (i) shall not apply if the 
                        individual ceased to be an eligible 
                        individual by reason of the death of 
                        the individual or the individual 
                        becoming disabled (within the meaning 
                        of section 72(m)(7)).
                          (iii) Testing period.--The term 
                        ``testing period'' means the period 
                        beginning with the last month of the 
                        taxable year referred to in 
                        subparagraph (A) and ending on the last 
                        day of the 12th month following such 
                        month.
  (c) Definitions and special rules.--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.
                  (B) Certain coverage disregarded.--
                Subparagraph (A)(ii) shall be applied without 
                regard to--
                          (i) coverage for any benefit provided 
                        by permitted insurance,
                          (ii) coverage (whether through 
                        insurance or otherwise) for accidents, 
                        disability, dental care, vision care, 
                        or long-term care, [and]
                          (iii) for taxable years beginning 
                        after December 31, 2006, coverage under 
                        a health flexible spending arrangement 
                        during any period immediately following 
                        the end of a plan year of such 
                        arrangement during which unused 
                        benefits or contributions remaining at 
                        the end of such plan year may be paid 
                        or reimbursed to plan participants for 
                        qualified benefit expenses incurred 
                        during such period if--
                                  (I) the balance in such 
                                arrangement at the end of such 
                                plan year is zero, or
                                  (II) the individual is making 
                                a qualified HSA distribution 
                                (as defined in section 106(e)) 
                                in an amount equal to the 
                                remaining balance in such 
                                arrangement as of the end of 
                                such plan year, in accordance 
                                with rules prescribed by the 
                                Secretary[.], and
                          (iv) entitlement to hospital 
                        insurance benefits under part A of 
                        title XVIII of the Social Security Act 
                        by reason of section 226(a) of such 
                        Act.
                  (C) Special rule for individuals eligible for 
                certain veterans benefits.--An individual shall 
                not fail to be treated as an eligible 
                individual for any period merely because the 
                individual receives hospital care or medical 
                services under any law administered by the 
                Secretary of Veterans Affairs for a service-
                connected disability (within the meaning of 
                section 101(16) of title 38, United States 
                Code).
          (2) High deductible health plan.--
                  (A) In general.--The term ``high deductible 
                health plan'' means a health plan--
                          (i) which has an annual deductible 
                        which is not less than--
                                  (I) $1,000 for self-only 
                                coverage, and
                                  (II) twice the dollar amount 
                                in subclause (I) for family 
                                coverage, and
                          (ii) the sum of the annual deductible 
                        and the other annual out-of-pocket 
                        expenses required to be paid under the 
                        plan (other than for premiums) for 
                        covered benefits does not exceed--
                                  (I) $5,000 for self-only 
                                coverage, and
                                  (II) twice the dollar amount 
                                in subclause (I) for family 
                                coverage.
                  (B) 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).
                  (C) 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 (within the meaning of section 
                1861 of the Social Security Act, except as 
                otherwise provided by the Secretary).
                  (D) Special rules for network plans.--In the 
                case of a plan using a network of providers--
                          (i) Annual out-of-pocket 
                        limitation.--Such plan shall not fail 
                        to be treated as a high deductible 
                        health plan by reason of having an out-
                        of-pocket limitation for services 
                        provided outside of such network which 
                        exceeds the applicable limitation under 
                        subparagraph (A)(ii).
                          (ii) Annual deductible.--Such plan's 
                        annual deductible for services provided 
                        outside of such network shall not be 
                        taken into account for purposes of 
                        subsection (b)(2).
          (3) Permitted insurance.--The term ``permitted 
        insurance'' means--
                  (A) insurance if substantially all of the 
                coverage provided under such insurance relates 
                to--
                          (i) liabilities incurred under 
                        workers' compensation laws,
                          (ii) tort liabilities,
                          (iii) liabilities relating to 
                        ownership or use of property, or
                          (iv) such other similar liabilities 
                        as the Secretary may specify by 
                        regulations,
                  (B) insurance for a specified disease or 
                illness, and
                  (C) insurance paying a fixed amount per day 
                (or other period) of hospitalization.
          (4) Family coverage.--The term ``family coverage'' 
        means any coverage other than self-only coverage.
          (5) Archer MSA.--The term ``Archer MSA'' has the 
        meaning given such term in section 220(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 described in subsection (f)(5) or 
                section 220(f)(5), no contribution will be 
                accepted--
                          (i) unless it is in cash, or
                          (ii) to the extent such contribution, 
                        when added to previous contributions to 
                        the trust for the calendar year, 
                        exceeds the sum of--
                                  (I) the dollar amount in 
                                effect under subsection 
                                (b)(2)(B), and
                                  (II) the dollar amount in 
                                effect under subsection 
                                (b)(3)(B).
                  (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.--
                  (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.
                  (B) Health insurance may not be purchased 
                from account.--Subparagraph (A) shall not apply 
                to any payment for insurance.
                  (C) Exceptions.--Subparagraph (B) shall not 
                apply to any expense for coverage under--
                          (i) a health plan during any period 
                        of continuation coverage required under 
                        any Federal law,
                          (ii) a qualified long-term care 
                        insurance contract (as defined in 
                        section 7702B(b)),
                          (iii) a health plan during a period 
                        in which the individual is receiving 
                        unemployment compensation under any 
                        Federal or State law, or
                          (iv) in the case of an account 
                        beneficiary who has attained the age 
                        specified in section 1811 of the Social 
                        Security Act, any health insurance 
                        other than a medicare supplemental 
                        policy (as defined in section 1882 of 
                        the Social Security Act).
          (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).
  (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 received by 
                        the individual on or before the last 
                        day prescribed by law (including 
                        extensions of time) for filing such 
                        individual's return for such taxable 
                        year, and
                          (ii) such distribution is accompanied 
                        by the amount of net income 
                        attributable to such excess 
                        contribution.
                Any net income described in clause (ii) shall 
                be included in the gross income of the 
                individual for the taxable year in which it is 
                received.
                  (B) Excess contribution.--For purposes of 
                subparagraph (A), the term ``excess 
                contribution'' means any contribution (other 
                than a rollover contribution described in 
                paragraph (5) or section 220(f)(5)) which is 
                neither excludable from gross income under 
                section 106(d) nor deductible under this 
                section.
          (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 20 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.--An amount is described in 
        this paragraph as a rollover contribution if it meets 
        the requirements of subparagraphs (A) and (B).
                  (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) Coordination with medical expense deduction.--For 
        purposes of determining the amount of the deduction 
        under section 213, any payment or distribution out of a 
        health savings account for qualified medical expenses 
        shall not be treated as an expense paid for medical 
        care.
          (7) Transfer of account incident to divorce.--The 
        transfer of an individual's interest in a health 
        savings account to an individual's spouse or former 
        spouse under a divorce or separation instrument 
        described in clause (i) of section 121(d)(3)(C) shall 
        not be considered a taxable transfer made by such 
        individual notwithstanding any other provision of this 
        subtitle, and such interest shall, after such transfer, 
        be treated as a health savings account with respect to 
        which such spouse is the account beneficiary.
          (8) Treatment after death of account beneficiary.--
                  (A) Treatment if designated beneficiary is 
                spouse.--If the account beneficiary's surviving 
                spouse acquires such beneficiary's interest in 
                a health savings account by reason of being the 
                designated beneficiary of such account at the 
                death of the account beneficiary, such health 
                savings account shall be treated as if the 
                spouse were the account beneficiary.
                  (B) Other cases.--
                          (i) In general.--If, by reason of the 
                        death of the account beneficiary, any 
                        person acquires the account 
                        beneficiary's interest in a health 
                        savings account in a case to which 
                        subparagraph (A) does not apply--
                                  (I) such account shall cease 
                                to be a health savings account 
                                as of the date of death, and
                                  (II) an amount equal to the 
                                fair market value of the assets 
                                in such account on such date 
                                shall be includible if such 
                                person is not the estate of 
                                such beneficiary, in such 
                                person's gross income for the 
                                taxable year which includes 
                                such date, or if such person is 
                                the estate of such beneficiary, 
                                in such beneficiary's gross 
                                income for the last taxable 
                                year of such beneficiary.
                          (ii) Special rules.--
                                  (I) Reduction of inclusion 
                                for predeath expenses.--The 
                                amount includible in gross 
                                income under clause (i) by any 
                                person (other than the estate) 
                                shall be reduced by the amount 
                                of qualified medical expenses 
                                which were incurred by the 
                                decedent before the date of the 
                                decedent's death and paid by 
                                such person within 1 year after 
                                such date.
                                  (II) Deduction for estate 
                                taxes.--An appropriate 
                                deduction shall be allowed 
                                under section 691(c) to any 
                                person (other than the decedent 
                                or the decedent's spouse) with 
                                respect to amounts included in 
                                gross income under clause (i) 
                                by such person.
  (g) Cost-of-living adjustment.--
          (1) In general.--Each dollar amount in subsections 
        (b)(2) and (c)(2)(A) shall be increased by an amount 
        equal to--
                  (A) such dollar amount, multiplied by
                  (B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in 
                which such taxable year begins determined by 
                substituting for ``calendar year 2016'' in 
                subparagraph (A)(ii) thereof--
                          (i) except as provided in clause 
                        (ii), ``calendar year 1997'', and
                          (ii) in the case of each dollar 
                        amount in subsection (c)(2)(A), 
                        ``calendar year 2003''.
        In the case of adjustments made for any taxable year 
        beginning after 2007, section 1(f)(4) shall be applied 
        for purposes of this paragraph by substituting ``March 
        31'' for ``August 31'', and the Secretary shall publish 
        the adjusted amounts under subsections (b)(2) and 
        (c)(2)(A) for taxable years beginning in any calendar 
        year no later than June 1 of the preceding calendar 
        year.
          (2) Rounding.--If any increase under paragraph (1) is 
        not a multiple of $50, such increase shall be rounded 
        to the nearest multiple of $50.
  (h) Reports.--The Secretary may require--
          (1) 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, the return of excess 
        contributions, and such other matters as the Secretary 
        determines appropriate, and
          (2) any person who provides an individual with a high 
        deductible health plan to make such reports to the 
        Secretary and to the account beneficiary with respect 
        to such plan 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.

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

H.R. 6309 Allowing Working Seniors to Keep Their Health Savings Account

    H.R. 6309 (Paulsen, R-MN) allows individuals enrolled in 
Medicare Part A to continue to contribute to a Health Savings 
Account (HSA) while enrolled in a qualifying High-Deductible 
Health Plan (HDHP) through their employer. Current law 
prohibits Medicare beneficiaries (non-high deductible 
insurance) from having both a secondary payer and an HSA. This 
bill mainly affects people who are drawing their Social 
Security benefits (thus, they are receiving Medicare Part A) 
but are still working.
    Legislation busts the deficit to benefit the wealthy, 
again. Altogether the 11 bills the Committee marked up would 
add another $92 billion in unoffset tax cuts to the deficit. 
Attempts to expand HSAs (and encourage more enrollment in plans 
with high deductibles, covering very few up-front health costs) 
represent a continuation of Republicans' platform of shifting 
families into health plans that provide fewer health benefits 
and higher out-of-pocket costs--while providing greater tax 
benefits for higher-income individuals and corporate-special 
interests. According to 2014 Treasury data, only five percent 
of families with adjusted gross income of under $100,000 held 
money in an HSA, and those users' average account balances were 
$1,700.
    Does nothing to undo Republican attacks on Medicare. 
Republicans have repeatedly attacked Medicare, threatening 
health care for 58 million seniors and individuals with 
disabilities. As a result of the Republican tax bill, the 
Medicare Trust Fund's solvency has been slashed by three years. 
Additionally, the Republican's health care repeal bill would 
have cut three years from Medicare's Trust Fund. It also would 
have allowed insurance companies to charge older Americans five 
times more for their insurance. Contrast this with the 
Democrats' effort to strengthen Medicare; the Affordable Care 
Act added 12 years to the Medicare Trust Fund.
    HDHPs and HSAs do not promote healthy behavior. It is 
widely acknowledged that HSAs and HDHPs lead consumers to delay 
care. They do not encourage individuals to make better health 
care decisions, as Republicans' ``skin in the game'' talking 
points assert. Decades of research show that exposure to high 
out-of-pocket costs leads consumers to delay or forgo both 
necessary and unnecessary care. Delaying care and increasing 
costs run counter to Democratic policy goals of better 
coordinated, high-value affordable care for American families. 
This legislation demonstrates why HDHPs in their current format 
do not allow consumers to see value in their health insurance.
    According to the American Hospital Association, ``Hospitals 
and health systems report that increased enrollment in HDHPs 
over the past several years has reduced access to care and 
subjected patients to costs they cannot afford. In addition, 
patients enrolled in HDHPs appear to delay care until they have 
reached their deductible or are in an emergency situation, 
which could lead to poorer health outcomes.''
    HSAs mostly benefit high-income taxpayers while doing 
little to help moderate-income families or seniors. High-income 
people can best afford to save for health care expenses and are 
therefore the most likely to contribute to HSAs. Higher income 
filers are much more likely to establish HSAs than lower income 
filers--70 percent of HSA contributions come from households 
with incomes over $100,000, according to the Joint Commission 
on Taxation (JCT)--and they are also likelier to max out their 
contributions. Additionally, high-income people receive the 
biggest tax benefit for each dollar contributed to an HSA 
because the value of a tax deduction rises with an individual's 
tax bracket. For seniors with an existing HSA, the funds in 
these accounts can be used tax-free to pay for Medicare-related 
expenses but few seniors benefit from these accounts. The 
average Medicare beneficiary has an income just above $25,000 
and fewer than 68 percent have incomes above $50,000 much less 
$100,000, which is only 5 percent of Medicare beneficaries.
    JCT estimates the cost of this bill to be $5.5 billion over 
10 years. With this bill, Republicans are adding more tax cuts 
and increasing the deficit. Republicans are using the deficit, 
which they keep making larger with cuts for the wealthy, to 
justify the deep cuts they plan to make to Medicare and 
Medicaid. Republicans already are proposing to cut Medicare and 
Medicaid by nearly a trillion dollars to try to pay for the tax 
cuts they've already enacted. This bill will only increase 
Republicans' call for further cuts to these critical programs.
    Mr. Larson (D-CT) offered an amendment to require the 
reduction in solvency of the Medicare Trust Fund resulting from 
enactment of the Republican Tax Cut (Public Law 115-97) be 
reversed before the provisions of the underlying bill could 
take effect. This amendment would only allow this bill to go 
forward if Medicare is protected and the three years cut from 
the Trust Fund by the Republican tax bill are restored. This is 
an important step to protecting seniors. The amendment was 
ruled non-germane. The appeal of the ruling of the chair was 
defeated.

                                           Richard E. Neal,
                                                    Ranking Member

                                  [all]