[House Report 118-387]
[From the U.S. Government Publishing Office]


118th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      118-387

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



 
                     HSA MODERNIZATION ACT OF 2023

                                _______
                                

 February 13, 2024.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Smith of Missouri, from the Committee on Ways and Means, submitted 
                             the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 5687]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 5687) to amend the Internal Revenue Code of 1986 to 
modernize health savings accounts, having considered the same, 
reports favorably thereon with an amendment and recommends that 
the bill as amended do pass.

                                CONTENTS

                                                                     Page
  I. SUMMARY AND BACKGROUND...........................................  4
          A. Purpose and Summary.................................       4
          B. Background and Need for Legislation.................       4
          C. Legislative History.................................       5
          D. Designated Hearing..................................       5
 II. EXPLANATION OF THE BILL..........................................  6
          A. Individuals Without Service-Connected Disability and 
              Eligible for Certain Veterans Benefits Permitted to 
              Contribute to Health Savings Accounts (sec. 2 of 
              the bill and sec. 223 of the Code).................       6
          B. Individuals Entitled to Part A of Medicare by Reason 
              of Age Allowed to Contribute to Health Savings 
              Accounts (sec. 3 of the bill and sec. 223 of the 
              Code)..............................................       8
          C. Individuals Eligible for Indian Health Service 
              Assistance Not Disqualified from Health Savings 
              Accounts (sec. 4 of the bill and sec. 223 of the 
              Code)..............................................       9
          D. Allowance of Bronze and Catastrophic Plans in 
              Connection With Health Savings Accounts (sec. 5 of 
              the bill and sec. 223 of the Code).................      10
          E. Safe Harbor for Absence of Deductible for Mental 
              Health Services (sec. 6 of the bill and sec. 223 of 
              the Code)..........................................      11
          F. Special Rule for Certain Medical Expenses Incurred 
              Before Establishment of Health Savings Account 
              (sec. 7 of the bill and sec. 223 of the Code)......      11
          G. Allow Both Spouses to Make Catch-up Contributions to 
              the Same Health Savings Account (sec. 8 of the bill 
              and sec. 223 of the Code)..........................      12
          H. Maximum Contribution Limit to Health Savings Account 
              Increased to Amount of Deductible and Out-of-pocket 
              Limitation (sec. 9 of the bill and sec. 223 of the 
              Code)..............................................      13
          I. Clarification of Treatment of Distributions From 
              Health Savings Account for Long-term Care Services 
              (sec. 10 of the bill and sec. 223 of the Code).....      14
III.  VOTE OF THE COMMITTEE..........................................  16
 IV.  BUDGET EFFECTS OF THE BILL.....................................  16
          A. Committee Estimate of Budgetary Effects.............      16
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................      16
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................      16
  V.  OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.....  21
          A. Committee Oversight Findings and Recommendations....      21
          B. Statement of General Performance Goals and 
              Objectives.........................................      22
          C. Information Relating to Unfunded Mandates...........      22
          D. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................      22
          E. Duplication of Federal Programs.....................      22
 VI.  CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED..........  22
          A. Text of Existing Law Amended or Repealed by the 
              Bill, as Reported..................................      22
VII. DISSENTING VIEWS................................................  34

    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 ``HSA Modernization Act of 2023''.

SEC. 2. INDIVIDUALS WITHOUT SERVICE-CONNECTED DISABILITY AND ELIGIBLE 
                    FOR CERTAIN VETERANS BENEFITS PERMITTED TO 
                    CONTRIBUTE TO HEALTH SAVINGS ACCOUNTS.

  (a) In General.--Section 223(c)(1)(C) of the Internal Revenue Code of 
1986 is amended by striking ``for a service-connected disability 
(within the meaning of section 101(16) of title 38, United States 
Code)''.
  (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2025.

SEC. 3. 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) Treatment of Health Insurance Purchased From Account.--Section 
223(d)(2)(C)(iv) of such Code is amended by inserting ``and who is not 
an eligible individual'' after ``who has attained the age specified in 
section 1811 of the Social Security Act''.
  (c) Coordination With Penalty on Distributions Not Used for Qualified 
Medical Expenses.--Section 223(f)(4)(C) of such Code is amended by 
striking ``Subparagraph (A)'' and inserting ``Except in the case of an 
eligible individual, subparagraph (A)''
  (d) 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''.
  (e) Effective Date.--The amendments made by this section shall apply 
to months beginning after December 31, 2025, in taxable years ending 
after such date.

SEC. 4. INDIVIDUALS ELIGIBLE FOR INDIAN HEALTH SERVICE ASSISTANCE NOT 
                    DISQUALIFIED FROM HEALTH SAVINGS ACCOUNTS.

  (a) In General.--Section 223(c)(1) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new subparagraph:
                  ``(E) Special rule for individuals eligible for 
                assistance under indian health service programs.--For 
                purposes of subparagraph (A)(ii), an individual shall 
                not be treated as covered under a health plan described 
                in such subparagraph merely because the individual 
                receives hospital care or medical services under a 
                medical care program of the Indian Health Service or of 
                a tribal organization.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2025.

SEC. 5. ALLOWANCE OF BRONZE AND CATASTROPHIC PLANS IN CONNECTION WITH 
                    HEALTH SAVINGS ACCOUNTS.

  (a) In General.--Section 223(c)(2) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new subparagraph:
                  ``(H) Bronze and catastrophic plans treated as high 
                deductible health plans.--The term `high deductible 
                health plan' shall include any plan described in 
                subsection (d)(1)(A) or (e) of section 1302 of the 
                Patient Protection and Affordable Care Act.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to months beginning after December 31, 2025, in taxable years ending 
after such date.

SEC. 6. SAFE HARBOR FOR ABSENCE OF DEDUCTIBLE FOR MENTAL HEALTH 
                    SERVICES.

  (a) In General.--Section 223(c)(2) of the Internal Revenue Code of 
1986, as amended by this Act, is amended by adding at the end the 
following new subparagraph:
                  ``(I) Safe harbor for absence of deductible for 
                mental health services.--A plan shall not fail to be 
                treated as a high deductible health plan by reason of 
                failing to have a deductible for not more than the 
                first $500 of any mental health benefits (as defined in 
                section 9812(e)(4)) specified by the plan for purposes 
                of this subparagraph.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after December 31, 2025.

SEC. 7. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE 
                    ESTABLISHMENT OF HEALTH SAVINGS ACCOUNT.

  (a) In General.--Section 223(d)(2) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new subparagraph:
                  ``(E) Treatment of certain medical expenses incurred 
                before establishment of account.--If a health savings 
                account is established during the 60-day period 
                beginning on the date that coverage of the account 
                beneficiary under a high deductible health plan begins, 
                then, solely for purposes of determining whether an 
                amount paid is used for a qualified medical expense, 
                such account shall be treated as having been 
                established on the date that such coverage begins.''.
  (b) Effective Date.--The amendment made by this section shall apply 
with respect to coverage beginning after December 31, 2025.

SEC. 8. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS TO THE SAME 
                    HEALTH SAVINGS ACCOUNT.

  (a) In General.--Section 223(b)(5) of the Internal Revenue Code of 
1986 is amended to read as follows:
          ``(5) Special rule for married individuals with family 
        coverage.--
                  ``(A) In general.--In the case of individuals who are 
                married to each other, if both spouses are eligible 
                individuals and either spouse has family coverage under 
                a high deductible health plan as of the first day of 
                any month--
                          ``(i) the limitation under paragraph (1) 
                        shall be applied by not taking into account any 
                        other high deductible health plan coverage of 
                        either spouse (and if such spouses both have 
                        family coverage under separate high deductible 
                        health plans, only one such coverage shall be 
                        taken into account),
                          ``(ii) such limitation (after application of 
                        clause (i)) shall be reduced by the aggregate 
                        amount paid to Archer MSAs of such spouses for 
                        the taxable year, and
                          ``(iii) such limitation (after application of 
                        clauses (i) and (ii)) shall be divided equally 
                        between such spouses unless they agree on a 
                        different division.
                  ``(B) Treatment of additional contribution amounts.--
                If both spouses referred to in subparagraph (A) have 
                attained age 55 before the close of the taxable year, 
                the limitation referred to in subparagraph (A)(iii) 
                which is subject to division between the spouses shall 
                include the additional contribution amounts determined 
                under paragraph (3) for both spouses. In any other 
                case, any additional contribution amount determined 
                under paragraph (3) shall not be taken into account 
                under subparagraph (A)(iii) and shall not be subject to 
                division between the spouses.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2025.

SEC. 9. MAXIMUM CONTRIBUTION LIMIT TO HEALTH SAVINGS ACCOUNT INCREASED 
                    TO AMOUNT OF DEDUCTIBLE AND OUT-OF-POCKET 
                    LIMITATION.

  (a) Self-Only Coverage.--Section 223(b)(2)(A) of the Internal Revenue 
Code of 1986 is amended by striking ``$2,250'' and inserting ``the 
amount in effect under subsection (c)(2)(A)(ii)(I)''.
  (b) Family Coverage.--Section 223(b)(2)(B) of such Code is amended by 
striking ``$4,500'' and inserting ``the amount in effect under 
subsection (c)(2)(A)(ii)(II)''.
  (c) Conforming Amendments.--Section 223(g)(1) of such Code is 
amended--
          (1) by striking ``subsections (b)(2) and'' both places it 
        appears and inserting ``subsection'', and
          (2) in subparagraph (B), by striking ``determined by'' and 
        all that follows through ```calendar year 2003'.'' and 
        inserting ``determined by substituting `calendar year 2003' for 
        `calendar year 2016' in subparagraph (A)(ii) thereof.''.
  (d) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2025.

SEC. 10. CLARIFICATION OF TREATMENT OF DISTRIBUTIONS FROM HEALTH 
                    SAVINGS ACCOUNT FOR LONG-TERM CARE SERVICES.

  (a) In General.--Section 223(d)(2)(A) of the Internal Revenue Code of 
1986 is amended by inserting before the last sentence the following: 
``Such term includes amounts paid for qualified long-term care services 
(as defined in section 7702B(c)).''.
  (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid after the date of the enactment of this Act.
  (c) No Inference.--Nothing contained in this section or the amendment 
made thereby shall be construed to create any inference with respect to 
any amounts paid on or before such date.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 5687, the ``HSA Modernization Act of 2023,'' 
as ordered reported by the Committee on Ways and Means on 
September 28, 2023, would expand high deductible health plan 
health savings account eligibility to more populations, 
increase contribution limits, and make technical changes to 
improve these accounts.

                 B. Background and Need for Legislation

    In order for an individual to be eligible to make 
contributions or to receive contributions from an employer to a 
health savings account (HSA), the individual must have a high 
deductible health plan (``HDHP'') and have no disqualifying 
health coverage. An HDHP is a health insurance plan that 
satisfies certain requirements with respect to minimum 
deductibles and maximum out-of-pocket expenses.
    Individuals without a service-connected disability who are 
eligible for health care services through the Department of 
Veterans Affairs (``VA''), individuals who are entitled to 
Medicare Part A but enrolled in an HDHP, and individuals who 
receive care under a medical care program of the Indian Health 
Service (``IHS'') or tribal organization are all ineligible to 
contribute to an HSA under certain circumstances.
    Under current law, some bronze plans on the Health Benefit 
Exchanges\1\ may have maximum out-of-pocket costs that exceed 
limits for HDHPs defined by the Internal Revenue Service 
(``IRS''). In addition, catastrophic plans cannot be HDHPs.
---------------------------------------------------------------------------
    \1\See secs. 1311 and 1321 of Patient Protection and Affordable 
Care Act (the ``PPACA'').
---------------------------------------------------------------------------
    Subject to several specific exceptions, under section 
223(c)(2)(A) of the Internal Revenue Code, a HDHP may not 
provide benefits for any year until the minimum deductible for 
that year is satisfied.
    HSA funds can only be used to pay for qualified medical 
expenses (QMEs) incurred after the HSA is established.
    Under current law, if both spouses are HSA-eligible and age 
55 or older, they must open separate HSA accounts for their 
respective ``catch-up'' contributions (an extra $1,000 
annually).
    The annual HSA contribution limit for an individual is 
generally the sum of the limits determined separately for each 
month (i.e., \1/12\ of the limit for the year, including the 
catch-up limit, if applicable), based on the individual's 
status and health plan coverage as of the first day of the 
month. For 2023, the general limit on annual contributions that 
can be made to an HSA is $3,850 in the case of self-only 
coverage and $7,750 in the case of family coverage.
    Clarification is needed to affirm that HSA funds can be 
used for diagnostic, preventive, therapeutic, curing, treating, 
mitigating, and rehabilitative services, and maintenance or 
personal care services, for an individual that is unable to 
perform at least two of the following activities: eating, 
toileting, transferring, bathing, dressing, or continence as 
certified by a licensed health care practitioner.

                         C. Legislative History


Background

    H.R. 5687 was introduced on September 26, 2023, and was 
referred to the Committee on Ways and Means.

Committee Hearings

    On May 16, 2023, the Committee held a Full Committee 
Hearing on ``Health Care Price Transparency: A Patient's Right 
to Know''.

Committee Action

    The Committee on Ways and Means marked up H.R. 5687, the 
``HSA Modernization Act of 2023,'' on September 28, 2023, and 
ordered the bill, as amended, favorably reported (with a quorum 
being present).

                         D. Designated Hearing

    Pursuant to clause 3(c)(6) of rule XIII, the Committee on 
Ways and Means held a hearing on May 16, 2023, Ways and Means 
Hearing ``Health Care Price Transparency: A Patient's Right to 
Know'' which was used to develop and consider H.R. 5687.

                      II. EXPLANATION OF THE BILL


 A. Individuals Without Service-Connected Disability and Eligible for 
  Certain Veterans Benefits Permitted to Contribute to Health Savings 
         Accounts (Sec. 2 of the Bill and Sec. 223 of the Code)


                              PRESENT LAW

Health savings accounts

    An individual may contribute to an HSA only if the 
individual is covered under a plan that meets the requirements 
for a high deductible health plan, as described below. 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, an HSA is a tax-exempt 
trust or custodial account created exclusively to pay for the 
qualified medical expenses of the account holder and his or her 
spouse and dependents.
    Within limits,\2\ contributions to an HSA made by or on 
behalf of an eligible individual (with the exception of 
contributions by the individual's employer) are deductible by 
the individual. HSA contributions made on behalf of an eligible 
individual by an employer are excludible from income and wages 
for employment tax purposes. Earnings on amounts in HSAs are 
not taxable. Distributions from an HSA for qualified medical 
expenses are not includible in 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 (age 65).
---------------------------------------------------------------------------
    \2\For 2023, the basic limit on annual contributions that can be 
made to an HSA is $3,850 in the case of self-only coverage and $7,750 
in the case of family coverage. Rev. Proc. 2022-24, 2022-20 I.R.B. 
1075, May 16, 2022. The basic 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). Sec. 
223(b)(3).
---------------------------------------------------------------------------

High deductible health plans

    An HDHP is a health plan that has an annual deductible 
which is not less than $1,500 (for 2023) for self-only coverage 
(twice this amount for family coverage), and for which the sum 
of the annual deductible and other annual out-of-pocket 
expenses (other than premiums) for covered benefits does not 
exceed $7,500 (for 2023) for self-only coverage (twice this 
amount for family coverage).\3\ These dollar thresholds are 
adjusted for inflation.\4\
---------------------------------------------------------------------------
    \3\Ibid. Sec. 223(c)(2).
    \4\Sec. 223(g).
---------------------------------------------------------------------------
    An individual who is covered under an HDHP is eligible to 
contribute to an HSA, provided that while such individual is 
covered under the HDHP, the individual is not covered under any 
health plan that (1) is not an HDHP and (2) provides coverage 
for any benefit (subject to certain exceptions) covered under 
the HDHP.\5\
---------------------------------------------------------------------------
    \5\Sec. 223(c)(1).
---------------------------------------------------------------------------
    Various types of coverage are disregarded for this purpose, 
including coverage of any benefit provided by permitted 
insurance, coverage (whether through insurance or otherwise) 
for accidents, disability, dental care, vision care, or long-
term care, as well as certain limited coverage through health 
flexible spending arrangements.\6\ Permitted insurance means 
insurance under which substantially all of the coverage 
provided relates to liabilities incurred under workers' 
compensation laws, tort liabilities, liabilities relating to 
ownership or use of property, or such other similar liabilities 
as specified by the Secretary of the Treasury (the 
``Secretary'') under regulations. Permitted insurance also 
means insurance for a specified disease or illness and 
insurance paying a fixed amount per day (or other period) of 
hospitalization.\7\
---------------------------------------------------------------------------
    \6\Sec. 223(c)(1)(B).
    \7\Sec. 223(c)(3).
---------------------------------------------------------------------------
    Under a safe harbor, an HDHP is permitted to provide 
coverage for preventive care (within the meaning of section 
1861 of the Social Security Act, except as otherwise provided 
by the Secretary) before satisfaction of the minimum 
deductible.\8\ IRS guidance provides a safe harbor for the 
types of coverage that constitute preventive care for this 
purpose.\9\
---------------------------------------------------------------------------
    \8\Sec. 223(c)(2)(C).
    \9\Notice 2004-23, 2004-1 C.B. 725. See also Notice 2004-50, 2004-
33 I.R.B. 196, August 16, 2004, Q&A's-26 and 27; Notice 2008-59, 2008-
29 I.R.B. 123, July 21, 2008; Notice 2013-57, 2013-40 I.R.B. 293, 
September 30, 2013; and Notice 2019-45, 2019-32 I.R.B. 593, August 5, 
2019.
---------------------------------------------------------------------------
    After an individual has attained age 65 and becomes 
enrolled in Medicare benefits, contributions cannot be made to 
the individual's HSA.\10\
---------------------------------------------------------------------------
    \10\See sec. 223(b)(7), as interpreted by Notice 2004-2, 2004-2 
I.R.B. 269, January 12, 2004, corrected by Announcement 2004-67, 2004-
36 I.R.B. 459, September 7, 2004.
---------------------------------------------------------------------------

Health savings accounts and veterans benefits

    Prior to the passage of the Surface Transportation and 
Veterans Health Care Choice Improvement Act of 2015 (``the 
Surface Transportation Act''),\11\ under IRS guidance, an 
individual who was eligible to receive medical services or 
medical benefits through the VA, but who had not actually 
received such services during the previous three months, was an 
eligible individual for purposes of making contributions to an 
HSA.\12\
---------------------------------------------------------------------------
    \11\Pub. L. No. 114-41, July 31, 2015.
    \12\Notice 2004-50, 2004-33 I.R.B. 196, August 16, 2004, Q&A-5.
---------------------------------------------------------------------------
    The Surface Transportation Act amended the Code to provide 
that 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.\13\ In response, the IRS issued 
guidance providing that as a rule of administrative 
simplification, any hospital care or medical services received 
from the VA by a veteran who has a disability rating from the 
VA may be considered to be hospital care or medical services 
under a law administered by the Secretary of Veterans Affairs 
for service-connected disability.\14\
---------------------------------------------------------------------------
    \13\Pub. L. No. 114-41, sec. 4007(b), July 31, 2015 (adding sec. 
223(c)(1)(C)). A service-connected disability is defined by reference 
to section 101(16) of title 38, United States Code.
    \14\Notice 2015-87, 2015-52 I.R.B. 889, December 28, 2015, Q&A-20.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that all veterans should be able to 
contribute to HSAs if they are otherwise eligible, not just 
those that have a service-connected disability, or who have not 
used VA medical benefits in the previous three months.

                        EXPLANATION OF PROVISION

    Under the provision, an individual is not treated as 
covered under a health plan other than an HDHP merely because 
the individual receives hospital care or medical services under 
any law administered by the VA. Thus, an individual who is 
otherwise an eligible individual for purposes of making HSA 
contributions does not become ineligible merely because of 
receiving hospital care or medical services under a VA medical 
care program.

                             EFFECTIVE DATE

    The provision applies to taxable years beginning after 
December 31, 2025.

B. Individuals Entitled to Part A of Medicare by Reason of Age Allowed 
 to Contribute to Health Savings Accounts (Sec. 3 of the Bill and Sec. 
                            223 of the Code)


                              PRESENT LAW

Health savings accounts and entitlement to Medicare

    For a general description of HSA eligibility, see Part A of 
this document.
    After an individual has attained age 65 and becomes 
enrolled in Medicare benefits, contributions can no longer be 
made to the individual's HSA.\15\ An individual who is 
receiving retirement benefits from Social Security or the 
Railroad Retirement Board is automatically enrolled in both 
Medicare Part A (hospital insurance benefits) and Part B 
(supplementary medical insurance benefits) starting the first 
day of the month in which he or she turns age 65.\16\ 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.\17\ In addition, the 20-percent additional 
tax that otherwise applies to distributions not used for 
qualified medical expenses does not apply if the distribution 
is made after the individual attains age 65.
---------------------------------------------------------------------------
    \15\See sec. 223(b)(7), as interpreted by Notice 2004-2, 2004-2 
I.R.B. 269, January 12, 2004, 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. 196, August 16, 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.''); Notice 2008-59, 2008-29 I.R.B. 123, July 21, 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)]'').
    \16\42 U.S.C. 426(a). Medicare Part B, however, is a voluntary 
program, and enrollees must pay premiums. See sec. 1839 of the Social 
Security Act, 42 U.S.C. 1395r.
    \17\Sec. 223(b)(7).
---------------------------------------------------------------------------

Qualified medical expenses

    Generally, for purposes of distributions from HSAs, 
qualified medical expenses\18\ mean amounts paid for medical 
care\19\ or menstrual care products. Medical care generally 
means amounts paid for the diagnosis, cure, mitigation, 
treatment and prevention of disease, or for the purpose of 
affecting any structure or function of the body, as well as 
transportation primarily for and essential to medical care. 
Health insurance premiums are generally not qualified medical 
expenses,\20\ but an individual who attains the age of Medicare 
eligibility (age 65) may use an HSA to pay for health insurance 
other than a Medicare supplemental policy.\21\
---------------------------------------------------------------------------
    \18\Sec. 223(d)(2).
    \19\Based on the definition under sec. 213(d).
    \20\Sec. 223(d)(2)(B).
    \21\As defined in section 1882 of the Social Security Act, 42 
U.S.C. 1395ss. Sec. 223(d)(2)(C)(iv).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    As Americans increasingly work later into their lives, the 
Committee believes that a working individual should not be 
precluded from contributing to an HSA merely because the 
individual has reached the age of Medicare eligibility.

                        EXPLANATION OF PROVISION

    Under the provision, with respect to an individual who is 
Medicare eligible but enrolled only in Medicare Part A, 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 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 but enrolled 
only in Medicare Part A would not fail to be treated as 
eligible to make HSA contributions merely by reason of 
enrollment in Medicare Part A.
    In addition, the provision provides that individuals who 
have attained age 65 and who are eligible to contribute to an 
HSA generally may not use HSA funds to pay for health 
insurance, unlike other individuals who have attained age 65, 
and that the 20-percent additional tax on HSA distributions 
that otherwise does not apply to individuals who have attained 
age 65 continues to apply if the individual is an eligible 
individual.

                             EFFECTIVE DATE

    The provision applies to months beginning after December 
31, 2025, in taxable years ending after such date.

   C. Individuals Eligible for Indian Health Service Assistance Not 
Disqualified From Health Savings Accounts (Sec. 4 of the Bill and Sec. 
                            223 of the Code)


                              PRESENT LAW

    For a general description of what constitutes permitted 
insurance or permitted coverage related to eligibility to make 
HSA contributions, see Part A of this document.
    Under IRS guidance, an individual who is eligible to 
receive medical services at an IHS facility, but who has not 
actually received such services during the previous three 
months, is an eligible individual for purposes of making 
contributions to an HSA.\22\ However, an individual generally 
is not an eligible individual if the individual has received 
medical services at an IHS facility at any time during the 
previous three months.
---------------------------------------------------------------------------
    \22\Notice 2012-14, 2012-8 I.R.B. 411, February 21, 2012.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes Native Americans should be able to 
contribute to HSAs if otherwise eligible, not just individuals 
that have not received IHS or similar tribal medical benefits 
within the past three months.

                        EXPLANATION OF PROVISION

    Under the provision, an individual is not treated as 
covered under a health plan other than an HDHP merely because 
the individual receives hospital care or medical services under 
a medical care program of the IHS or of a tribal organization. 
Thus, an individual who is otherwise an eligible individual for 
purposes of making HSA contributions does not become ineligible 
merely because of receiving hospital care or medical services 
under a medical care program of the IHS or of a tribal 
organization.

                             EFFECTIVE DATE

    The provision applies to taxable years beginning after 
December 31, 2025.

D. Allowance of Bronze and Catastrophic Plans in Connection With Health 
     Savings Accounts (sec. 5 of the Bill and sec. 223 of the Code)


                              PRESENT LAW

    For a general description of HDHPs, see Part A of this 
document.
    Plans in the Health Benefit Exchanges\23\ are defined by 
reference to various metal categories which correspond to the 
percentage of costs an enrollee is expected to incur, including 
bronze, silver, gold, and platinum plans.\24\ A bronze plan 
provides coverage that is designed to provide benefits that are 
actuarially equivalent to 60 percent of the full actuarial 
value of the benefits provided under the plan.\25\ This 
percentage increases to 70 percent in a silver plan, 80 percent 
in a gold plan, and 90 percent in a platinum plan.
---------------------------------------------------------------------------
    \23\See secs. 1311 and 1321 of Patient Protection and Affordable 
Care Act (the ``PPACA'').
    \24\See sec. 1302 of the PPACA.
    \25\Sec. 1302(d) of the PPACA.
---------------------------------------------------------------------------
    Catastrophic plans\26\ do not fall into any of these 
categories and have low monthly premiums and higher 
deductibles. Catastrophic plans are available only to 
individuals under 30 or individuals of any age with a hardship 
exemption. Under present law, catastrophic plans cannot be 
qualified as HDHPs.
---------------------------------------------------------------------------
    \26\See sec. 1302(e) of the PPACA.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that, consistent with the intent of 
HDHPs, individuals enrolled in qualified health coverage with 
deductibles above the HDHP threshold should be eligible to 
contribute to HSAs and have identified bronze and catastrophic 
plans as meeting this requirement.

                        EXPLANATION OF PROVISION

    Under the provision, any bronze or catastrophic plan\27\ is 
treated as an HDHP.
---------------------------------------------------------------------------
    \27\See sec. 1302(d)(1)(A) and (e) of the PPACA.
---------------------------------------------------------------------------

                             EFFECTIVE DATE

    The provision is applicable to months beginning after 
December 31, 2025, in taxable years ending after such date.

  E. Safe Harbor for Absence of Deductible for Mental Health Services 
             (sec. 6 of the Bill and sec. 223 of the Code)


                              PRESENT LAW

    For a general description of HDHPs, see Part A of this 
document.

                           REASONS FOR CHANGE

    The Committee believes that subject to a dollar limit, 
permitting individuals with HSAs to access mental health 
services at reduced rates before reaching their annual 
deductible would increase access to these important services.

                        EXPLANATION OF PROVISION

    The provision provides that an HDHP is permitted to provide 
coverage for up to $500 of any mental health benefits\28\ 
specified by the plan before satisfaction of the plan's annual 
deductible.
---------------------------------------------------------------------------
    \28\As defined in sec. 9812(c)(4).
---------------------------------------------------------------------------

                             EFFECTIVE DATE

    The provision applies to plan years beginning after 
December 31, 2025.

     F. Special Rule for Certain Medical Expenses Incurred Before 
 Establishment of Health Savings Account (sec. 7 of the Bill and sec. 
                            223 of the Code)


                              PRESENT LAW

Health savings accounts and high deductible health plans

    For a general description of HSAs and HDHPs, see Part A of 
this document.
    In order for a distribution from an HSA to be excludable as 
a payment for a qualified medical expense, the medical expense 
must be incurred on or after the date that the HSA is 
established.\29\ Thus, a distribution from an HSA is not 
excludable as a payment for a qualified medical expense if the 
medical expense is incurred after a taxpayer enrolls in an HDHP 
but before the taxpayer establishes an HSA.
---------------------------------------------------------------------------
    \29\Notice 2004-2, 2004-1 C.B. 269, Q&A-26.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes connecting consumers to their health 
care dollars through consumer-directed health plans, including 
HDHPs, reduces health care costs. The Committee further 
believes that HSAs are an important tool used in conjunction 
with HDHPs to permit consumers to set aside funds and provide 
such consumers the choice on how to spend those funds to pay 
for medical care.
    The Committee believes that allowing an HSA to be treated 
as established on the date coverage under an HDHP begins will 
avoid confusion and delays in care for individuals setting up 
their HSAs while expanding access to and enhancing the utility 
of HSAs.

                        EXPLANATION OF PROVISION

    Under the provision, if an HSA is established during the 
60-day period beginning on the date that an individual's 
coverage under an HDHP begins, then, solely for purposes of 
determining whether an amount paid is used for a qualified 
medical expense, the HSA is treated as having been established 
on the date that coverage under the HDHP begins. Thus, if a 
taxpayer establishes an HSA within 60 days of the date that the 
taxpayer's coverage under an HDHP begins, any distribution from 
an HSA used as a payment for a qualified medical expense 
incurred during that 60-day period after the HDHP coverage 
began is excludable from gross income as a payment for a 
qualified medical expense even though the expense was incurred 
before the date that the HSA was established.

                             EFFECTIVE DATE

    The provision is effective with respect to coverage 
beginning after December 31, 2025.

G. Allow Both Spouses To Make Catch-Up Contributions to the Same Health 
     Savings Account (Sec. 8 of the Bill and Sec. 223 of the Code)


                              PRESENT LAW

Health savings accounts

    For a general description of HSAs, see Part A of this 
document.
    Within limits, contributions to an HSA made by or on behalf 
of an eligible individual (with the exception of contributions 
by the individual's employer) are deductible by the individual. 
For 2023, the basic limit on annual contributions that can be 
made to an HSA is $3,850 in the case of self-only coverage and 
$7,750 in the case of family coverage.\30\ The basic annual 
contributions 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).\31\ If eligible 
individuals are married to each other and either spouse has 
family coverage, both spouses are treated as having only family 
coverage, so that the coverage limit for family coverage 
applies. The contribution limit, after being reduced by the 
aggregate amount paid to the Archer Medical Savings Accounts 
(``Archer MSAs'') of the spouses, but without regard to any 
catch-up contribution amounts, is divided equally between the 
spouses unless they agree to a different division.\32\
---------------------------------------------------------------------------
    \30\Rev. Proc. 2022-24, 2022-20 I.R.B. 1075, May 16, 2022.
    \31\Sec. 223(b)(3).
    \32\Sec. 223(b)(5).
---------------------------------------------------------------------------
    If both spouses of a married couple are eligible 
individuals, each may contribute to an HSA, but they cannot 
have a joint HSA.\33\ Under the rule described above, however, 
the spouses may divide their basic contribution limit for the 
year by allocating the entire amount to one spouse to be 
contributed to that spouse's HSA.\34\ However, this allocation 
rule does not apply to catch-up contribution amounts. Thus, if 
both spouses are at least age 55 and eligible to make catch-up 
contributions, each must make the catch-up contribution to his 
or her own HSA.\35\
---------------------------------------------------------------------------
    \33\Notice 2004-50, 2004-2 C.B. 196, Q&A-63.
    \34\Notice 2004-50, 2004-2 C.B. 196, Q&A-32. Funds from the 
spouse's HSA may be used to pay qualified medical expenses for either 
spouse on a tax-free basis. Notice 2004-50, Q&A-36.
    \35\Notice 2004-50, 2004-2 C.B. 196, Q&A-22.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that HSAs are a useful tool to allow 
and encourage individuals and families to cover current and 
future health care expenses. The Committee further believes 
that there should be fewer barriers for those wishing to 
contribute to their HSAs.
    Therefore, the Committee believes that spouses should be 
allowed to make catch-up contributions to the same HSA, without 
requiring each spouse to make the catch-up contribution to his 
or her own HSA.

                        EXPLANATION OF PROVISION

    Under the provision, if both spouses of a married couple 
are eligible for catch-up contributions (i.e., both spouses are 
at least age 55) and either has family coverage under a high 
deductible health plan as of the first day of any month, the 
annual contribution limit that can be allocated between them 
(after being reduced by the aggregate amount paid to the Archer 
MSAs of the spouses) includes the catch-up contribution amounts 
of both spouses. Thus, for example, the spouses may agree to 
have their combined basic and catch-up contribution amounts 
allocated to one spouse to be contributed to that spouse's HSA.

                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after December 31, 2025.

 H. Maximum Contribution Limit to Health Savings Account Increased to 
 Amount of Deductible and Out-of-Pocket Limitation (Sec. 9 of the Bill 
                       and Sec. 223 of the Code)


                              PRESENT LAW

Health savings accounts and high deductible health plans

    For a general description of HSAs and HDHPs, see Part A of 
this document.
    Within limits, contributions to an HSA made by or on behalf 
of an eligible individual (with the exception of contributions 
by the individual's employer) are deductible by the individual. 
The annual HSA contribution limit for an individual is 
generally the sum of the limits determined separately for each 
month (i.e., \1/12\ of the limit for the year, including the 
catch-up limit, if applicable), based on the individual's 
status and health plan coverage as of the first day of the 
month.\36\ For 2023, the basic limit on annual contributions 
that can be made to an HSA is $3,850 in the case of self-only 
coverage and $7,750 in the case of family coverage.\37\ The 
basic 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).\38\
---------------------------------------------------------------------------
    \36\Sec. 223(b).
    \37\Rev. Proc. 2022-24, 2022-20 I.R.B. 1075, May 16, 2022.
    \38\Sec. 223(b)(3).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that the basic HSA contribution 
limit should be aligned to better reflect the actual health 
care costs (i.e., the out-of-pocket expenses and the 
deductible) that individuals and families may have to cover.

                        EXPLANATION OF PROVISION

    The provision increases the basic limit on aggregate HSA 
contributions for a year to equal the sum of the annual 
deductible and out-of-pocket expenses permitted under an HDHP. 
Thus, for 2023, the basic limit is $7,500 for self-only 
coverage and $15,000 in the case of family coverage. As under 
present law, the basic contribution limit is increased by 
$1,000 for an eligible individual who has attained age 55 by 
the end of the taxable year. In addition, as under present law, 
the annual HSA contribution limit for an individual is 
generally the sum of the limits determined separately for each 
month (i.e., \1/12\ of the limit for the year, including the 
catch-up limit, if applicable), based on the individual's 
status and health plan coverage as of the first day of the 
month.

                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after December 31, 2025.

  I. Clarification of Treatment of Distributions from Health Savings 
 Account for Long-Term Care Services (Sec. 10 of the Bill and Sec. 223 
                              of the Code)


                              PRESENT LAW

    For general information on HSAs and HDHPs, see Part A of 
this document.

Qualified medical expenses

    Generally, for purposes of distributions from HSAs, 
qualified medical expenses\39\ mean amounts paid for medical 
care.\40\ Medical care generally means (with respect to an 
account beneficiary) amounts paid for the diagnosis, cure, 
mitigation, treatment and prevention of disease, or for the 
purpose of affecting any structure or function of the body, as 
well as transportation primarily for and essential to medical 
care.
---------------------------------------------------------------------------
    \39\Sec. 223(d)(2); see also Notice 2004-50, 2004-2 C.B. 196, Q&A-
42.
    \40\Based on the definition under sec. 213(d). For HSA purposes, 
amounts paid for menstrual care products are treated as paid for 
medical care. Sec. 223(d)(2)(A).
---------------------------------------------------------------------------
            Qualified long-term care services
    Medical care also includes qualified long-term care 
services\41\ which are certain necessary diagnostic, 
preventive, therapeutic, curing, treating, mitigating and 
rehabilitative services, and maintenance or personal services 
required by a chronically ill individual which are provided 
pursuant to a plan of care prescribed by a licensed health care 
practitioner. The term ``chronically ill individual'' includes 
any individual who has been certified by a licensed health care 
practitioner (within the preceding 12-month period) as being 
unable to perform (without substantial assistance from another 
individual) at least two activities of daily living--eating, 
toileting, transferring, bathing, dressing, or continence--for 
a period of at least 90 days due to a loss of functional 
capacity. The term ``maintenance or personal care services'' 
means any care the primary purpose of which is the provision of 
needed assistance with any of the disabilities as a result of 
which the individual is a chronically ill individual (including 
the protection from threats to health and safety due to severe 
cognitive impairment). A ``licensed health care practitioner'' 
is any physician\42\ and any registered professional nurse, 
licensed social worker, or other individual who meets such 
requirements as may be prescribed by the Secretary.
---------------------------------------------------------------------------
    \41\Sec. 213(d)(1)(C). Qualified long-term care services are 
defined in section 7702B(c).
    \42\As defined in section 1861(r)(1) of the Social Security Act, 42 
U.S.C. 1395x. Section 1861(r)(1) of the Social Security Act provides 
that a doctor of medicine or osteopathy must be legally authorized to 
practice medicine and surgery by the State in which he performs such 
function or action.
---------------------------------------------------------------------------

                           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 HDHPs to permit consumers to set aside 
funds and provide such consumers the choice on how to spend 
those funds to pay for medical care.
    The Committee believes that individuals should be able to 
use their HSAs to pay for qualified long-term care services, 
including certain home health care services, for chronically 
ill individuals.

                        EXPLANATION OF PROVISION

    The provision clarifies that qualified medical expenses 
include amounts paid for qualified long-term care services, 
allowing HSA distributions to be used to pay for needed 
assistance for chronically ill individuals.

                             EFFECTIVE DATE

    The provision is effective for amounts paid after the date 
of enactment.
    Nothing contained in the provision is to be construed to 
create any inference with respect to any amounts paid on or 
before the date of enactment.

                       III. VOTE OF THE COMMITTEE

    Pursuant to clause 3(b) of rule XIII of the Rules of the 
House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 5687, the ``HSA Modernization Act of 
2023,'' on September 28, 2023.
    H.R. 5687 was ordered favorably reported to the House of 
Representatives as amended by a roll call vote of 24 yeas to 18 
nays (with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO)...................       X   .......  .........  Mr. Neal...........  .......       X   .........
Mr. Buchanan.....................       X   .......  .........  Mr. Doggett........  .......       X   .........
Mr. Smith (NE)...................       X   .......  .........  Mr. Thompson.......  .......       X   .........
Mr. Kelly........................       X   .......  .........  Mr. Larson.........  .......       X   .........
Mr. Schweikert...................       X   .......  .........  Mr. Blumenauer.....  .......       X   .........
Mr. LaHood.......................       X   .......  .........  Mr. Pascrell.......  .......       X   .........
Dr. Wenstrup.....................       X   .......  .........  Mr. Davis..........  .......       X   .........
Mr. Arrington....................       X   .......  .........  Ms. Sanchez........  .......       X   .........
Dr. Ferguson.....................       X   .......  .........  Mr. Higgins........  .......       X   .........
Mr. Estes........................       X   .......  .........  Ms. Sewell.........  .......       X   .........
Mr. Smucker......................       X   .......  .........  Ms. DelBene........  .......       X   .........
Mr. Hern.........................       X   .......  .........  Ms. Chu............  .......       X   .........
Ms. Miller.......................       X   .......  .........  Ms. Moore..........  .......       X   .........
Dr. Murphy.......................       X   .......  .........  Mr. Kildee.........  .......       X   .........
Mr. Kustoff......................       X   .......  .........  Mr. Beyer..........  .......       X   .........
Mr. Fitzpatrick..................       X   .......  .........  Mr. Evans..........  .......       X   .........
Mr. Steube.......................  .......  .......  .........  Mr. Schneider......  .......       X   .........
Ms. Tenney.......................       X   .......  .........  Mr. Panetta........  .......       X   .........
Mrs. Fischbach...................       X   .......  .........
Mr. Moore........................       X   .......  .........
Mrs. Steel.......................       X   .......  .........
Ms. Van Duyne....................       X   .......  .........
Mr. Feenstra.....................       X   .......  .........
Ms. Malliotakis..................       X   .......  .........
Mr. Carey........................       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. 5687, as 
reported.
    The estimate prepared by the Congressional Budget Office 
(CBO) is included below.

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.

      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 CBO is 
provided.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    The bill would:
           Expand eligibility for health savings 
        accounts (HSAs)
           Increase annual HSA contribution limits to 
        $7,500 for self-only coverage and $15,000 for family 
        coverage
           Increase the HSA catch-up contribution limit 
        by $1,000 for people age 55 or older
    Estimated budgetary effects would mainly stem from:
           Decreased Medicare outlays caused by 
        increased use of HSAs
           Reduced revenues from expanding HSA 
        contribution limits and eligibility
    Areas of significant uncertainty include:
           Anticipating the number of taxpayers who 
        would contribute to HSAs and the amount of their 
        contributions
    The Congressional Budget Act of 1974, as amended, 
stipulates that revenue estimates provided by the staff of the 
Joint Committee on Taxation (JCT) are the official estimates 
for all tax legislation considered by the Congress. CBO 
therefore incorporates such estimates into its cost estimates 
of the effects of legislation. Most of the estimates for the 
provisions of this bill were provided by JCT.
    Bill summary: H.R. 5687 would increase contribution limits 
and expand eligibility for health savings accounts (HSAs)--tax-
favored accounts used to cover medical expenses for people with 
high-deductible health plans (HDHPs). The bill also would 
modify certain coverage requirements for HDHPs. H.R. 5687 would 
take effect for tax years beginning after December 31, 2025.
    Estimated Federal cost: The estimated budgetary effect of 
H.R. 5687 is shown in Table 1. The costs of the legislation 
fall within budget functions 570 (Medicare), 550 (health), 700 
(veterans benefits and services), and 800 (general government).
    Basis of estimate: The Congressional Budget Act of 1974, as 
amended, stipulates that revenue estimates provided by the 
staff of the Joint Committee on Taxation (JCT) are the official 
estimates for all tax legislation considered by the Congress. 
CBO therefore incorporates such estimates into its cost 
estimates of the effects of legislation. JCT provided all 
revenue estimates presented here for H.R. 5687.\1\
---------------------------------------------------------------------------
    \1\For JCT's preliminary estimates of the provisions that include 
detail beyond the summary presented here, see Joint Committee on 
Taxation, Estimated Revenue Effects of H.R. 5687, the ``HSA 
Modernization Act of 2023,'' Scheduled for Markup by the Committee on 
Ways and Means on September 28, 2023, JCX-42-43 (September 26, 2023), 
www.jct.gov/publications/2023/jcx-42-23; other details are in Joint 
Committee on Taxation, Description of the Chairman's Amendment in the 
Nature of a Substitute to H.R. 5687, The ``HSA Modernization Act of 
2023,'' JCX-44-23 (September 27, 2023), www.jct.gov/publications/2023/
jcx-44-23.
---------------------------------------------------------------------------
    For this estimate, CBO and JCT assume that the bill will be 
enacted in fiscal year 2024 and that, except as otherwise 
specified, its provisions would affect tax years beginning in 
2026.
    Direct spending and revenues: CBO and JCT estimate that 
enacting H.R. 5687 would reduce Medicare outlays because some 
people would remain in an HDHP who would not do so under 
current law. JCT estimates that enacting the bill would reduce 
income tax receipts because new or larger HSA contributions 
would reduce income tax liabilities for some filers.
    CBO and JCT estimate that, in total, H.R. 5687 would reduce 
revenues by $61.1 billion and reduce outlays by $2.7 billion 
over the 2024-2033 period. The bill's revenue reductions 
include Social Security taxes, which are classified as off-
budget.

                                                   TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 5687
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 By fiscal year, billions of dollars--
                                             -----------------------------------------------------------------------------------------------------------
                                               2024    2025    2026    2027     2028     2029     2030     2031     2032     2033   2024-2028  2024-2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Decreases in Direct Spending
 
Estimated Budget Authority..................       0       0    -0.1    -0.2     -0.3     -0.4     -0.4     -0.4     -0.5     -0.5      -0.6       -2.7
Estimated Outlays...........................       0       0    -0.1    -0.2     -0.3     -0.4     -0.4     -0.4     -0.5     -0.5      -0.6       -2.7
 
                                                                  Decreases in Revenues
 
Section 3, Extend Tax Exclusion of HSA
 Contributions to Certain Medicare Part A
 Enrollees
Estimated Revenues..........................       0       0    -0.2    -0.5     -0.9     -1.2     -1.3     -1.4     -1.4     -1.5      -1.7       -8.5
    On-Budget Revenues......................       0       0    -0.1    -0.4     -0.6     -0.8     -0.9     -0.9     -1.0     -1.1      -1.2       -5.9
    Off-Budget Revenues.....................       0       0    -0.1    -0.2     -0.3     -0.4     -0.4     -0.4     -0.4     -0.5      -0.5       -2.6
Section 9, Increase HSA Contribution Limits
Estimated Revenues..........................       0       0    -2.5    -4.5     -5.2     -5.6     -6.0     -6.4     -6.8     -7.2     -12.2      -44.2
    On-Budget Revenues......................       0       0    -1.9    -3.5     -4.0     -4.2     -4.5     -4.8     -5.2     -5.5      -9.3      -33.5
    Off-Budget Revenues.....................       0       0    -0.6    -1.1     -1.3     -1.3     -1.4     -1.5     -1.7     -1.8      -2.9      -10.7
All Other Sectionsa
Estimated Revenues..........................       0       0    -0.3    -0.7     -0.9     -1.1     -1.2     -1.3     -1.4     -1.5      -2.0       -8.4
    On-Budget Revenues......................       0       0    -0.2    -0.6     -0.7     -0.9     -1.0     -1.0     -1.1     -1.2      -1.5       -6.7
    Off-Budget Revenues.....................       0       0    -0.1    -0.1     -0.2     -0.2     -0.2     -0.3     -0.3     -0.3      -0.4       -1.7
Total Decreases
Estimated Revenues..........................       0       0    -3.0    -5.8     -7.1     -7.9     -8.5     -9.0     -9.6    -10.2     -15.9      -61.1
    On-Budget Revenues......................       0       0    -2.3    -4.4     -5.4     -5.9     -6.4     -6.8     -7.3     -7.7     -12.0      -46.1
    Off-Budget Revenues.....................       0       0    -0.7    -1.4     -1.7     -1.9     -2.1     -2.2     -2.4     -2.5      -3.8      -15.0
 
                                                               Net Increase in the Deficit
                                                      From Changes in Direct Spending and Revenues
 
Effect on the Deficit.......................       0       0     2.9     5.6      6.8      7.5      8.1      8.6      9.2      9.7      15.3       58.3
    On-Budget Increases.....................       0       0     2.2     4.2      5.1      5.6      6.0      6.4      6.8      7.2      11.5       43.4
    Off-Budget Increases....................       0       0     0.7     1.4      1.7      1.9      2.1      2.2      2.4      2.5       3.8       15.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
Components may not sum to totals because of rounding; HSA = health savings account.
CBO estimates that implementing H.R. 5687 would increase spending subject to appropriation by less than $500,000 in any year over the 2024-2028 period.
aIncludes effects of interactions among all of the bill's provisions.

    Section 3. This section would expand HSA eligibility to 
include some people who are eligible for Medicare Part A: 
People enrolled in an HDHP would no longer lose the tax 
preference for HSA contributions when they enroll in Medicare 
at age 65. As a result, CBO and JCT expect that some 
beneficiaries who, under current law, would drop their HDHP 
coverage would instead retain that coverage and thus make 
Medicare their secondary payer.
    CBO and JCT estimate that as a result, Medicare outlays 
would decline by $2.7 billion over the 2024-2033 period. JCT 
also estimates that, as a result of the additional HSA 
contributions, enacting section 3 would reduce revenues by $8.5 
billion over the same period.
    Section 9. This section would raise the annual HSA 
contribution limit from $3,850 for self-only coverage to $7,500 
and from $7,750 for family coverage to $15,000 (if the policy 
was in place for 2023). As under current law, those amounts 
would be indexed for inflation and people age 55 or older could 
make an additional $1,000 in catch-up contributions. All of the 
increases would take effect for tax years after 2025. JCT 
estimates that the changes to contribution limits would reduce 
revenues by $44.2 billion over the 2024-2033 period.
    All Other Sections. Provisions in other sections of the 
bill would expand HSA eligibility to include veterans receiving 
care through the Department of Veterans Affairs, enrollees in 
certain health care exchange plans with low premiums, and 
people receiving medical care through the Indian Health 
Service. In addition, the bill would allow HDHPs to cover as 
much as $500 annually for mental health services before the 
plan's deductible is met and would allow HSA funds to be used 
for health care services provided up to 60 days before the HSA 
is established. Finally, H.R. 5687 would allow a spouse to make 
catch-up contributions into the same HSA rather than having to 
establish a separate account to do so. JCT estimates that 
enacting those provisions would reduce revenues by an 
additional $8.4 billion over the 2024-2033 period; that 
estimate accounts for interactions among all of the bill's 
provisions. CBO estimates that some veterans who currently 
forego receiving health care through the Department of Veterans 
Affairs in order to maintain an HSA would no longer do so under 
H.R. 5687. Some costs for health care provided through the 
Department of Veterans Affairs are paid from the Toxic 
Exposures Fund, which is a mandatory appropriation; CBO 
estimates that any changes to such direct spending stemming 
from those provisions would be insignificant.
    Spending subject to appropriation: CBO estimates that 
implementing H.R. 5687 would increase the Internal Revenue 
Service's administrative costs by less than $500,000 over the 
2024-2028 period. There also would be an insignificant cost for 
spending on health care for veterans and for people receiving 
medical care through the Indian Health Service over the same 
period. That spending would be subject to the availability of 
appropriated funds.
    Uncertainty: JCT's and CBO's estimates of the budgetary 
effects of H.R. 5687 are subject to uncertainty because they 
are made on the basis of underlying projections and other 
factors that could change significantly. In particular, the 
estimates here rely on CBO's economic projections for the next 
decade under current law and on expectations about the way 
taxpayers and beneficiaries of other health care programs might 
respond to changes in tax law. In this case, the uncertainty 
involves how many people would decide to contribute to an HSA 
after the 2025 tax year and how much they would contribute.
    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. Only on-budget changes to outlays or revenues are 
subject to pay-as-you-go procedures. The net changes in outlays 
and revenues that are subject to those pay-as-you-go procedures 
are shown in Table 2.

    TABLE 2.--CBO'S ESTIMATE OF THE STATUTORY PAY-AS-YOU-GO EFFECTS OF H.R. 5687, THE HSA MODERNIZATION ACT OF 2023, AS ORDERED REPORTED BY THE HOUSE
                                                    COMMITTEE ON WAYS AND MEANS ON SEPTEMBER 28, 2023
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, billions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2024    2025    2026    2027    2028    2029    2030    2031    2032    2033   2024-2028  2024-2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Net Increase in the On-Budget Deficit
 
Pay-As-You-Go Effect..............................       0       0     2.2     4.2     5.1     5.6     6.0     6.4     6.8     7.2      11.5       43.4
Memorandum:
    Changes in Outlays............................       0       0    -0.1    -0.2    -0.3    -0.4    -0.4    -0.4    -0.5    -0.5      -0.6       -2.7
    Changes in Revenues...........................       0       0    -2.3    -4.4    -5.4    -5.9    -6.4    -6.8    -7.3    -7.7     -12.0      -46.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.

    Increase in long-term net direct spending and deficits: CBO 
and JCT estimate that enacting H.R. 5687 would not increase net 
direct spending in any of the four consecutive 10-year periods 
beginning in 2034.
    CBO and JCT estimate that enacting H.R. 5687 would increase 
on-budget deficits by more than $5 billion in at least one of 
the four consecutive 10-year periods beginning in 2034.
    Mandates: JCT has determined that H.R. 5687 would not 
impose intergovernmental or private-sector mandates as defined 
in the Unfunded Mandates Reform Act.
    Estimate prepared by: Federal Revenues: Nathaniel Frentz, 
Staff of the Joint Committee on Taxation; Federal Costs: Sarah 
Sajewski for Medicare, Matthew Pickford for Internal Revenue 
Service, Staff of the Joint Committee on Taxation; Mandates: 
Andrew Laughlin, Staff of the Joint Committee on Taxation.
    Estimate reviewed by: Joshua Shakin, Chief, Revenue 
Estimating Unit; Robert Reese, Chief, Natural and Physical 
Resources Cost Estimates Unit; Asha Saavoss, Chief, Medicare 
and Health Systems Cost Estimates Unit; Kathleen FitzGerald, 
Chief, Public and Private Mandates Unit; H. Samuel Papenfuss, 
Deputy Director of Budget Analysis; John McClelland, Director 
of Tax Analysis.
    Estimate approved by: Phillip L. Swagel, Director, 
Congressional Budget Office.

     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, the Committee made findings and 
recommendations that are reflected in 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 does not authorize funding, so no statement of general 
performance goals and objectives 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. 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.

                   E. Duplication of Federal Programs

    In compliance with clause 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 Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

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


  A. Text of Existing Law Amended or Repealed by the Bill, as Reported

    With respect to the requirement of 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 reflected in 
the following.

         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 italics, 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] the amount in effect under subsection 
                (c)(2)(A)(ii)(I).
                  (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] the amount in effect under subsection 
                (c)(2)(A)(ii)(II).
          (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:
          (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.]
          (5) Special rule for married individuals with family 
        coverage.--
                  (A) In general.--In the case of individuals 
                who are married to each other, if both spouses 
                are eligible individuals and either spouse has 
                family coverage under a high deductible health 
                plan as of the first day of any month--
                          (i) the limitation under paragraph 
                        (1) shall be applied by not taking into 
                        account any other high deductible 
                        health plan coverage of either spouse 
                        (and if such spouses both have family 
                        coverage under separate high deductible 
                        health plans, only one such coverage 
                        shall be taken into account),
                          (ii) such limitation (after 
                        application of clause (i)) shall be 
                        reduced by the aggregate amount paid to 
                        Archer MSAs of such spouses for the 
                        taxable year, and
                          (iii) such limitation (after 
                        application of clauses (i) and (ii)) 
                        shall be divided equally between such 
                        spouses unless they agree on a 
                        different division.
                  (B) Treatment of additional contribution 
                amounts.--If both spouses referred to in 
                subparagraph (A) have attained age 55 before 
                the close of the taxable year, the limitation 
                referred to in subparagraph (A)(iii) which is 
                subject to division between the spouses shall 
                include the additional contribution amounts 
                determined under paragraph (3) for both 
                spouses. In any other case, any additional 
                contribution amount determined under paragraph 
                (3) shall not be taken into account under 
                subparagraph (A)(iii) and shall not be subject 
                to division between the spouses.
          (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, 
                        long-term care, or (in the case of 
                        months or plan years to which paragraph 
                        (2)(E) applies) telehealth and other 
                        remote 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)].
                  (D) Special rule for individuals receiving 
                benefits subject to surprise billing 
                statutes.--An individual shall not fail to be 
                treated as an eligible individual for any 
                period merely because the individual receives 
                benefits for medical care subject to and in 
                accordance with section 9816 or 9817, section 
                2799A-1 or 2799A-2 of the Public Health Service 
                Act, or section 716 or 717 of the Employee 
                Retirement Income Security Act of 1974, or any 
                State law providing similar protections to such 
                individual.
                  (E) Special rule for individuals eligible for 
                assistance under indian health service 
                programs.--For purposes of subparagraph 
                (A)(ii), an individual shall not be treated as 
                covered under a health plan described in such 
                subparagraph merely because the individual 
                receives hospital care or medical services 
                under a medical care program of the Indian 
                Health Service or of a tribal organization.
          (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).
                  (E) Safe harbor for absence of deductible for 
                telehealth.--In the case of--
                          (i) months beginning after March 31, 
                        2022, and before January 1, 2023, and
                          (ii) plan years beginning on or 
                        before December 31, 2021, or after 
                        December 31, 2022, and before January 
                        1, 2025,
                a plan shall not fail to be treated as a high 
                deductible health plan by reason of failing to 
                have a deductible for telehealth and other 
                remote care services.
                  (F) Special rule for surprise billing.--A 
                plan shall not fail to be treated as a high 
                deductible health plan by reason of providing 
                benefits for medical care in accordance with 
                section 9816 or 9817, section 2799A-1 or 2799A-
                2 of the Public Health Service Act, or section 
                716 or 717 of the Employee Retirement Income 
                Security Act of 1974, or any State law 
                providing similar protections to individuals, 
                prior to the satisfaction of the deductible 
                under paragraph (2)(A)(i).
                  (G) Safe harbor for absence of deductible for 
                certain insulin products.--
                          (i) In general.--A plan shall not 
                        fail to be treated as a high deductible 
                        health plan by reason of failing to 
                        have a deductible for selected insulin 
                        products.
                          (ii) Selected insulin products.--For 
                        purposes of this subparagraph--
                                  (I) In general.--The term 
                                ``selected insulin products'' 
                                means any dosage form (such as 
                                vial, pump, or inhaler dosage 
                                forms) of any different type 
                                (such as rapid-acting, short-
                                acting, intermediate-acting, 
                                long-acting, ultra long-acting, 
                                and premixed) of insulin.
                                  (II) Insulin.--The term 
                                ``insulin'' means insulin that 
                                is licensed under subsection 
                                (a) or (k) of section 351 of 
                                the Public Health Service Act 
                                (42 U.S.C. 262) and continues 
                                to be marketed under such 
                                section, including any insulin 
                                product that has been deemed to 
                                be licensed under section 
                                351(a) of such Act pursuant to 
                                section 7002(e)(4) of the 
                                Biologics Price Competition and 
                                Innovation Act of 2009 (Public 
                                Law 111-148) and continues to 
                                be marketed pursuant to such 
                                licensure.
                  (H) Bronze and catastrophic plans treated as 
                high deductible health plans.--The term ``high 
                deductible health plan'' shall include any plan 
                described in subsection (d)(1)(A) or (e) of 
                section 1302 of the Patient Protection and 
                Affordable Care Act.
                  (I) Safe harbor for absence of deductible for 
                mental health services.--A plan shall not fail 
                to be treated as a high deductible health plan 
                by reason of failing to have a deductible for 
                not more than the first $500 of any mental 
                health benefits (as defined in section 
                9812(e)(4)) specified by the plan for purposes 
                of this subparagraph.
          (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 includes 
                amounts paid for qualified long-term care 
                services (as defined in section 7702B(c)). For 
                purposes of this subparagraph, amounts paid for 
                menstrual care products shall be treated as 
                paid for medical care.
                  (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 and who is not an eligible 
                        individual, any health insurance other 
                        than a medicare supplemental policy (as 
                        defined in section 1882 of the Social 
                        Security Act).
                  (D) Menstrual care product.--For purposes of 
                this paragraph, the term ``menstrual care 
                product'' means a tampon, pad, liner, cup, 
                sponge, or similar product used by individuals 
                with respect to menstruation or other genital-
                tract secretions.
                  (E) Treatment of certain medical expenses 
                incurred before establishment of account.--If a 
                health savings account is established during 
                the 60-day period beginning on the date that 
                coverage of the account beneficiary under a 
                high deductible health plan begins, then, 
                solely for purposes of determining whether an 
                amount paid is used for a qualified medical 
                expense, such account shall be treated as 
                having been established on the date that such 
                coverage begins.
          (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)] 
                Except in the case of an eligible individual, 
                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] subsection (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--] determined by 
                substituting ``calendar year 2003'' 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] 
        subsection (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.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

    H.R. 5687 (Van Duyne, R-TX-24) includes a series of 
provisions intended to incentivize use of health savings 
accounts (HSAs), which are tax-preferred savings accounts that 
are paired with high-deductible health plans (HDHPs). HDHPs, as 
the name implies, are health plans that have high deductibles, 
requiring Americans to pay thousands of dollars out-of-pocket 
before insurance begins. More specifically, this bill expands 
HSA contribution eligibility and categorizes Affordable Care 
Act marketplace Bronze and Catastrophic plans as HDHPs for the 
purposes of HSA eligibility. It also changes contribution 
rules, allows individuals to disburse funds for expenses 
incurred before establishing an HSA, allows for catch-up 
contributions for individuals over 55, and increases the 
maximum contribution limit to the qualifying deductible and 
out-of-pocket maximum for an HDHP (for 2023, $7,500 for 
individuals and $15,000 for families). According to the Joint 
Committee on Taxation, this bill would cost American taxpayers 
$58.34 billion over 10 years--and the provisions do not take 
effect until 2026.
    This legislation neither lowers out-of-pocket health care 
costs nor improves insurance coverage. These provisions do 
nothing to lower the cost of care or provide coverage to the 
millions of underinsured or uninsured Americans. HSAs are not 
health insurance but tax-preferred savings accounts: 
Contributions are pretax, assets grow tax-free, and 
distributions are not taxed for qualified medical expenses.\1\ 
The fundamental premise behind HSAs is that individuals should 
be responsible for saving for their own health care needs, 
which is a flawed approach because even paying for non-
catastrophic events is beyond the reach of most American 
families. The American Hospital Association points to the 
prevalence of HDHPs as one of the paramount drivers of medical 
debt. Twenty percent of employers that offer HDHPs do not 
contribute to an HSA for their employees, and most firms offer 
a modest $400 to $799 for individual coverage.\2\ This trend 
leaves employees at risk for all or most of the cost of the 
deductible. Thus, individuals with incomes below $75,000 who 
have HDHPs are likely to forgo needed medical care, 
specifically low-cost primary care services.\3\ Unlike the 
Republican approach to health care, the Democrats' Inflation 
Reduction Act made key investments to lower prescription drug 
prices, reduce patients' out-of-pocket health costs, reduce 
insurance premiums, and enhance the tax credits that make 
insurance coverage affordable for more than 13 million 
Americans.\4\
---------------------------------------------------------------------------
    \1\Joseph Slife & Matt Bell, A Health Savings Account: The Other 
``Retirement Account,'' SOUND MIND INVESTING (Jan. 27, 2023), https://
soundmindinvesting.com/articles/a-health-savings-account-the-other-
retirement-account.
    \2\2022 employer health benefits survey--section 8: High-deductible 
health plans with savings option. KFF. (2022, October 27). https://
www.kff.org/report-section/ehbs-2022-section-8-high-deductible-health-
plans-with-savings-option/#::text=ENROLLMENT%20IN%20HDHP%2FHRAS%
20AND%20HSA%2DQUALIFIED%20HDHPS&text=Enrollment%20in%20HDHP%2FSOs%
20has,HSA%2Dqualified%20HDHPs%20in%202022.
    \3\Schnettler, T. (2022, July 19). Impact of high deductible health 
plans on Health Care Utilization. Vital Record. https://
vitalrecord.tamhsc.edu/impact-of-high-deductible-health-plans-on-
health-care-utilization/.
    \4\The Inflation Reduction Act Turns One: Millions of Americans Are 
Saving On Health Care, With More To Come. PROTECT OUR CARE, (2023). 
https://www.protectourcare.org/wp-content/uploads/2023/08/IRA-First-
Anniversary-Fact-Sheet.pdf.
---------------------------------------------------------------------------
    HSAs provide little benefit for the average American 
family. While 75 percent of HSA account holders live in ZIP 
codes with a median household income of less than $100,000 only 
four percent of all HSA contributions come from households with 
incomes $50,000 or below, demonstrating that most lower and 
middle income Americans with an account do not actually 
contribute to it.\5\ \6\ In contrast, 77 percent of 
contributions to HSAs come from households with incomes over 
$100,000 and 44 percent from households with incomes over 
$200,000.\7\ People with incomes over $100,000 represent 78 
percent of participants maxing out HSA contributions.\8\
---------------------------------------------------------------------------
    \5\2022 Devenir & HSA Council Demographic Survey. DEVENIR RESEARCH 
(July, 13, 2023), https://www.devenir.com/wp-content/uploads/2022-
Devenir-and-HSA-Council-Demographic-Report.pdf.
    \5\Gideon Lukens, House Bills Expanding HSAs Would Boost High-
Income Tax Breaks--Not Affordability of Care, CENTER ON BUDGET AND 
POLICY PRIORITIES (Sep. 27, 2023), https://www.cbpp.org/blog/house-
bills-expanding-hsas-would-boost-high-income-tax-breaks-not-
affordability-of-
care#::text=Two%20bills%20due%20for%20House,costing%20over%20%
2470%20billion%20combined%2C.
    \7\Gideon Lukens, House Bills Expanding HSAs Would Boost High-
Income Tax Breaks--Not Affordability of Care, CENTER ON BUDGET AND 
POLICY PRIORITIES (Sep. 27, 2023), https://www.cbpp.org/blog/house-
bills-expanding-hsas-would-boost-high-income-tax-breaks-not-
affordability-of-
care#::text=Two%20bills%20due%20for%20House,costing%20over%20%2470%
20billion%20combined%2C.
    \8\Gideon Lukens, Expanding Health Savings Accounts Would Boost Tax 
Shelters, Not Access to Care, CENTER ON BUDGET AND POLICY PRIORITIES 
(June 22, 2023). https://www.cbpp.org/research/health/expanding-health-
savings-accounts-would-boost-tax-shelters-not-access-to-care.
---------------------------------------------------------------------------
    HSAs exacerbate health disparities. This legislation does 
nothing to reduce health disparities or address the 
generational wealth gaps and poorer health outcomes for people 
of color. A typical White family in 2019 had eight times the 
wealth of a typical Black family and five times the wealth of a 
typical Latino family. The median wealth of White households 
was $171,000, compared with $17,100 for Black households and 
$20,600 for Latino households.\9\ Thus, people of color benefit 
from the tax benefits of HSAs far less than White people, as 
the preferential tax treatment accrues inequitably along income 
lines and is disproportionately out of reach for many people of 
color. Account balances, contributions, and distributions from 
HSA accounts differ significantly by race, and HSA expansion 
will only exacerbate the health equity and wealth gap.\10\
---------------------------------------------------------------------------
    \9\Dorothy Brown, The Whiteness of Wealth: How the Tax System 
Impoverishes Black Americans--and How We Can Fix It 18 (2021).
    \10\Spiegel, J. Examining HSAs through a DEI lens. EMPLOYEE BENEFIT 
RESEARCH INSTITUTE, (2022, April 7).
---------------------------------------------------------------------------
    HSAs impact solvency of Medicare and Social Security Trust 
Funds. HSAs have multiple tax advantages for accumulating 
wealth. Contributions to HSAs are made with pretax dollars (in 
most states), assets grow tax-free, and distributions are tax-
free if used to pay for qualified medical expenses or as 
reimbursement for such expenses. These tax giveaways will cost 
the federal government more than $180 billion over the next 10 
years, disproportionately benefitting the wealthy--and H.R. 
5688 would add another $12.95 billion to that total over the 
next decade.\11\ Because employer contributions to HSAs are not 
subject to the payroll tax imposed on either the employer or 
the employee, expanding their use will inevitably reduce 
contributions into the Medicare and Social Security Trust 
Funds, harming America's seniors and people with disabilities. 
Closing the Medicaid coverage gap or extending marketplace 
premium tax credits for the next 10 years would cost about the 
same as continuing to fund HSAs.\12\
---------------------------------------------------------------------------
    \11\Gideon Lukens, Expanding Health Savings Accounts Would Boost 
Tax Shelters, Not Access to Care, CENTER ON BUDGET AND POLICY 
PRIORITIES (June 22, 2023). https://www.cbpp.org/research/health/
expanding-health-savings-accounts-would-boost-tax-shelters-not-access-
to-care.
    \12\House GOP Health Care Bills Benefit the Wealthy and Diminish 
Affordable Care Act Protections, PROTECT OUR CARE (June 7, 22023). 
https://www.protectourcare.org/house-gop-health-care-bills-benefit-the-
wealthy-and-diminish-affordable-care-act-protections/.
---------------------------------------------------------------------------
    HSAs are a tax shelter for the wealthy. HSAs 
disproportionately benefit wealthy Americans--and this 
legislation seeks to make HSAs more attractive. People with 
higher incomes 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.\13\ People with income 
in the lowest tax brackets save up to 12 cents on the dollar in 
federal income taxes for their HSA contributions.\14\ By 
comparison, those earning over half a million dollars save 37 
cents for each dollar in federal income taxes put into an 
HSA.\15\ At age 65, withdrawals can be used for any purpose 
with no penalty. This loophole means HSA funds can be used for 
any non-medical expenses after age 65 without paying a penalty 
for non-medical use. HSA funds can be used to cover day-to-day 
expenses, pay for home renovations, or even finance a new 
boat.\16\ \17\ Investment advisors see a lucrative opportunity 
and are now marketing HSAs as retirement and wealth 
accumulation products, not health care accounts.\18\ Democrats 
offered an amendment to H.R. 5688 to close this tax loophole, 
but the majority rejected the changes. Republicans would rather 
exacerbate disparities by giving away billions to the wealthy.
---------------------------------------------------------------------------
    \13\Ryan Ermey, This savings account offers a `triple tax 
benefit'--but 88% of users are missing out, CNBC (Feb. 9, 2023), 
https://www.cnbc.com/2023/02/09/health-savings-accounts-how-to-save-
for-retirement.html.
    \14\Gideon Lukens, Expanding Health Savings Accounts Would Boost 
Tax Shelters, Not Access to Care, CENTER ON BUDGET AND POLICY 
PRIORITIES (June 22, 2023). https://www.cbpp.org/research/health/
expanding-health-savings-accounts-would-boost-tax-shelters-not-access-
to-care.
    \15\Id.
    \16\How to avoid penalties on an HSA withdrawal, BENEFIT RESOURCE 
(Aug 4, 2022), https://www.benefitresource.com/blog/how-to-avoid-
penalties-on-an-hsa-withdrawal/.
    \17\5 ways HSAs can help with your retirement, FIDELITY (Dec. 7, 
2022), https://
www.fidelity.com/viewpoints/wealth-management/hsas-and-your-retirement.
    \18\Id.
---------------------------------------------------------------------------
    Low- and middle-income Americans often cannot take 
advantage of the tax benefits of HSAs in the same way wealthy 
Americans do. Those with higher incomes can afford to take on 
the risk of a high deductible and are more likely to establish 
HSAs compared to low-income consumers. For those who have 
little to contribute, given fees and extremely low interest 
rates, these accounts may offer little value. Some account 
holders could actually be losing money. Six of seven major 
institutions require a minimum balance to invest their HSA 
contributions, some up to $2,000. Some accounts offer paltry 
returns of only 0.01 percent on money invested.\19\ Nearly half 
of American families do not have enough money in the bank to 
pay a $1,000 medical bill in the next 30 days, let alone fund 
an account that might earn less interest than a checking 
account.\20\
---------------------------------------------------------------------------
    \19\What is the standard interest rate for a Lively HSA? LIVELY 
(Aug 21, 2023), https://support.livelyme.com/hc/en-us/articles/
4405466272667-What-is-the-standard-interest-rate-for-a-
Lively-HSA.
    \20\Sara Collins, Lauren Haynes, & Relebohile Masitha, The State of 
U.S. Health Insurance in 2022, THE COMMONWEALTH FUND (Sep. 29, 2022) 
https://www.commonwealthfund.org/publications/issue-briefs/2022/sep/
state-us-health-insurance-2022-biennial-survey.
---------------------------------------------------------------------------
            Sincerely,
                                           Richard E. Neal,
                                                    Ranking Member.

                                  [all]