To amend the Internal Revenue Code of 1986 to make health care coverage more accessible and affordable.

Summary: Comprehensive Health Care Reform Act of 2005 - Amends the Internal Revenue Code to: (1) revise the tax credit for the health insurance costs of a taxpayer, the taxpayer's spouse, and dependents; (2) permit up to $500 of unused health benefits under a health flexible spending arrangement to be carried over to a succeeding plan year or paid directly to an employee as compensation; (3) revise the tax deduction for payments to a health savings account; and (4) repeal the 7.5 percent threshold limitation on the tax deduction of medical and dental expenses.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Comprehensive Health Care Reform Act 
of 2005''.

SEC. 2. REFUNDABLE CREDIT FOR HEALTH CARE COSTS.

    (a) In General.--Section 35 of the Internal Revenue Code of 1986 
(relating to health insurance costs of eligible individuals) is amended 
to read as follows:

``SEC. 35. HEALTH INSURANCE COSTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by subtitle A an amount 
equal to the amount paid by the taxpayer for insurance which 
constitutes medical care for the taxpayer and the taxpayer's spouse and 
dependents.
    ``(b) Limitation.--The credit allowed by subsection (a) for the 
taxable year shall not exceed the sum of--
            ``(1) the taxpayer's net income tax for the taxable year, 
        plus
            ``(2) the taxpayer's social security taxes (as defined in 
        section 24(d)) for such taxable year.
For purposes of paragraph (1), the term `net income tax' means the sum 
of the regular tax liability plus the tax imposed by section 55, 
reduced by the credits allowable under this part (other than this 
subpart).
    ``(c) Denial of Double Benefit.--Any amount allowed as a credit 
under this section shall not be taken into account in determining the 
amount of any deduction under this chapter.''.
    (b) Conforming Amendments.--
            (1) Section 162 of such Code is amended by striking 
        subsection (l).
            (2) Chapter 77 of such Code is amended by striking section 
        7527 and by striking the item relating to section 7527 in the 
        table of sections for such chapter.
            (3) Subpart B of part III of subchapter A of chapter 61 of 
        such Code is amended by striking section 6050T and by striking 
        the item relating to section 6050T in the table of sections for 
        such chapter.
            (4) Section 6103(l) of such Code is amended by striking 
        paragraph (18).
            (5) Section 6103(p) of such Code is amended--
                    (A) in paragraph (3)(A) by striking ``(17), or 
                (18)'' and inserting ``or (17)'', and
                    (B) in paragraph (4) by striking ``or (17)'' after 
                ``any other person described in subsection (l)(16)'' 
                each place it appears.
            (6) Section 7213A(a)(1)(B) of such Code is amended by 
        striking ``subsection (l)(18) or (n) of section 6103'' and 
        inserting ``section 6103(n)''.
            (7) Section 6724(d)(1)(B) of such Code is amended by 
        striking clause (xi).
            (8) Section 6724(d)(2) of such Code is amended by striking 
        subparagraph (BB).
            (9) The item relating to section 35 in the table of 
        sections for subpart C of part IV of subchapter A of chapter 1 
        of such Code is amended to read as follows:

``Sec. 35 Health insurance costs.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

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

    (a) In General.--Section 125 of the Internal Revenue Code of 1986 
(relating to cafeteria plans) is amended by redesignating subsections 
(h) and (i) as subsections (i) and (j), respectively, and by inserting 
after subsection (g) the following:
    ``(h) Carryforwards or Payments of Certain Unused Health 
Benefits.--
            ``(1) In general.--For purposes of this title, a plan or 
        other arrangement shall not fail to be treated as a cafeteria 
        plan solely because qualified benefits under such plan include 
        a health flexible spending arrangement under which not more 
        than $500 of unused health benefits may be--
                    ``(A) carried forward to the succeeding plan year 
                of such health flexible spending arrangement, or
                    ``(B) paid to or on behalf of an employee as 
                compensation as of the end of such plan year or upon 
                the termination of, or failure to re-enroll in, such 
                plan or arrangement.
            ``(2) Distribution of unused health benefits on behalf of 
        employee.--For purposes of paragraph (1)(B), unused health 
        benefits paid as compensation on behalf of an employee by the 
        employer shall be--
                    ``(A) includible in gross income and wages of the 
                employee, whether or not a deduction for such payment 
                is allowable under this title to the employee, and
                    ``(B) excludable from--
                            ``(i) gross income to the extent provided 
                        under section 402(e), 457(a) (with respect to 
                        contributions to an eligible deferred 
                        compensation plan (as defined in section 
                        457(b)) of an eligible employer described in 
                        section 457(e)(1)(A)), or 220, and
                            ``(ii) wages to the extent otherwise 
                        provided for amounts so excludable.
            ``(3) Health flexible spending arrangement.--For purposes 
        of this subsection, the term `health flexible spending 
        arrangement' means a flexible spending arrangement (as defined 
        in section 106(c)) that is a qualified benefit and only permits 
        reimbursement for expenses for medical care (as defined in 
        section 213(d)(1)) (without regard to subparagraphs (C) and (D) 
        thereof).
            ``(4) Unused health benefits.--For purposes of this 
        subsection, the term `unused health benefits' means the excess 
        of--
                    ``(A) the maximum amount of reimbursement allowable 
                during a plan year under a health flexible spending 
                arrangement, over
                    ``(B) the actual amount of reimbursement during 
                such year under such arrangement.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2005.

SEC. 4. STRENGTHENING HEALTH SAVINGS ACCOUNTS.

    (a) Repeal of Requirement for Coverage Under High Deductible Health 
Plan.--
            (1) In general.--Section 223 of the Internal Revenue Code 
        of 1986 (relating to health savings accounts) is amended by 
        striking subsections (a), (b), and (c) and inserting the 
        following:
    ``(a) Deduction Allowed.--In the case of an individual, 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 to a 
        taxpayer under subsection (a) for the taxable year shall not 
        exceed $8,000 ($16,000 in the case of a joint return).
            ``(2) Coordination with other contributions.--The 
        limitation which would (but for this paragraph) apply under 
        this subsection to a taxpayer 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 the taxpayer, and
                    ``(B) the aggregate amount contributed to health 
                savings accounts of the taxpayer 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)).
            ``(3) 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.''.
            (2) Conforming amendments.--
                    (A) Section 223 of such Code is amended by 
                redesignating subsections (d), (e), (f), (g), and (h) 
                as subsections (c), (d), (e), (f), and (g), 
                respectively.
                    (B) Section 223(f) of such Code (as redesignated by 
                subparagraph (A)) is amended to read as follows:
    ``(f) Cost-of-Living Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 2006, each dollar amount in 
        subsection (b)(1) 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 
                `calendar year 2006' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(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.''.
                    (C) Section 26(b)(2)(S) of such Code is amended by 
                striking ``section 223(f)(4)'' and inserting ``section 
                223(e)(4)''.
                    (D) Each of the following sections of such Code is 
                amended by striking ``section 223(d)'' and inserting 
                ``section 223(c)'':
                            (i) Section 35(g)(3).
                            (ii) Section 106(d)(1).
                            (iii) Section 220(f)(5)(A).
                            (iv) Section 848(e)(1)(B)(v).
                            (v) Section 4973(a)(5).
                            (vi) Section 4973(g).
                            (vii) Section 4975(c)(6).
                            (viii) Section 4975(e)(1)(E).
                            (ix) Section 6051(a)(12).
                    (E) Section 4973(g) of such Code is amended--
                            (i) in paragraph (1) by striking ``section 
                        223(f)(5)'' and inserting ``section 
                        223(e)(5)'',
                            (ii) in paragraph (2)(A) by striking 
                        ``section 223(f)(2)'' and inserting ``section 
                        223(e)(2)'', and
                            (iii) in the matter following paragraph (2) 
                        by striking ``section 223(f)(3)'' and inserting 
                        ``section 223(e)(3)''.
                    (F) Section 4975(c)(6) of such Code is amended by 
                striking ``section 223(e)(2)'' and inserting ``section 
                223(d)(2)''.
                    (G) Section 6693(a)(2)(C) of such Code is amended 
                by striking ``section 223(h)'' and inserting ``section 
                223(g)''.
    (b) Deduction Allowed for Premium Payments for High Deductible 
Policies.--Section 223(c)(2)(C) of such Code (as amended by subsection 
(a)) is amended by striking ``or'' at the end of clause (iii), by 
striking the period at the end of clause (iv) and inserting ``, or'', 
and by inserting after clause (iv) the following new clause:
                            ``(v) a high deductible health plan.''.
    (c) Purchase of Medigap Policies Permitted.--Clause (iv) of section 
223(c)(2)(C) of such Code (as amended by this section) is amended by 
striking ``other than'' and inserting ``, including''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 5. REPEAL OF 7.5 PERCENT THRESHOLD ON DEDUCTION FOR MEDICAL 
              EXPENSES.

    (a) In General.--Subsection (a) of section 213 of the Internal 
Revenue Code of 1986 (relating to deduction for medical expenses) is 
amended by striking ``to the extent that such expenses exceed 7.5 
percent of adjusted gross income''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2005.