To amend the Internal Revenue Code of 1986 to allow a deduction for amounts paid for health insurance and prescription drug costs of individuals.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Health Care Tax Deduction Act of 
2001''.

SEC. 2. DEDUCTION FOR HEALTH INSURANCE AND PRESCRIPTION DRUG COSTS OF 
              INDIVIDUALS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by redesignating section 222 
as section 223 and by inserting after section 221 the following new 
section:

``SEC. 222. HEALTH INSURANCE AND PRESCRIPTION DRUG COSTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a deduction an amount equal to the sum of the amount paid 
during the taxable year for--
            ``(1) insurance which constitutes medical care for the 
        taxpayer and the taxpayer's spouse and dependents, plus
            ``(2) unreimbursed prescription drug expenses paid by the 
        taxpayer for the taxpayer and the taxpayer's spouse and 
        dependents.
    ``(b) Limitations and Special Rules.--
            ``(1) Employer contributions to cafeteria plans, flexible 
        spending arrangements, and medical savings accounts.--Employer 
        contributions to a cafeteria plan, a flexible spending or 
        similar arrangement, or a medical savings account which are 
        excluded from gross income under section 106 shall be treated 
        for purposes of subsection (a) as paid by the employer.
            ``(2) Deduction not available for payment of ancillary 
        coverage premiums.--Any amount paid as a premium for insurance 
        which provides for--
                    ``(A) coverage for accidents, disability, dental 
                care, vision care, or a specified illness, or
                    ``(B) making payments of a fixed amount per day (or 
                other period) by reason of being hospitalized,
        shall not be taken into account under subsection (a).
            ``(3) Coordination with deduction for health insurance and 
        prescription drug costs of self-employed individuals.--The 
        amount taken into account by the taxpayer in computing the 
        deduction under section 162(l) shall not be taken into account 
        under this section.
            ``(4) Coordination with medical expense deduction.--The 
        amount taken into account by the taxpayer in computing the 
        deduction under this section shall not be taken into account 
        under section 213.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Medical care.--
                    ``(A) In general.--The term `medical care' has the 
                meaning given such term by section 213(d) without 
                regard to--
                            ``(i) paragraph (1)(C) thereof, and
                            ``(ii) so much of paragraph (1)(D) thereof 
                        as relates to qualified long-term care 
                        insurance contracts.
                    ``(B) Exclusion of certain other contracts.--The 
                term `medical care' shall not include insurance if a 
                substantial portion of its benefits are excepted 
                benefits (as defined in section 9832(c)).
            ``(2) Unreimbursed prescription drug expenses.--The term 
        `unreimbursed prescription drug expenses' means amounts paid or 
        incurred for a prescribed drug (as defined by section 
        213(d)(3)) the cost of which to the taxpayer is not reimbursed 
        by insurance or otherwise.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out this section.''.
    (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting after paragraph (17) the following new item:
            ``(18) Health insurance and prescription drug costs.--The 
        deduction allowed by section 222.''.
    (c) Clerical Amendments.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the last 
item and inserting the following new items:

                              ``Sec. 222. Health insurance and 
                                        prescription drug costs.
                              ``Sec. 223. Cross reference.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

SEC. 3. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE AND PRESCRIPTION 
              DRUG COSTS OF SELF-EMPLOYED INDIVIDUALS.

    (a) In General.--Paragraph (1) of section 162(l) of the Internal 
Revenue Code of 1986 (relating to general rule for allowance of 
deduction for health insurance costs of self-employed individuals) is 
amended to read as follows:
            ``(1) Allowance of deduction.--In the case of an individual 
        who is an employee within the meaning of section 401(c)(1), 
        there shall be allowed as a deduction under this section an 
        amount equal to the sum of--
                    ``(A) 100 percent of the amount paid during the 
                taxable year for insurance which constitutes medical 
                care for the taxpayer and the taxpayer's spouse and 
                dependents, plus
                    ``(B) unreimbursed prescription drug expenses 
                (within the meaning of section 222(c)(2)) paid during 
                the taxable year by the taxpayer for the taxpayer and 
                the taxpayer's spouse and dependents.''.
    (b) Clarification of Limitations on Other Coverage.--The first 
sentence of section 162(l)(2)(B) of such Code is amended to read as 
follows: ``Paragraph (1) shall not apply to any taxpayer for any 
calendar month for which the taxpayer participates in any subsidized 
health plan maintained by any employer (other than an employer 
described in section 401(c)(4)) of the taxpayer or the spouse of the 
taxpayer.''.
    (c) Clerical Amendment.--The heading for section 162(l) of such 
Code is amended by inserting ``and Prescription Drug'' after 
``Insurance''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

Summary: Health Care Tax Deduction Act of 2001 - Amends the Internal Revenue Code to allow all individuals a deduction for amounts paid for qualifying health insurance and unreimbursed prescription drugs on behalf of the taxpayer, spouse, and dependents. Provides self-employed individuals not otherwise covered with 100 percent coverage for health insurance and unreimbursed prescription drug costs on behalf of the taxpayer, spouse, and dependents. Coordinates such deductions with existing individual and self-employed medical deduction provisions.