19–006 

112TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 112–516 

RESTORING ACCESS TO MEDICATION ACT OF 2012 

JUNE 5, 2012.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. CAMP, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

DISSENTING AND ADDITIONAL VIEWS 

[To accompany H.R. 5842] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 5842) to amend the Internal Revenue Code of 1986 to repeal the amendments made by the Patient Protection and Affordable Care Act which disqualify expenses for over-the-counter drugs 

under health savings accounts and health flexible spending arrangements, having considered the same, report favorably thereon 

and recommend that the bill, as amended, do pass. 

CONTENTS 

Page 

I. Summary and Background ........................................................................... 2 

II. Explanation of Provision ............................................................................... 3 

A. Repeal of the Disqualification of Expenses for Over-the-Counter 

Medicine Under Health Savings Accounts, Archer MSAs, 

Health Flexible Spending Arrangements, and Health Reimbursement Arrangements (sec. 2 of the bill and secs. 106, 

220, and 223 of the Code) .............................................................. 3 

III. Votes of the Committee ................................................................................. 6 

IV. Budget Effects of the Provision .................................................................... 7 

V. Other Matters To Be Discussed Under the Rules of the House ................ 13 

VI. Changes in Existing Law Made by the Bill, as Reported ........................... 17 

VII. Dissenting Views ........................................................................................... 19 

VIII. Additional Views ............................................................................................ 20 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 


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SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Restoring Access to Medication Act of 2012’’. 

SEC. 2. REPEAL OF DISQUALIFICATION OF EXPENSES FOR OVER-THE-COUNTER DRUGS 

UNDER CERTAIN ACCOUNTS AND ARRANGEMENTS. 

(a) HSAS.—Subparagraph (A) of section 223(d)(2) of the Internal Revenue Code 

of 1986 is amended by striking the last sentence. 

(b) ARCHER MSAS.—Subparagraph (A) of section 220(d)(2) of such Code is amended by striking the last sentence. 

(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH REIMBURSEMENT

ARRANGEMENTS.—Section 106 of such Code is amended by striking subsection (f). 

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to expenses incurred after December 31, 2012. 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

The bill, H.R. 5842, as reported by the Committee on Ways and 

Means, repeals the limitations on the use of certain tax-advantaged 

accounts and arrangements for the purchase of over-the-counter 

medicine. 

B. BACKGROUND AND NEED FOR LEGISLATION

Millions of Americans currently use tax-advantaged accounts and 

arrangements to save for ‘‘qualified’’ medical expenses, as defined 

by the Internal Revenue Code (‘‘IRC’’). Contributions to and distributions from these accounts and arrangements are generally taxfavored and may be used for unreimbursed medical expenses such 

as deductibles and co-payments. Approximately 33 million Americans are currently in families with Flexible Spending Arrangements (‘‘FSAs’’), which are offered by 29 percent of small businesses and 85 percent of large employers. Over 13 million Americans currently hold or maintain a Health Savings Account (‘‘HSA’’). 

As a result of the Patient Protection and Affordable Care Act 

(Pub. L. No. 111–148), beginning in January 2011, the nearly 45 

million Americans enrolled in an FSA, HSA, Archer Medical Savings Account (‘‘MSA’’) or Health Reimbursement Arrangement 

(‘‘HRA’’) could no longer purchase over-the-counter (‘‘OTC’’) medicines, other than insulin, without a doctor’s prescription with funds 

from these accounts or arrangements. Americans must now purchase non-prescribed OTC medications with after-tax dollars, resulting in a tax increase on American families. 

The limitation on the use of HSA, FSA, HRA and Archer MSA 

funds for OTC medicine is directly at odds with the goal of lowering health care costs and increasing access to primary care physicians. A 2010 study by Booz & Co. concluded that every dollar 

spent by consumers on OTC medicines saves $6 to $7 for the U.S. 

healthcare system as a whole. According to a survey completed for 

the Consumer Healthcare Products Association, 63 percent of physicians believe the limitation on OTC purchases will increase the 

burden on medical professionals. In addition, 47 percent of patients 

surveyed said they would seek a doctor’s prescription for their OTC 

medications. 

Repealing the OTC medicine limitation will lower health care 

costs for millions of Americans, and relieve burdens placed on physicians by the Patient Protection and Affordable Care Act. 


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1Sec. 213(a). The 7.5 percent of AGI threshold increases to 10 percent for taxable years beginning after December 31, 2012. However, this increase in the percentage does not apply until 

taxable years beginning after December 31, 2016 with respect to any taxpayer if the taxpayer 

or the taxpayer’s spouse has attained age 65 before the close of the taxable year. 2Sec. 213(d). There are certain limitations on the general definition including a rule that cosmetic surgery or similar procedures are generally not medical care. 3Sec. 213(b). 

4Sec. 213(d)(3). 

5 Rev. Rul. 2003–58, 2003–1 CB 959. 

C. LEGISLATIVE HISTORY

Background 

H.R. 5842 was introduced on May 18, 2012, and was referred to 

the Committee on Ways and Means. 

Committee action 

The Committee on Ways and Means marked up H.R. 5842 on 

May 31, 2012, and ordered the bill, as amended, favorably reported 

(with a quorum being present). 

Committee hearings 

The Subcommittee on Oversight of the Committee on Ways and 

Means held a public hearing on April 25, 2012, on the impact of 

limitations on the use of tax-advantaged accounts for the purchase 

of over-the-counter medicine. 

II. EXPLANATION OF PROVISION 

A. REPEAL OF THE DISQUALIFICATION OF EXPENSES FOR OVER-THECOUNTER MEDICINE UNDER HEALTH SAVINGS ACCOUNTS, ARCHER

MSAS, HEALTH FLEXIBLE SPENDING ARRANGEMENTS, AND

HEALTH REIMBURSEMENT ARRANGEMENTS (sec. 2 of the bill and 

secs. 106, 220, and 223 of the Code) 

PRESENT LAW

Individual deduction for medical expenses 

Expenses for medical care, not compensated for by insurance or 

otherwise, are deductible by an individual under the rules relating 

to itemized deductions to the extent the expenses exceed 7.5 percent (generally 10 percent for years after 2012) of adjusted gross 

income (‘‘AGI’’).1 Medical care generally is defined broadly as 

amounts paid for diagnoses, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure of the 

body.2

Under an explicit limitation, any amount paid during a taxable 

year for medicine or drugs is deductible as a medical expense only 

if the medicine or drug is a prescribed drug or insulin.3 The term 

prescribed drug means a drug or biological which requires a prescription of a physician for its use by an individual.4 Thus, any 

amount paid for medicine available without a prescription (‘‘overthe-counter medicine’’) is not deductible as a medical expense, including any medicine prescribed or recommended by a physician.5

Exclusion for employer-provided health care 

Employees are not taxed on (that is, may exclude from gross income) the value of employer-provided health coverage under an acVerDate Mar 15 2010 17:18 Jun 07, 2012 Jkt 019006 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\HR516.XXX HR516

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6Sec 106. 

7Sec. 105(b). 

8Treas. Reg. sec. 1.105–2. 

9For 2012, the maximum aggregate annual contribution that can be made to an HSA is 

$3,100 in the case of self-only coverage and $6,250 in the case of family coverage. The annual 

contribution limits are increased by $1,000 for individuals who have attained age 55 by the end 

of the taxable year (referred to as ‘‘catch-up contributions’’). Contributions, including catch-up 

contributions, cannot be made once an individual is enrolled in Medicare. 10Sec. 220. 

cident or health plan.6 In addition, any reimbursements under an 

employer-provided accident or health plan for medical care expenses for employees, their spouses, their dependents, and adult 

children under age 27 generally are excludible from gross income.7

An employer may agree to reimburse expenses for medical care of 

its employees (and their spouses and dependents), not covered by 

a health insurance plan, through a flexible spending arrangement 

(‘‘FSA’’) which allows reimbursement not in excess of a specified 

dollar amount. The amounts available for reimbursement must be 

exclusively for reimbursement for medical care because the exclusion does not apply to amounts which the employee would be entitled to irrespective of whether he or she incurs expenses for medical care.8

Such dollar amount is either elected by an employee under a cafeteria plan (‘‘Health FSA’’) or otherwise specified by the employer 

under a health reimbursement arrangement (‘‘HRA’’). Reimbursements under these arrangements are also excludible from gross income as reimbursements for medical care under employer-provided 

health coverage. 

Health savings accounts 

An individual with a high deductible health plan (and no other 

health plan other than a plan that provides certain permitted insurance or permitted coverage) may establish a health savings account (‘‘HSA’’). In general, HSAs provide tax-favored treatment for 

current medical expenses as well as the ability to save on a taxfavored basis for future medical expenses. In general, HSAs are 

tax-exempt trusts or custodial accounts created exclusively to pay 

for the qualified medical expenses of the account holder and his or 

her spouse and dependents. Thus, earnings on amounts in HSAs 

are not taxable. 

Subject to limits,9 contributions made to an HSA by an employer, 

including contributions made through a cafeteria plan through salary reduction, are excludible from income (and from wages for payroll tax purposes). Contributions made by individuals are deductible for income tax purposes, regardless of whether the individuals 

itemize. Distributions from an HSA that are used for qualified 

medical expenses are excludible from gross income. Distributions 

from an HSA that are not used for qualified medical expenses are 

includible in gross income and are subject to an additional tax of 

20 percent. The 20-percent additional tax does not apply if the distribution is made after death, disability, or the individual attains 

the age of Medicare eligibility (i.e., age 65). Similar rules apply for 

another type of medical savings arrangement called an Archer 

medical savings account (‘‘Archer MSA’’).10


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11Pub. L. No 111–148. Various provisions of the Affordable Care Act are amended by the 

Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111–152. 12 Rev. Rul. 2003–102, 2993–2 C.B. 559, now obsolete by Rev. Rul. 2010–23, 2010–39 I.R.B. 

388. 13Sec. 9003 of the Affordable Care Act. Notice 2010–59, 2010–39 I.R.B. 388, provides guidance 

on this change to the definition of medical care for these purposes. 

Medical care for excludible reimbursements 

For purposes of the exclusion for reimbursements under employer-provided accident and health plans (including under Health 

FSAs and HRAs), and for distributions from HSAs and Archer 

MSAs used for qualified medical expenses, the definition of medical 

care is generally the same as the definition that applies for the 

itemized deduction for the cost of medical care. However, prior to 

the enactment of the Patient Protection and Affordable Care Act 

(referred to as the ‘‘Affordable Care Act’’),11 the limitation (applicable to the itemized deduction) that only prescription medicines or 

drugs and insulin are taken into account did not apply. Thus, for 

example, amounts paid from a Health FSA or HRA, or funds distributed from an HSA to reimburse a taxpayer for nonprescription 

drugs, such as nonprescription aspirin, allergy medicine, antacids, 

or pain relievers, were excludible from income even though, if the 

taxpayer paid for such amounts directly (without such reimbursement), the expenses could not be taken into account in determining 

the itemized deduction for medical expenses.12

For years beginning after December 31, 2010, the Affordable 

Care Act changed the definition of medical care for purposes of the 

exclusion for reimbursements for medical care under employer-provided accident and health plans and for distributions from HSAs 

and Archer MSAs used for qualified medical expenses to require 

that over-the-counter medicine (other than insulin) be prescribed 

by a physician in order for the medicine to be medical care for 

these purposes.13 Thus, under present law, a Health FSA or an 

HRA is only permitted to reimburse an employee for the cost of 

over-the-counter medicine if the medicine is prescribed by a physician and distributions from an HSA or an Archer MSA used to purchase over-the-counter medicine is not a qualified medical expense 

unless the medicine is prescribed by a physician. 

REASONS FOR CHANGE

The Committee observes that the requirement that over-thecounter medicine requires a prescription in order to be an eligible 

expense for individuals and families covered by an FSA, HSA, 

HRA, or MSA has left these consumers with three options: (1) seek 

an unnecessary appointment with a doctor to obtain a prescription, 

and then submit the purchase for reimbursement under an FSA account; (2) purchase the OTC medicine out-of-pocket, which significantly increases the after-tax cost to the consumer; or (3) forego 

treatment entirely and suffer from the symptoms of the condition. 

The Committee notes that all three options increase costs to the 

consumer and to our healthcare system. The Committee therefore 

believes that the provision of the Affordable Care Act that disqualified expenses for over-the-counter medicine (unless obtained with a 

prescription) from being medical expenses under Health FSAs, 

HRAs, HSAs, and Archer HSAs should be repealed. 


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EXPLANATION OF PROVISION

The provision repeals the change to the definition of medical care 

made by the Affordable Care Act for purposes of the exclusion for 

reimbursements for medical care under employer-provided accident 

and health plans and for distributions from HSAs or Archer MSAs 

used for qualified medical expenses that requires that over-thecounter medicine (other than insulin) be prescribed by a physician 

in order for the medicine to be medical care for these purposes. 

Thus, for example, amounts paid from a Health FSA or HRA, or 

funds distributed from an HSA or an Archer MSA to reimburse a 

taxpayer for nonprescription drugs, such as nonprescription aspirin, allergy medicine, antacids, or pain relievers, are excludible 

from income even though, if the taxpayer paid for such amounts directly (without such reimbursement), the expenses could not be 

taken into account in determining the itemized deduction for medical expenses. 

EFFECTIVE DATE

The provision is effective with respect to expenses incurred after 

December 31, 2012. 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the votes of the Committee on Ways and Means in its consideration of H.R. 5842. 

MOTION TO REPORT RECOMMENDATION

The bill H.R. 5842, as amended, was ordered favorably reported 

by a rollcall vote of 24 yeas to 9 nays (with a quorum being 

present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Camp .............................. X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Herger ............................. X ........... ............. Mr. Rangel ........................... ........... ........... .............

Mr. Johnson ........................... ........... ........... ............. Mr. Stark .............................. ........... X .............

Mr. Brady .............................. X ........... ............. Mr. McDermott ..................... ........... ........... .............

Mr. Ryan ............................... X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Becerra .......................... ........... X .............

Mr. Davis .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Boustany ......................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Gerlach ........................... X ........... ............. Mr. Kind ............................... X ........... .............

Mr. Price ............................... X ........... ............. Mr. Pascrell .......................... ........... ........... .............

Mr. Buchanan ....................... X ........... ............. Ms. Berkley ........................... X ........... .............

Mr. Smith .............................. X ........... ............. Mr. Crowley .......................... X ........... .............

Mr. Schock ............................ X ........... .............

Ms. Jenkins ........................... X ........... .............

Mr. Paulsen ........................... X ........... .............

Mr. Marchant ........................ X ........... .............

Mr. Berg ................................ X ........... .............

Ms. Black .............................. X ........... .............

Mr. Reed ............................... X ........... .............


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IV. BUDGET EFFECTS OF THE PROVISION 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the revenue provisions of the 

bill, H.R. 5842 as reported. 

The bill is estimated to have the following effects on budget receipts for fiscal years 2013–2022: 


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FISCAL YEARS 

[Millions of dollars] 

Item 

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013–17 2013–22 

Repeal the limitation on reimbursement of over-the-counter 

medications from health FSAs, HRAs, HSAs, and Archer MSAs 1 ................................................................................ ¥223 ¥305 ¥332 ¥361 ¥390 ¥419 ¥448 ¥479 ¥511 ¥544 ¥1,611 ¥4,012 

NOTE: Details do not add to totals dur to rounding. 1 Estimate includes the following off-budget effects: 

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013–17 2013–22 

¥54 ¥73 ¥80 ¥87 ¥94 ¥100 ¥108 ¥115 ¥123 ¥130 ¥387 ¥963 


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B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the bill involves no new or increased budget authority. The Committee further states that the revenue-reducing tax provisions involve increased tax expenditures. 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following statement by the CBO is provided. 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, June 4, 2012. 

Hon. DAVE CAMP, Chairman, Committee on Ways and Means, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 5842, the Restoring Access to Medication Act of 2012. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Pamela Green. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

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

Summary: H.R. 5842 would amend the Internal Revenue Code to 

repeal the provisions that disqualify expenses for over-the-counter 

medicine under health savings accounts (HSAs), Archer medical 

savings accounts (Archer MSAs), health flexible spending arrangements (FSAs), and health reimbursement arrangements (HRAs). 

The bill would thus allow costs for over-the-counter medications to 

be eligible for reimbursement by funds in those tax-favored accounts. 

The staff of the Joint Committee on Taxation (JCT) estimates 

that enacting H.R. 5842 would reduce revenues by about $4 billion 

over the 2012–2022 period. Of that reduction, about $3 billion 

would result from changes in on-budget revenues, and about $1 billion would result from changes in off-budget revenues (from Social 

Security payroll taxes, which are categorized as off-budget). Pay-asyou-go procedures apply because enacting the legislation would affect on-budget revenues. 

JCT has determined that the bill contains no intergovernmental 

or private-sector mandates as defined in the Unfunded Mandates 

Reform Act (UMRA). 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 5842 is shown in the following table. 


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By fiscal year, in millions of dollars— 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012¥2017 2012¥2022 

CHANGES IN REVENUES 

Estimated Revenues ....................................... 0 ¥223 ¥305 ¥332 ¥361 ¥390 ¥419 ¥448 ¥479 ¥511 ¥544 ¥1,611 ¥4,012 

On-budget .............................................. 0 ¥169 ¥232 ¥252 ¥274 ¥296 ¥319 ¥340 ¥364 ¥388 ¥414 ¥1,224 ¥3,049 

Off-budget ............................................. 0 ¥54 ¥73 ¥80 ¥87 ¥94 ¥100 ¥108 ¥115 ¥123 ¥130 ¥387 ¥963 

Source: Staff of the Joint Committee on Taxation. Note: Components may not sum to totals because of rounding. 


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Basis of estimate: H.R. 5842 would allow taxpayers to be reimbursed for purchases of over-the-counter drugs from their HSAs, 

Archer MSAs, FSAs and HRAs. Under current law, expenses for 

over-the-counter medications are not eligible for reimbursement 

from these accounts unless the medicine is prescribed by a physician. The bill would expand the expenses eligible for reimbursement under these health accounts, which provide tax-favored treatment for medical expenses. JCT estimates that enacting H.R. 5842 

would reduce on-budget revenues by about $3 billion and off-budget 

revenues by about $1 billion between 2013 and 2022, thereby increasing federal budget deficits by about $4 billion over that period. 

Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. The net 

changes in revenues that are subject to those pay-as-you-go procedures are shown in the following table. Only on-budget changes to 

outlays or revenues are subject to pay-as-you-go procedures. 


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CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS OF H.R. 5842, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON MAY 31, 2012 

By fiscal year, in millions of dollars— 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012– 2017 2012– 2022 

NET INCREASE IN THE ON-BUDGET DEFICIT 

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


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Intergovernmental and private-sector impact: JCT has determined that the bill contains no intergovernmental or private-sector 

mandates as defined in UMRA. 

Estimate prepared by: Pamela Greene. 

Estimate approved by: Frank Sammartino, Assistant Director for 

Tax Analysis. 

D. MACROECONOMIC IMPACT ANALYSIS

In compliance with clause 3(h)(2) of rule XIII of the Rules of the 

House of Representatives, the following statement is made by the 

Joint Committee on Taxation with respect to the provisions of the 

bill amending the Internal Revenue Code of 1986: the effects of the 

bill on economic activity are so small as to be incalculable within 

the context of a model of the aggregate economy. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee advises that it was as a result of the Committee’s review of 

the potential impact of the limitations on the use of certain tax-advantaged accounts and arrangements for the purchase of over-thecounter medicine and the provisions of H.R. 5842 that the Committee concluded that it is appropriate to report the bill, as amended, favorably to the House of Representatives with the recommendation that the bill do pass. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for any measure authorizing 

funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the reported bill does not 

contain any Federal private sector mandates within the meaning of 

Public Law No. 104–4, the Unfunded Mandates Reform Act of 

1995. The costs required to comply with each Federal private sector 

mandate generally are no greater than the aggregate estimated 

budget effects of the provision. 

The Committee has determined that the bill does not impose a 

private sector mandate, and has determined that the bill does not 

impose a Federal intergovernmental mandate on State, local, or 

tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Clause 5(b) of rule XXI of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, 


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or conference report carrying a Federal income tax rate increase 

may not be considered as passed or agreed to unless so determined 

by a vote of not less than three-fifths of the Members voting, a 

quorum being present.’’ The Committee has carefully reviewed the 

provisions of the bill, and states that the provisions of the bill do 

not involve any Federal income tax rate increases within the meaning of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Reform and Restructuring Act of 1998 (the ‘‘IRS Reform Act’’) requires the staff 

of the Joint Committee on Taxation (in consultation with the Internal Revenue Service and the Treasury Department) to provide a 

tax complexity analysis. The complexity analysis is required for all 

legislation reported by the Senate Committee on Finance, the 

House Committee on Ways and Means, or any committee of conference if the legislation includes a provision that directly or indirectly amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. Pursuant to clause 

3(h)(1) of rule XIII of the Rules of the House of Representatives, 

for each such provision identified by the staff of the Joint Committee on Taxation, a summary description of the provision is provided along with a discussion regarding the relevant complexity 

and administrative issues. Below is a summary description of the 

provision and discussion regarding the relevant complexity and administrative issues provided by the Internal Revenue Service with 

which the staff of the Joint Committee on Taxation concurs. 


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F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

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

REPORTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle A—Income Taxes 

* * * * * * * 

CHAPTER 1—NORMAL TAXES AND SURTAXES 

* * * * * * * 

Subchapter B—Computation of Taxable Income 

* * * * * * * 

PART III—ITEMS SPECIFICALLY EXCLUDED FROM 

GROSS INCOME 

* * * * * * * 

SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH 

PLANS. 

(a) * * * 

* * * * * * * 

ø(f) REIMBURSEMENTS FOR MEDICINE RESTRICTED TO PRESCRIBED

DRUGS AND INSULIN.—For purposes of this section and section 105, 

reimbursement for expenses incurred for a medicine or a drug shall 

be treated as a reimbursement for medical expenses only if such 

medicine or drug is a prescribed drug (determined without regard 

to whether such drug is available without a prescription) or is insulin.¿ 

* * * * * * * 

PART VII—ADDITIONAL ITEMIZED DEDUCTIONS FOR 

INDIVIDUALS 

* * * * * * * 


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SEC. 220. ARCHER MSAS. 

(a) * * * 

* * * * * * * 

(d) ARCHER MSA.—For purposes of this section— 

(1) * * * 

(2) QUALIFIED MEDICAL EXPENSES.— (A) IN GENERAL.—The term ‘‘qualified medical expenses’’ 

means, with respect to an account holder, amounts paid by 

such holder for medical care (as defined in section 213(d)) 

for such individual, the spouse of such individual, and any 

dependent (as defined in section 152, determined without 

regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of 

such individual, but only to the extent such amounts are 

not compensated for by insurance or otherwise. øSuch 

term shall include an amount paid for medicine or a drug 

only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available 

without a prescription) or is insulin.¿ 

* * * * * * * 

SEC. 223. HEALTH SAVINGS ACCOUNTS. 

(a) * * * 

* * * * * * * 

(d) HEALTH SAVINGS ACCOUNT.—For purposes of this section— 

(1) * * * 

(2) QUALIFIED MEDICAL EXPENSES.— 

(A) IN GENERAL.—The term ‘‘qualified medical expenses’’ 

means, with respect to an account beneficiary, amounts 

paid by such beneficiary for medical care (as defined in 

section 213(d) for such individual, the spouse of such individual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and 

(d)(1)(B) thereof) of such individual, but only to the extent 

such amounts are not compensated for by insurance or 

otherwise. øSuch term shall include an amount paid for 

medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such 

drug is available without a prescription) or is insulin.¿ 

* * * * * * * 


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(19) 

VII. DISSENTING VIEWS 

We voted against this bill because it costs $4 billion in lost tax 

revenues and this revenue loss is not offset. When combined with 

the three other health care measures under consideration at the 

Markup, the total cost for all bills is nearly $42 billion—and the 

Majority has not set forth any options to pay for this cost. Not one 

option was set forth at the Markup. It is simply unacceptable in 

this time of fiscal austerity to not pay the cost of these bills. It is 

irresponsible to add nearly $42 billion to the deficit. 

This Markup continues the Majority’s attempt to repeal the Affordable Care Act (ACA) without offering a replacement. In January of 2009, the Majority voted to repeal and replace the ACA. If 

their replacement solution is expanded access to Health Flexible 

Spending Accounts and Health Savings Accounts, then it falls far 

short of the needs of American families. Neither Health Flexible 

Spending Accounts nor Health Savings Accounts provide health 

coverage to participants. They only provide tax breaks for certain 

health costs. They are not real solutions to the problems facing our 

nation with respect to health care and insurance coverage. 

SANDER M. LEVIN. 

CHARLES B. RANGEL. 

FORTNEY PETE STARK. 

JIM MCDERMOTT. 

JOHN B. LEWIS. 

XAVIER BECERRA. 

EARL BLUMENAUER. 


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VIII. ADDITIONAL VIEWS 

The legislation reported by the Committee repeals a prohibition 

on the use of Health Savings Accounts (HSAs), Flexible Spending 

Accounts (FSAs), and Health Reimbursement Arrangements 

(HRAs) for purchasing over-the-counter drugs without a prescription. In addition to this statutory barrier, we are concerned that 

the Internal Revenue Service (IRS) is imposing additional restrictions on the use of these tax-advantaged savings accounts through 

its interpretation of the definition of ‘‘medical care’’ in Section 

213(d) of the Code. Specifically, we understand that the IRS is currently preventing individuals and families from using HSAs, FSAs, 

HRAs, or the deduction for medical expenses exceeding 7.5% of adjusted gross income, for private umbilical cord blood banking unless 

a transplant need is imminently probable at the time of banking. 

As medical technology moves increasingly toward personalized 

cellular therapies, families that choose to bank their child’s umbilical cord blood are making an investment in their child’s healthcare 

that, in our view, clearly falls within the definition of ‘‘prevention 

of disease.’’ Further, the methodology that the IRS is currently 

using is contradictory. Expenses associated with a cord blood stem 

cell transplant are considered ‘‘medical care’’ and qualify for use 

with a tax-advantaged healthcare account or the medical expense 

deduction. However, expenses associated with collecting, processing 

and storing cord blood stem cells at the time of birth so they can 

be used for such a future transplant are not. Since umbilical cord 

blood stem cells must be collected, processed and stored prior to 

transplantation, whether such a transplant occurs imminently or in 

the future, we believe the current IRS interpretation of the law is 

conflicting and incorrect. 

We urge the IRS to closely review and consider changing its classification of private umbilical cord blood banking so that individuals and families may use HSAs, FSAs, HRAs or the deduction for 

medical expenses exceeding 7.5% of adjusted gross income, for expenses associated with the collection, processing and storage of umbilical cord blood stem cells. 

WALLY HERGER. 

RON KIND. 

Æ 


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