I 
108TH CONGRESS 
1ST SESSION H. R. 2114
To amend the Internal Revenue Code of 1986 to expand medical savings 
accounts and to amend title XIX of the Social Security Act to provide 
for medical freedom accounts under the Medicaid and State children’s 
health insurance programs. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 15, 2003
Mr. BURGESS (for himself and Mr. SCOTT of Georgia) introduced the fol-
lowing bill; which was referred to the Committee on Ways and Means, 
and in addition to the Committee on Energy and Commerce, for a period 
to be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee 
concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to expand 
medical savings accounts and to amend title XIX of 
the Social Security Act to provide for medical freedom 
accounts under the Medicaid and State children’s health 
insurance programs.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Health Access and 
Flexibility Act of 2003’’.
SEC. 2. EXPANSION OF MEDICAL SAVINGS ACCOUNTS. 
(a) AVAILABILITY NOT LIMITED TO ACCOUNTS FOR 
EMPLOYEES
OF
SMALL
EMPLOYERS
AND
SELF-EM-
PLOYED INDIVIDUALS.—
(1) IN GENERAL.—Subparagraph (A) of section 
220(c)(1) of the Internal Revenue Code of 1986 (re-
lating to eligible individual) is amended to read as 
follows: 
‘‘(A) IN GENERAL.—The term ‘eligible in-
dividual’ 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 cov-
ered under a high deductible health plan, 
covered under any health plan—
‘‘(I) which is not a high deduct-
ible health plan, and 
‘‘(II) which provides coverage for 
any benefit which is covered under the 
high deductible health plan.’’. 
(2) REPEAL OF LIMITATIONS ON NUMBER OF 
MEDICAL SAVINGS ACCOUNTS.—
(A) IN GENERAL.—Subsections (i) and (j) 
of section 220 are hereby repealed.
(B) CONFORMING AMENDMENTS.—
(i) Paragraph (1) of section 220(c) of 
such Code is amended by striking subpara-
graph (D). 
(ii) Section 138 of such Code is 
amended by striking subsection (f). 
(3) CONFORMING AMENDMENTS.—
(A) Section 220(c)(1) of such Code is 
amended by striking subparagraph (C). 
(B) Section 220(c) of such Code is amend-
ed by striking paragraph (4) (defining small 
employer) and by redesignating paragraph (5) 
as paragraph (4). 
(C) Section 220(b) of such Code is amend-
ed by striking paragraph (4) (relating to deduc-
tion limited by compensation) and by redesig-
nating paragraphs (5), (6), and (7) as para-
graphs (4), (5), and (6), respectively. 
(b) REDUCTION
OF
PERMITTED
DEDUCTIBLES 
UNDER HIGH DEDUCTIBLE HEALTH PLANS.—
(1) IN GENERAL.—Subparagraph (A) of section 
220(c)(2) of such Code (defining high deductible 
health plan) is amended—
(A) in clause (i) by striking ‘‘$1,500’’ and 
inserting ‘‘$1,000’’, and
(B) in clause (ii) by striking ‘‘$3,000’’ and 
inserting ‘‘$2,000’’. 
(2) COST OF LIVING ADJUSTMENT.—Subsection 
(g) of section 220 of such Code is amended by strik-
ing ‘‘each dollar amount in subsection (c)(2) shall be 
increased’’ and inserting ‘‘the $2,250, $4,500, 
$3,000, and $5,500 amounts in subsection (c)(2)(A) 
shall each be increased’’. 
(c) INCREASE IN AMOUNT OF DEDUCTION ALLOWED 
FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.—
(1) IN
GENERAL.—Paragraph (2) of section 
220(b) of such Code is amended to read as follows: 
‘‘(2) MONTHLY LIMITATION.—The monthly lim-
itation for any month is the amount equal to 1⁄12 of 
the annual deductible under the type of coverage 
such individual has for such month.’’
(2) CONFORMING AMENDMENT.—Clause (ii) of 
section 220(d)(1)(A) of such Code is amended by 
striking ‘‘75 percent of ’’. 
(d) BOTH EMPLOYERS AND EMPLOYEES MAY CON-
TRIBUTE TO MEDICAL SAVINGS ACCOUNTS.—Paragraph 
(4) of section 220(b) of such Code (as redesignated by 
subsection (b)(2)(C)) is amended to read as follows: 
‘‘(4) COORDINATION WITH EXCLUSION FOR EM-
PLOYER
CONTRIBUTIONS.—The limitation which
would (but for this paragraph) apply under this sub-
section to the taxpayer for any taxable year shall be 
reduced (but not below zero) by the amount which 
would (but for section 106(b)) be includible in the 
taxpayer’s gross income for such taxable year.’’. 
(e) ROLLOVERS TO ARCHER MSAS FROM HEALTH 
FLEXIBLE SPENDING ARRANGEMENTS..—
(1) IN
GENERAL.—Subsection (d) of section 
220 of the Internal Revenue Code of 1986 (defining 
Archer MSA) is amended by redesignating para-
graph (4) as paragraph (5) and by inserting after 
paragraph (3) the following new paragraph: 
‘‘(4) SPECIAL
RULE
FOR
ROLLOVERS
FROM 
HEALTH FLEXIBLE SPENDING ACCOUNTS.—A roll-
over contribution described in this paragraph is a 
transfer from a flexible spending account (as defined 
in section 125(h)) to the extent the amount received 
is paid into an Archer MSA for the benefit of such 
holder not later than the 60th day after the day on
which the holder receives the payment or distribu-
tion.’’. 
(2) ROLLOVER OF UNUSED HEALTH BENEFITS 
IN CAFETERIA PLANS AND FLEXIBLE SPENDING AR-
RANGEMENTS.—
(A) IN
GENERAL.—Section 125 of such 
Code (relating to cafeteria plans) is amended by 
redesignating subsections (h) and (i) as sub-
sections (i) and (j), respectively, and by insert-
ing after subsection (g) the following: 
‘‘(h) ROLLOVER TO ARCHER MEDICAL SAVINGS AC-
COUNTS 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, with respect to 
any plan year, health benefits which are unused at 
the end of such year may be transferred to an Ar-
cher MSA of the employee. 
‘‘(2) TAX
TREATMENT
OF
UNUSED
HEALTH 
BENEFITS.—Amounts transferred under paragraph 
(1) to an Archer MSA shall not be includible in 
gross income for such taxable year and shall not be 
treated as a contribution for purposes of section 
220(a). 
‘‘(3) HEALTH FLEXIBLE SPENDING ARRANGE-
MENT.—For purposes of this subsection, the term 
‘health flexible spending arrangement’ means a flexi-
ble spending arrangement (as defined in section
106(c)) that is a qualified benefit and only permits 
reimbursement for expenses for medical care (as de-
fined in section 213(d)(1) (without regard to sub-
paragraphs (C) and (D) thereof). 
‘‘(4) UNUSED
HEALTH
BENEFITS.—For pur-
poses of this subsection, the term ‘unused health 
benefits’ means the excess of—
‘‘(A) the maximum amount of reimburse-
ment allowable for a plan year under a health 
flexible spending arrangement, over 
‘‘(B) the actual amount of reimbursement 
for such year under such arrangement.’’. 
(B) CONFORMING
AMENDMENT.—Section 
220(d)(1)(A) of such Code is amended by in-
serting ‘‘described in paragraph (4) or’’ after 
‘‘contribution’’. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 3. MEDICAL FREEDOM ACCOUNTS UNDER THE MED-
ICAID PROGRAM AND UNDER THE STATE 
CHILDREN’S HEALTH INSURANCE PROGRAM 
(SCHIP). 
(a) IN GENERAL.—Title XIX of the Social Security 
Act is amended—
(1) by redesignating section 1935 as section 
1936; and 
(2) by inserting after section 1934 the following 
new section: 
‘‘MEDICAL FREEDOM ACCOUNTS 
‘‘SEC. 1935. (a) AUTHORITY.—
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of this title, a State may amend its State 
plan under this title (including in a Statewide waiver 
under section 1115 relating to this title) to provide 
in accordance with this section for the provision of 
alternative benefits consistent with subsection (c) for 
eligible population groups in one or more geographic 
areas of the State specified by the State. An amend-
ment under the previous sentence is referred to in 
this section as a ‘State plan amendment’. 
‘‘(2) APPROVAL.—The Secretary shall not ap-
prove a State plan amendment under paragraph (1) 
unless the amendment incorporates the following: 
‘‘(A) Creating patient awareness of the 
high cost of medical care. 
‘‘(B) Providing incentives to patients to 
seek preventive care services. 
‘‘(C) Reduction in inappropriate use of 
health care services.
‘‘(D) Enabling patients to take responsi-
bility for health outcomes. 
‘‘(b) ELIGIBLE POPULATIONS GROUPS.—The State 
plan amendment under this section shall specify the eligi-
ble population groups. 
‘‘(c) ALTERNATIVE BENEFITS.—
‘‘(1) IN
GENERAL.—The alternative benefits 
provided under this section shall consist of at 
least—
‘‘(A) coverage for medical expenses in a 
year after a catastrophic deductible has been 
met; and 
‘‘(B) contribution into a medical freedom 
account. 
‘‘(2) OVERRIDING
EXISTING
BENEFITS.—The 
provisions of this title relating to mandated benefits 
or cost-sharing or comparability of benefits (includ-
ing sections 1902(a)(10) and 1916) shall not apply
to an individual or family being provided alternative 
benefits under this section. 
‘‘(3) TREATMENT AS MEDICAL ASSISTANCE.—
Payments for alternative benefits under this section 
(including contributions into a medical freedom ac-
count) shall be treated as medical assistance for pur-
poses of section 1903(a).
‘‘(d) MEDICAL FREEDOM ACCOUNT.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘medical freedom account’ means an 
account that meets the requirements of this sub-
section. 
‘‘(2) CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—No contribution may 
be made into a medical freedom account ex-
cept—
‘‘(i) contributions by the State under 
this title; and 
‘‘(ii) contributions by an employer, 
which may not exceed, in the case of an in-
dividual otherwise eligible for benefits 
under this title, $1,000 per account per 
year. 
‘‘(B) LIMITATION.—In no case may a con-
tribution be made into a medical freedom ac-
count if the balance in such account exceeds 
$3,500, in the case of an account for an indi-
vidual, or $5,500, in the case of an account for 
a family. 
‘‘(3) USE.—
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this paragraph, amounts
in a medical freedom account may be used only 
for the payment of medical care (as defined by 
section 213(d) of the Internal Revenue Code of 
1986), and may only be used for expenses in 
the year in which the contribution was made. 
The State plan amendment shall provide for a 
method whereby withdrawals may be made from 
the account for such purposes using an elec-
tronic benefits transfer (EBT) system. 
‘‘(B) ROLLOVER PERMITTED.—
‘‘(i) IN GENERAL.—Subject to clause 
(ii), amounts in a medical freedom account 
at the end of a year may be rolled over and 
used in the following year. 
‘‘(ii) PREVENTIVE CARE MAY BE RE-
QUIRED
FOR
ROLLOVER
FOR
MEDICAID 
BENEFICIARIES.—In the case of an ac-
count holder who is eligible for benefits 
under this title in December of a year, 
amounts in the medical freedom account at 
the end of the year may be rolled over and 
used in the following year only apply if the 
account holder meets such preventive care 
requirements as is provided under the 
State plan amendment.
‘‘(C) MAINTENANCE
OF
MEDICAL
FREE-
DOM
ACCOUNT
AFTER
BECOMING
INELIGIBLE 
FOR
PUBLIC
BENEFIT.—Notwithstanding any 
other provision of law, if an account holder of 
a medical freedom account becomes ineligible 
for benefits under this title because of an in-
crease in income or assets, no additional con-
tribution shall be made into the account under 
paragraph (2)(A)(i) but the account shall re-
main available to the account holder for with-
drawals under the same terms and conditions 
as if the account holder remained eligible for 
such benefits, except that the amounts in the 
account shall be available for the purchase of 
health insurance coverage. An account holder of 
a medical freedom account, after becoming so 
ineligible, is not required to purchase high-de-
ductible or other insurance as a condition of 
maintaining or using the account. 
‘‘(4) ADMINISTRATION.—A State shall coordi-
nate administration of medical freedom accounts 
through the use of a third party administrator. 
‘‘(5) TREATMENT.—Amounts in a medical free-
dom account shall not be counted as income or as-
sets for purposes of determining eligibility for bene-
fits under this title. 
‘‘(6) UNAUTHORIZED WITHDRAWALS.—A State 
may establish procedures—
‘‘(A) to penalize or remove an individual 
from the medical freedom account program 
based on nonqualified withdrawals by the indi-
vidual from such an account; and 
‘‘(B) to recoup costs that derive from such 
nonqualified withdrawals.’’. 
(b) APPLICATION UNDER THE STATE CHILDREN’S 
HEALTH
INSURANCE
PROGRAM
(SCHIP).—Section 
2107(e)(1) of the Social Security Act (42 U.S.C. 
1397gg(e)(1)) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(E) Section 1935 (relating to medical 
freedom accounts).’’. 
(c) EXCLUSION FROM GROSS INCOME
FOR EM-
PLOYER CONTRIBUTIONS
TO MEDICAL FREEDOM AC-
COUNTS.—Section 106 of the Internal Revenue Code of 
1986 (relating to contributions by employer to accident 
and health plans) is amended by adding at the end the 
following new subsection: 
‘‘(d) CONTRIBUTIONS TO MEDICAL FREEDOM AC-
COUNTS.—
‘‘(1) IN GENERAL.—In the case of an employee 
who is an eligible individual, amounts contributed by 
such employee’s employer to any medical freedom 
account of such employee shall be treated as em-
ployer-provided coverage for medical expenses under 
an accident or health plan to the extent such 
amounts do not exceed the limitation under section 
1935(d)(2) of the Social Security Act which is appli-
cable to such employee for such taxable year. 
‘‘(2) NO CONSTRUCTIVE RECEIPT.—No amount 
shall be included in the gross income of any em-
ployee solely because the employee may choose be-
tween the contributions referred to in paragraph (1) 
and employer contributions to another health plan of 
the employer. 
‘‘(3) EMPLOYER MEDICAL FREEDOM ACCOUNT 
CONTRIBUTION
REQUIRED
TO
BE
SHOWN
ON
RE-
TURN.—Every individual required to file a return 
under section 6012 for the taxable year shall include 
on such return the aggregate amount contributed by 
employers to the medical freedom accounts of such 
individual or such individual’s spouse for such tax-
able year.
‘‘(4) CONTRIBUTIONS
NOT
PART
OF
COBRA 
COVERAGE.—Paragraph (1) shall not apply for pur-
poses of section 4980B. 
‘‘(5) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) ELIGIBLE
INDIVIDUAL.—The term 
‘eligible individual’ means an individual for 
whose benefit a medical freedom account is es-
tablished under section 1935 of the Social Secu-
rity Act. 
‘‘(B) MEDICAL FREEDOM ACCOUNT.—The 
term ‘medical freedom account’ has the mean-
ing given to such term by section 1935 of the 
Social Security Act.’’.
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