I
103D CONGRESS
1ST SESSION
H. R. 3333
To amend the Internal Revenue Code of 1986 to allow individuals a deduction
for contributions to a Medisave account.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 21, 1993
Mr. HOKE introduced the following bill; which was referred to the Committee
on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to allow in-
dividuals a deduction for contributions to a Medisave
account.
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 ‘‘Medisave Patient
Empowerment Act of 1993’’.
SEC. 2. MEDISAVE ACCOUNTS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions for individuals) is amended
by redesignating section 220 as section 221 and by insert-
ing after section 219 the following new section:
‘‘SEC. 220. MEDISAVE ACCOUNTS.
‘‘(a) DEDUCTION ALLOWED.—In the case of an eligi-
ble individual, there shall be allowed as a deduction the
amounts paid in cash during the taxable year by or on
behalf of such individual to a Medisave account for the
benefit of such individual and (if any) such individual’s
spouse and dependents if such spouse and dependents are
eligible individuals.
‘‘(b) LIMITATIONS.—
‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—Except as
provided in regulations prescribed by this Secretary,
no deduction shall be allowed under subsection (a)
for amounts paid to any Medisave account for the
benefit of an individual, such individual’s spouse, or
any dependent of such individual or spouse if such
individual, spouse, or dependent is a beneficiary of
any other Medisave account.
‘‘(2) DOLLAR LIMITATION.—The amount allow-
able as a deduction under subsection (a) for the tax-
able year shall not exceed the lesser of—
‘‘(A) the lowest deductible under any cata-
strophic health plan providing coverage to any
beneficiary of the Medisave account, or
‘‘(B)(i) $2,500, or
‘‘(ii) $5,000 if the catastrophic health plan
covering the taxpayer provides coverage for
more than 1 individual.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible
individual’ means any individual who is covered
under a catastrophic health plan throughout the cal-
endar year in which or with which the taxable year
ends.
‘‘(2) CATASTROPHIC HEALTH PLAN.—For pur-
poses of paragraph (1)—
‘‘(A) IN
GENERAL.—The term ‘cata-
strophic health plan’ means a health plan cover-
ing specified expenses incurred by an individual
for medical care for such individual and the
spouse and dependents (as defined in section
152) of such individual only to the extent such
expenses covered by the plan for any calendar
year exceed $1,800 ($3,600 if the catastrophic
health plan covering the taxpayer provides cov-
erage for more than 1 individual) or such high-
er amounts as may be specified by the plan.
‘‘(B) COST-OF-LIVING
ADJUSTMENT.—In
the case of any calendar year after 1994, each
dollar amount in subparagraph (A) shall be in-
creased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such
calendar year.
If any increase under the preceding sentence is
not a multiple of $50, such increase shall be
rounded to the nearest multiple of $50.
‘‘(d) MEDISAVE ACCOUNTS.—For purposes of this
section—
‘‘(1) MEDISAVE ACCOUNT.—
‘‘(A) IN GENERAL.—The term ‘Medisave
account’ means a trust created or organized in
the United States exclusively for the purpose of
paying the medical expenses of the beneficiaries
of such trust, but only if the written governing
instrument creating the trust meets the follow-
ing requirements:
‘‘(i) Except in the case of a rollover
contribution described in subsection (e)(4),
no contribution will be accepted unless it is
in cash, and contributions will not be ac-
cepted in excess of the amount allowed as
a deduction under this section for the tax-
able year (or would be allowed as such a
deduction but for subsection (c)(1)(C)).
‘‘(ii) The trustee is a bank (as defined
in section 408(n)) or another person who
demonstrates to the satisfaction of the Sec-
retary that the manner in which such per-
son will administer the trust will be con-
sistent with the requirements of this sec-
tion.
‘‘(iii) No part of the trust assets will
be invested in life insurance contracts.
‘‘(iv) The assets of the trust will not
be commingled with other property except
in a common trust fund or common invest-
ment fund.
‘‘(v) The interest of an individual in
the balance in his account is nonforfeit-
able.
‘‘(vi) Under regulations prescribed by
the Secretary, rules similar to the rules of
section 401(a)(9) shall apply to the dis-
tribution of the entire interest of bene-
ficiaries of such trust.
‘‘(B) TREATMENT
OF
COMPARABLE
AC-
COUNTS
HELD
BY
INSURANCE
COMPANIES.—
ual engages in any transaction prohibited by
section 4975 with respect to the account, the
account ceases to be a Medisave account as of
the first day of that taxable year.
‘‘(B) ACCOUNT TREATED AS DISTRIBUTING
ALL ITS ASSETS.—In any case in which any ac-
count ceases to be a Medisave account by rea-
son of subparagraph (A) on the first day of any
taxable year, paragraph (1) of subsection (e)
shall be applied as if there were a distribution
on such first day in an amount equal to the fair
market value (on such first day) of all assets in
the account (on such first day) and no portion
of such distribution were used to pay medical
expenses.
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, the individual for
whose benefit a Medisave account was established
uses the account or any portion thereof as security
for a loan, the portion so used is treated as distrib-
uted to that individual and not used to pay medical
expenses.
‘‘(g) CUSTODIAL ACCOUNTS.—For purposes of this
section, a custodial account shall be treated as a trust if—