I 
112TH CONGRESS 
1ST SESSION H. R. 2010 
To amend the Internal Revenue Code of 1986 to improve access to health 
care through expanded health savings accounts, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 26, 2011 
Mr. PAULSEN (for himself, Mr. TIBERI, Ms. GRANGER, Mr. CULBERSON, Mr. 
BURTON of Indiana, Mr. FRANKS of Arizona, Mr. MCHENRY, Mr. FLEM-
ING, Mr. GARRETT, Mr. GOHMERT, Ms. HERRERA BEUTLER, Mr. 
LUETKEMEYER, Mr. DANIEL E. LUNGREN of California, Mr. MANZULLO, 
Mr. PEARCE, Mr. CHAFFETZ, Mr. PAUL, Mr. ROSKAM, Mrs. LUMMIS, 
Mrs. MCMORRIS RODGERS, Mr. WESTMORELAND, Mr. BRADY of Texas, 
Mr. DENT, Mrs. BIGGERT, Mr. LANCE, and Mr. ROONEY) introduced the 
following bill; which was referred to the Committee on Ways and Means, 
and in addition to the Committees on the Judiciary and Energy and 
Commerce, for a period to be subsequently determined by the Speaker, 
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to improve 
access to health care through expanded health savings 
accounts, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Family and Retirement Health Investment Act of 2011’’. 
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(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents is 
as follows: 
Sec. 1. Short title, etc. 
TITLE I—PROVISIONS RELATING TO TAX-PREFERRED HEALTH 
ACCOUNTS 
Sec. 101. Allow both spouses to make catch-up contributions to the same HSA 
account. 
Sec. 102. Provisions relating to Medicare. 
Sec. 103. Individuals eligible for veterans benefits for a service-connected dis-
ability. 
Sec. 104. Individuals eligible for Indian Health Service assistance. 
Sec. 105. Individuals eligible for TRICARE coverage. 
Sec. 106. Health FSA carryforwards. 
Sec. 107. FSA and HRA interaction with HSAs. 
Sec. 108. Allowance of distributions for prescription and over-the-counter medi-
cines and drugs. 
Sec. 109. Purchase of health insurance from HSA account. 
Sec. 110. Special rule for certain medical expenses incurred before establish-
ment of account. 
Sec. 111. Preventive care prescription drug clarification. 
Sec. 112. Equivalent bankruptcy protections for health savings accounts as re-
tirement funds. 
Sec. 113. Administrative error correction before due date of return. 
Sec. 114. Reauthorization of medicaid health opportunity accounts. 
TITLE II—OTHER PROVISIONS 
Sec. 121. Certain exercise equipment and physical fitness programs treated as 
medical care. 
Sec. 122. Certain nutritional and dietary supplements to be treated as medical 
care. 
Sec. 123. Certain provider fees to be treated as medical care. 
Sec. 124. Repeal of annual limitations on deductibles for employer-sponsored 
plans offered in small group market. 
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TITLE I—PROVISIONS RELATING 
TO TAX-PREFERRED HEALTH 
ACCOUNTS 
SEC. 101. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CON-
TRIBUTIONS TO THE SAME HSA ACCOUNT. 
(a) IN GENERAL.—Paragraph (3) of section 223(b) 
is amended by adding at the end the following new sub-
paragraph: 
‘‘(C) 
SPECIAL
RULE
WHERE
BOTH 
SPOUSES ARE ELIGIBLE INDIVIDUALS WITH 1 
ACCOUNT.—If— 
‘‘(i) an individual and the individual’s 
spouse have both attained age 55 before 
the close of the taxable year, and 
‘‘(ii) the spouse is not an account ben-
eficiary of a health savings account as of 
the close of such year, 
the additional contribution amount shall be 200 
percent of the amount otherwise determined 
under subparagraph (B).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 102. PROVISIONS RELATING TO MEDICARE. 
(a) INDIVIDUALS OVER AGE 65 ONLY ENROLLED IN 
MEDICARE PART A.—Paragraph (7) of section 223(b) is 
amended by adding at the end the following: ‘‘This para-
graph shall not apply to any individual during any period 
for which the individual’s only entitlement to such benefits 
is an entitlement to hospital insurance benefits under part 
A of title XVIII of such Act pursuant to an enrollment 
for such hospital insurance benefits under section 
226(a)(1) of such Act.’’. 
(b) MEDICARE BENEFICIARIES PARTICIPATING
IN 
MEDICARE ADVANTAGE MSA MAY CONTRIBUTE THEIR 
OWN MONEY TO THEIR MSA.—Subsection (b) of section 
138 is amended by striking paragraph (2) and by redesig-
nating paragraphs (3) and (4) as paragraphs (2) and (3), 
respectively. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 103. INDIVIDUALS ELIGIBLE FOR VETERANS BENE-
FITS 
FOR 
A 
SERVICE-CONNECTED 
DIS-
ABILITY. 
(a) IN GENERAL.—Paragraph (1) of section 223(c) 
is amended by adding at the end the following new sub-
paragraph: 
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‘‘(C) SPECIAL RULE FOR INDIVIDUALS ELI-
GIBLE
FOR
CERTAIN
VETERANS
BENEFITS.— 
For purposes of subparagraph (A)(ii), an indi-
vidual shall not be treated as covered under a 
health plan described in such subparagraph 
merely because the individual receives periodic 
hospital care or medical services for a service- 
connected disability under any law administered 
by the Secretary of Veterans Affairs but only if 
the individual is not eligible to receive such care 
or services for any condition other than a serv-
ice-connected disability.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 104. INDIVIDUALS ELIGIBLE FOR INDIAN HEALTH 
SERVICE ASSISTANCE. 
(a) IN GENERAL.—Paragraph (1) of section 223(c), 
as amended by section 103, is amended by adding at the 
end the following new subparagraph: 
‘‘(D) SPECIAL RULE FOR INDIVIDUALS EL-
IGIBLE
FOR
ASSISTANCE
UNDER
INDIAN 
HEALTH SERVICE PROGRAMS.—For purposes of 
subparagraph (A)(ii), an individual shall not be 
treated as covered under a health plan de-
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scribed in such subparagraph merely because 
the individual receives hospital care or medical 
services under a medical care program of the 
Indian Health Service or of a tribal organiza-
tion.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 105. INDIVIDUALS ELIGIBLE FOR TRICARE COVERAGE. 
(a) IN GENERAL.—Paragraph (1) of section 223(c), 
as amended by sections 103 and 104, is amended by add-
ing at the end the following new subparagraph: 
‘‘(E) SPECIAL RULE FOR INDIVIDUALS EL-
IGIBLE FOR ASSISTANCE UNDER TRICARE.—For 
purposes of subparagraph (A)(ii), an individual 
shall not be treated as covered under a health 
plan described in such subparagraph merely be-
cause the individual is eligible to receive hos-
pital care, medical services, or prescription 
drugs under TRICARE Extra or TRICARE 
Standard and such individual is not enrolled in 
TRICARE Prime.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 106. HEALTH FSA CARRYFORWARDS. 
(a) IN GENERAL.—Section 125 is amended by redes-
ignating subsections (i) and (j) as subsections (j) and (k), 
respectively, and by inserting after subsection (h) the fol-
lowing new subsection: 
‘‘(i) SPECIAL
RULES
APPLICABLE
TO
HEALTH 
FLEXIBLE SPENDING ARRANGEMENTS.— 
‘‘(1) IN GENERAL.—For purposes of this title, 
a plan or other arrangement shall not fail to be 
treated as a health flexible spending or similar ar-
rangement solely because under the plan or arrange-
ment a participant is permitted access to any unused 
balance in the participant’s accounts under such 
plan or arrangement in the manner provided under 
paragraph (2). 
‘‘(2) CARRYFORWARD OF UNUSED BENEFITS IN 
HEALTH ARRANGEMENTS.— 
‘‘(A) IN
GENERAL.—A plan or arrange-
ment may permit a participant in a health flexi-
ble spending arrangement to elect to carry for-
ward any aggregate unused balances in the par-
ticipant’s accounts under such arrangement as 
of the close of any year to the succeeding year. 
Such carryforward shall be treated as having 
occurred within 30 days of the close of the year. 
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‘‘(B) 
DOLLAR
LIMIT
ON 
CARRYFORWARDS.— 
‘‘(i) IN GENERAL.—The amount which 
a participant may elect to carry forward 
under subparagraph (A) from any year 
shall not exceed $500. For purposes of this 
paragraph, all plans and arrangements 
maintained by an employer or any related 
person shall be treated as 1 plan. 
‘‘(ii) COST-OF-LIVING ADJUSTMENT.— 
In the case of any taxable year beginning 
in a calendar year after 2011, the $500 
amount under clause (i) shall be increased 
by an amount equal to— 
‘‘(I) $500, multiplied by 
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3) 
for such calendar year, determined by 
substituting ‘2010’ for ‘1992’ in sub-
paragraph (B) thereof. 
If any dollar amount as increased under 
this clause is not a multiple of $100, such 
amount shall be rounded to the next lowest 
multiple of $100. 
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‘‘(C) EXCLUSION FROM GROSS INCOME.— 
No amount shall be required to be included in 
gross income under this chapter by reason of 
any carryforward under this paragraph. 
‘‘(D) COORDINATION WITH LIMITS.—The 
maximum amount which may be contributed to 
a health flexible spending arrangement for any 
year to which an unused amount is carried 
under this paragraph shall be reduced by such 
amount. 
‘‘(3) TERMS RELATING TO FLEXIBLE SPENDING 
ARRANGEMENTS.— 
‘‘(A) 
FLEXIBLE
SPENDING
ARRANGE-
MENTS.—For purposes of this subsection, a 
flexible spending arrangement is a benefit pro-
gram which provides employees with coverage 
under which specified incurred expenses may be 
reimbursed (subject to reimbursement maxi-
mums and other reasonable conditions). 
‘‘(B) HEALTH ARRANGEMENTS.—The term 
‘health flexible spending arrangement’ means 
any flexible spending arrangement (or portion 
thereof) which provides payments for expenses 
incurred for medical care (as defined in section 
213(d)).’’. 
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(b) CONFORMING AMENDMENTS.— 
(1) The heading for section 125 of the Internal 
Revenue Code of 1986 is amended by inserting 
‘‘AND HEALTH FLEXIBLE SPENDING ARRANGE-
MENTS’’ after ‘‘PLANS’’. 
(2) The item relating to section 125 in the table 
of sections for part III of subchapter B of chapter 
1 of such Code is amended by inserting ‘‘and health 
flexible spending arrangements’’ after ‘‘plans’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 107. FSA AND HRA INTERACTION WITH HSAS. 
(a) ELIGIBLE INDIVIDUALS INCLUDE FSA AND HRA 
PARTICIPANTS.—Subparagraph (B) of section 223(c)(1) 
is amended— 
(1) by striking ‘‘and’’ at the end of clause (ii), 
(2) by striking the period at the end of clause 
(iii) and inserting ‘‘, and’’, and 
(3) by inserting after clause (iii) the following 
new clause: 
‘‘(iv) coverage under a health flexible 
spending arrangement or a health reim-
bursement arrangement in the plan year a 
qualified HSA distribution as described in 
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section 106(e) is made on behalf of the in-
dividual if after the qualified HSA dis-
tribution is made and for the remaining 
duration of the plan year, the coverage 
provided under the health flexible spending 
arrangement or health reimbursement ar-
rangement is converted to— 
‘‘(I) coverage that does not pay 
or reimburse any medical expense in-
curred before the minimum annual de-
ductible under paragraph (2)(A)(i) 
(prorated for the period occurring 
after the qualified HSA distribution is 
made) is satisfied, 
‘‘(II) coverage that, after the 
qualified HSA distribution is made, 
does not pay or reimburse any med-
ical expense incurred after the quali-
fied HSA distribution is made other 
than preventive care as defined in 
paragraph (2)(C), 
‘‘(III) coverage that, after the 
qualified HSA distribution is made, 
pays or reimburses benefits for cov-
erage described in clause (ii) (but not 
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through insurance or for long-term 
care services), 
‘‘(IV) coverage that, after the 
qualified HSA distribution is made, 
pays or reimburses benefits for per-
mitted insurance or coverage de-
scribed in clause (ii) (but not for long- 
term care services), 
‘‘(V) coverage that, after the 
qualified HSA distribution is made, 
pays or reimburses only those medical 
expenses incurred after an individual’s 
retirement (and no expenses incurred 
before retirement), or 
‘‘(VI) coverage that, after the 
qualified HSA distribution is made, is 
suspended, pursuant to an election 
made on or before the date the indi-
vidual elects a qualified HSA distribu-
tion or, if later, on the date of the in-
dividual enrolls in a high deductible 
health plan, that does not pay or re-
imburse, at any time, any medical ex-
pense incurred during the suspension 
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period except as defined in the pre-
ceding subclauses of this clause.’’. 
(b) QUALIFIED HSA DISTRIBUTION SHALL NOT AF-
FECT FLEXIBLE SPENDING ARRANGEMENT.—Paragraph 
(1) of section 106(e) is amended to read as follows: 
‘‘(1) IN GENERAL.—A plan shall not fail to be 
treated as a health flexible spending arrangement 
under this section, section 105, or section 125, or as 
a health reimbursement arrangement under this sec-
tion or section 105, merely because such plan pro-
vides for a qualified HSA distribution.’’. 
(c) FSA BALANCES AT YEAR END SHALL NOT FOR-
FEIT.—Paragraph (2) of section 125(d) is amended by 
adding at the end the following new subparagraph: 
‘‘(E) EXCEPTION FOR QUALIFIED HSA DIS-
TRIBUTIONS.—Subparagraph 
(A) 
shall 
not 
apply to the extent that there is an amount re-
maining in a health flexible spending account at 
the end of a plan year that an individual elects 
to contribute to a health savings account pursu-
ant to a qualified HSA distribution (as defined 
in section 106(e)(2)).’’. 
(d) SIMPLIFICATION OF LIMITATIONS ON FSA AND 
HRA ROLLOVERS.—Paragraph (2) of section 106(e) is 
amended to read as follows: 
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‘‘(2) QUALIFIED HSA DISTRIBUTION.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
HSA distribution’ means a distribution from a 
health flexible spending arrangement or health 
reimbursement arrangement to the extent that 
such distribution does not exceed the lesser 
of— 
‘‘(i) the balance in such arrangement 
as of the date of such distribution, or 
‘‘(ii) the amount determined under 
subparagraph (B). 
Such term shall not include more than 1 dis-
tribution with respect to any arrangement. 
‘‘(B) DOLLAR LIMITATIONS.— 
‘‘(i) DISTRIBUTIONS FROM A HEALTH 
FLEXIBLE
SPENDING
ARRANGEMENT.—A 
qualified HSA distribution from a health 
flexible spending arrangement shall not ex-
ceed the applicable amount. 
‘‘(ii) DISTRIBUTIONS FROM A HEALTH 
REIMBURSEMENT
ARRANGEMENT.—A 
qualified HSA distribution from a health 
reimbursement arrangement shall not ex-
ceed— 
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‘‘(I) the applicable amount di-
vided by 12, multiplied by 
‘‘(II) the number of months dur-
ing which the individual is a partici-
pant in the health reimbursement ar-
rangement. 
‘‘(iii) 
APPLICABLE
AMOUNT.—For 
purposes of this subparagraph, the applica-
ble amount is— 
‘‘(I) $2,250 in the case of an eli-
gible individual who has self-only cov-
erage under a high deductible health 
plan at the time of such distribution, 
and 
‘‘(II) $4,500 in the case of an eli-
gible individual who has family cov-
erage under a high deductible health 
plan at the time of such distribu-
tion.’’. 
(e) ELIMINATION OF ADDITIONAL TAX FOR FAILURE 
TO MAINTAIN HIGH DEDUCTIBLE HEALTH PLAN COV-
ERAGE.—Subsection (e) of section 106 is amended— 
(1) by striking paragraph (3) and redesignating 
paragraphs (4) and (5) as paragraphs (3) and (4), 
respectively, and 
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(2) by striking subparagraph (A) of paragraph 
(3), as so redesignated, and redesignating subpara-
graphs (B) and (C) of such paragraph as subpara-
graphs (A) and (B) thereof, respectively. 
(f) LIMITED PURPOSE FSAS
AND HRAS.—Sub-
section (e) of section 106, as amended by this section, is 
amended by adding at the end the following new para-
graph: 
‘‘(5) LIMITED PURPOSE FSAS AND HRAS.—A 
plan shall not fail to be a health flexible spending 
arrangement or health reimbursement arrangement 
under this section or section 105 merely because the 
plan converts coverage for individuals who enroll in 
a high deductible health plan described in section 
223(c)(2) 
to 
coverage 
described 
in 
section 
223(c)(1)(B)(iv). Coverage for such individuals may 
be converted as of the date of enrollment in the high 
deductible health plan, without regard to the period 
of coverage under the health flexible spending ar-
rangement or health reimbursement arrangement, 
and without requiring any change in coverage to in-
dividuals who do not enroll in a high deductible 
health plan.’’. 
(g) DISTRIBUTION AMOUNTS ADJUSTED FOR COST- 
OF-LIVING.—Subsection (e) of section 106, as amended 
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by this section, is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(6) COST-OF-LIVING ADJUSTMENT.— 
‘‘(A) IN
GENERAL.—In the case of any 
taxable year beginning after December 31, 
2011, each of the dollar amounts in paragraph 
(2)(B)(iii) shall be increased by an amount 
equal to such dollar amount, multiplied by the 
cost-of-living adjustment determined under sec-
tion 1(f)(3) for the calendar year in which such 
taxable year begins by substituting ‘calendar 
year 2010’ for ‘calendar year 1992’ in subpara-
graph (B) thereof. 
‘‘(B) ROUNDING.—If any increase under 
paragraph (1) is not a multiple of $50, such in-
crease shall be rounded to the nearest multiple 
of $50.’’. 
(h) DISCLAIMER OF DISQUALIFYING COVERAGE.— 
Subparagraph (B) of section 223(c)(1), as amended by 
this section, is amended— 
(1) by striking ‘‘and’’ at the end of clause (iii), 
(2) by striking the period at the end of clause 
(iv) and inserting ‘‘, and’’, and 
(3) by inserting after clause (iv) the following 
new clause: 
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‘‘(v) any coverage (including prospec-
tive coverage) under a health plan that is 
not a high deductible health plan which is 
disclaimed in writing, at the time of the 
creation or organization of the health sav-
ings account, including by execution of a 
trust 
described 
in 
subsection 
(d)(1) 
through a governing instrument that in-
cludes such a disclaimer, or by acceptance 
of an amendment to such a trust that in-
cludes such a disclaimer.’’. 
(i) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 108. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIP-
TION AND OVER-THE-COUNTER MEDICINES 
AND DRUGS. 
(a) REPEAL
OF DISTRIBUTIONS
FOR MEDICINE 
QUALIFIED ONLY IF FOR PRESCRIBED DRUG OR INSU-
LIN.—Section 9003 of the Patient Protection and Afford-
able Care Act (Public Law 111–148) and the amendments 
made by such section are repealed and the Internal Rev-
enue Code of 1986 shall be applied as if such section and 
amendments had never been enacted. 
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(b) ALLOWANCE OF DISTRIBUTIONS FOR ALL MEDI-
CINES AND DRUGS.— 
(1) HSAS.—Subparagraph (A) of section 
223(d)(2) is amended by adding at the end the fol-
lowing: ‘‘Such term shall include an amount paid for 
any prescription or over-the-counter medicine or 
drug.’’. 
(2) ARCHER MSAS.—Subparagraph (A) of sec-
tion 220(d)(2) is amended by adding at the end the 
following: ‘‘Such term shall include an amount paid 
for any prescription or over-the-counter medicine or 
drug.’’. 
(3) HEALTH
FLEXIBLE
SPENDING
ARRANGE-
MENTS
AND
HEALTH
REIMBURSEMENT
ARRANGE-
MENTS.—Section 106 is amended by adding at the 
end the following new subsection: 
‘‘(f) REIMBURSEMENTS FOR ALL MEDICINES AND 
DRUGS.—For purposes of this section and section 105, 
reimbursement for expenses incurred for any prescription 
or over-the-counter medicine or drug shall be treated as 
a reimbursement for medical expenses.’’. 
(4) EFFECTIVE DATES.— 
(A) DISTRIBUTIONS
FROM
SAVINGS
AC-
COUNTS.—The amendments made by para-
graphs (1) and (2) shall apply to amounts paid 
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with respect to taxable years beginning after 
December 31, 2009. 
(B) REIMBURSEMENTS.—The amendment 
made by paragraph (3) shall apply to expenses 
incurred with respect to taxable years beginning 
after December 31, 2009. 
SEC. 109. PURCHASE OF HEALTH INSURANCE FROM HSA 
ACCOUNT. 
(a) IN GENERAL.—Paragraph (2) of section 223(d) 
is amended to read as follows: 
‘‘(2) QUALIFIED MEDICAL EXPENSES.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
medical expenses’ means, with respect to an ac-
count beneficiary, amounts paid by such bene-
ficiary for medical care (as defined in section 
213(d)) for any individual covered by a high de-
ductible health plan of the account beneficiary, 
but only to the extent such amounts are not 
compensated for by insurance or otherwise. 
‘‘(B) HEALTH
INSURANCE
MAY
NOT
BE 
PURCHASED FROM ACCOUNT.—Except as pro-
vided in subparagraph (C), subparagraph (A) 
shall not apply to any payment for insurance. 
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‘‘(C) 
EXCEPTIONS.—Subparagraph 
(B) 
shall not apply to any expense for coverage 
under— 
‘‘(i) a health plan during any period 
of continuation coverage required under 
any Federal law, 
‘‘(ii) a qualified long-term care insur-
ance contract (as defined in section 
7702B(b)), 
‘‘(iii) a health plan during any period 
in which the individual is receiving unem-
ployment compensation under any Federal 
or State law, 
‘‘(iv) a high deductible health plan, or 
‘‘(v) any health insurance under title 
XVIII of the Social Security Act, other 
than a Medicare supplemental policy (as 
defined in section 1882 of such Act).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to insurance pur-
chased after the date of the enactment of this Act in tax-
able years beginning after such date. 
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SEC. 110. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 
INCURRED BEFORE ESTABLISHMENT OF AC-
COUNT. 
(a) IN GENERAL.—Paragraph (2) of section 223(d), 
as amended by section 109, is amended by adding at the 
end the following new subparagraph: 
‘‘(D) CERTAIN
MEDICAL
EXPENSES
IN-
CURRED BEFORE ESTABLISHMENT OF ACCOUNT 
TREATED AS QUALIFIED.—An expense shall not 
fail to be treated as a qualified medical expense 
solely because such expense was incurred before 
the establishment of the health savings account 
if such expense was incurred— 
‘‘(i) during either— 
‘‘(I) the taxable year in which the 
health savings account was estab-
lished, or 
‘‘(II) the preceding taxable year 
in the case of a health savings ac-
count established after the taxable 
year in which such expense was in-
curred but before the time prescribed 
by law for filing the return for such 
taxable year (not including extensions 
thereof), and 
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‘‘(ii) for medical care of an individual 
during a period that such individual was 
covered by a high deductible health plan 
and met the requirements of subsection 
(c)(1)(A)(ii) (after application of sub-
section (c)(1)(B)).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 111. PREVENTIVE CARE PRESCRIPTION DRUG CLARI-
FICATION. 
(a) CLARIFY
USE
OF
DRUGS
IN
PREVENTIVE 
CARE.—Subparagraph (C) of section 223(c)(2) is amend-
ed by adding at the end the following: ‘‘Preventive care 
shall include prescription and over-the-counter drugs and 
medicines which have the primary purpose of preventing 
the onset of, further deterioration from, or complications 
associated with chronic conditions, illnesses, or diseases.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
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SEC. 112. EQUIVALENT BANKRUPTCY PROTECTIONS FOR 
HEALTH SAVINGS ACCOUNTS AS RETIRE-
MENT FUNDS. 
(a) IN GENERAL.—Section 522 of title 11, United 
States Code, is amended by adding at the end the fol-
lowing new subsection: 
‘‘(r) 
TREATMENT
OF
HEALTH
SAVINGS
AC-
COUNTS.—For purposes of this section, any health savings 
account (as described in section 223 of the Internal Rev-
enue Code of 1986) shall be treated in the same manner 
as an individual retirement account described in section 
408 of such Code.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to cases commencing under title 
11, United States Code, after the date of the enactment 
of this Act. 
SEC. 113. ADMINISTRATIVE ERROR CORRECTION BEFORE 
DUE DATE OF RETURN. 
(a) IN GENERAL.—Paragraph (4) of section 223(f) 
is amended by adding at the end the following new sub-
paragraph: 
‘‘(D) EXCEPTION
FOR
ADMINISTRATIVE 
ERRORS CORRECTED BEFORE DUE DATE OF RE-
TURN.—Subparagraph (A) shall not apply if 
any payment or distribution is made to correct 
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an administrative, clerical or payroll contribu-
tion error and if— 
‘‘(i) such distribution is received by 
the individual on or before the last day 
prescribed by law (including extensions of 
time) for filing such individual’s return for 
such taxable year, and 
‘‘(ii) such distribution is accompanied 
by the amount of net income attributable 
to such contribution. 
Any net income described in clause (ii) shall be 
included in the gross income of the individual 
for the taxable year in which it is received.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 114. REAUTHORIZATION OF MEDICAID HEALTH OP-
PORTUNITY ACCOUNTS. 
(a) IN GENERAL.—Section 1938 of the Social Secu-
rity Act (42 U.S.C. 1396u–8) is amended— 
(1) in subsection (a)— 
(A) by striking paragraph (2) and insert-
ing the following: 
‘‘(2) INITIAL
DEMONSTRATION.—The dem-
onstration program under this section shall begin on 
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January 1, 2007. The Secretary shall approve States 
to conduct demonstration programs under this sec-
tion for a 5-year period, with each State demonstra-
tion program covering 1 or more geographic areas 
specified by the State. With respect to a State, after 
the initial 5-year period of any demonstration pro-
gram conducted under this section by the State, un-
less the Secretary finds, taking into account cost-ef-
fectiveness and quality of care, that the State dem-
onstration program has been unsuccessful, the dem-
onstration program may be extended or made per-
manent in the State.’’; and 
(B) in paragraph (3), in the matter pre-
ceding subparagraph (A)— 
(i) by striking ‘‘not’’; and 
(ii) by striking ‘‘unless’’ and inserting 
‘‘if’’; 
(2) in subsection (b)— 
(A) in paragraph (3), by inserting ‘‘clause 
(i) through (vii), (viii) (without regard to the 
amendment made by section 2004(c)(2) of Pub-
lic Law 111–148), (x), or (xi) of’’ after ‘‘de-
scribed in’’; and 
(B) by striking paragraphs (4), (5), and 
(6); 
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(3) in subsection (c)— 
(A) by striking paragraphs (3) and (4); 
(B) 
by 
redesignating 
paragraphs 
(5) 
through (8) as paragraphs (3) through (6), re-
spectively; and 
(C) in paragraph (4) (as redesignated by 
subparagraph (B)), by striking ‘‘Subject to sub-
paragraphs (D) and (E)’’ and inserting ‘‘Sub-
ject to subparagraph (D)’’; and 
(4) in subsection (d)— 
(A) in paragraph (2), by striking subpara-
graph (E); and 
(B) in paragraph (3)— 
(i) in subparagraph (A)(ii), by strik-
ing ‘‘Subject to subparagraph (B)(ii), in’’ 
and inserting ‘‘In’’; and 
(ii) by striking subparagraph (B) and 
inserting the following: 
‘‘(B) MAINTENANCE OF HEALTH OPPOR-
TUNITY
ACCOUNT
AFTER
BECOMING
INELI-
GIBLE FOR PUBLIC BENEFIT.—Notwithstanding 
any other provision of law, if an account holder 
of a health opportunity account becomes ineli-
gible for benefits under this title because of an 
increase in income or assets— 
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‘‘(i) no additional contribution shall be 
made into the account under paragraph 
(2)(A)(i); and 
‘‘(ii) the account shall remain avail-
able to the account holder for 3 years after 
the date on which the individual becomes 
ineligible for such benefits for withdrawals 
under the same terms and conditions as if 
the account holder remained eligible for 
such benefits, and such withdrawals shall 
be treated as medical assistance in accord-
ance with subsection (c)(4).’’. 
(b) CONFORMING
AMENDMENT.—Section 613 of 
Public Law 111–3 is repealed. 
TITLE II—OTHER PROVISIONS 
SEC. 121. CERTAIN EXERCISE EQUIPMENT AND PHYSICAL 
FITNESS PROGRAMS TREATED AS MEDICAL 
CARE. 
(a) IN GENERAL.—Subsection (d) of section 213 is 
amended by adding at the end the following new para-
graph: 
‘‘(12) EXERCISE
EQUIPMENT
AND
PHYSICAL 
FITNESS PROGRAMS.— 
‘‘(A) IN
GENERAL.—The term ‘medical 
care’ shall include amounts paid— 
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‘‘(i) to purchase or use equipment 
used in a program (including a self-di-
rected program) of physical exercise, 
‘‘(ii) to participate, or receive instruc-
tion, in a program of physical exercise, and 
‘‘(iii) for membership dues in a fitness 
club the primary purpose of which is to 
provide access to equipment and facilities 
for physical exercise. 
‘‘(B) LIMITATION.—Amounts treated as 
medical care under subparagraph (A) shall not 
exceed $1,000 with respect to any individual for 
any taxable year.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 122. CERTAIN NUTRITIONAL AND DIETARY SUPPLE-
MENTS TO BE TREATED AS MEDICAL CARE. 
(a) IN GENERAL.—Subsection (d) of section 213, as 
amended by section 121, is amended by adding at the end 
the following new paragraph: 
‘‘(13) NUTRITIONAL
AND
DIETARY
SUPPLE-
MENTS.— 
‘‘(A) IN
GENERAL.—The term ‘medical 
care’ shall include amounts paid to purchase 
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herbs, vitamins, minerals, homeopathic rem-
edies, meal replacement products, and other di-
etary and nutritional supplements. 
‘‘(B) LIMITATION.—Amounts treated as 
medical care under subparagraph (A) shall not 
exceed $1,000 with respect to any individual for 
any taxable year. 
‘‘(C) MEAL
REPLACEMENT
PRODUCT.— 
For purposes of this paragraph, the term ‘meal 
replacement product’ means any product that— 
‘‘(i) is permitted to bear labeling mak-
ing a claim described in section 403(r)(3) 
of the Federal Food, Drug, and Cosmetic 
Act, and 
‘‘(ii) is permitted to claim under such 
section that such product is low in fat and 
is a good source of protein, fiber, and mul-
tiple essential vitamins and minerals.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 123. CERTAIN PROVIDER FEES TO BE TREATED AS 
MEDICAL CARE. 
(a) IN GENERAL.—Subsection (d) of section 213, as 
amended by sections 121 and 122, is amended by adding 
at the end the following new paragraph: 
‘‘(14) PERIODIC
PROVIDER
FEES.—The term 
‘medical care’ shall include periodic fees paid to a 
primary physician, physician assistant, or nurse 
practitioner for the right to receive medical services 
on an as-needed basis.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 
124. 
REPEAL 
OF 
ANNUAL 
LIMITATIONS 
ON 
DEDUCTIBLES FOR EMPLOYER-SPONSORED 
PLANS OFFERED IN SMALL GROUP MARKET. 
Section 1302(c)(2) of the Patient Protection and Af-
fordable Care Act (Public Law 111–148) is repealed. 
Æ 
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