Sen. Hatch Introduces Bill to Expand Supplements to Tax-Deductible Health Care Plans

Republicans in the House and Senate on Thursday introduced legislation that would make nutritional and dietary supplements eligible for tax-deductible medical expenses.

The Health Savings Act of 2016 would expand the use of Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) to dietary and nutritional supplements. The legislation was introduced by Sen. Orrin Hatch (R-Utah), who chairs the Senate Finance Committee, and Rep. Erik Paulsen (R-Minnesota), a member of the House Ways & Means Committee.

Trade associations representing the dietary supplement industry expressed their support for the bill.

Although more than half of Americans use supplements regularly, “organized health care plans" do not support the products, noted Daniel Fabricant, Ph.D., executive director and CEO of the Natural Products Association (NPA), in a letter to four members of the Senate Finance Committee and House Ways & Means Committee.

“The Health Savings Act would make necessary changes to dietary supplement coverage, allowing families to lead healthier lives, provide more freedom in Americans’ personal health care choices, and lower overall health care costs," Fabricant wrote in the letter. 

Section 602 of the legislation amends the current definition of “medical care" to include money paid out for “herbs, vitamins, minerals, homeopathic remedies, meal replacement products and other dietary and nutritional supplements." Such medical care cannot exceed US$1,000 for any taxable year for an individual.

The provision “would allow consumers to use their flexible spending accounts and actually deduct their dietary supplements from them in a tax-free manner," said Mike Greene, vice president of government relations with the Council for Responsible Nutrition (CRN), who noted the trade association planned to encourage members of the House and Senate to support the legislation.

The Health Savings Act is broad in its scope, affecting such varied matters as Native Americans’ contributions to HSAs, the rollover of funds from FSAs to HSAs, and bankruptcy protections for HSAs.

“Health Savings Accounts and Flexible Spending Accounts were created to give Americans control over their personal health care spending," Hatch said in a press release, which noted that 19.7 million Americans are covered under a health care plan that is eligible for an HSA. “Enacted over a decade ago, these plans have grown in popularity despite needing critical updates to match our changing health care system. This legislation provides those much-needed updates and simplifies these plans helping American families, workers and retirees build tax-free savings for future medical costs."

The Health Savings Act of 2015 was introduced in the last Congress. And while standalone legislation was introduced a number of years ago to make supplements eligible for health care plans, Greene said the bill didn’t go anywhere and more narrowly defined supplements.

Greene noted there is more momentum for the current legislation, although he stopped short of predicting its fate.

“I don’t know there is a clear pathway forward yet," he acknowledged in a brief phone interview.