H.R. 5734 — Health Care Savings Account Act of 1992

 
HR 5734 IH1S
102d CONGRESS
2d Session
 H. R. 5734
To amend the Internal Revenue Code of 1986 to allow individuals a credit
against income tax for amounts contributed to a health care savings account
and to amend title XVIII of the Social Security Act to provide for a high
deductible and protection against catastrophic medical care expenses for
individuals who have established such accounts.
IN THE HOUSE OF REPRESENTATIVES
July 31, 1992
Mr. MCCANDLESS introduced the following bill; which was referred jointly to
the Committees on Ways and Means and Energy and Commerce
A BILL
To amend the Internal Revenue Code of 1986 to allow individuals a credit
against income tax for amounts contributed to a health care savings account
and to amend title XVIII of the Social Security Act to provide for a high
deductible and protection against catastrophic medical care expenses for
individuals who have established such accounts.
  Be it enacted by the Senate and House of Representatives of the United
  States of America in Congress assembled,
SECTION 1. SHORT TITLE.
  This Act may be cited as the `Health Care Savings Account Act of 1991'.
SEC. 2. CREDIT FOR CONTRIBUTIONS TO HEALTH CARE SAVINGS ACCOUNT.
  (a) IN GENERAL- Subpart A of part IV of subchapter A of chapter 1 of the
  Internal Revenue Code of 1986 (relating to nonrefundable personal credits)
  is amended by inserting after section 25 the following new section:
`SEC. 25A. HEALTH CARE SAVINGS ACCOUNT CONTRIBUTIONS.
  `(a) Allowance of Credit-
  `(1) EMPLOYEE OR SELF-EMPLOYED INDIVIDUAL- In the case of an employee or
  a self-employed individual, there shall be allowed as a credit against
  the tax imposed by this chapter for the taxable year an amount equal to 60
  percent of the contributions made for the taxable year by such employee or
  individual to a health care savings account of such employee or individual.
  `(2) EMPLOYER- In the case of an employer, there shall be allowed as a
  credit against the tax imposed by this chapter for the taxable year an
  amount equal to 60 percent of the contributions made for such taxable
  year by such employer on behalf of an employee to a health care savings
  account of such employee. Such employer payments shall not be included in
  the taxable income of the employee, except as provided under subsection (e).
  `(3) NO CREDIT FOR SPOUSAL ROLLOVER CONTRIBUTIONS- Paragraph (1) shall
  not apply to a spousal rollover contribution described in section 4980D.
  `(b) Limitations-
  `(1) IN GENERAL- The total amount of contributions to the health care
  savings accounts of an individual with respect to a taxable year which may
  be taken into account under subsection (a), whether made by the individual
  or the individual's employer, shall not exceed the aggregate amount of
  hospital insurance tax paid during such taxable year by such individual
  and by the individual's employer (if any) with respect to the employment
  of such individual.
  `(2) BENEFICIARY CANNOT BE COVERED UNDER MEDICARE- For purposes of paragraph
  (1), there shall not be taken into account any amount of hospital insurance
  tax paid for employment (or self-employment) occurring during a time when
  the individual is covered by medicare.
  `(3) CERTAIN OTHER RULES TO APPLY- Rules similar to the rules of section
  219(f) shall apply for purposes of this section, except the provisions of
  section 219(f)(5) shall not apply.
  `(c) HEALTH CARE SAVINGS ACCOUNT DEFINED- For purposes of this section, the
  term `health care savings account' means a trust created or organized in the
  United States to pay eligible medical care expenses, but only if the written
  governing instrument creating the trust meets the following requirements:
  `(1) Except in the case of a spousal rollover contribution described in
  section 4980D, no contribution will be accepted unless it is in cash,
  and contributions will not be accepted for the taxable year on behalf of
  any individual to the extent that such contribution exceeds the limitation
  described in subsection (b).
  `(2) The trustee is a bank (as defined in section 408(n)) or such other
  person who demonstrates to the satisfaction of the Secretary that the manner
  in which such other person will administer the trust will be consistent
  with the requirements of this section.
  `(3) No part of the trust funds will be invested in life insurance contracts.
  `(4) The interest of an individual in the balance of his account is
  nonforfeitable.
  `(5) The assets of the trust will not be commingled with other property
  except--
  `(A) in a common trust fund or a common investment fund, or
  `(B) in an individual retirement account described in section 408, but
  only if a separate accounting is maintained of the trust established under
  this section.
  `(d) Tax Treatment of Account-
  `(1) IN GENERAL- Any health care savings account shall be exempt from
  taxation under this subtitle unless the account ceases to be a health care
  savings account by reason of paragraph (2) or (3). Notwithstanding the
  preceding sentence, any such account shall be subject to the tax imposed by
  section 511 (relating to imposition of tax on unrelated income of charitable,
  etc., organizations).
  `(2) LOSS OF EXEMPTION OF ACCOUNT WHERE DISTRIBUTEE ENGAGES IN PROHIBITED
  TRANSACTION- If, during any taxable year of the distributee, the distributee
  engages in any transaction prohibited by section 4975 with respect to
  such account--
  `(A) such account shall cease to be a health care savings account as of
  the first of such taxable year, and
  `(B) paragraph (1) of subsection (e) shall be applied as if there were
  a distribution (which is not used for eligible medical expenses) 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).
  `(3) EFFECT OF PLEDGING ACCOUNT AS SECURITY- If, during any taxable year
  of the distributee, the distributee uses any portion of the health care
  savings account as security for a loan, such portion shall be treated as
  distributed to the distributee and not used for eligible medical expenses.
  `(e) Tax Treatment of Distributions-
  `(1) IN GENERAL- Except as otherwise provided in this subsection, any amount
  distributed from a health care savings account shall be included in gross
  income by the distributee for the taxable year in which the distribution
  is received. Notwithstanding any other provision of this title (including
  chapters 11 and 12), the basis of any person in such an account is zero.
  `(2) EXCEPTION FOR AMOUNT USED FOR ELIGIBLE MEDICAL CARE EXPENSES- Paragraph
  (1) shall not apply to any amount distributed out of a health care savings
  account for eligible medical care expenses.
  `(3) ROLLOVER CONTRIBUTIONS- Paragraph (1) shall not apply to any amount
  distributed out of a health care savings account to the distributee to
  the extent such amount is paid into another health care savings account
  of the distributee not later than the 60th day after the day on which
  he receives the distribution. The preceding sentence shall not apply to
  any amount described therein received by the distributee if at any time
  during the 1-year period ending on the day of such receipt the distributee
  received any other amount described in the preceding sentence which was
  not includible in his gross income by reason of this paragraph.
  `(4) EXCESS CONTRIBUTIONS RETURNED BEFORE DUE DATE OF RETURN- Paragraph
  (1) shall not apply to the distribution of any contribution paid during
  a taxable year to a health care savings account to the extent that such
  contribution exceeds the limitation described in subsection (b) if--
  `(A) such distribution is received on or before the day prescribed by law
  (including extensions of time) for filing such individual's return for
  such taxable year,
  `(B) no credit is allowed under this section with respect to such excess
  contribution, and
  `(C) such distribution is accompanied by the amount of net income
  attributable to such excess contribution.
Any net income described in subparagraph (C) shall be included in gross
income for the taxable year in which such excess contribution is made.
  `(5) TRANSFERS INCIDENT TO DIVORCE- Rules similar to the rules of paragraph
  (6) of section 408(d) shall apply for purposes of this section.
  `(6) TRANSFERS INCIDENT TO DEATH- Paragraph (1) shall not apply to a
  distribution of amounts in a health care savings account to an individual's
  estate upon the death of the individual.
  `(7) Early distribution penalty-
  `(A) IN GENERAL- Except as provided in subparagraph (B), if--
  `(i) a distribution is made from a health care savings account to a
  distributee,
  `(ii) the amount of the distribution is included in gross income under
  this section for any taxable year, and
  `(iii) the distributee is not covered by medicare before the beginning of
  such taxable year,
then the distributee's tax under this chapter for the taxable year for
which such distribution is received or in which the amount is required to
be included in income shall be increased by an amount equal to 10 percent
of such distribution.
  `(B) DISABILITY CASES- Subparagraph (A) shall not apply to any distribution
  or income inclusion attributable to the taxpayer becoming disabled within
  the meaning of section 72(m)(7).
  `(8) EXCESS DISTRIBUTIONS- Paragraphs (1) and (7)(A) shall not apply to
  a distribution which is subject to tax under section 4980C (relating to
  tax on excess distributions under health care savings accounts).
  `(f) ADDITIONAL DEFINITIONS AND SPECIAL RULES- For purposes of this section
  and section 4980A--
  `(1) DISTRIBUTEE- The term `distributee' means the individual on whose
  behalf the health care savings account is established.
  `(2) DISTRIBUTED- The term `distributed' includes paid.
  `(3) COVERED BY MEDICARE- An individual shall be treated as covered by
  medicare as of any time if the individual is 65 years of age or older at
  that time or otherwise is entitled to benefits under part A of title XVIII
  of the Social Security Act at that time.
  `(4) ELIGIBLE MEDICAL CARE EXPENSES- The term `eligible medical care
  expenses' means, with respect to a health care savings account, any amount
  paid for medical care (as defined in section 213(d))--
  `(A) of the distributee, if at the time of the receipt of the medical care
  the distributee was covered by medicare, or
  `(B) of a qualifying spouse of the distributee.
  `(5) QUALIFYING SPOUSE- The term `qualifying spouse' has the meaning given
  such term by section 1893(b)(2)(B) of the Social Security Act.
  `(6) Hospital insurance tax-
  `(A) IN GENERAL- The term `hospital insurance tax' means the taxes
  imposed by--
  `(i) section 3101(b) (relating to hospital insurance tax on employees),
  `(ii) section 3111(b) (relating to hospital insurance tax on employers), and
  `(iii) section 1401(b) (relating to hospital insurance tax on self-employment
  income).
  `(B) ONLY NET TAXES TAKEN INTO ACCOUNT- The amount of hospital insurance
  taxes taken into account under this section for any taxable year shall be
  reduced by an amount equal to that portion of any credit or refund under
  subsection (b) or (c) of section 6413 which is attributable to such taxes.
  `(C) WITHHELD TAXES TREATED AS PAID WHEN WAGES RECEIVED- The tax imposed by
  section 3101(b) which is paid by the taxpayer shall be treated for purposes
  of this section as paid during the taxable year during which the wages
  (with respect to which such tax was withheld) are received.
  `(D) SPECIAL RULE FOR STATE AND LOCAL EMPLOYEES- Under regulations prescribed
  by the Secretary, in the case of an agreement made pursuant to section 218 of
  the Social Security Act, amounts deducted from the employee's remuneration
  as a result of such agreement (to the extent comparable to the tax imposed
  by section 3101(b)) shall be treated as taxes paid under such section.
  `(7) OTHER RULES- Rules similar to the rules of subsections (g), (h), and
  (i) of section 408 shall apply.
  `(g) COORDINATION WITH MEDICAL EXPENSE DEDUCTION- No amount distributed out
  of a health care savings account may be taken into account under section 213.
  `(h) Cross References-
 `(1) For tax on excess contributions in health care savings accounts,
 section 4973.
 `(2) For tax on excess distributions from health care savings accounts,
 see section 4980C.
 `(3) For tax on failure to effect a rollover upon death of spouse, see
 section 4980D.'
  (b) Tax on Excess Contributions-
  (1) IN GENERAL- Subsection (a) of section 4973 of such Code (relating to tax
  on excess contributions to individual retirement accounts, certain section
  403(b) contracts, and certain individual retirement annuities) is amended by
  striking out `or' at the end of paragraph (1), by redesignating paragraph
  (2) as paragraph (3), and by inserting after paragraph (1) the following
  new paragraph:
  `(2) a health care savings account (within the meaning of section 25A(c)),
  or'.
  (2) Technical amendments-
  (A) Subsection (b) of section 4973 of such Code is amended by adding at the
  end thereof the following: `In the case of a health care savings account,
  rules similar to the rules of the preceding provisions of this subsection
  shall apply in determining excess contributions.'
  (B) Subsection (c) of section 4973 of such Code is amended by striking out
  `subsection (a)(2)' and inserting in lieu thereof `subsection (a)(3)'.
  (C) The section heading for section 4973 of such Code is amended by inserting
  `health care savings accounts,' after `individual retirement accounts,'.
  (D) The table of sections for subchapter C of chapter 42 of such Code is
  amended in the item relating to section 4973 by inserting `health care
  savings accounts,' after `individual retirement accounts,'.
  (c) TAX ON PROHIBITED TRANSACTIONS-
  (1) IN GENERAL- Paragraph (1) of section 4975(e) of such Code (relating
  to definitions) is amended by inserting `, a health care savings account
  described in section 25A(c),' after `described in section 408(a)'.
  (2) SPECIAL RULE- Subsection (c) of section 4975 of such Code (defining
  prohibited transaction) is amended by adding at the end thereof the
  following new paragraph:
  (4) SPECIAL RULES FOR HEALTH CARE SAVINGS ACCOUNTS- An individual for whose
  benefit a health care savings account is established shall be exempt from
  the tax imposed by this section with respect to any transaction concerning
  such account (which would otherwise be taxable under this section) if,
  with respect to such transaction, the account ceases to be a health care
  savings account by reason of the application of section 25A(d)(2) of if
  section 25A(d)(3) applies to such account.'
  (d) TAX ON EXCESS DISTRIBUTIONS AND FAILURE TO EFFECT SPOUSAL ROLLOVERS-
  (1) IN GENERAL- Chapter 43 of such Code (relating to qualified pension, etc.,
  plans) is amended by adding at the end thereof the following new sections:
`SEC. 4980C. TAX ON EXCESS DISTRIBUTIONS FROM HEALTH CARE SAVINGS ACCOUNTS.
  `(a) INITIAL TAX- There is hereby imposed a tax on each prohibited
  transaction. The rate of tax shall be equal to 5 percent of the amount
  involved with respect to the prohibited transaction for each year (or part
  thereof) in the taxable period. The tax imposed by this subsection shall
  be paid by the distributee.
  `(b) ADDITIONAL TAXES- In any case in which an initial tax is imposed
  by subsection (a) on a prohibited transaction and the transaction is not
  corrected within the taxable period, there is hereby imposed a tax equal
  to 100 percent of the amount involved. The tax involved by this subsection
  shall be paid by the distributee.
  `(c) PROHIBITED TRANSACTION- For purposes of this section, the term
  `prohibited transaction' means a distribution from a health care savings
  account in a taxable year which reduces the level of all of such accounts
  with respect to the distributee below the total value of HCSA tax credits
  of the distributee.
  `(d) EXCEPTIONS- The prohibitions provided in subsection (c) shall not
  apply to a distribution--
  `(1) for eligible medical care expenses, or
  `(2) to the extent that the amount of the distribution is less than the
  amount by which--
  `(A) the sum of the annual HCSA-related annuity amounts for the years in
  which the distributee has been covered by medicare, exceeds
  `(B) the sum of all distributions made and used for eligible medical care
  expenses in all of those years.
  `(e) DEFINITIONS- For purposes of this section and section 1893 of the
  Social Security Act--
  `(1) ANNUAL HCSA-RELATED ANNUITY AMOUNT-
  `(A) DEFINITION- The term `annual HCSA-related annuity amount' means, with
  respect to a distributee and a distributee's qualifying spouse (if any),
  the annual amount (determined by the Secretary) that could be paid during
  the expected lifetime of the distributee (based on actuarial life tables
  at the time of the determination), assuming--
  `(i) such payments are financed at the time of the determination by a
  principal amount equal to the total value of HCSA tax credits of the
  distributee (and the distributee's qualifying spouse, if any),
  `(ii) such payments are made in equal amounts, and
  `(iii) over such expected lifetime, interest on the principal amount
  described in clause (i) is equal to the average (at the time the
  determination is made) of the interest rates for debts of the Federal
  Government which are due over the period of such expected lifetime.
  `(B) TIME OF DETERMINATION- The determination of the annual HCSA-related
  annuity amount shall be made at the time the distributee becomes covered
  by medicare and at such other times (including at the time distributee's
  qualifying spouse becomes covered by medicare) as the Secretary shall
  provide.
  `(C) DETERMINATION OF EXPECTED LIFETIME- In the case of an individual who
  is a qualifying individual and who is married to an individual who also
  is a qualifying individual, the `expected lifetime of the distributee'
  referred to in subparagraph (A) is the average of the expected lifetimes
  of the individual and the individual's spouse.
  `(2) TOTAL VALUE OF HCSA TAX CREDITS- The term `total value of HCSA
  tax credits' means, with respect to a distributee, an amount equal to
  the sum of the value of the HCSA tax credits of the distributee (and of
  any qualifying spouse of the distributee) for all taxable years of the
  distributee and the spouse.
  `(3) VALUE OF HCSA TAX CREDIT- The term `value of HCSA tax credit' means,
  with respect to an individual for a taxable year, an amount equal to the
  total amount of credit in the taxable year determined under subsections
  (a)(1) and (a)(2) of section 25A for contributions made to the health care
  savings account of the individual, compounded annually for each subsequent
  taxable year by the presumed rate of return for that year.
  `(4) PRESUMED RATE OF RETURN- The term `presumed rate of return' means,
  with respect to a taxable year, the average of the Federal short-term rate,
  the Federal mid-term rate, and the Federal long-term rate which apply to
  the determination of the applicable Federal rate under section 1274(d)(1)
  for each of the months during the taxable year.
  `(f) OTHER DEFINITIONS AND SPECIAL RULES- For purposes of this section--
  `(1) TAXABLE PERIOD- The term `taxable period' means, with respect to any
  prohibited transaction, the period beginning with the date on which the
  prohibited transaction occurs and ending on the earliest of--
  `(A) the date of mailing a notice of deficiency with respect to the tax
  imposed by subsection (a) under section 6212,
  `(B) the date on which the tax imposed by subsection (a) is assessed, or
  `(C) the date on which correction of the prohibited transaction is completed.
  `(2) AMOUNT INVOLVED- The term `amount involved' means, with respect to
  a prohibited transaction, the amount by which--
  `(A) the total value of HCSA tax credits of the distributee, exceeds
  `(B) the sum of--
  `(i) the level of all the health care savings accounts of the distributee
  after the transaction, and
  `(ii) the amount of any distributions to which subsection (d) applies with
  respect to the distributee.
  `(3) CORRECTION- The term `correction' and `correct' mean, with respect to
  a prohibited transaction, undoing the transaction to the extent possible,
  but in any case placing the health care savings account in a financial
  position not worse than that in which it would be if the prohibited
  transaction had not occurred.
  `(4) QUALIFYING INDIVIDUAL AND QUALIFYING SPOUSE- The terms `qualifying
  individual' and `qualifying spouse' have the meanings given such terms by
  section 1893(b)(2) of the Social Security Act.
  `(g) CROSS REFERENCES-
 `For definitions of certain terms used in this section, see section 25A(f).
`SEC. 4980D. TAX ON FAILURE TO EFFECT SPOUSAL ROLLOVER OF HEALTH CARE SAVINGS
ACCOUNT UPON DEATH OF SPOUSE.
  `(a) TAX IMPOSED- In the case of a decedent who is survived by a spouse,
  there is hereby imposed on the decedent's estate a tax of 50 percent of
  the difference between the value of the decedent's health care savings
  accounts at the time of death and the amount contributed into the spouse's
  health care savings account at the time of, and on account of, such death.
  `(b) HEALTH CARE SAVINGS ACCOUNT DEFINED- In this section, the term `health
  care savings account' has the meaning given such term by section 25A(c).'.
  (2) CLERICAL AMENDMENT- The table of sections of such chapter is amended
  by adding at the end the following new items:
`Sec. 4980C. Tax on excess distributions from health care savings accounts.
`Sec. 4980D. Tax on failure to effect spousal rollover of health care savings
account upon death of spouse.'.
  (e) FAILURE TO PROVIDE REPORTS-
  (1) IN GENERAL- Subsection (a) of section 6693 of such Code (relating to
  failure to provide reports on individual retirement accounts or annuities)
  is amended by inserting `, or by subsection (f)(7) of section 25A to file a
  report regarding a health care savings account,' after `retirement annuity'.
  (2) CLERICAL AMENDMENTS-
  (A) The section heading for section 6693 of such Code is amended by inserting
  `or health care savings account' after `annuities'.
  (B) The table of sections for subchapter B of chapter 68 of such Code is
  amended in the item relating to section 6693 by inserting `or health care
  savings account' after `annuities'.
  (f) PERMITTING COMMINGLING WITH IRAS- Section 408(a)(5) of such Code
  (relating to individual retirement accounts) is amended to read as follows:
  `(5) The assets of the trust will not be commingled with other property,
  except--
  `(A) in a common trust fund or a common investment fund, or
  `(B) with a health care savings account described in section 25A(c), but
  only if a separate accounting is maintained of the trust established under
  this section.'.
  (g) CLERICAL AMENDMENT- The table of sections for subpart A of part IV of
  subchapter A of chapter 1 of such Code is amended by inserting after the
  item relating to section 25 the following new item:
`Sec. 25A. Health care savings account contributions.'
  (h) EFFECTIVE DATE- The amendments made by this section shall apply to
  taxable years beginning after December 31, 1991.
SEC. 3. ADJUSTMENT OF MEDICARE BENEFITS FOR INDIVIDUALS WITH HEALTH CARE
SAVINGS ACCOUNTS.
  Title XVIII of the Social Security Act is amended by adding at the end
  thereof the following new section:
`ADJUSTMENT OF MEDICARE BENEFITS FOR INDIVIDUALS WITH HEALTH CARE SAVINGS
ACCOUNTS
  `SEC. 1893. (a) ADDITIONAL ANNUAL MEDICARE DEDUCTIBLE-
  `(1) IN GENERAL- In the case of an individual who has established a health
  care savings account, the total amount of any benefits that may be paid with
  respect to the individual (and the individual's qualifying spouse, if any)
  under this title shall be reduced each calendar year by the individual's
  HCSA-related deductible (as defined in paragraph (2)).
  `(2) HCSA-RELATED DEDUCTIBLE- In paragraph (1), the term `HCSA-related
  deductible' means, with respect to an individual for a calendar year,
  60 percent of the maximum amount of medicare-related expenditures (as
  defined in paragraph (3)(B)) that could reasonably be underwritten for
  the average medicare beneficiary under this title, assuming--
  `(A) the same distribution of average per capita medicare-related
  expenditures during the calendar year as in the fiscal year ending in the
  previous calendar year,
  `(B) that average per capita medicare-related expenditures increase during
  the calendar year at the same rate as those expenditures increased during
  the fiscal year ending in the previous calendar year,
  `(C) an annual premium equal to the annual HCSA-related annuity amount
  (as defined in section 4980C(e)(1) of the Internal Revenue Code of 1986)
  of the individual (and of the individual's qualifying spouse, if any), and
  `(D) that the underwriting provides for no deductible, copayment, or
  coinsurance other than that imposed by this title (other than this section).
  `(3) Special rule for high cost insurance beneficiaries.
  `(A) REDUCTION OF HCSA-RELATED DEDUCTIBLE- If an individual or qualifying
  spouse is determined (in accordance with regulations of the Secretary)
  to be ineligible to be issued a medicare supplemental policy (as defined
  in section 1882(g)(1)) that covers medicare-related expenditures in an
  amount that is at least equal to the HCSA-related deductible provided
  under this subsection without regard to this paragraph for a premium that
  does not exceed the standard rate for such a policy (as determined by
  the Secretary), then the amount of the HCSA-related deductible otherwise
  applicable shall be reduced by a proportion that reflects 80 percent of
  the excess premium required, except that in no case may such a reduction
  result in an individual's HCSA-related deductible being less than 120
  percent of the individual's annual HCSA-related annuity amount.
  `(B) MEDICARE-RELATED EXPENDITURES AND MEDICARE BENEFICIARY DEFINED-
  In subparagraph (A)--
  `(i) The term `medicare beneficiary' means an individual who is entitled
  to benefits under part A and enrolled under part B.
  `(ii) The term `medicare-related expenditures' means benefits that are paid
  under this title or that would be paid but for the deductible imposed by
  paragraph (1).
  `(4) PART-YEAR ELIGIBILITY- In the case of an individual (or qualifying
  spouse of an individual) who is only covered by medicare for a part of
  a year, the reduction otherwise effected under this subsection shall be
  reduced to reflect the portion of the year in which the individual or
  qualifying spouse (or both) is not so covered.
  `(5) RULES FOR TREATMENT OF QUALIFYING SPOUSES- The Secretary shall establish
  rules for treatment of individuals with qualifying spouses under which the
  HCSA-related deductible is redetermined at the time a qualifying spouse
  becomes covered under medicare or when a qualifying individual (with a
  qualifying spouse) dies.
  `(b) Protection Against Catastrophic Health Care Expenses-
  `(1) IN GENERAL- In the case of a qualifying individual and a qualifying
  spouse--
  `(A) benefits shall be provided under part A without regard to any limitation
  under paragraph (1) or (2)(A) of section 1812(a) on the number of days of
  inpatient hospital services or post-hospital extended care services for
  which payment may be made;
  `(B) the deductible and coinsurance amounts provided under section 1813
  (other than that required under subsection (a)(2) thereof, relating to
  the cost of blood, and under subsection (a)(4)(A) (i) and (ii), relating
  to certain hospice care) shall not apply; and
  `(C) any reference in section 1833(a) to `80 percent' shall be deemed a
  reference to `100 percent' after the individual (or individuals) incurs,
  in a calendar year, expenses for services equal to the part B catastrophic
  limit for that year (as defined in paragraph (3)).
  `(2) Individuals covered-
  `(A) Qualifying individual-
  `(i) IN GENERAL- For purposes of this section, the term `qualifying
  individual' means an individual who has established one or more health
  care savings accounts, if--
  `(I) the total value of HCSA tax credits (as defined in section 4980C(e)(2)
  of the Internal Revenue Code of 1986) in those accounts at the time
  the individual first becomes covered under medicare is at least equal to
  one-third of the maximum total value of HCSA tax credits that the individual
  could have achieved by making the maximum contributions to such accounts
  consistent with section 25A(b)(1) of such Code, and
  `(II) in each of 10 taxable years, there was contributed to such an account
  an amount equal to at least the greater of $100 or 50 percent of the maximum
  contribution which could have been made to such an account and for which a
  credit could have been provided consistent with section 25A(b) of such Code.
  `(ii) INCLUSION OF SURVIVING SPOUSES- Such term also includes an individual,
  not described in clause (i), who was the spouse of a person described in
  clause (i) at the time of the individual's death, but only if the individual
  provides for the contribution, into a health care savings account, of an
  amount equal to the total value of the HCSA tax credits (as defined in
  section 4980C(e)(2) of the Internal Revenue Code of 1986) of the decedent's
  health care savings accounts at the time of the decedent's death.
  `(iii) Indexing minimum dollar contribution-
  `(I) IN GENERAL- For taxable years beginning during a calendar year after
  1990, the $100 amount specified in clause (i)(II) shall be increased by
  the same percentage as the percentage increase in the consumer price index
  from July 1989 to the July before that calendar year.
  `(II) ROUNDING TO NEAREST DOLLAR- If the increase under subclause (I) is
  not a multiple of $1, the increase shall be rounded to the nearest dollar
  or, if a multiple of 50 cents, to the next highest dollar.
  `(B) QUALIFYING SPOUSE- For purposes of this section, the term `qualifying
  spouse' means an individual who--
  `(i) is covered by medicare,
  `(ii) is the spouse of a qualifying individual who is covered by medicare,
  and
  `(iii) elects (and whose spouse joins in the election) to be treated as
  a qualifying spouse under this section.
  `(C) EFFECT OF SPOUSAL ELECTION- An election under subparagraph (C)(iii)
  shall be considered an election to have any health care savings account
  of the spouse of a qualifying individual treated as a health care savings
  account of the qualifying individual for purposes of computing a deductible
  under subsection (a), and the annual HCSA-related annuity amount (under
  section 4980C(e)(1) of the Internal Revenue Code of 1986), which shall
  apply to both spouses.
  `(3) PART B CATASTROPHIC LIMIT DEFINED- As used in paragraph (1)(C), the
  term `part B catastrophic limit' means, for a calendar year, an amount equal
  to $1,000 increased, for each calendar year after 1990, by the percentage
  increase in the consumer price index from June 1989 to the June of the
  year before the calendar year involved, rounded to the nearest $10.
  `(c) DEFINITIONS- In this section--
  `(1) HEALTH CARE SAVINGS ACCOUNT- The term `health care savings account'
  means an account established under section 25A of the Internal Revenue
  Code of 1986.
  `(2) CONSUMER PRICE INDEX- The term `consumer price index' means the
  Consumer Price Index for All Urban Consumers (all items, U.S. city average,
  as published by the Department of Labor).
  `(3) COVERED BY MEDICARE- An individual shall be treated as covered by
  medicare as of any time if the individual is 65 years of age or older at
  that time or otherwise is entitled to benefits under part A of this title
  at that time.'
Health Care Savings Account Act of 1992

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