A bill to amend the Internal Revenue Code of 1986 to provide for the establishment of individual medical savings accounts to assist in the payment of medical and long-term care expenses and other qualified expenses, to provide that the earnings on such accounts will not be taxable, and for other purposes.

Amends the Internal Revenue Code to provide for the establishment of individual medical savings accounts.

Declares individual medical savings accounts exempt from taxation, except for the tax on unrelated business income. Limits contributions to such accounts to $3,000 plus $600 for each dependent of the individual for whom the account is created. Adjusts such amounts for inflation beginning after 1993.

Allows distributions from such accounts for qualified medical expenses and qualified long-term care expenses. Provides for the tax treatment of nonqualified distributions, excess contributions, and an account that ceases meeting applicable requirements or engages in prohibited transactions. Requires the taxation of any portion of an account used as security for a loan. Sets forth additional taxes for nonqualified distributions and disqualification cases.

Declares that contributions to individual medical savings accounts are not to be considered gifts for gift tax purposes.

Establishes a penalty for failure to make required reports on such accounts.

Excludes qualified distributions from such accounts from gross income.

Excludes employer contributions to such accounts from gross income.

Requires the same tax treatment for qualified long-term care insurance as that provided for accident or health insurance for purposes of: (1) taxation of life insurance companies; and (2) exclusion for benefits received under, and for employer contributions for, medical insurance.