To amend the Internal Revenue Code of 1986 to improve health care choice by providing for the tax deductibility of medical expenses by individuals.

January 4, 2005

Mr. COX (for himself, Mr. CONYERS, Mr. AKIN, Mr. BARTLETT of Maryland, Mr. BARTON of Texas, Mr. BASS, Mr. BEAUPREZ, Mrs. BLACKBURN, Mrs. BONO, Mr. BOOZMAN, Mr. BOYD, Mr. BRADLEY of New Hampshire, Ms. GINNY BROWN-WAITE of Florida, Mr. BURGESS, Mr. BURTON of Indiana, Mr. CALVERT, Mr. CHOCOLA, Mr. COLE of Oklahoma, Mr. CUNNINGHAM, Mrs. JO ANN DAVIS of Virginia, Mr. LINCOLN DIAZ-BALART of Florida, Mr. DOOLITTLE, Mr. DUNCAN, Mr. EHLERS, Mr. FEENEY, Mr. FLAKE, Mr. FRANKS of Arizona, Mr. GARRETT of New Jersey, Mr. GILLMOR, Mr. GINGREY, Mr. GOODE, Mr. GRAVES, Mr. GREEN of Wisconsin, Mr. GUTIERREZ, Mr. HALL, Mr. HAYES, Mr. HEFLEY, Mr. HERGER, Mr. HOSTETTLER, Mr. ISSA, Mr. ISTOOK, Mr. JONES of North Carolina, Mr. KING of Iowa, Mr. MCCOTTER, Mr. MCHUGH, Mr. MANZULLO, Mrs. MILLER of Michigan, Mr. MILLER of Florida, Mrs. MUSGRAVE, Mrs. MYRICK, Mr. NEUGEBAUER, Mrs. NORTHUP, Mr. OTTER, Mr. OWENS, Mr. PAYNE, Mr. PAUL, Mr. PEARCE, Mr. PENCE, Mr. PITTS, Mr. RADANOVICH, Mr. ROHRABACHER, Mr. ROYCE, Mr. RYUN of Kansas, Mr. SENSENBRENNER, Mr. SESSIONS, Mr. SIMPSON, Mr. SMITH of New Jersey, Mr. STEARNS, Mr. TANCREDO, Mr. TERRY, Mr. TURNER, and Mr. WILSON of South Carolina) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to improve health care choice by providing for the tax deductibility of medical expenses by individuals.

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 Freedom of Choice Act'.

SEC. 2. FINDINGS.

The Congress finds the following:

(1) Current law confers a tax benefit for health insurance provided as an employee fringe benefit, but no similar tax benefit for health insurance purchased by individuals. Similarly, current law confers a tax benefit on third-party payment of medical expenses, but no similar tax benefit for most individuals' direct payment of medical expenses. This has effectively promoted employer-provided third party payment systems and effectively discouraged direct doctor-patient relationships.

(2) The current tax treatment of medical expenses has significantly curtailed competition for both health insurance and health care services generally. This has effectively increased the cost of health care and health insurance, which in turn has exposed people to greater health risks and made it more likely that individuals will go without needed care.

(3) The current tax treatment of medical expenses has restricted the freedom of individuals to exercise direct control over their health care dollars. The exclusion from gross income for employer-provided health care plans with no corresponding tax benefit for health insurance and health care obtained by individuals (except the self-employed) constitutes a strong preferment for health care provided through employers' group plans as compared to health care that individuals purchase for themselves. This is why 90 perecent of Americans under age 65 with private health insurance receive it through their employer.

(4) Providing a tax benefit for employer-provided plans, but not for individually-purchased health care, discriminates against individuals who work for companies that do not provide health benefits, individuals who are temporarily employed, and the disabled.

(5) In many cases, employers are not able to offer their employees a variety of health insurance plans. The Tax Code's provision of benefits for mostly employer-provided health insurance has discriminated against individuals who work for these employers, especially small businesses. This is why 90 percent of American businesses that provide health insurance offer employees the `choice' of only one health care plan. Americans who work for businesses with fewer than 25 employees are half as likely to have health coverage as those working for companies with 1,000 or more employees.

(6) The Tax Code's preferment of employer-provided group plans has triggered a marketplace response reflected in the significant increases in large group health care delivery, and the creation of a few health care conglomerates in lieu of thousands of competitive providers of medical services and health insurance. This has increasingly placed medical decisions in the hands of health care bureaucracies, and significantly eroded the doctor-patient relationship. Medical decisions should be returned to doctors and their patients. This will result in higher quality treatment and more patient protection.

(7) Consumers should have the freedom to purchase the health insurance of their choice, to choose their own doctors, and to make their own decisions about their health care.

(8) By putting the medical choices made by individuals on an equal footing with the medical choices made for them by their employers and third parties, the Tax Code can encourage greater choice and competition, thereby reducing the cost of necessary insurance for all Americans. This will enable millions more Americans to obtain needed health coverage, to make their own choices about which doctors to see, and to have access to the quality care they deserve and expect.

SEC. 3. TAX DEDUCTIBILITY OF MEDICAL EXPENSES FOR INDIVIDUALS.

(a) In General- Section 213(a) of the Internal Revenue Code of 1986 (relating to the treatment of medical and dental expenses) is amended to read as follows:

`(a) Allowance of Deduction- There shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, the taxpayer's spouse, or a dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof).'.

(b) Effective Date- The amendment made by subsection (a) shall apply to taxable years beginning after the calendar year which includes the date of the enactment of this Act.

END