Why the IRS doesn’t believe your doctor’s note for tax-free health items

For years, Americans have been using tax-free dollars from health savings accounts to cover a wide variety of health and wellness items, including glasses, tampons, massage devices, acupuncture, and even exercise equipment that a doctor considers medically necessary.

But now the IRS says some companies are deceptive consumers about what is and is not eligible under the rules of these Health Savings Accounts (HSA) and Flexible Savings Accounts (FSA), which allow consumers to use pre-tax dollars for various health needs.

At the center of the problem are companies that provide consumers with “letters of medical necessity” (essentially a doctor's note) to purchase health-related items such as nutritious meal plans, gym memberships, fitness trackers and supplements. dietary.

Although these notes are written by doctors, the IRS questions the validity of their advice. In general, the agency said medical letters should be the result of face-to-face interactions with the patient, either in person or through telehealth visits. Obtaining a medical letter by filling out a questionnaire, as some companies commonly practice, is not appropriate, the agency says.

IRS says pre-tax funds are not for 'health and wellness'

In an interview, an agency spokesperson stated that foods and dietary supplements could only "rarely" be considered a medical expense and only under strict circumstances. It's also unclear how the IRS plans to decide which medical notes are legitimate and which don't count.

"Some companies erroneously claim that doctors' notes based simply on self-reported health information can convert non-medical expenses for food, wellness and exercise into medical expenses, but this documentation actually does not do so," the agency said in a statement. press.

The agency says that unless consumers meet strict criteria, they cannot use funds from their HSA and FSA accounts to pay for things that promote their "general health and well-being."

Calley Means, co-founder of Truemed, a company that helps people obtain letters of medical necessity to purchase items with HSA funds, said the IRS is on shaky legal ground and oversteps the relationship between patients and their doctors.

He said that by questioning the legitimacy of some doctors' notes and warning that HSA funds could only be used "rarely" for things like diet and exercise, the agency is setting a higher standard for people to get "meal plans and medically adapted exercise. than antidepressants and Ozempic.”

Tax rules that favor drugs over prevention

Using questionnaires and emails to help determine medical needs is a common practice “used to prescribe tens of millions of pharmaceutical interventions,” he said. "Let's call this what it is: an attempt by regulators to confuse and freeze Americans' tendency to learn that they can work with their doctors to reverse diseases with food, not drugs."

Half pointed out several cases in which the US Tax Court has ruled that special diets prescribed by a doctor could qualify as medical expenses for people with medical conditions.

In a case from 1976, the U.S. Tax Court ruled that a man and woman with allergies to pesticides and herbicides could deduct some of the costs of their expensive organic diet as a medical expense. In another case, the Tax Court ruled that a man with heart disease who was prescribed a salt-free diet could deduct as a medical expense some of the costs associated with his special diet.

Means said the IRS seemed to be suggesting that food was not medicine, which he said runs counter to the federal government's position."Food is medicine" initiative launched last year to reduce the prevalence of chronic diseases by providing Americans with better access to nutritious foods.

“In the midst of a chronic disease crisis that is crippling the American people, why is the IRS starting a war on doctor-recommended dietary and exercise interventions to treat specific health conditions?” Media said.

How HSA and FSA Funds Work

HSAs and FSAs allow people to set aside pre-tax money to pay for a wide range of medical and dental expenses, such as prescription medications, pregnancy tests, and hearing aids. As of last year, Americans had about $116 billion in 36 million health savings accounts, according to Becoming, a research and investment company. About 1 in 4 people People with employer-sponsored health insurance are enrolled in high-deductible health care plans with HSAs.

Using HSA and FSA funds to pay for health and wellness products is widespread. Walmart, Aim and other large retailers advertise some dietary supplements, sunscreens, and a variety of other products as “FSA/HSA eligible” on their websites. One popular website, HSA Store, sells skin care products, electrolyte supplements, massage guns, foam rollers, heating pads, fitness trackers, and other products that it advertises to customers as “surprisingly eligible.”

The IRS has published guidance on your website about what products and services can be considered medical expenses. But in some cases, what qualifies and what doesn't remains a gray area.

The IRS spokesperson said some products, such as fitness trackers, could qualify as medical expenses if a person with a medical condition is recommended by their doctor to purchase them. But only in "rare" circumstances can things like food or supplements be considered medical expenses, the spokesperson said.

How consumers obtain medical letters

To qualify as a medical expense, supplements must be “doctor recommended” as a treatment for a specific medical condition. Food can be considered a medical expense only if it "does not meet normal nutritional needs," helps relieve an illness, and the need is "substantiated by a physician." the IRS says.

A gym membership, according to the agency, can count as a medical expense if it is purchased “for the sole purpose of affecting a structure or function of the body (such as a prescribed physical therapy plan to treat an injury)” or if the membership was purchased to treat hypertension, heart disease, obesity, or other medically diagnosed illness.

When consumers use Truemed ​​to obtain letters of medical necessity, they fill out an online form that describes their health and medical history and then a remote doctor reviews their information. The patient receives a letter of medical necessity if the doctor determines that the customer needs a particular product or service to treat or prevent a medical condition such as diabetes, heart disease, or obesity. The customer can then use that letter to justify their purchase as a medical expense and request reimbursement through their health account.

Truemed ​​partners with companies like CrossFit, Equinox, LA Fitness, CorePower Yoga, and healthy food delivery services Daily Harvest and Sakara.

It is the lack of a face-to-face encounter between doctor and patient that appears to have drawn the agency's ire. But it's unclear how the IRS or an HSA or FSA administrator could distinguish between medical letters written from in-person visits, those that occur on a video screen, and those that occur via a questionnaire.

The agency also doesn't have any specific enforcement authority, but a spokesperson said IRS guidance is shared with the Federal Trade Commission, which could target companies that engage in deceptive advertising.

“Legitimate medical expenses have an important place in tax law that allows for refunds,” IRS Commissioner Danny Werfel said in a news release Wednesday. "But taxpayers should be careful to follow the rules amid aggressive marketing suggesting that personal expenses on things like weight-loss foods qualify for reimbursement when they don't qualify as medical expenses."

Do you have any questions about healthy eating? Email EatingLab@washpost.comand we may answer your question in a future column.

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