HSA Modernization Act of 2023

This bill amends the Internal Revenue Code to modernize health savings accounts (HSAs) by expanding eligibility, increasing contribution limits, and clarifying rules for certain expenses and plans, effective mostly after 2025.

Sec. 2, Veterans benefits eligibility: Veterans receiving certain non-service-connected disability benefits from the Department of Veterans Affairs will be allowed to contribute to HSAs, effective for tax years after 2025.

Sec. 3, Medicare Part A eligibility: Individuals entitled to Medicare Part A solely due to age (65 or older) will be allowed to contribute to HSAs, with conforming changes to rules on using HSA funds for health insurance and penalties, effective for months after 2025.

Sec. 4, Indian Health Service: Individuals receiving medical care from the Indian Health Service or a tribal organization will not be disqualified from contributing to HSAs, effective for tax years after 2025.

Sec. 5, Bronze and catastrophic plans: Bronze-level and catastrophic health plans under the Affordable Care Act will be treated as high deductible health plans for HSA purposes, effective for months after 2025.

Sec. 6, Mental health services safe harbor: A high deductible health plan may waive the deductible for up to the first $500 of mental health benefits without losing its HSA-qualified status, effective for plan years after 2025.

Sec. 7, Expenses before HSA establishment: If an HSA is established within 60 days of the start of high deductible health plan coverage, medical expenses incurred after coverage begins but before the HSA is set up will be treated as qualified medical expenses, effective for coverage starting after 2025.

Sec. 8, Spousal catch-up contributions: Both spouses with family HDHP coverage may make catch-up contributions to the same HSA, with rules for dividing the contribution limit, effective for tax years after 2025.

Sec. 9, Increased contribution limit: The maximum HSA contribution limit will be raised to equal the plan's deductible and out-of-pocket limit (instead of fixed dollar amounts), with conforming changes to inflation adjustments, effective for tax years after 2025.

Sec. 10, Long-term care services: HSA funds may be used for qualified long-term care services, effective for amounts paid after the date of enactment, with no inference about prior payments.