Position Statement:
Tax Policy Should Encourage Consumers to Make Beneficial Healthcare Choices Using Dietary Supplements

Health Savings Accounts and Flexible Spending Accounts Encourage Consumers to Make Cost-Effective Decisions for Their Healthcare

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) provide consumers with tax incentives to make smarter decisions and to take greater control over their healthcare. With the rising costs of health care, consumers should be encouraged to use products and services that are cost-effective and that focus on prevention and wellness. Tax policies should encourage the use of a narrowly defined range of dietary supplements containing such beneficial nutrients as calcium, folic acid, antioxidant vitamins, and soy protein.

Dietary Supplements Provide Health Benefits to Millions of Americans

An estimated 150 million Americans use dietary supplements each year. Dietary supplements are a cost-effective way for consumers to take an active role in managing their healthcare. Combined with other healthful practices, dietary supplements are a component of smart lifestyle choices, playing a key role in preventative healthcare and overall good health.

There is a growing body of scientific research that demonstrates the benefits of dietary supplements. The Food and Drug Administration (FDA), one of the government agencies which regulates the dietary supplement industry, has approved specific health claims, based on scientific research, for a number of dietary supplements.

Research shows that consumers who take dietary supplements also are likely to engage in other health-promoting activities such as trying to eat a well-balanced diet, exercising habitually, visiting the doctor regularly, and getting enough sleep.

Dietary Supplements and Meal Replacements Should Be Covered Under HSAs and FSAs

The Internal Revenue Code defines "medical care" (Section 213d) as expenses "for the diagnosis, cure, mitigation, treatment, or prevention of disease or for the purpose of affecting any structure or function of the body." Dietary supplements and meal replacements products that are qualified to make health claims fit into this definition and therefore should be recognized under the tax code as allowable deductible medical expenses.

Consumers benefit when the government recognizes the substantial health benefits of those dietary supplements and meal replacement products eligible to bear an FDA-approved health claim. Expanding the coverage of HSAs and FSAs to include these products will provide economic incentives for consumers to practice preventative healthcare.

Those dietary supplements that are "prescribed" by a doctor and most over-the-counter (OTC) medicines are already covered by FSAs and HSAs. Dietary supplements carrying a health claim should also be covered—even when they are self-selected—because they offer similar benefits. The science behind dietary supplements that are eligible to carry these health claims has been thoroughly reviewed by FDA and substantiated by scientists.

H.R. 1545:
Dietary Supplement and Healthy Meal Replacement Tax Parity Act

Sponsor: Rep. Chris Cannon (R-Utah) introduced on April 12, 2005

Co-sponsors: Rep. Ed Towns (D-NY), Rep. Jeb Bradley (R-NH), Rep. Charlie Norwood (R-GA), Rep. Mike Spence (R-IN), Rep. James T. Walsh (R-NY), Rep. John J. Duncan, Jr. (R-NY), Rep. Ron Paul (R-TX) and Rep. Bart Gordon (D-TN)—as of June 2, 2005

What: H.R. 1545 would allow consumers to purchase dietary supplements and low-fat meal replacements that qualify for approved health claims as deductible medical expenses under Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs). For dietary supplement products, this would include products containing such beneficial nutrients as: antioxidant vitamins, B-vitamins, calcium, folic acid, multivitamins with folic acid, omega-3 fatty acids, plant sterols and stanol esters, and soy protein.

Background: Both HSAs and FSAs offer consumers tax benefits that would provide incentives for positive behavior in the area of health care. By encouraging consumers to "plan ahead," these programs focus on keeping good health top-of-mind and they empower consumers to be more active participants in their own well-being. HSAs are designed to help individuals save for qualified medical and retiree health expenses by providing tax incentives for participating in an HSA. FSAs are employer-sponsored programs that encourage employees to voluntarily put money aside in a non-taxable account that can be used to pay for healthcare-related expenses not reimbursed by insurance.

Currently, dietary supplements that are "prescribed" by a doctor for a specific medical condition may be covered under HSAs and FSAs. Most over-the-counter medicines (OTCs) that are self-selected are also covered. But when a consumer makes a personal decision to practice wellness and preventative healthcare using dietary supplements, those expenses are not covered. H.R. 1545—by including those dietary supplements and low-fat meal replacements with FDA-approved health claims among the products covered under HSAs and FSAs—would provide taxpayers with additional options for saving money on health-promoting products that are used by millions of consumers.

The health benefits of dietary supplements are well-documented by scientific research. In addition, those products that contain FDA-approved health claims enjoy the status of having their benefits specifically recognized by FDA (who must review the data and agree to these claims before they can be placed on the label). It just makes sense that tax policy should give consumers the same incentive to protect their well-being with preventative health-conscious choices as it does for curing and treating conditions after they occur.

Requested Action: Support H.R. 1545.

DSHEA: It Makes Sense…Let’s Make it Work

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