HR 1140119th CongressIn Committee

Direct Medical Care Freedom Act of 2025

Introduced: Feb 7, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Direct Medical Care Freedom Act of 2025 would modify the Internal Revenue Code to treat direct medical care service arrangements (DMCSAs) as not being health plans for the purposes of Health Savings Accounts (HSAs). It defines DMCSA as an arrangement under which an individual receives medical care from practitioners (physicians or certain advanced practice clinicians) and the sole compensation is a fixed periodic fee. The bill clarifies that such arrangements can be limited to a subset of care or practitioners without losing DMCSA status, and it allows the fees paid under DMCSAs to be treated as eligible medical expenses for HSA contributions. It also requires reporting of DMCSA fees on an employee’s W-2 if the arrangement is provided in connection with employment, and it provides an effective date tying the changes to months after December 31, 2024. Overall, the bill aims to preserve HSA eligibility for individuals who use DMCSAs and to expand how DMCSA payments can be treated under the tax code.

Key Points

1Direct medical care service arrangements defined: A DMCSA is an arrangement where medical care is provided by qualified practitioners (physicians or certain nurse practitioners/physician assistants) with compensation solely as a fixed periodic fee, and it may be restricted to specific care or practitioners without losing DMCSA status.
2DMCSA not treated as a health plan for HSA purposes: DMCSAs would not count as a health plan when determining eligibility for contributing to or using a Health Savings Account, addressing potential disqualification concerns for HSA holders.
3DMCSA fees treated as eligible medical expenses: Amounts paid under a DMCSA can be treated as medical expenses eligible for HSA contributions, expanding what can be paid or reimbursed with an HSA.
4W-2 reporting: If a DMCSA is provided in connection with employment, the aggregate DMCSA fees must be reported on the employee’s W-2, increasing payroll tax reporting.
5Effective date: These changes would apply to months beginning after December 31, 2024, for tax years ending after that date.

Impact Areas

Primary group/area affected- Individuals who participate in or choose to use direct medical care service arrangements, and those who contribute to or use Health Savings Accounts (HSAs).- Employers offering or facilitating DMCSAs as a benefit to employees, given the W-2 reporting requirement.Secondary group/area affected- Medical care practitioners who operate under DMCSAs (physicians, nurse practitioners, clinical nurse specialists, physician assistants) and the broader direct primary care-style care delivery models.- Health insurers and the broader health care market, as the policy space around what counts as a health plan versus alternative care arrangements could shift.Additional impacts- Tax and compliance effects: New rules for HSA eligibility and W-2 reporting could require payroll and tax compliance updates for employers and changes in how individuals plan contributions to HSAs.- Access and affordability: By allowing DMCSAs to be reimbursable through HSAs and not treated as traditional health plans, some individuals may gain more flexible or potentially lower-cost access to certain primary care services.- Market dynamics: The bill could influence the growth of direct care models and affect how health care is financed outside conventional health plans.

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