IRS Reset on Health Savings Accounts Would Boost MAHA Outcomes

The Trump administration says it wants to make America healthy again, but it may be overlooking a key partner in that effort: the IRS.

The IRS has already cracked down on fraud and abuse of health savings accounts, which allow Americans to set aside pre-tax dollars for qualifying medical expenses. Now, updated guidance—particularly on telehealth and wellness products—could expand access to the benefit for millions of Americans who genuinely qualify.

An HSA’s primary purpose is to encourage spending on preventive care, which over time lowers healthcare costs for everyone. For the IRS, administering this benefit comes with an ongoing responsibility: ensuring everyone eligible has a path to the benefit while the rules defining the boundaries of that path are enforced.

In 2024, during my tenure as IRS commissioner, we alerted the public that too many promoters and mills were encouraging taxpayers inappropriately to claim general health and wellness products (such as food for weight loss) as legitimate medical expenses. These mills designed and exploited a shortcut that had taxpayers substituting their own judgment for a clinician’s. The IRS’s focus at this moment was on guardrails, not access.

In a well-functioning tax system, recalibration is part of the process. Step one was to clear out the bad actors. But then comes step two, where a healthy marketplace is reestablished. If done effectively, mills will be discouraged, legitimate players will sustain, and the risk of eligible taxpayers missing out on a benefit will decrease.

To accomplish this, two specific barriers must be addressed.

The first has to do with telehealth. After the IRS tightened its guidance, we made clear that letters of medical necessity must come from face-to-face interactions. Today, however, 54% of Americans have had a telehealth visit, and 71% of physicians report using telehealth in their practices weekly—up from just 25% in 2018.

Congress signaled new legitimacy for telehealth in its 2025 tax package that permanently extends the safe harbor allowing telehealth services to qualify under an HSA. With this statutory change, the IRS has the green light to clarify that nothing in its rules or regulations prohibits a telehealth encounter from serving as the basis for a letter of medical necessity, as long as that encounter satisfies applicable state law requirements.

The second barrier has to do with the wellness products themselves. The IRS notice strongly implied that healthy food and exercise were less likely to pass the medical necessity test, as evidenced by the mills resorting to shortcuts to demonstrate clinical evidence for them.

However, the science and evidence around these products existed, even if the mills made the IRS skeptical of anything in the category. The American College of Preventive Medicine, a board-certified specialty recognized by the American Medical Association, found credible evidence that nutrition, fitness, and lifestyle interventions can prevent and manage chronic disease.

The IRS should clarify that the issue isn’t the product category itself. The primary determination of HSA eligibility should depend on the purpose the expense serves—treating or preventing a specific medical condition.

The final piece to reestablish a healthy HSA marketplace is for the IRS to be explicit about what separates the legitimate players from the mills. Here, the key factor is how seriously a company treats medical necessities.

A company worth trusting in this space will have hired physicians to review clinical outcomes, not just process paperwork. It will employ people with experience in tax compliance. It will have built quality controls rigorous enough that real rejections happen. Products that don’t meet the evidence bar would get turned away, and patients whose situations don’t qualify won’t get approved.

That kind of infrastructure costs real money to build. A mill looking to turn a quick buck won’t build it.

The case for recalibration is especially compelling given how much the health landscape has shifted since 2003, when Congress created the HSA. Then, roughly one in three American adults was overweight or obese. Today the number is nearly three in four. This crisis falls disproportionately on lower-income Americans, who are least likely to hold an HSA.

Therefore, the HSA is an ineffective lever for what arguably is the highest priority cohort of Americans to make healthy again. Yet, if we ensure that Americans who do have HSAs take maximum advantage of this benefit within the law, more people will be investing in evidence-based preventative care. And this will yield lower aggregate healthcare costs overall.

The political environment for this move may be more favorable than it appears. Last month, President Donald Trump held an event centered on the issue of drug pricing that drew an unlikely guest: Mark Cuban. It was a reminder that on healthcare, there are some patches of common ground for the current administration and its most vocal critics.

MAHA and progressive health advocates disagree on a great deal including, fundamentally, how to address the gap in access and outcomes for lower-income Americans. But responsibly closing an access gap that yields more preventive care for millions of Americans is an outcome that should find warm reception on both sides of the aisle.

Administering the tax code effectively means finding the right balance between expanding access to a benefit and preventing its abuse. In 2024, faced with a surge of bad actors, the IRS did what regulators sometimes have to do—it sent a signal strong enough to clear the room. Now comes an equally important part of effective regulation: opening the door for the companies willing to do this right, and telling them exactly what that means.

Danny Werfel has twice served as IRS commissioner, most recently from 2023 to 2025. He is now executive in residence at the Johns Hopkins School of Government and Policy and a distinguished fellow at the Polis Center for Politics at Duke University, writing about the intersection of tax and policy.

Read More By All Accounts