Can I Use My HSA for Foreign Medical Expenses?

A Health Savings Account (HSA) is a tax-advantaged savings account for healthcare costs, available to those enrolled in a high-deductible health plan. While primarily used for domestic expenses, HSA funds can also cover medical care received in other countries. Understanding the specific rules set by the Internal Revenue Service (IRS) is necessary for proper account management.

Determining Qualified Medical Expenses Abroad

The principle for using HSA funds internationally is that if a medical expense is qualified in the United States, it is qualified when incurred in another country. The guide for what constitutes a qualified medical expense is IRS Publication 502. This means payments to foreign doctors and dentists, as well as costs for stays in foreign hospitals, can be paid for or reimbursed from an HSA.

The services must be for the diagnosis, cure, mitigation, treatment, or prevention of a disease. The treatment received must also be legal in both the country where it is provided and in the United States. For example, if a medical procedure is not permitted by law in the U.S., its cost cannot be reimbursed from an HSA, even if it is legal in the foreign country.

Certain expenses are not covered, regardless of where the service is performed. This includes procedures that are purely for cosmetic purposes and not to address a deformity arising from a congenital abnormality, personal injury, or disfiguring disease. Expenses for general health, such as vitamins or a vacation, are not considered qualified medical expenses.

Rules for Foreign Prescription Drugs

The regulations for prescription drugs purchased outside the U.S. are specific. For a drug to be a qualified medical expense, it must be legal for purchase in both the foreign country and the United States. This allows an individual to use their HSA to pay for a prescribed medication obtained and consumed abroad, provided that same drug is legally available in the U.S.

A restriction is that you cannot use HSA funds to pay for drugs purchased in another country and brought into the United States. The U.S. Food and Drug Administration (FDA) has strict rules on the importation of prescription medications, and in most cases, it is illegal. The expense only qualifies if the medication is consumed while you are outside the U.S.

The requirement that the drug be prescribed by a physician still applies. Over-the-counter medicines that do not require a prescription are not eligible for HSA reimbursement unless prescribed by a doctor.

Covering Associated Travel and Lodging Costs

HSA funds can be used to cover transportation and lodging costs associated with receiving medical care internationally. The primary IRS rule is that the travel must be “primarily for and essential to” medical care. This means the main purpose of the trip must be to receive treatment, not to take a vacation.

For lodging, an individual can include the cost of lodging while away from home for medical care provided by a physician in a licensed hospital or an equivalent facility. The amount for lodging cannot exceed $50 per night for each person. Lodging for a person traveling with the individual receiving care may also be included, allowing for a total of up to $100 per night.

If you travel to another country for a surgical procedure and stay in a hotel near the hospital for recovery, those lodging costs, up to the specified limit, would be qualified. However, if you are on a two-week vacation and visit a doctor for a minor issue, you cannot claim your lodging for the entire trip.

Documentation and Reimbursement Procedures

After incurring a qualified medical expense abroad, you must keep all itemized receipts and statements from the foreign provider. These documents should clearly show the nature of the medical service or product, the date of the transaction, and the amount paid. If the original receipts are in a foreign language, you are responsible for obtaining a translation to substantiate the expense if requested by the IRS.

A practical challenge is handling currency conversion. The amount of the qualified medical expense should be converted to U.S. dollars. You should use the exchange rate in effect on the date the expense was paid and document this rate. This can often be found on a credit card statement or through historical data from a financial source.

There are two primary ways to pay for these expenses. An HSA debit card can often be used for direct payment, though you should check with the HSA administrator about foreign transaction fees. Alternatively, you can pay for the expense out-of-pocket and then take a tax-free distribution from the HSA as a reimbursement at any time after the expense was incurred.