Can You Use HSA for Breast Reduction?

Health Savings Accounts (HSAs) offer a tax-advantaged way to save and pay for qualified medical expenses. These accounts are available to individuals enrolled in a high-deductible health plan. A common inquiry among account holders is whether HSA funds can be used for breast reduction surgery. While cosmetic procedures are generally not eligible, breast reduction may qualify if it addresses a diagnosed medical condition rather than solely enhancing appearance.

Determining Medical Necessity

For a breast reduction to be considered a qualified medical expense for HSA purposes, it must be deemed medically necessary. The Internal Revenue Service (IRS) defines “medical care” as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. Cosmetic surgery is excluded unless it improves a deformity from a congenital abnormality, personal injury, or disfiguring disease.

Establishing medical necessity involves symptoms directly caused by excessively large breasts, a condition known as macromastia. These symptoms can include chronic pain in the back, neck, or shoulders, nerve compression, severe skin irritation or rashes under the breast folds, or skeletal deformities. The procedure must aim to alleviate these physical ailments, not just improve aesthetics.

A physician’s diagnosis and recommendation are essential for substantiating medical necessity. This medical determination confirms the surgery treats an illness, alleviates a physical defect, or prevents further complications. Without clear medical justification, the breast reduction expense would be considered cosmetic and ineligible for HSA use.

Required Documentation

To substantiate medical necessity for HSA purposes, specific records and information must be gathered and retained. A detailed letter of medical necessity (LMN) from a qualified physician is a key requirement. This letter should outline the patient’s symptoms, the duration and severity of the condition, and how the macromastia impairs daily activities or overall health.

The LMN should also specify any conservative treatments attempted prior to considering surgery, such as physical therapy, chiropractic care, or the use of specialized bras, and explain why these treatments were ineffective. Additionally, supporting medical records, including diagnostic test results and prescriptions related to the condition, should be maintained. These documents serve as evidence of medical necessity if the HSA administrator or the IRS requests substantiation during an audit.

Submitting for Reimbursement

Once breast reduction is deemed medically necessary and supporting documentation compiled, individuals can use their HSA funds. Two methods exist for utilizing HSA funds: direct payment or reimbursement. Direct payment can be made using an HSA debit card at the time of service, or through online bill payment options provided by the HSA administrator.

Alternatively, individuals can pay for the procedure out-of-pocket and then submit a claim for reimbursement from their HSA. This process involves providing the HSA administrator with a copy of the bill or Explanation of Benefits (EOB) from the healthcare provider, detailing the date of service and the amount incurred. Medical necessity documentation, such as the physician’s letter and supporting records, should be retained by the individual, even if the HSA administrator does not require them for the initial reimbursement claim. The IRS may request these documents during an audit, making their preservation important for tax compliance.