Expenses That Your HSA Will (and Won’t) Cover

Tom Gilmour is a senior director of Planning Experience Integration for Northwestern Mutual.

Health savings accounts (HSAs) and flexible spending accounts (FSAs) are great tools to help you pay for medical expenses while realizing significant tax benefits. But the money in your HSA can’t be used for just anything. Your HSA funds must be used on qualified expenses to avoid being hit with taxes. In addition to income tax, a 20 percent penalty may also apply to nonqualified distributions, although this penalty is waived after you turn 65 or become disabled.

Below, we take a closer look at what the IRS says counts as qualified when it comes to HSAs. We also review common categories of expenses that are covered by HSAs, as well as those that typically aren’t covered.

What are qualified medical expenses?

Qualified medical expenses (QMEs) are specific expenses that the IRS defines as being HSA-eligible. This means that you can use the funds in your HSA to pay for them without incurring taxes or penalties.

IRS publication 502 defines qualified medical expenses as any medical expense that is medically necessary and related to the prevention, mitigation, diagnosis, cure or treatment of disease. Importantly, this can include medical expenses related to hearing, vision, dental and mental health.

What can I use an HSA to pay for?

Because the IRS’s definition of QMEs is broad, you can use the money held in your HSA for a variety of medical expenses. This includes copays, coinsurance, deductibles and other out-of-pocket medical expenses that aren’t reimbursed by your health insurer or taken as an itemized deduction on your tax return.

As a rule of thumb, if a medical expense is ordered by or prescribed by a medical or health care professional (like your doctor), then there is a good chance that it’s covered. Should you ever be questioned or audited, you can request a “letter of medical necessity” from your health care provider to act as proof that the expense is, in fact, a QME.

While the list below isn’t exhaustive, you’ll get a good idea of the expenses that are typically HSA-eligible. Your HSA provider can advise you on the eligibility of a particular expense if you are unsure. If you’re shopping online, you may see an icon and wording like “HSA eligible” that can help, too.

Medical services

Many common medical services are QMEs, so you can pay for them with money held within your HSA. These can include the following:

• Physicals
• Routine appointments
• Checkups and follow-ups
• Emergency care or urgent care
• Medical transportation
• Hospital stays
• Surgeries
• Home care
• Wound care
• Fracture care

This category includes those services provided by your primary care physician as well as specialists like dermatologists, endocrinologists, cardiologists, neurologists and others.

Diagnostic services

Because diagnostic services are a required part of diagnosing, mitigating, treating and preventing a wide variety of injuries or disease, many of these services are also considered QMEs. These are some of the most common HSA-eligible diagnostic services:

• Lab tests
• Blood work
• X-rays
• MRIs
• CT scans
• EKGs

Medications and prescribed vitamins or supplements

Medically necessary medications and drugs also count as QMEs. This category can include medication prescribed by your doctor, such as these:

• Antibiotics, antivirals and antiseptics
• Anesthesia
• Muscle relaxers
• Pain relievers
• Sedatives

Immunizations such as the flu shot, COVID vaccine or other routine vaccinations will also typically be considered QMEs. Additionally, QMEs include over-the-counter medications, menstrual care products, and pre-natal and doctor-prescribed vitamins and supplements needed to treat specific medical conditions.

Dental care

While insurers differentiate between your mouth and the rest of your body, the IRS doesn’t. That means that you can use your HSA to pay for a wide variety of dental care:

• Dental examinations
• Teeth cleanings
• Dental X-rays
• Fillings
• Root canals
• Extractions
• Oral surgery
• Oral cancer screenings
• Bite, chewing and swallowing evaluations
• Artificial teeth
• Orthodontia
• Prescriptions

It’s important to note that while many dental procedures are medically necessary, others are cosmetic—and some can be both. Braces and some forms of artificial teeth, for example, can be both cosmetic and medically necessary. But it’s important to remember that you cannot use funds in your HSA to pay for purely cosmetic procedures without risking a penalty.

Vision care

As with dental care, vision care is also considered a QME and therefore is HSA-eligible. Here are some common medical expenses related to your eyes:

• Eye exams
• Lasik eye surgery
• Cataract removal
• Glaucoma surgery
• Astigmatism correction
• Prescription glasses, sunglasses and contact lenses
• Eyeglass fitting and repair
• Medications

Medical equipment

Any medical equipment that you need to treat, cure, prevent or mitigate an injury or disease can be paid for with funds held in your HSA. Following are some common examples:

• Canes, crutches and walkers
• Wheelchairs and wheelchair ramps
• CPAP machines, masks and hoses used during sleep
• Oxygen equipment
• Grab bars and shower equipment
• Blood sugar monitors and strips
• Hearing aids and hearing aid batteries
• Medical alert systems
• Hospital beds
• Patient lift equipment
• Breast pumps

Mental health services

If you incur expenses related to mental health services, those expenses may be qualified if they are prescribed by a doctor; are deemed medically necessary; or otherwise treat, prevent, mitigate or cure a disease. This can include costs related to any of these:

• Office visits for counseling, psychiatry, psychoanalysis or therapy
• Prescriptions
• Hospital stays

That being said, not all mental health services are HSA-eligible. If counseling is used to diagnose or treat a mental illness like anxiety or depression, then it will most likely count as a QME. Counseling related to nonmedical issues, however, like marriage counseling or family counseling, may not.

Other treatment programs

Many other treatment programs may also be QMEs if they are tied to treating or preventing a disease and/or prescribed by a doctor, including those here:

• Acupuncture
• Chiropractic care
• Drug or alcohol rehabilitation
• Massage
• Nutritional counseling
• Physical therapy
• Smoking cessation programs
• Speech therapy
• Weight loss programs

What are common expenses I can’t pay for with my HSA?

Unfortunately, not every health care-related expense counts as a QME. Some fairly common expenses are ineligible, meaning you’ll need to pay for them out of pocket or face a potential penalty:

• Elective cosmetic procedures: Any medical procedure that is purely cosmetic is not HSA-eligible. This includes things like Botox injections, cosmetic dentistry, face lifts, hair transplants, liposuction, teeth whitening and more.
• Health insurance premiums: Most health insurance premiums are not considered a QME, though there are exceptions. These can include continuation of health care coverage known as COBRA, some long-term care coverage and Medicare.
• Memberships: If you have a membership at a gym, health club, fitness club or with a personal trainer, the cost of that membership will in most cases not be HSA-eligible. The one rare exception would be if the membership is being used to treat a specific disease or injury diagnosed by your health care provider.
• Personal care: Services like manicures, pedicures, spa treatments, haircuts, cosmetics and unprescribed massages are not HSA-eligible.
• Some vitamins and supplements: These aren’t eligible if taken to maintain ordinary good health.

Making the most out of your HSA money

An HSA can be a great way of saving and paying for many common medical expenses. And it’s portable, meaning you can take your money with you if you change jobs, retire or leave the workforce.

Talk to your Northwestern Mutual financial advisor about your cash flow. After getting to know you and your values, they can help with saving and spending—and ways to minimize taxes. They can also discuss strategies to protect and grow your wealth.

This publication is not intended as legal or tax advice. Consult with a tax professional for tax advice that is specific to your situation.