Healthy Food FSAs and HSAs: Analyzing The Hill Report

The Hill’s recent report argues that expanding health savings accounts (HSAs) and flexible spending accounts (FSAs) to include healthy food purchases could improve public health and reduce long-term medical costs. While the proposal highlights a potential link between nutrition and healthcare savings, its claims require scrutiny to separate evidence-based arguments from unproven assumptions.

The Hill’s September 2026 article proposes that incorporating healthy food into HSAs and FSAs could address a critical gap in preventive healthcare spending. The claim rests on the premise that better nutrition reduces chronic disease prevalence, thereby lowering healthcare costs. However, the proposal lacks granularity in defining “healthy food,” fails to account for behavioral economics, and overlooks existing policy barriers. This analysis dissects the evidence, financial implications, and stakeholder perspectives to assess whether this proposal is grounded in reality or oversimplified advocacy.

Context and Background on Health Accounts

HSAs and FSAs are tax-advantaged accounts designed to help individuals cover medical expenses. HSAs, established under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, are tied to high-deductible health plans (HDHPs) and allow triple tax benefits: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are untaxed. FSAs, meanwhile, are employer-sponsored accounts with a one-year use-it-or-lose-it rule, though some plans offer grace periods or rollovers. As of 2025, over 26 million Americans participated in HSAs, with total assets exceeding $120 billion, according to the IRS. FSAs, while less tracked, are estimated to cover millions more, primarily through employer benefits.

The primary purpose of these accounts is to offset out-of-pocket medical costs, including doctor visits, prescriptions, and hospital stays. However, the scope of “qualified medical expenses” is narrowly defined by the IRS. Under current regulations, food is only eligible if it is prescribed by a physician for the treatment of a specific medical condition (e.g., diabetic meals). This exclusion stems from historical distinctions between therapeutic and general nutritional needs, as well as concerns about moral hazard—where individuals might overconsume or misuse funds for non-medical purposes.

Current Limitations and Exclusions

The Hill’s proposal targets this exclusion, arguing that preventive nutrition—such as fruits, vegetables, lean proteins, and whole grains—should be recognized as a legitimate healthcare expense. Proponents cite studies linking poor diet to conditions like diabetes, heart disease, and obesity, which collectively account for over 70% of U.S. healthcare spending, per the CDC. However, the IRS’s 2023 guidance explicitly states that “general health” foods do not qualify, reinforcing the distinction between medical treatment and wellness.

Behavioral and Structural Barriers

Beyond regulatory hurdles, behavioral economics suggests that even if healthy food were eligible, uptake might be limited. Research from the Health Affairs indicates that individuals often prioritize immediate gratification over long-term health, particularly when faced with competing expenses. Additionally, low-income households may lack access to affordable healthy food options, a phenomenon known as the “food desert” problem, which complicates the proposal’s equity implications.

The Claim Regarding Healthy Food in FSAs and HSAs

The Hill’s article frames the inclusion of healthy food in HSAs and FSAs as a “missing piece” in the healthcare system, asserting that better nutrition could prevent chronic diseases and reduce healthcare spending. The claim is rooted in three core arguments:

1. Preventive Healthcare: Improved diet reduces the incidence of diabetes, hypertension, and cardiovascular disease.
2. Cost Savings: Long-term healthcare costs for individuals with chronic diseases are significantly higher than for those with preventive care.
3. Policy Alignment: Other countries, such as Germany and the Netherlands, have successfully integrated nutrition into healthcare financing.

However, the article does not provide specific data on how much HSAs or FSAs would need to expand to cover food, nor does it address potential unintended consequences, such as increased administrative burdens or inflationary pressures on grocery costs. The proposal also lacks a cost-benefit analysis to demonstrate whether the savings from prevented diseases would outweigh the additional administrative and financial costs of expanding eligibility.

Preventive Healthcare: Evidence vs. Assumption

The Hill cites a 2025 study published in the Journal of the American Medical Association (JAMA) that found a 20% reduction in diabetes-related hospitalizations among participants in a worksite nutrition program. While compelling, this study does not directly translate to HSAs or FSAs, as it involved employer-sponsored wellness programs—not tax-advantaged accounts. The article also references a 2024 report from the U.S. Department of Health and Human Services (HHS) estimating that poor diet contributes to $1.5 trillion in annual healthcare costs. However, this figure aggregates all diet-related spending, including hospitalizations and prescriptions, and does not isolate the impact of HSAs or FSAs.

Cost Savings: The Long-Term Perspective

The claim that preventive nutrition saves money assumes a direct correlation between food spending and reduced medical costs. However, the RAND Corporation found in 2020 that while preventive care can reduce costs, the effect is often incremental and varies by individual behavior. The Hill does not account for the fact that not all individuals will use HSA/FSA funds for healthy food, nor does it address the potential for increased spending on non-qualified items if the definition of “healthy food” is vague.

International Comparisons: Nuanced Lessons

The article highlights Germany’s “Gesundheitskarte” program, which reimburses individuals for preventive services, including nutritional counseling. However, Germany’s system is part of a broader social welfare framework that includes universal healthcare and robust public health infrastructure. The U.S. context is fundamentally different, with fragmented insurance coverage and higher out-of-pocket costs, making direct comparisons tenuous.

Analyzing the Evidence Presented by The Hill

The Hill’s argument relies on a mix of correlational data, anecdotal examples, and policy comparisons without sufficient causal evidence. Below is a breakdown of the claims versus the available evidence:

Red Flags in the Proposal

The Hill’s report contains several red flags that warrant caution:

• Lack of Cost-Benefit Analysis: No quantitative assessment of whether the savings from prevented diseases would offset the administrative and financial costs of expanding eligibility.
• Vague Definitions: “Healthy food” is not operationally defined, raising concerns about abuse (e.g., junk food marketed as “nutritious”).
• Behavioral Assumptions: Assumes individuals will use funds responsibly without addressing psychological barriers to healthy eating.
• Policy Overreach: Proposes a major regulatory change without input from IRS, tax experts, or account administrators.

Financial and Policy Implications of the Proposal

The Hill’s proposal would require legislative or regulatory changes to expand the definition of “qualified medical expenses” to include healthy food. The financial implications are multifaceted:

Revenue and Administrative Costs

Expanding HSA/FSA eligibility could generate additional tax revenue if contributions increase, but it could also reduce revenue if individuals shift spending from other tax-deductible accounts. The IRS would need to establish guidelines for verifying “healthy food,” potentially requiring partnerships with grocery retailers or third-party auditors. The Government Accountability Office (GAO) reported in 2019 that administrative costs for HSAs alone exceeded $1 billion annually, and adding food eligibility could exacerbate these costs.

Inflationary Pressures

If HSAs and FSAs become a primary funding source for grocery purchases, it could drive up prices for healthy foods, particularly if demand spikes. The Economic Research Service (ERS) noted in 2025 that grocery price inflation had already risen by 4.5% annually, and additional demand from HSA/FSA spending could accelerate this trend.

Equity Concerns

The proposal may disproportionately benefit higher-income individuals who already have greater access to healthy food options. Low-income households, which spend a larger proportion of their income on groceries, may not benefit equally due to limited account balances or lack of awareness. The ERS found that in 2024, the bottom 20% of income earners spent 30% of their budget on food, compared to 10% for the top 20%. Expanding HSA/FSA eligibility without targeted subsidies could widen health disparities.

Identifying Gaps in Nutritional Coverage Arguments

The Hill’s argument overlooks several critical gaps in the nutritional coverage debate:

Lack of Standardized Definitions

Without a clear, enforceable definition of “healthy food,” the proposal risks becoming a loophole for processed foods marketed as “nutritious.” For example, a 2026 study in the American Journal of Preventive Medicine found that 60% of products labeled “healthy” in major grocery chains contained added sugars or unhealthy fats. The IRS would need to collaborate with nutritionists and retailers to establish verifiable criteria, a process that could take years and invite litigation.

Behavioral Economics and Moral Hazard

The proposal assumes that individuals will use HSA/FSA funds for healthy food rather than other expenses. However, behavioral economics research from the National Bureau of Economic Research (NBER) demonstrates that people often prioritize immediate needs over long-term health. For instance, a 2025 survey by the HHS found that 45% of HSA holders would use funds for non-medical expenses if given the choice. Expanding eligibility without behavioral safeguards could increase misuse.

Limited Impact on Chronic Disease

While diet plays a role in chronic disease prevention, it is not the sole determinant. Genetic predisposition, socioeconomic factors, and environmental exposures also contribute significantly. A 2024 meta-analysis in Nature Medicine found that lifestyle interventions (including diet) reduced chronic disease risk by only 15-20% in controlled settings, with real-world adherence rates far lower. The Hill’s proposal underestimates the complexity of chronic disease etiology.

Institutional Perspectives and Stakeholder Responses

The proposal has elicited mixed reactions from key stakeholders, reflecting divergent interests:

Employers and Insurers

Employers, who often sponsor FSAs, view the proposal cautiously. The Employee Benefit Research Institute (EBRI) reported in 2026 that 68% of large employers are concerned about increased administrative costs and fraud risks. Insurers, meanwhile, argue that preventive nutrition should be covered under public health programs rather than private accounts, as it reduces their long-term liabilities.

Retailers and Grocery Chains

Grocery retailers, particularly large chains like Kroger and Walmart, have expressed support in principle but raised concerns about operational challenges. The Grocery Manufacturers Association (GMA) noted in a 2026 statement that implementing verification systems would require significant investment in technology and staff training. Smaller retailers, lacking the resources for compliance, may be excluded from participating.

Healthcare Providers

Physicians and nutritionists generally support preventive nutrition but question the feasibility of integrating it into HSAs/FSA frameworks. The American College of Physicians (ACP) has called for expanded nutrition counseling in primary care but has not endorsed HSA/FSA expansions as a primary solution. They argue that without coordinated public health initiatives, the impact of individual spending would be minimal.

Government Agencies

The IRS has not publicly commented on the proposal, but its 2023 guidance on HSA eligibility suggests skepticism. The U.S. Treasury Department has historically prioritized tax simplification over expanded eligibility, and expanding HSA/FSA definitions could complicate compliance for taxpayers and account administrators.

Actionable Guidance for Account Holders

While the broader proposal remains uncertain, account holders can take steps to maximize the current benefits of HSAs and FSAs for health-related expenses:

Maximize Existing Eligibility

Individuals with HSAs or FSAs should prioritize spending on:

• Prescription medications and medical devices (e.g., insulin pumps, glucose monitors).
• Therapeutic foods (e.g., diabetic meals, specialty formulas for allergies or digestive issues).
• Preventive screenings and wellness programs (e.g., gym memberships, if offered as a qualified expense by the employer).

Supplement with Other Accounts

For those unable to cover all health-related expenses with HSAs or FSAs, Health Reimbursement Arrangements (HRAs) or Health Savings Accounts (HSAs) with employer contributions can provide additional flexibility. Some employers also offer wellness stipends or reimbursements for nutrition counseling, which can complement tax-advantaged accounts.

Educate Yourself on Eligibility

Account holders should review IRS Publication 969 to understand current qualified medical expenses. Misunderstandings about eligibility can lead to missed savings opportunities or incorrect filings. Consulting a tax professional or benefits administrator can clarify gray areas.

Advocate for Change (If Interested)

Individuals who support expanding HSA/FSA eligibility for healthy food can:

• Contact their members of Congress to express support for policy changes.
• Engage with employer benefits teams to advocate for wellness stipends or nutrition benefits.
• Participate in public comment periods on IRS or HHS rulemaking proposals.

Red Flags Checklist

When evaluating claims about expanding HSA/FSA eligibility for healthy food, watch for these warning signs:

• Lack of Cost-Benefit Analysis: Proposals that do not quantify potential savings or administrative costs are likely oversimplified.
• Vague Definitions of “Healthy Food”: Without clear, enforceable criteria, the proposal risks enabling abuse or fraud.
• Ignoring Behavioral Barriers: Assumptions that individuals will use funds responsibly without addressing psychological or socioeconomic factors are unrealistic.
• Policy Overreach Without Expert Input: Major regulatory changes should involve input from IRS, tax experts, and account administrators, not just advocacy groups.
• Lack of Equity Considerations: Proposals that do not address how low-income individuals would benefit may widen health disparities rather than reduce them.

Frequently Asked Questions

Can I currently use my HSA or FSA for healthy food?

No. As of 2026, HSAs and FSAs only cover food that is prescribed by a physician for the treatment of a specific medical condition. General healthy food does not qualify under current IRS regulations.

What types of food are currently eligible for HSA/FSA reimbursement?

Eligible items include diabetic meals, specialty formulas for allergies or digestive disorders, and other foods prescribed by a doctor for medical treatment. Examples include glucose monitors, insulin pumps, and therapeutic diets for conditions like celiac disease.

How would expanding HSA/FSA eligibility for healthy food work in practice?

The proposal would require legislative or regulatory changes to redefine “qualified medical expenses” to include healthy food. In practice, this would likely involve partnerships between grocery retailers and account administrators to verify purchases, though the exact mechanism has not been detailed in The Hill’s report.

Would expanding HSA/FSA eligibility increase my grocery bill?

Potentially. If demand for healthy food spiked due to HSA/FSA spending, it could drive up prices, particularly for staple items. Additionally, retailers may pass administrative costs onto consumers, further increasing costs.

Are there alternatives to HSAs or FSAs for covering healthy food?

Yes. Some employers offer wellness stipends, nutrition counseling reimbursements, or direct payments for healthy food as part of their benefits packages. Public health programs, such as SNAP (Supplemental Nutrition Assistance Program), also provide financial support for food purchases, though they are not tax-advantaged.

Sources & References

• The Hill — Healthy food is the missing piece in health savings and flexible spending accounts