Funds can be withdrawn for any purpose, at any time. However, if funds are withdrawn for reasons other than to pay for qualified medical expenses by someone under age 65, the amount withdrawn is taxable and subject to a 10 percent penalty by the IRS. After age 65, there is no penalty for non-qualified withdrawals BUT amounts are taxable.

Funds used to pay for the following are tax-free and penalty-free:

• Qualified medical expenses as defined under Section 213 of the IRS Code (See IRS Publication 502: Medical and Dental Expenses ). This is the same code section that governs medical savings accounts.
• COBRA insurance
• Qualified long -term care insurance
  
• Health insurance premiums for individuals receiving unemployment compensation
  
• Medicare and retiree health insurance premiums, but not Medicare supplement premiums
• Funds may be used for eligible expenses for your spouse or dependents, even if they are not covered by the HDHP.

Section 223(d)(2) of the Internal Revenue Code of 1986 is amended

(1) by striking "medical care (as defined in section 213(d)" in subparagraph (A) and inserting "specified medical care (as defined in subparagraph (D))"; and

(2) by adding at the end the following new subparagraph:

"(D) SPECIFIED MEDICAL CARE.  For purposes of this paragraph

"(i) IN GENERAL.  The term 'specified medical care' means

"(I) medical care (as defined in section 213(d)), and

"(II) qualified home care.

"(ii) QUALIFIED HOME CARE.  The term 'qualified home care' means a contract to provide three or more of the following services in the residence of the service recipient:

"(I) Assistance with eating.

"(II) Assistance with toileting.

"(III) Assistance with transferring.

"(IV) Assistance with bathing.

"(V) Assistance with dressing.

"(VI) Assistance with continence.

"(VII) Medication adherence.

Such term shall not include any contract unless the services provided pursuant to such contract are provided by a service provider which is licensed by the State to provide such services or such services are otherwise provided in a manner that is consistent with State requirements.

"(iii) RELATED PARTIES.  The term 'qualified home care' shall not include any contract which is, directly or indirectly, between a service provider and a service recipient who are related within the meaning of section 267(b) or 707(b).".