Using HSA/FSA Funds for Medical Tourism: Is It Legal?

American patient consulting with orthopedic surgeon holding HSA card and passport beside a hip implant model in front of an international hospital

Many Americans considering hip, knee, or spine surgery abroad ask whether Health Savings Accounts (HSA) or Flexible Spending Accounts (FSA) can pay for care overseas. This article explains IRS rules on qualified medical expenses, travel, and documentation, plus practical steps for using HSA/FSA funds for orthopedic and joint replacement care abroad, and the risks to consider before you go.

How HSAs and FSAs work for international medical expenses

When you decide to travel abroad for a major surgery like a hip or knee replacement, one of the first questions is often about payment. The good news is that your Health Savings Account (HSA) or Flexible Spending Account (FSA) can be a powerful tool. The key is understanding the rules set by the IRS. At its core, the IRS allows you to use these tax-advantaged funds for medical care outside the United States as long as the expense would have been considered a qualified medical expense if you received the care at home.

The IRS defines a qualified medical expense in its Publication 502 as the costs of diagnosis, cure, mitigation, treatment, or prevention of disease. This includes payments for legal medical services rendered by physicians, surgeons, and other medical practitioners. If your orthopedic surgery is medically necessary to treat a condition like osteoarthritis or a spinal injury, it generally falls under this definition, regardless of whether the hospital is in Cleveland or Cancún. The procedure must be legal in both the country where it is performed and in the U.S. Purely cosmetic surgeries, however, are not eligible for reimbursement. Proving medical necessity is crucial; a written recommendation or referral from your U.S. doctor is the strongest evidence you can have.

While both HSAs and FSAs can be used internationally, they operate differently. An HSA is a personal savings account that you own. The funds roll over year after year, and the account is yours even if you change jobs. A critical rule is that you can only pay for expenses incurred after your HSA was established. Your annual contribution limits, which for 2025 are $4,300 for an individual and $8,550 for a family, are not affected by where you spend the money. It’s also important to know that once you enroll in Medicare (Parts A and B), you can no longer contribute to an HSA, but you can continue to use your existing funds for qualified expenses.

An FSA, on the other hand, is an employer-owned account. This means you must adhere to your employer’s specific plan rules, which can be stricter than the IRS guidelines. FSAs are subject to the “use-it-or-lose-it” rule. You must spend the funds within the plan year, though some employers offer a grace period of up to 2.5 months or allow you to carry over a limited amount. For 2025, the maximum carryover amount is $640. Your plan administrator will require you to substantiate every claim before reimbursement, making meticulous documentation even more important.

Proper documentation is non-negotiable for both account types but especially scrutinized for foreign transactions. Your plan administrator will not accept a simple credit card statement. You need an itemized, merchant-identifiable receipt that clearly shows the following information:

  • Full name, address, and tax ID (if available) of the medical provider or hospital
  • Date the service was rendered
  • A detailed description of each specific service or procedure performed (e.g., “Total Knee Arthroplasty, left knee”)
  • The exact cost of each individual service

If the original receipt is not in English, you will need to provide a certified translation. Using your HSA or FSA debit card abroad might be convenient, but be prepared for the transaction to be flagged. Plan administrators often request follow-up documentation for any foreign charge to verify it was for a qualified medical expense.

Beyond the surgery itself, you can also use your HSA or FSA for some associated costs, but the rules are strict. Transportation and lodging expenses are eligible only if your trip is primarily for and essential to medical care. This means the main reason for your travel is the procedure, not a vacation with a surgery on the side. You can claim the cost of airfare or other transportation to the medical facility. For lodging, the IRS sets a per-night limit. As of 2025, you can claim up to $50 per night for yourself. If a companion is necessary for your care, such as a parent accompanying a minor child, you can claim an additional $50 per night for them. Costs for meals are not considered a medical expense and cannot be reimbursed.

To stay compliant and avoid issues with your plan administrator or a potential IRS audit, recordkeeping is your best defense. Keep digital and physical copies of everything, including your U.S. doctor’s referral letter, correspondence with the foreign hospital, itemized invoices, proof of payment, and travel itineraries that support the primary purpose of your trip. The IRS generally has three years to audit a tax return, so you should keep these records for at least that long. Large, lump-sum claims for foreign medical care, especially without detailed itemization, are more likely to draw scrutiny, so having your documentation organized and complete from the start will save you significant stress later.

Preparing to use HSA or FSA funds for orthopedic surgery abroad

Embarking on a medical journey abroad for orthopedic surgery is a significant decision, and using your HSA or FSA funds to pay for it adds a layer of financial planning. While the previous section established the rules, this section provides a practical, step-by-step guide to ensure your journey is both medically successful and financially compliant. Think of this as your pre-flight checklist for a smooth, reimbursable experience.

  1. Consult Your Plan Administrator First.
    Before you even book a consultation, your first call should be to your HSA or FSA plan administrator or your company’s benefits department. Do not skip this step. Explain your intention to have a specific, medically necessary orthopedic surgery abroad. Ask them directly about their process for substantiating foreign medical expenses. Key questions to ask include:

    • Do you have specific forms or requirements for claims from foreign providers?
    • What are your requirements for receipts that are not in English? Do you require a certified translation?
    • How do you handle debit card transactions from international hospitals? Will they be flagged for automatic denial pending further documentation?
    • Are there any specific country exclusions or provider types you do not cover?

    Get their answers in writing if possible, even if it’s just a follow-up email summarizing your conversation. This initial contact establishes a record and prevents surprises later.

  2. Secure a Written Recommendation from a U.S. Physician.
    Medical necessity is the cornerstone of any HSA or FSA claim. The strongest proof is a formal letter or referral from your current U.S. treating physician. This document should clearly state your diagnosis, confirm that the proposed surgery (e.g., total knee arthroplasty, lumbar spinal fusion) is medically necessary to treat your condition, and ideally, mention that you are seeking treatment for this condition. This letter is your primary evidence to the IRS or a plan administrator that your trip is not an elective vacation with a side of surgery.

  3. Thoroughly Vet the Foreign Hospital and Surgeon.
    Your health is the priority, but diligent vetting also strengthens your financial claim.

    • Hospital Accreditation: Verify that the hospital is accredited by a recognized international body. The gold standard is the Joint Commission International (JCI), which uses standards similar to those in the U.S. This adds significant credibility to your claim.
    • Surgeon Credentials: Investigate the surgeon’s qualifications, board certifications, and experience with your specific procedure. Ask for their credentials and verify them with the relevant medical boards in their country.
    • Implant and Device Standards: This is critical for orthopedic surgery. Ask the surgeon what specific brand and model of implant or device they will use. Verify if it is FDA-approved or meets high international standards, such as the CE Mark in Europe. Using a non-FDA-approved implant can create major challenges for follow-up care, imaging, or revision surgery back in the United States.

  4. Obtain a Detailed, Itemized Financial Agreement.
    Before committing, request a formal, itemized estimate or a “commitment-to-treat” invoice. A simple one-line bill for “hip surgery” will not suffice for the IRS. The document must include the hospital or clinic’s full name, address, and tax identification number if available. It should break down the costs clearly: surgeon’s fee, anesthesiologist’s fee, hospital stay per day, cost of the implant, lab work, and physical therapy. This document serves as your baseline for the expected eligible expenses.

  5. Plan Your Payment and Receipt Collection Strategy.
    Understand how the hospital accepts payment. Using a credit card is often best, as it creates a clear electronic record. However, you still need an itemized receipt from the provider. A credit card statement alone is not enough. Arrange to receive a final, detailed bill before you leave the hospital. If the receipt is in another language, you will need to get it translated by a certified service for your records. Do not rely on free online translators for official documentation.

  6. Document Your Travel Purpose Meticulously.
    To claim travel and lodging expenses, you must prove the trip’s primary purpose was medical care. Create a travel file that includes your U.S. physician’s referral, email correspondence with the foreign hospital confirming appointment dates, your flight itinerary showing arrival just before the procedure and departure after a reasonable recovery period, and lodging receipts for the nights you are eligible to claim (capped at $50 per night for the patient). Keeping a simple travel log noting medical appointments can further substantiate the trip’s primary purpose.

  7. Arrange Post-Op Care and Understand Complication Protocols.
    Before you travel, have a plan for your follow-up care in the U.S. You may need a U.S. orthopedic surgeon who is willing to oversee your recovery. Discuss this with your U.S. doctor beforehand. Also, ask the foreign hospital for their written policy on handling complications. Who pays if you need a longer hospital stay or an unexpected second procedure? Understanding this is a crucial part of risk management.

  8. Consider Medical Tourism Facilitators Carefully.
    Using a third-party medical tourism facilitator can simplify logistics, but it can complicate financial substantiation. If you use one, ensure they provide you with direct, itemized invoices from the actual medical providers. A single invoice from the facilitator bundling medical care, travel, and other services is a red flag for plan administrators and may be rejected. A direct contract with the hospital is often cleaner for documentation purposes.

  9. Mitigate Risks with Specialized Insurance.
    Your standard health insurance will likely not cover you abroad. Purchase a comprehensive travel insurance policy that specifically includes medical evacuation coverage. This ensures that if a serious complication arises, you can be transported back to the U.S. without incurring catastrophic costs. Also, be aware that malpractice laws and legal recourse abroad are very different and often more limited than in the U.S. This insurance is a non-negotiable safety net.

  10. Create and Maintain a “Substantiation File.”
    Keep meticulous records. Create a physical or digital folder for everything related to your medical trip. This includes all the documents mentioned above: physician letters, invoices, itemized receipts, translations, travel itineraries, and correspondence with your plan administrator. The IRS generally has three years to audit a tax return, so keep this file for at least that long. Many experts recommend keeping such important records for seven years, just to be safe.

Frequently Asked Questions about using HSA and FSA funds abroad

Is it legal to use my HSA or FSA for surgery abroad?
Yes, it is legal, provided the procedure is a qualified medical expense under U.S. tax law and is legal in the country where it is performed.

Practical Action: Before booking anything, call your HSA or FSA administrator. Confirm their specific requirements for foreign claims and let them know you are planning to use your funds for a medical procedure overseas.

What kind of documentation will I need to submit?
You will need meticulous documentation to prove your expenses were for legitimate medical care, including a letter of medical necessity, itemized invoices, and proof of payment.

Practical Action: Create a dedicated digital folder and physical file. Immediately save every email, invoice, receipt, and medical report related to your trip. Keep originals and make digital backups.

What makes a receipt “acceptable” for an HSA or FSA claim?
An acceptable receipt is itemized. It must clearly state the provider’s name and address, the date and specific description of the service, and the exact cost for each item.

Practical Action: Before you pay the foreign hospital, request a sample of their itemized bill to ensure it meets these standards. If it doesn’t, ask them if they can produce one that does for your U.S. tax-advantaged account.

Can I get reimbursed for my flight and hotel?
Partially, with strict rules. You can claim transportation costs if the trip is “primarily for and essential to medical care.” Lodging is reimbursable up to $50 per night for the patient and another $50 for a necessary companion. Meals are not eligible.

Practical Action: Keep a simple travel log. Note your daily activities, such as “Hospital pre-op appointment” or “Day 2 post-op recovery.” This helps substantiate that the trip’s main purpose was medical, not tourism. For more details on travel, you can review guidance on using your HSA or FSA for travel expenses.

What if my procedure is considered elective or cosmetic?
It will not be eligible for reimbursement. HSA and FSA funds can only be used for medically necessary procedures that treat or mitigate a disease or condition.

Practical Action: Obtain a Letter of Medical Necessity from your U.S. doctor. This letter should clearly state your diagnosis and explain why the orthopedic surgery is required to treat your condition.

What happens if my receipts are not in English?
You must provide a certified translation. Your plan administrator or the IRS will not accept documents in a foreign language for an audit.

Practical Action: Find a professional, certified translation service before your trip. When you receive your medical bills, send them for translation immediately so you have them ready for submission upon your return.

Can I just use my HSA debit card at the foreign hospital?
Yes, but be prepared for extra scrutiny. A large international transaction is a common trigger for a substantiation request from your plan administrator.

Practical Action: Before you travel, inform your HSA provider of your travel dates and the expected charge amount. This can help prevent the transaction from being declined as fraudulent. Have your Letter of Medical Necessity and the hospital’s itemized estimate ready to submit if requested.

How do I prove my surgery was medically necessary?
The strongest proof is a formal, written referral or recommendation from a licensed U.S. physician connecting your diagnosis to the required surgical procedure.

Practical Action: Ask your primary care physician or U.S. orthopedic specialist for a signed letter on their official letterhead. It should detail your medical history, the diagnosis, and their professional recommendation for the surgery.

What if the implants used abroad aren’t FDA-approved in the U.S.?
This can create significant challenges for your follow-up care, as a U.S. surgeon may be hesitant to work with a device they are unfamiliar with.

Practical Action: Before your surgery, get the exact specifications of the implant (manufacturer, model, and regulatory approval numbers). Discuss this information with the U.S. surgeon who will be handling your post-operative care to ensure they are comfortable with it.

What happens if I have complications and need treatment back home?
The medical care you receive in the U.S. to treat complications is a separate, qualified medical expense. You can use your HSA or FSA funds to pay for this care.

Practical Action: Purchase a comprehensive medical travel insurance policy before you leave. Ensure it specifically covers complications arising from your planned surgery and includes medical evacuation back to the U.S.

What usually triggers an audit of foreign claims by plan administrators?
Large, lump-sum charges from foreign providers are the biggest red flag. Other triggers include missing itemization, claims for lodging that exceed the IRS limit, or using an HSA debit card for multiple non-medical purchases in the same foreign location.

Practical Action: To avoid suspicion, submit a complete and organized claim package. Include the itemized bill, the certified translation, the Letter of Medical Necessity, and your travel log all at once. This proactive approach shows you’ve done your due diligence.

How does “hybrid care” work, like a consultation abroad but surgery in the U.S.?
You can only claim the qualified medical expenses, regardless of where they occurred. The consultation abroad would be an eligible expense. The subsequent surgery in the U.S. would also be eligible. You simply submit the claims with documentation for each part of your care separately.

Practical Action: Keep two separate files for your expenses: one for the foreign consultation and one for the U.S. surgery. This prevents confusion and makes it easy to submit clean, distinct claims for each.

Conclusions and final recommendations

Using your Health Savings Account or Flexible Spending Account for orthopedic surgery abroad is not just about finding a more affordable procedure; it is about navigating a complex intersection of healthcare, international travel, and U.S. tax law. While the potential for significant savings is real, it comes with an equal measure of personal responsibility. Getting it right means unlocking thousands in tax-free funds for essential care. Getting it wrong can lead to financial penalties and stressful audits.

The foundation of a successful medical journey abroad rests on meticulous planning and an unwavering commitment to documentation. Think of yourself as the project manager of your own healthcare. Your HSA or FSA administrator, and potentially the IRS, will not give you the benefit of the doubt. They require clear, indisputable proof that every dollar spent was for a qualified medical expense. This process begins long before you book a flight, starting with a thorough review of your specific plan documents and a direct call to your plan administrator to understand their rules for foreign claims.

Building an Audit-Proof Case

Your primary task is to create a paper trail so clear that it leaves no room for interpretation. The most critical document is the letter of medical necessity from your U.S.-based physician, explicitly stating your diagnosis and recommending the specific procedure. Next, focus on financial records. The receipts you collect abroad must be itemized, breaking down costs for the surgeon’s fees, anesthesia, the implant, and hospital charges. If the documents are not in English, you are responsible for obtaining a certified translation. This level of detail is what plan administrators look for when auditing claims.

Navigating the Nuances of Travel and Logistics

While the surgery itself is the main event, associated logistical costs have their own set of strict rules. The IRS allows you to use HSA or FSA funds for travel expenses only when the trip is primarily for and essential to medical care. Transportation costs, such as airfare, are eligible. Lodging expenses are also eligible but are capped at $50 per night for the patient and another $50 per night for a necessary companion. Meals are never a reimbursable expense. To bolster your case, choose a facility accredited by an internationally recognized body like the Joint Commission International (JCI), which signals adherence to rigorous standards of care.

Managing Risks and Planning for the Unexpected

No surgery is without risk, and these risks can be magnified when you are thousands of miles from home. Your financial planning must account for potential complications. Before you leave, purchase a comprehensive medical travel insurance policy that specifically covers complications and provides for medical evacuation. Equally important is your post-operative care plan. You must arrange for follow-up care with a U.S. physician before your trip to ensure continuity of care for a smooth and successful recovery. Keep detailed records of all post-operative consultations and physical therapy sessions back in the U.S., as these are also qualified medical expenses.

In summary, using your HSA or FSA for orthopedic surgery abroad is legally permissible and can be financially advantageous. However, it demands a proactive and organized approach. You must become an expert on the rules, a diligent record-keeper, and a prudent planner. Ultimately, your success hinges on treating this endeavor not as a simple transaction but as a comprehensive project requiring your full attention to detail from start to finish.

Sources

Legal Disclaimers & Brand Notices

Medical Disclaimer: The content of this article is provided for informational purposes only and is not intended to be a substitute for professional medical advice, diagnosis, or treatment. Always seek the advice of a qualified physician or other healthcare provider with any questions you may have regarding a medical condition, procedure, or treatment plan, especially concerning complex surgeries like hip or knee replacement. Reliance on any information provided by this article is solely at your own risk. The discussion of medical necessity, procedures, and complications is general and does not constitute personalized medical guidance.

Financial and Legal Disclaimer: This article discusses U.S. tax law (IRS rules regarding HSAs and FSAs) and international medical travel. This information is for general guidance only and does not constitute legal, tax, or financial advice. Readers should consult with a qualified tax professional, financial advisor, or legal counsel regarding their specific circumstances, especially concerning foreign transactions, IRS compliance, and plan administrator requirements.

Trademark Acknowledgement: All product names, logos, and brands mentioned in this article, including those related to medical devices, implants, or financial services, are the property of their respective owners. Their use does not imply any affiliation with or endorsement by them.

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