New! Patiently™ by FSA & HSA Store®: Use pre-tax dollars for weight loss treatment. | Get started today
Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) offer significant tax advantages for individuals looking to manage out-of-pocket medical costs. Some items and services do not neatly fit into the IRS definition of medical care, and will only be reimbursable if they are used primarily for a medical purpose. One commonly used tool to prove a certain expenses are medical is the Letter of Medical Necessity (LMN) — a document from a licensed healthcare provider that states a product or service is necessary for the treatment of a specific medical condition. While an LMN can unlock reimbursement for items that are not automatically covered, there are still limits to what they can cover. Understanding these limitations is key to avoiding denied claims or IRS penalties.
What a Letter of Medical Necessity Can Do
An LMN can make certain "dual-purpose" items — which have both medical and general use — eligible for reimbursement. Examples include:
- Massage therapy for chronic pain
- Nutritional supplements for a diagnosed condition
- Exercise equipment
When properly documented, these items may be reimbursable with an FSA or HSA and provide more choice and flexibility in using tax-free healthcare benefits.
But There Are Still Restrictions
Despite the flexibility an LMN provides, it does not guarantee that all expenses will be approved. Some expenses are categorically excluded from FSA/HSA eligibility — even with a letter from a medical professional.
1. Cosmetic Procedures
Procedures that are primarily intended to improve appearance rather than treat a medical condition are not eligible, even if a doctor supports them. This includes:
- Botox for wrinkles
- Teeth whitening
- Hair transplants
Exceptions exist when these procedures treat a documented medical issue (e.g., reconstructive surgery after an accident), but cosmetic motives alone are not eligible.
2. Personal Use Items
Unlike dual-purpose items, personal use items have no medical purpose and therefore would not be eligible. Examples include:
- Toiletries: every day items like regular soaps, shampoos, deodorants, toothbrushes, and toothpaste.
- Regular baby products, like infant formula and diapers
- Foot grooming: non-medicate products that are primarily for moisturizing or reducing odor are not eligible.
3. Illegal Services or Treatments
- Some products, such as cannabis, are not legal at the Federal level and are therefore never reimbursable with an FSA/HSA.
Final Word: Know the Rules
An LMN is a powerful tool, but it’s not a catch-all solution. FSA and HSA plans are governed by IRS regulations, and administrators are required to follow strict guidelines. Some items and services are strictly cosmetic or personal, and per the IRS an LMN is not sufficient to turn a non-medical expense into a medical one.
If you’re unsure whether a particular item or service is eligible — even with an LMN — it’s best to check with your plan administrator.
The bottom line
Your employer pays you for the work you do—not the other way around. Missing your FSA deadline and forfeiting the funds you’ve saved essentially flips that script. So get ahead of that deadline and make the most of your funds on the essential health products that matter most to you and your family.
