As we feared, the House Ways and Means Committee did indeed approve legislation on Wednesday that would require every expenditure from Health Savings Accounts to be approved, injecting new complexities, driving up costs, and discouraging HSA enrollment.

Wisconsin Rep. Paul Ryan was the hero to HSA-advocates in leading the battle to strike the provision, but his amendment was defeated on a largely party-line vote. The measure was a tempting target for Democratic leaders in Congress who generally dislike HSAs and are always looking for new ways to raise money to pay for other spending.

The Joint Tax Committee said the provision would save more than $300 million because the IRS will be collecting more penalties on HSAs and because contributions to HSAs will go down. They admitted that the HSA "substantiation" provision would have a significant impact on the HSA market.

It's not clear that the Democratic leadership would have realized the damage they could do with this one seemingly small change, and there is a lot of anger at the Republican lobbyist who offered the idea on behalf of a self-interested benefits management company.

And the legislation is totally unnecessary. Under current law, if people with HSAs use the money in their accounts for non-medical purposes, they have to pay taxes on the money, plus a 10% penalty — the same as if they had withdrawn the money directly.

When people take a deduction for other kinds of medical expenses on their tax returns, they can claim anything they want, but if they are audited and can't validate the expense, they are subject to penalties.

Chairman Rangel offered an amendment that would delay implementation by two years (until 2011) so there is still time to bring sense to this debate as it moves to a less-certain fate in the Senate.