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While I certainly have been a huge supporter of the health care reform legislation, and quite frankly think we should have gone way farther.(cough) Public option. (cough) I also think the whole effort on the part of Republicans to repeal HCR, is ludicrous, I am pretty keen about making minor tweaks that make sense in the legislation.

Per this post, they did vote to add an amendment to get rid of one requirement that would have seriously complicated the tax reporting requirements for small businesses.

In that same light, I have a very serious suggestion for another tweak they can make that would have an immediate impact.

Like many others who do their health care through their employer, I went through the process of doing our annual enrollment, which included the allocations one makes for Flexible Spending Accounts (FSA), also sometimes called a "Cafeteria Plan".  

This account lets you stash away a designated amount of pre-tax money (you make that decision at that time for the entire year, no changes later on are allowed) per paycheck with the idea that it would be used to pay for medical expenses throughout the year....co-payments, medical services, medical supplies, dentistry, eyeglasses, and medicines.  Basically, there was a list of those items that were considered eligible for reimbursement through these accounts, or for those who have an FSA debit card, you could use those funds to pay at a drugstore, or doctor's office.

Well, this past fall, we were notified that the new healthcare legislation had made some changes relevant specifically to FSA's.  And it was a change that really stymied me.

Eligibility for Over-The-Counter (OTC) Items

As part of the new Health Care Reform legislation, the requirements for reimbursement of OTC medicines and drugs have changed. For expenses incurred on or after January 1, 2011, all OTC medicines and drugs must be prescribed by an authorized healthcare provider to be eligible for reimbursement from an FSA account. Prescriptions for OTC medicines and drugs must meet the same requirements as any prescription medicine or drug for the state in which the expense is incurred.

Since the new legislation is effective January 1, 2011 for any OTC drugs or medicines purchased in 2011, the new requirement will apply to items purchased during an annual grace period for unused participant FSA balances in 2010.

While we cannot provide specific product name brands, the below categories of OTC medicines and drugs will require prescriptions as of January 1, 2011. These include both ingested and topical forms.

Acid Controllers
Digestive Aids
Allergy & Sinus Medications
Feminine Anti-Fungal/Anti-Itch Products
Antibiotic Products
Hemorrhoid Preps
Anti-Diarrheal Drugs
Laxatives
Anti-Gas
Motion Sickness
Anti-Itch & Insect Bite
Pain Relief
Antiparasitic Treatments
Respiratory Treatments
Rash Ointments/Creams (including baby)
Sleep Aids & Sedatives
Cold Sore Remedies
Stomach Remedies
Cold, Cough & Flu

So, basically all of the things that one uses for things that generally don't require you go to a doctor.....now require that you go to a doctor if you want to use your FSA funds to buy them.

I, for one, certainly don't remember this provision coming up for any kind of discussion during the healthcare debate, but it's certainly right there in the legislation:

SEC. 9003. DISTRIBUTIONS FOR MEDICINE QUALIFIED ONLY IF FOR
PRESCRIBED DRUG OR INSULIN.

(a) HSAS.—Subparagraph (A) of section 223(d)(2) of the Internal
Revenue Code of 1986 is amended by adding at the end the following:
‘‘Such term shall include an amount paid for medicine
or a drug only if such medicine or drug is a prescribed drug
(determined without regard to whether such drug is available without
a prescription) or is insulin.’’.
(b) ARCHER MSAS.—Subparagraph (A) of section 220(d)(2) of
the Internal Revenue Code of 1986 is amended by adding at the
end the following: ‘‘Such term shall include an amount paid for
medicine or a drug only if such medicine or drug is a prescribed
drug (determined without regard to whether such drug is available
without a prescription) or is insulin.’’.
(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH
REIMBURSEMENT ARRANGEMENTS.—Section 106 of the Internal Revenue
Code of 1986 is amended by adding at the end the following
new subsection:
‘‘(f) REIMBURSEMENTS FOR MEDICINE RESTRICTED TO PRESCRIBED
DRUGS AND INSULIN.—For purposes of this section and
section 105, reimbursement for expenses incurred for a medicine
or a drug shall be treated as a reimbursement for medical expenses
only if such medicine or drug is a prescribed drug (determined
without regard to whether such drug is available without a prescription)
or is insulin.’’.

(d) EFFECTIVE DATES.—
(1) DISTRIBUTIONS FROM SAVINGS ACCOUNTS.—The amendments
made by subsections (a) and (b) shall apply to amounts
paid with respect to taxable years beginning after December
31, 2010.

Now, if one takes a look at it from a cost savings (i.e. revenue generation) perspective, this is a dumb change.  Why?  Because the amount of funds used to purchase these items is generally going to be quite small.  Personally, when I determine how much money I'm going to allocate for my FSA, I am thinking in terms of money that will be laid out for doctor's office co-pays, prescription meds (which can be VERY pricey), vision care, dentistry services, etc.  The amount of money I might use for OTC meds is generally not going to be a factor in that decision.  So, what was the point?

The people who this change will directly affect the most are those in the middle class income brackets.  People who live from paycheck to paycheck....people who might not have an extra $20 or $30 at the end of a  payperiod to go buy some OTC meds when they fall ill with the flu or a cold, or other illness that generally doesn't need a doctor's visit.  At least not until now.  

Now let's watch this year as doctors are inundated with requests for prescriptions for basic things like pain relievers, cough and cold medicines, allergy meds, all of which have always been able to be purchased using one's FSA funds.  At the very least, since these funds are "use them or lose them" by the end of the year, if you'd not used them up, you could at least make a last-ditch trip to your local drugstore and stock up on things you might need throughout the year so you didn't lose your money.  YOUR money.

So, why was this change made?  And isn't this something we should look at "tweaking" that would have a positive effect on those in the working class?

Originally posted to Ubiquitous A on Wed Feb 02, 2011 at 04:48 PM PST.

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Comment Preferences

  •  Didn't know that (0+ / 0-)

    But, you're right. This should be fixed.

    One of the best changes on FSA, was the ability to roll it over from one year to the other.

    •  Wait, what? (0+ / 0-)

      Where did you hear that?  I know we haven't had that change in our FSA, as they're still telling us you have to use it or lose it during the calendar year.  I would LOVE for them to change that!

      •  HSAs can be rolled (0+ / 0-)

        FSAs don't roll. They are use it or lose it.

        And on the diary topic, the change affects both HSAs and FSAs. Also, it always struck me that there were only a few logical beneficiaries of the OTC exclusion.

        A - Doctors, who now must write a prescription for exactly the same medicine you could previously obtain OTC, sans tax. But, somehow, I doubt they will be thrilled by having patients come in for a "dope" scrip, no matter the easy fee. Plus, it isn't as if doctors were front and center in the shaping of this legislation.

        B - Health Insurance Companies - who receive at least one fee share for visits to get that dope scrip, if, that is, they are also the owners of the PPO or HMO network enterprise with which the Doctor's are contracted.

        C - The Treasuries of the various States, which may, dependent on their tax structure, see increased revenue flows from the sale of these OTC medicaments. But, as diarist notes, those revenues are relatively small.

        Any other "takers" or, if you will, follow the money.

    •  No it doesn't need fixing (0+ / 0-)

      but health industry lobbyists want you to think it should.

      http://www.kaiserhealthnews.org/...

      Restoring taxpayer subsidies for over the counter prescription drugs subtracts money from PPACA.

      This is how the health industry lobbyists plan to "defund" PPACA - through many little cuts that consumers don't know enough about.

      Proud member of the Democratic Wing of the Democratic Party.

      by Betty Pinson on Wed Feb 02, 2011 at 06:10:06 PM PST

      [ Parent ]

  •  I can see it now: (0+ / 0-)

    A script from the doctor for aspirin, 1000 tablets, with a refill for 100, and the dosing will read prn (as needed)

    Geesh.  

    Hensarling: "Let's repeal it today, replace it tomorrow." Wimpy: "I'll gladly pay you Tuesday for a hamburger today"

    by gooderservice on Wed Feb 02, 2011 at 04:58:34 PM PST

  •  That use it or lose it provision was all the (0+ / 0-)

    persuasion I needed to reject FSAs.  A device designed to encourage unnecessary medical expenditures.

    The community of fools might be small if it were not such an accomplished proselytizer.

    by ZedMont on Wed Feb 02, 2011 at 05:01:07 PM PST

    •  Actually.... (1+ / 0-)
      Recommended by:
      ZedMont

      I've found it to be a lifesaver, quite frankly.  Even if you're only stashing away $20 per paycheck, it means if that first week you need several hundred dollars of dentistry, you'll have it!

      I ended up having major dental work that had to be done this year, and still had enough left to handle the few doctors visits I needed to make.  And not once did I have to worry that I didn't have enough cash in my regular checking account to cover it, because I paid directly with my FSA debit card.

      It's one less thing to worry about, in my book.

  •  "Tweaks" kill PPACA (0+ / 0-)

    The effort to make this "tweak" is being funded by industry interest groups and promoted by lobbyists in DC. They're spending millions to convince you that this is important and will help you.

    How does this "tweak" hurt PPACA?  Removing the tax exemption for moderate to high income wage earners who benefit from buying OTC drugs tax free was done to provide funding for PPACA. Your $150 per yr tax break will cost thousands of Americans access to affordable health care.

    Some health economists say FSAs are a wasteful tax break because they don't help those who need aid the most.

    "Is it really so bad to pay for insurance for our lowest income citizens by removing a tax break for our middle and upper income citizens that they use to buy aspirin and glasses?" asks Jonathan Gruber, a health economist at the Massachusetts Institute of Technology.

    Link

    Do you really need a tax break for your over the counter medications if it means de-funding health care reform?  

    So here's a deal - if you want some "tweaks" that will cost PPACA millions of dollars in funding, tell us how you plan to replace that funding.  Think of it as health care PayGO.  You want a tax break that hurts the uninsured - tell us how you'll replace the funds.

    Deal?

    Proud member of the Democratic Wing of the Democratic Party.

    by Betty Pinson on Wed Feb 02, 2011 at 06:07:36 PM PST

    •  It will be interesting to see who comprises this (0+ / 0-)

      new subcategory of fat cats.

      Removing the tax exemption for moderate to high income wage earners...

    •  I'm sorry, but explain to me.... (0+ / 0-)

      how this is true:

      "Removing the tax exemption for moderate to high income wage earners who benefit from buying OTC drugs tax free was done to provide funding for PPACA."

      First off, it doesn't make sense to me how high income earners are going to make tons of money in tax breaks just because they get to use an FSA to buy their damn aspirin.....and it's not like they probably get sick any more frequently than lower income people, in fact they probably get ill less often.  So, I'm not convinced how big of an impact that really would have.

      So here's a deal - if you want some "tweaks" that will cost PPACA millions of dollars in funding, tell us how you plan to replace that funding.  Think of it as health care PayGO.  You want a tax break that hurts the uninsured - tell us how you'll replace the funds.

      If someone who can actually explain to me that there is a significant amount of money actually saved by taking OTC's off the reimburse list, I'm actually happy to deal with the inconvenience if it means real money helping others to get health insurance.  But as I mentioned before, the allocations people make to FSA's as a result prior to the beginning of the plan year will generally not vary all that much based on this change...in fact the ones that would make cutbacks on their allocations are going to be the lowest wage earners, not the highest.  So how is there any real money saved at all to help pay for other things?

      I'm not only open to answers to this, but welcome them.  

      •  Sorry, screwed up my formatting..... (0+ / 0-)

        how this is true:

        "Removing the tax exemption for moderate to high income wage earners who benefit from buying OTC drugs tax free was done to provide funding for PPACA."

        First off, it doesn't make sense to me how high income earners are going to make tons of money in tax breaks just because they get to use an FSA to buy their damn aspirin.....and it's not like they probably get sick any more frequently than lower income people, in fact they probably get ill less often.  So, I'm not convinced how big of an impact that really would have.

        So here's a deal - if you want some "tweaks" that will cost PPACA millions of dollars in funding, tell us how you plan to replace that funding.  Think of it as health care PayGO.  You want a tax break that hurts the uninsured - tell us how you'll replace the funds.

        If someone who can actually explain to me that there is a significant amount of money actually saved by taking OTC's off the reimburse list, I'm actually happy to deal with the inconvenience if it means real money helping others to get health insurance.  But as I mentioned before, the allocations people make to FSA's as a result prior to the beginning of the plan year will generally not vary all that much based on this change...in fact the ones that would make cutbacks on their allocations are going to be the lowest wage earners, not the highest.  So how is there any real money saved at all to help pay for other things?

        I'm not only open to answers to this, but welcome them.  

  •  You're missing the point (0+ / 0-)

    Requiring a doctor's visit makes it more likely that you'll go and seek preventive care.  Maybe, yes, all you need is an OTC remedy...but, as nyceve points out, maybe you need something else.

    The point is to get people to go to a physician earlier, not later.

    •  So folk looking for Rolaids et. al will be (1+ / 0-)
      Recommended by:
      Ubiquitous A

      competing for doctor appointments with the uninsured. That should be fun.

      •  Thank you, this. (1+ / 0-)
        Recommended by:
        valion

        For instance, I get cramps on a regular basis, and have ever since I was a teenager.  This now means if I want to use my FSA to buy Advil, I have to get a prescription.

        If I come down with a cold, and just need to get some Sudafed, and want to use my FSA, I now need to get a prescription.

        I have indoor allergies, and if I want to buy Claritin or Zyrtec, and want to use my FSA, I now need to get a prescription.

        In order to get any one of those prescriptions, I have to pay anywhere from $10 - $25 copayment to visit the doctor for them to tell me, I have a cold, I have indoor allergies, or I am a woman who gets cramps.  It's a waste of their time, of my money, and it's just plain dumb.

        As I said above.  I'm happy to deal with the inconvenience if someone can demonstrate to me that this change saves gazillions of dollars that will help to pay for others to get health insurance.  But the logic of this fails thus far to my mind.

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