What do Democratic leaders have against individual economic choice? Amid so many other flash points in their various versions of health care overhaul, observers might have missed their attempt to torch the Flexible Spending Accounts (FSAs), which are popular with millions of Americans.
FSAs are funds that workers can set aside without being taxed for out-of-pocket health care costs that are not covered by insurance. As many as 35 million Americans use them, according to loose industry estimates. The funds already are somewhat self-limiting because they must be used within each calendar year rather than being carried over tax-free indefinitely. But they serve the valuable purpose of encouraging people to treat their ailments early rather than waiting until their condition gets so bad that they need more doctors' appointments, emergency-room visits or other expensive help.
In their efforts to put a few billion dollars of lipstick on a trillion-dollar pig, Democratic leaders have targeted FSAs in an attempt to find "savings" to pay for their massive government health care dreams. The theory is that taxing these accounts as ordinary income would bring more money into the Treasury. This theory, however, contradicts the message peddled in other contexts by the Obama administration that smaller, preventive care now will save oodles of cash from surgeries and hospitalizations later.
In May, the Senate Finance Committee announced that among the changes it would consider were "limiting the amount that can be contributed to an FSA or eliminating FSAs altogether." In July, the Joint Committee on Taxation actually adopted an amendment to H.R. 3200, the House leadership's main bill, that would disallow over-the-counter medicines from being bought with money from FSAs or related Health Savings Accounts or Health Reimbursement Arrangements. The committee estimated that this change would "save" $8.2 billion, over 10 years, from the trillion-dollar -- or, put another way, the one-thousand-billion-dollar -- reform boondoggle.
Politicians should think about the ramifications of this policy. If people don't buy medicines over the counter, they likely will seek a prescription instead. That would drive costs up, not down.
Congressional leadership seems to have backed off the idea of eliminating FSAs, although the ban could re-emerge. The other Senate idea, that of putting a cap (usually pegged at $2,000) on the size of an FSA, surely would harm the people who need FSAs the most. Jody Dietel, chief compliance officer at WageWorks Inc., a company that oversees 1.5 million accounts, told Roll Call that about 20 percent of FSA users would be hurt by a $2,000 cap. The lion's share of those account users are people with chronic conditions such as diabetes, which necessitate far more than the usual out-of-pocket costs.
The liberal attack on FSAs, along with even broader attacks on full Health Savings Accounts, is an assault on the very notion of individuals managing their own health care budgets. The real agenda, one suspects, is to make government-run health care a default option by eliminating all other significant alternatives. Yet President Obama repeatedly has pledged that anybody happy with his or her current health coverage will be able keep it. Surely that pledge should apply as well to coverage that individuals provide for themselves through their own careful savings.