The healthcare bill may soon be creating even more profits for the pharmaceutical companies, thanks to a change in the tax code that affects flexible spending accounts (FSA) or health savings accounts (HSA).
Consumers can use these pre-tax accounts to pay for eligible health care expenses -- expenses that used to include over-the-counter medications. Under the new healthcare bill, however, only prescribed medications will be covered. As written in Newsmax:
“ … Section 9004 of the Senate bill the House … as well as Section 531 of the House bill that passed in November, changes the tax code so that “distribution for medicine” from HSAs and FSAs are “qualified only if for prescribed drug or insulin.”
Yes, the bills are merciful enough to allow diabetics to purchase insulin under these tax plans, but if you or your family members need Pedialyte, prenatal vitamins, or numerous other OTC health items, you will see a tax hike that could be huge.
Since HSAs and FSA contributions are exempt from both income taxes and 15.3 percent payroll tax for Social Security and Medicare, and since these together can reach more than 40 percent of an employee’s salary, the effective tax increase on these medicines could be more than 40 percent.
And this tax change will almost certainly cost the healthcare system billions more dollars in unnecessary spending both to the government and private insurance plans.”
This is only one aspect of the healthcare bill that could end up costing the government more money. According to Robert J. Samuelson in the Washington Post, the plan may also trigger a budget crisis. He writes:
“Two weeks before the House vote, the Congressional Budget Office released its estimate of Obama's budget, including its health-care program. From 2011 to 2020, the cumulative deficit is almost $10 trillion. Adding 2009 and 2010, the total rises to $12.7 trillion.
In 2020, the projected annual deficit is $1.25 trillion, equal to 5.6 percent of the economy (gross domestic product). That assumes economic recovery, with unemployment at 5 percent. Spending is almost 30 percent higher than taxes. Total debt held by the public rises from 40 percent of GDP in 2008 to 90 percent in 2020, close to its post-World War II peak.”