If you use a medical flex-spending account or health savings account to buy your over-the-counter products, be prepared for changes next year. Instead of using your flex spending account debit card to pay for these products outright, you will now need a doctor’s prescription to buy them.

According to Dr. Douglas Henley of the American Academy of Physicians, “It’s going to create a lot of new obstacles for patients and their doctors.”

For the person who uses his/her flex-spending account to buy those medications, it’s now going to cost more.  Starting next year, patients will have an increased cost of going to the doctor to write the prescription and then subsequently going to the pharmacy to have it filled…all adding to the the overall cost of the medications.

This just seems to be an unnecessary hassle and burden,” Henley said.

Another change that baffles the medical community is starting January 1, flex spending accounts will no longer recognize breast feeding as a form of medical care. For many years now, breast-feeding mothers received a tax break when purchasing supplies through their health flex spending account.

According to the new IRS tax code, breast pumps and accessories are no longer qualified expenses for employer flex spending accounts.

For many medical experts, breast-feeding is more than just a method for feeding children and breast milk is more than just food.  It is a key element to strengthening a child’s immunity system.

These changes as well as other changes that take effect in 2013 are expected to decrease costs, saving the federal government money. The savings would be used to help insure the uninsured,  a key goal of health reform. Not affected in this change are durable medical supplies, such as crutches, bandages or braces.  The changes  are slated for the start of the new year and will only affect people with flex spending (FSA) or health savings accounts (HSA), which use tax deferred money for qualified medical expenses. For those who don’t have one FSAs or HSAs, or pay out of pocket, nothing changes.

There may be additional changes for reimbursement through flexible spending, depending on the insurance provider.

Additional information:
Check on flex spending account changes through the FSAFeds.com website.

A recent proposal from the Senate Committee on Finance recommends eliminating flexible spending accounts (FSAs) as a way to help fund costs for health care reform efforts.  If enacted, this proposal would negatively affect many Americans who rely on FSAs to manage and pay for their health care costs not covered by insurance…in essence an increase in taxes at a time when many can least afford it.

According to the Daily Kos, “The Joint Committee on Taxation told Senate leaders recently they could collect $68.6 billion over 10 years by abolishing the accounts, along with separate ones in which employers contribute money for workers to use for health care expenses. Eliminating both types of accounts would pay for four percent or more of the estimated $1 trillion to $1.5 trillion cost of expanding coverage to the 46 million uninsured.”

The search for revenue is revisiting the debate over FSAs, HSAs and other medical savings accounts. Sparking controversy from some healthcare critics, they say these accounts are actually tax shelters for the rich and encourages spending on unnecessary or otherwise frivolous expenses. On the other hand, proponents of these plans say that flexible spending account programs help people pay for high medical expenses that aren’t covered by insurance.

The Daily Koz reports the debate is further complicated by the fact that “the government doesn’t track even basic details on how the accounts are used, how much money is involved and what happens to the unspent funds. The only data available come from the industry-the companies that administer the programs for employers. Even that information is incomplete.”

According to a July 16,2009, Bloomberg news report “The House Ways and Means Committee is proposing to prohibit reimbursements for over-the-counter drug purchases using pretax health-spending plans.

The proposed limits, affecting employer-sponsored flexible spending accounts and privately owned health savings accounts, were added to a 1,018-page bill aimed at overhauling the health- care system. ”

The proposed limit would raise $8.2 billion over a decade, according to official estimates. It would supplement a proposal to increase taxes on the highest-earning Americans, including a 5.4 percent surtax on couples who earn more than $1 million.”

Stay tuned…

A flexible spending arrangement (FSA), or Flexible Spending Account, as they are commonly called, is one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer in the United States. Flexible spending accounts allow an employee to set aside a portion of his or her earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses but often for dependent care or other expenses. Money deducted from an employee’s pay into an FSA is not subject to payroll taxes, resulting in a substantial payroll tax savings.

The most common FSA, the medical expense FSA (also known as medical FSA or health FSA), is similar to a health savings account (HSA) or a health reimbursement account (HRA). However, while HSA insurance plans and HRAs are almost exclusively used as components of a consumer driven health care plan, medical FSAs are commonly offered with more traditional health plans as well. An FSA may be utilized by paper claims or an FSA debit card also known as a Flexcard.

According to Celent, as of May 2006, there were approximately 6 million debit cards in the market tied to an FSA account, representing 25% of the FSA participating community. The outlook for FSA cards in the near future is optimistic. FSA cards will increase FSA adoption rates. The average card participation rate was around 20% as of May 2006. By 2010, it is projected this rate will increase to 85%.