Congressman Dave Reichert (WA-08), a member of the House Ways & Means Committee, and Congressman Walt Minnick (ID-01) today introduced the Restoring Assistance for Families and Seniors Health Expenses Act (H.R. 5936), legislation that would repeal and replace troubling provisions of the health care overhaul recently signed into law. Specifically, the Reichert/Minnick proposal would restore the 7.5 percent income threshold to deduct out-of-pocket medical expenses, repeal the cap on the maximum annual contribution to Flexible Savings Accounts (FSAs), and repeal the ban that prohibits holders of FSAs and Health Savings Accounts (HSAs) from using money from their accounts to purchase over-the-counter (OTC) medicines.
"As Americans continue to struggle to make ends meet, and as our country faces record unemployment and economic challenges, the last thing individuals and families need is to be saddled with more taxes created by the health care overhaul," Reichert said. "Our proposal would make sure that the average American family doesn't bear the burden of this bill. People across this country are looking for common-sense solutions, and this legislation delivers. I will never stop fighting to bring meaningful reform to health care, and that includes repealing and replacing things like the harmful taxes and caps created by this new law."
A breakdown of the Reichert/Minnick legislation follows.
Restoring Assistance for Families and Seniors Health Expenses Act, H.R. 5936
The health care overhaul law included an increase, from 7.5 percent to 10 percent of income, the threshold after which individuals can deduct out of pocket medical expenses. H.R. 5936 restores the deduction to the original percentage.
- H.R. 5936 would restore the medical expenses deduction to 7.5 percent of taxable income.
- According to the Joint Committee on Taxation, more than 95 percent of the tax increase imposed by this change would fall on filers earning under $200,000.
The health care overhaul law placed a new cap ($2,500 starting in 2011) on the maximum annual contribution to a Flexible Savings Account (FSA). H.R. 5936 repeals this cap.
- FSAs -- which are currently used by 35 million Americans -- encourage consumers to be more aware of both the cost and quality of health care goods and services.
- By limiting the value of FSAs, the legislation undermines this important incentive for cost control for millions of Americans. Additionally, for many Americans with chronic conditions, FSAs present an opportunity to set money aside to cover the ongoing cost of care.
- Approximately 7 million Americans put more than $2,500 into their FSAs. According to the Employers Council on Flexible Compensation, the median income of an FSA holder in 2008 was just $55,000.
The health care overhaul law included a new ban starting in 2011 prohibiting holders of FSAs and HSAs (as well as Archer MSAs and Health Reimbursement Accounts) from using money from their accounts to purchase over-the-counter (OTC) medicines. H.R. 5936 repeals this provision.
- Some OTC medicines, such as Claritin or Prilosec, can now be purchased over the counter for half the price of their prescription versions.
- By eliminating the ability to use an FSA or HSA for the purchase of such medicines, individuals will be forced to use more expensive prescription drugs.