Will health reform make saving harder?
Employees who put money in tax-free Flexible Spending Accounts for out-of-pocket medical expenses may face a limit for the first time. Bob Moon reports.
Doctor holds out stethoscope (iStockPhoto.com)
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TESS VIGELAND: Cleveland is home to one of the nation's preeminent medical facilities. And recently it's become a common reference in the debate over healthcare reform. The Cleveland Clinic is known nationwide for providing high-quality healthcare at a lower cost than many of its peers. This week executives from the clinic and several other medical groups were in Washington to talk about reform. Their visit came at the same time that Montana Democrat Max Baucus unveiled his overhaul proposal as head of the Senate Finance Committee.
Marketplace Senior Business Correspondent Bob Moon tells us this latest plan could bring some changes to existing employee benefits.
Bob Moon: The proposal would put a limit on tax-free savings that workers are allowed to tap for out-of-pocket medical expenses. Those flexible-spending accounts, or FSAs, would be capped for the first time, at $2,000 a year.
At Wage Works, an employee-benefits administrator, Jody Dietel says the change would hit millions of FSA users with hundreds of dollars a year in new taxes.
And while FSAs can currently be used to pay for any over-the-counter medicines, she says proposed new limits on those purchases would put an unnecessary burden on the whole system.
Jody Dietel: It really is going to drive up healthcare costs in our view, because it will require you to go see the doctor to write you a prescription to get those over-the-counter medicines paid for by your account-based plans.
The money that workers put into their FSAs would also be counted toward a new federal cap on employer-provided medical benefits. And if the total value of those benefits exceeded the limits, the amount over the cap would be hit with a stiff new tax.
At the benefits consulting firm the Segal Company, Kathy Bakich says that 35 percent tax could catch many employers and employees off guard.
Kathy Bakich: Lots of other things come under that cap, too. It's not just your health coverage, it's your dental, your vision, your hearing aids, your drugs, any health reimbursement account contributions. Everything is in there.
Supporters of the tax say its aimed at so-called gold-plated health plans lavished on the highly paid. But at Health Policy and Strategy Associates, consultant Robert Laszewski cautions they would probably end up wiggling out it.
Robert Laszewski: Politicians say, "Well, we're going to tax partners of Goldman Sachs." But I think what would happen there is, Goldman Sachs would probably cash these people out and let them go buy individual coverage, not subject to the 35 percent tax, no matter how expensive it is. So there's probably a way for the Wall Street types to get around it.
Laszewski says it's actually benefit packages worth far less than the coverage enjoyed by those fat cats that would most likely fall victim to the higher taxes. The real flash point he says could be coverage plans negotiated under union contracts for police, firemen and teachers.
I'm Bob Moon for Marketplace Money.
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From Merritt Island, FL, 09/19/2009
Flexible spending plans are just a tax break for people who can already afford health care. In fact they provide greater benefits to those in a higher tax bracket. By cutting taxes for the wealthy, they increase taxes on the poor. If you are motivated by altruism, the FSA is just a clever way to make you think you are helping people. If you're motivated by self-interest and in a low tax bracket you should also oppose FSAs because the wealthy people are shifting their tax burden to you. The only people who should rationally support FSAs are those who are wealthy and motivated by self-interest, because they are shifting taxes to those with less money.
The whole structure of FSAs suggests a con game. If you forget and don't spend all the money by the end of the year, the bank gets to keep it. What!!! Where's the logic here??? Wonder who usually comes out ahead on that transaction?
FSAs don't "save" taxes, taxes must still be paid. The FSA simply shifts the tax burden from rich to poor. They are a bad policy and should be eliminated. .
09/19/2009
Don't know about such savings plan. But can say that an 'Individual Mandate' would most definitely cut back on many individuals savings.
But isn't that just what the 'turbo capitalists' wish to do? Make people more despondent as well as more dependent on the system?
A socialized health plan was never really on the table. Well, it made good fodder to distract the public over the threat of turning America red.
The 'real plan' all along, may have been to enrich the HMO's with new 'forced' business and ram the latest scam, the 'Individual Mandate,' down the publics throats. I was told by one person that the lobbyists for HMO's have thrown more money at DC over this issue (healthcare related or not) than any other issue in history.
Lets take a look at how it all went down. After all, it is quite a change from what Obama promised. And links or no links for "hearsay" - actions speak louder than words or links.
From...
"Lets Spread the Wealth. Lets set up a Socialized Healthcare System for All Americans paid for by taxing the rich 5%."
To...
"All uninsured Americans MUST buy healthcare insurance. And you must submit such evidence of coverage on your tax returns to the IRS or you will be FINED a penalty up to $3800."
http://www.washingtonpost.com/wp-dyn/content/article/2009/07/21/AR2009072103410.html
Although, the capitalistic system we have in force in the US is kind of wishy-washy. When the capitalists / bankers / investment bankers were out of money during the financial panic, they turned to their political cronies so the looses could be socialized and had the taxpayers bail them out.
So American capitalism seems to accept profits without and issue, it is only when losses come about that they favor a socialistic view.
The hope of striking it rich, within a capitalistic society, is all that most citizen can cling to, as they go through a life of slavish dependence, working until they die.
Some of these worker drones may have given up the hopes of striking it rich long ago. Their hopes may be more along the lines of retiring in a one room sweat box and being able to afford some canned dog food to eat.
But the greedy Ponzi capitalists, along with the full faith and backing of the politicians, have taken that little dream away from many of the retirees as well. I often wonder how the old folks get by nowadays with 1/4 of 1 percent on money market funds and if they are lucky, maybe a whopping 1-1/2% in CD's.
Why are the rates kept so low? Can you imagine if the government had to pay high percentage rates on all their debt? so they keep the rates artificially low and to hell with the retirees.
If we look at the data, we can see that only 5% to 6% of the households are making more than $250,000 per year. That doesn't make them all rich, but we can generally say $250,000 a year would be a nice income for most of us reading this. (With mine being less than 9% of that figure.)
And if one is talking millions of dollars per year in income, then the figure is just a couple percent of the households in America.
http://en.wikipedia.org/wiki/Household_income_in_the_United_States
So capitalism favors 1% to 2% of the population and the other 98% end up as slaves to the capitalists.
Now, I'm not promoting communism or any other extreme views. Even the so called selfless communist governments get weighed down with egocentric leaders. If one is selfless such as ants or bees communism works fine. It is only when human selfishness is injected into the equation that communism fails miserably.
The reason the ideal of communism fails is because imperfect humans have to apply the perfect ideals. Same goes with our imperfect democratic elected leaders. But the problem is not so much that we elect imperfect leaders, the problem is that we have no oversight committee to change the wrongs that they do. Nor do we have punishment for them for doing such wrongs.
Just look at Bush and the rest. As soon as they leave office, what is said? "Well, they may have done something wrong...but lets just move on."
Politicians have a free reign to rape and pillage the US and Americans as they wish...because there is NO OVERSIGHT COMMITTEE nor PUNISHMENT for the evils they do.
Socialism, in its most ideal form, puts society and social issues first.
Capitalism puts profits and greed first.
But the way things are set up, social ethics goes out the window, all in favor of the cult worshiping the almighty dollar. Social ethics cost money. And spending money for such things is against the capitalists religion. Capitalism is not the religion of humanity, it is the religion of greed, power and money.
That is just how things are. We may wish things were different. But wishful thinking will never change a thing.
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