The Patient Protection and Affordable Care Act Obamacare may ostensibly be about expanding Americans' access to medical care, but one provision that went into effect in January 2011 penalizes millions of savings account holders who chose to treat their conditions with over-the-counter drugs.
The measure popularly known as the Medicine Cabinet Tax, contained in pages 1,957 to 1,959 of a law that runs more than 2,400 pages, forbids Americans to use health savings account (HSA), flexible spending account (FSA), or health reimbursement account (HRA) pre-tax dollars to purchase nonprescription medicines.
There was a decent public policy reason for doing this, Ryan Ellis, tax policy director for Americans for Tax Reform, tells Sunshine State News, explaining that the original purpose of the provision was to streamline a disconnect in federal tax policy. Before the Medicine Cabinet Tax went into effect, Americans with medical savings accounts could use their pre-tax dollars to pay for over-the-counter drugs, but could not write those purchases off as itemized medical expenses on their income tax returns.
The way [conservatives and libertarians] would fix that is we would allow people to take it as a tax deduction on their itemized deductions, Ellis continues. The way the Obamacare people made it equal, they went in the opposite direction. They said 'We're gonna have these accounts not be able to claim them either.
The federal government expects to collect about $5 billion in revenue from this provision by 2020.
"This tax is counterproductive. Many small businesses utilize consumer-driven health plans because they empower their employees to choose options that work best for their personal needs and help control rising costs, Bill Herrle, Florida executive director for the National Federation of Independent Business tells SSN. This tax is a burden on both businesses and consumers: it limits business's ability to offer valuable plans, taxes employees, and limits their control over their own health care dollars."
Ellison points out that the Medicine Cabinet Tax is one of several that violates President Obama's oft-repeated promises not to raise taxes on families making less than $250,000 in income.
I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase, candidate Obama told a New Hampshire audience in September 2008. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.
Vice presidential candidate Joe Biden repeated that pledge in his televised debate against Alaska Gov. Sarah Palin.
No one making less than $250,000 under Barack Obamas plan will see one single penny of their tax raised, whether its their capital gains tax, their income tax, investment tax, any tax, Biden insisted.
In December 2009, White House spokesman Robert Gibbs explicitly said the pledge would apply to the health care law.
The Medicine Cabinet Tax affects all holders of medical savings accounts, no matter what their family income.
Reach Eric Giunta at egiunta@sunshinestatenews.com or at (954) 235-9116.
