And Now We Have the Senate Version of the Health Care Reform Legislation Takeover Scheme A.K.A. "Patient Protection and Affordable Care Act"

A link to the Senate legislation can be found here.

I'm only going to delve into two parts of this ridiculous legislation. The Senate version of the plan includes new rules for HSAs (Health Savings Accounts).

page. 1997

1 SEC. 9003. DISTRIBUTIONS FOR MEDICINE QUALIFIED
2 ONLY IF FOR PRESCRIBED DRUG OR INSU-
3 LIN.
4 (a) HSAS.—Subparagraph (A) of section 223(d)(2)b>of the Internal Revenue Code of 1986 is amended by add-
6 ing at the end the following: ‘‘Such term shall include an
7 amount paid for medicine or a drug only if such medicine
8 or drug is a prescribed drug (determined without regard
9 to whether such drug is available without a prescription)
10 or is insulin.’’.

Internal Revenue Code
Section 223. (d)(2)

(2) Qualified medical expenses
(A) In general

The term “qualified medical expenses” means, with respect to an account beneficiary, amounts paid by such beneficiary for medical care (as defined in section 213 (d) such individual, the spouse of such individual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual, but only to the extent such amounts are not compensated for by insurance or otherwise.

Internal Revenue Code
Section 213 (d)

(d) Definitions
For purposes of this section—
(1) The term “medical care” means amounts paid—

(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,

(B) for transportation primarily for and essential to medical care referred to in subparagraph (A),

(C) for qualified long-term care services (as defined in section 7702B (c)), or

(D) for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B (b)).

In the case of a qualified long-term care insurance contract (as defined in section 7702B (b)), only eligible long-term care premiums (as defined in paragraph (10)) shall be taken into account under subparagraph (D).

To sum it up, you can only use your HSA account (tax free) to purchase prescription drugs. So, that means no more Aspirin, Midol or Pepto Bismol with a tax benefit. You know, this goes hand in hand with the proposed 2.5% excise tax on medical devices in the House Plan. The legal description of "medical device" means a 2.5% excise tax on just about anything that's not food and in any way medically related. Hmm...

They also go after FSAs (Flexible Spending Accounts).

page. 1999

1 SEC. 9005. LIMITATION ON HEALTH FLEXIBLE SPENDING
2 ARRANGEMENTS UNDER CAFETERIA PLANS.
3 (a) IN GENERAL.—Section 125 of the Internal Rev-
4 enue Code of 1986 is amended—
5 (1) by redesignating subsections (i) and (j) as
6 subsections (j) and (k), respectively, and
7 (2) by inserting after subsection (h) the fol-
8 lowing new subsection:
9 ‘‘(i) LIMITATION ON HEALTH FLEXIBLE SPENDING
10 ARRANGEMENTS.—For purposes of this section, if a ben-
11 efit is provided under a cafeteria plan through employer
12 contributions to a health flexible spending arrangement,
13 such benefit shall not be treated as a qualified benefit un-
14 less the cafeteria plan provides that an employee may not
15 elect for any taxable year to have salary reduction con-
16 tributions in excess of $2,500 made to such arrange-
17 ment.’’.
18 (b) EFFECTIVE DATE.—The amendments made by
19 this section shall apply to taxable years beginning after
20 December 31, 2010.

Wow the change just doesn't stop! Under this plan, you can only put up to 2,500 dollars into an FSA while still having your money maintain a tax exempt status. Currently there is no IRS limit on medical FSAs. FSAs come in handy when planning for a medical procedure, say knee surgery or hip surgery. A pre-funded medical FSA would essentially be a tax free interest free loan. So, the government has to put an end to that!

I had a conversation about this just the other day. I mentioned that the FSAs and HSAs would be some of the first things to go. At the very least the tax advantages of both FSAs and HSAs will have to be limited to encourage people not to use them anymore. After all HSAs and FSAs promote individual responsibility. You can't support individual responsibility when your policy removes it...

Can anyone explain how taxing individuals more will decrease the cost of health care, or help more to people have access to health care? If the cost of health care goes up, health care becomes less accessible right?

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