Will Congress Cure the Problems with Health Care FSAs?

You practically have to be an accountant to manage your family's health care these days. The good news is, some lawmakers seem to recognize this and are working toward changes to one program that should be well received by employers, employees and doctors alike.

The Medical Flexible Spending Improvement Act (S. 1404) was introduced in the Senate and would allow employees to withdraw and pay taxes on any remaining funds in their flexible spending accounts at the end of the year, removing the controversial "use it or lose it" issue that has left many people frantically trying to fit in dental visits or pick up a pair of eyeglasses to spend down their FSA's in December. One couple even squeezed in colonoscopies on Christmas Eve.

Savvy and organized consumers seem to make good use of their FSAs throughout the year, but it's widely agreed some logical adjustments need to be made to how they are regulated. First, it can be difficult to guess in advance how much money it will make sense to set aside for health care in a given year, and there's currently no option to roll over funds into the next.

"It is time to modernize FSAs to eliminate the burdensome 'use it or lose it' rule," Sen. Ben Cardin (D-Md.) said. "It is both fair and sound health policy to allow FSA participants to cash-out remaining funds at the end of the plan year rather than forfeiting the balance to their employer." The advocacy group Save Flexible Spending Plans is encouraging Americans to "remind Congress flexible spending accounts are part of the solution, not part of the problem."

A Good Way to Prepare for Medical Expenses

Fear of losing the FSA money definitely weighs on the choices of Cathy Davenport of Blakeslee Pa., the mother of two teenage girls. She started using an FSA when her girls needed braces. Now, she finds it's good for glasses and contacts, but she notes: "I always run out of funds in July, because I am scared of losing the money." Removing the "use it or lose it" factor would alleviate this common, understandable concern.

Diedre Ayers of Maplewood N.J., the highly-organized working mother of a 2-year-old son, is a huge proponent of FSAs. She reviews her annual medical expenses when open-enrollment time rolls around and looks forward to signing up for what she describes as "a pre-tax savings account that I don't even have to worry about." That annual routine more than paid off during her pregnancy, as well as when they made a recent trip to the emergency room with their son -- two significant medical events that, even with the best insurance, could have really thrown off their monthly expenses. Instead: "I just pull out my FSA Visa card for the out-of-pocket costs and I know the money is there." She deducts $3,000 to $5,000 annually from her paycheck into her FSA.

One variable viewed as a potential upcoming problem is the $2,500 cap, which will kick in beginning in 2013 as part of the Patient Protection and Affordable Care Act. Employee Benefit News contributing editor Christy Yaccarino makes a compelling case the cap is too low, pointing out that employees will be stuck with substantial out-of-pocket expenses if they get trapped between exceeding the cap and not reaching out-of-pocket spending maximums.

Prescription Rule Is a 'Cure' Worse Than the Problem

Also being revisited is the provision requiring a prescription for buying over-the-counter medicine with FSA accounts. Intended to prevent consumers from unnecessarily stocking up on the likes of aspirin and ibuprofen to deplete their FSA accounts, it instead sent patients flocking to doctors offices just to get a piece of paper. Understandably, that didn't go over well with many physicians, especially when you consider the math on the doctor's side. Dr. Matthew Mintz gives an eye-opening account, explaining that procedures get reimbursed, while time-consuming but less tangible tasks like talking to patients, filling out forms, etc., do not. Moreover, physicians take on liability every time they write a prescription. Doctors simply aren't being compensated to reflect new realities. Even they need to be accountants these days.

Dr. Richard Barron, an internist in a practice with more than 8,000 patients, took on the task, conducting a year-long study to evaluate just how doctors are allocating their time during their roughly 50- to 60-hour work weeks. The numbers tell the story regarding what's keeping doctors so busy in primary care:

On an average work day, each primary care provider in his practice, reportedly:

• Saw 18.1 patients
• Handled 23.7 phone calls
• Answered 16.8 emails
• Issued 12.1 prescription refills (above and beyond those issued during patient visits).

At least patients appear to appreciate physicians' efforts, even if insurance companies haven't adjusted the way they compensate them. The Deloitte 2011 Survey of Health Care Consumers in the United States indicates just 38% of consumers feel they received value for money spent on health insurance, but fully 61% feel they received excellent or good value on physician or specialist services. It appears our primary issues with primary care really are on the insurance side and we're a wreck about them. The same study soberly reports that 23% of consumers say they feel confident their household is financially prepared to handle future health care costs, holding close to the 24% levels observed in 2010 and 2009. That's not progress.