Paying for reform

In the debate over health reform legislation, the tendency can be to focus on the big picture at the expense of smaller details, especially in bills that run more than 1,000 pages.

One example is the proposed change to popular flexible spending accounts that allow workers to set aside tax-free money to help pay for certain medical costs. Bills in the House and Senate would tamper with the plans by imposing limits on them at consumers' expense.

Workers can put pretax income into the accounts offered by employers to pay for dental work, eye exams, prescription drugs or even over-the-counter drugs. The accounts allow consumers to build a small reserve to pay for deductibles and co-pays on anticipated treatments during the year rather than being hit by the cost all at once.

The accounts would seem to fit well in the massive restructuring intended to keep health care affordable. They're popular with employers and employees, and proposed health care reforms rely heavily on employer mandates to achieve their goals.

The typical flexible spending account user earns about $55,000 a year. In 2008, the plans were offered by more than a quarter of all employers and more than one-third of eligible workers use them.

Yet that also means billions of dollars in foregone tax revenue while Congress and the White House are looking at every available avenue to raise money needed to pay for the estimated $900 billion overhaul of our health care system. So they have set their sights on the flexible spending accounts.

The federal government does not put limits on contributions. Legislation before Congress would cap the contributions at $2,500 a year. The cap would generate more than $13 billion over 10 years to help pay for the Democratic-proposed plans. The $13 billion will come from the pockets of consumers relying on flexible spending accounts to defray their health costs and go toward the care of others.

Insurers, companies and even some unions are joining together to remove the proposed cap. If they fail, low-income and middle-class workers can expect higher taxes in a plan that will make it more costly for them.