# What was the logic behind exempting OTC meds from Flex Spending Accounts? **URL:** \ **Category:** Factual Questions\ **Created:** [September 30, 2010, 7:21pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648 "2010-09-30T19:21:03Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Baracus](https://avatars.discourse-cdn.com/v4/letter/b/2bfe46/32.png) [@Baracus](https://boards.straightdope.com/u/Baracus)\ **Post date:** [October 1, 2010, 1:22pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/21 "2010-10-01T13:22:23Z")
> [@rbroome](#): > > I don’t believe that is what the new regulations say. That is just what your company chose to do-because it is simple, not because it is good for you or the government. So, blame your boss(es). 🙂 > > In our case, the company took the middle ground. We can no longer use our debit cards for OTCs. We have to file for reimbursement. As I understand it, the problem is that the IRS found that depending on random store clerks to correctly make decisions regarding tax laws didn’t work well. Some items have always been disallowed. The new regulations disallow a few more items and increase the review process to reduce “mistakes”. How those laws get implemented is partly up to the company. Sounds like yours took the easy way out. Nope. The IRS is quite explicit: > [@](#): > > Q. How are the rules changing for reimbursing the cost of over-the-counter medicines and drugs from health flexible spending arrangements (health FSAs) and health reimbursement arrangements (HRAs)? > > A. Section 9003 of the Affordable Care Act established a new uniform standard for medical expenses. Effective Jan. 1, 2011, distributions from health FSAs and HRAs will be allowed to reimburse the cost of over-the-counter medicines or drugs **only if they are purchased with a prescription**. This new rule does not apply to reimbursements for the cost of insulin, which will continue to be permitted, even if purchased without a prescription. Furthermore, Section 9003 falls under Title IX - Revenue Provions, Subsection A - Revenue Offest Provisions of the Affordable Care Act. It couldn’t be more clear that the point is to increase tax revenues. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [October 1, 2010, 1:30pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/22 "2010-10-01T13:30:00Z")
> [@Markxxx](#): > > …You know I’ll give you a bottle of Tylenol and you buy me lunch kind of trade off. > > Sure you could do that with Valium or any other prescription drug but you’re less likely to And if you do, it would be illegal. > [@gotpasswords](#): > > If you hadn’t guessed already, this comes from the IRS, never a group known for being friendly to consumers. No it doesn’t. It comes from your elected representatives in Congress. The IRS does not set policy or tax code, it just collects the money. > [@rbroome](#): > > …the problem is that the IRS found that depending on random store clerks to correctly make decisions regarding tax laws didn’t work well. Some items have always been disallowed. The new regulations disallow a few more items and increase the review process to reduce “mistakes”. The IRS doesn’t make the regulations. They may deserve some of the villification heaped on them in the past for their aggressive methods, but they are just Congress’ cash register. ---
**Author:** ![SmackFu](https://avatars.discourse-cdn.com/v4/letter/s/53a042/32.png) [@SmackFu](https://boards.straightdope.com/u/SmackFu)\ **Post date:** [October 1, 2010, 1:59pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/23 "2010-10-01T13:59:06Z")
When people have money left in their FSA at the end of the year, they have a pretty big incentive to use that money somehow, and I heard a lot of stories about pretty iffy OTC purchases. For instance, buying stuff at Rite Aid that was free after rebate, so that you spent FSA money and got a check back. Or buying something like a blood sugar monitor that you could resell on eBay. Since this is using pre-tax money, you could argue this is tax fraud. ---
**Author:** ![SmellMyWort](https://avatars.discourse-cdn.com/v4/letter/s/ea5d25/32.png) [@SmellMyWort](https://boards.straightdope.com/u/SmellMyWort)\ **Post date:** [October 1, 2010, 1:59pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/24 "2010-10-01T13:59:06Z")
> [@rbroome](#): > > I don’t believe that is what the new regulations say. That is just what your company chose to do-because it is simple, not because it is good for you or the government. So, blame your boss(es). 🙂 > > In our case, the company took the middle ground. We can no longer use our debit cards for OTCs. We have to file for reimbursement. As I understand it, the problem is that the IRS found that depending on random store clerks to correctly make decisions regarding tax laws didn’t work well. Some items have always been disallowed. The new regulations disallow a few more items and increase the review process to reduce “mistakes”. How those laws get implemented is partly up to the company. Sounds like yours took the easy way out. This doesn’t make the least bit of sense. In what way did store clerks ever have the slightest role in the way FSAs work? ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [October 1, 2010, 7:37pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/25 "2010-10-01T19:37:04Z")
> [@Markxxx](#): > > Because you can share the drugs with others, who don’t have such things. If I have a bunch of Valiums I am probably not gonna share them with others, but if I have Tylenol, I’ll buy a bunch and give or trade them others without thought. > > You know I’ll give you a bottle of Tylenol and you buy me lunch kind of trade off. > > Sure you could do that with Valium or any other prescription drug but you’re less likely to I really doubt this is the logic - at most, this is a few bucks (and it’s coming out of your pocket regardless). Why couldn’t your buddy just buy his own Tylenol, after all? I seem to recall the OTC stuff was a recent addition anyway - I don’t recall being able to do it 3-4 years ago. Only thing I can think of is that maybe people were abusing it. Also, and I could be wrong, how many people spend that much on OTC stuff? We used it to reimburse for some this year, but the vast majority was for doctors etc. I’d imagine that anyone spending a lot on OTC also has a lot of covered medical expenses so won’t lose much at all (we’ve spent every penny of two maxed-out accounts, for example). ---
**Author:** ![SmellMyWort](https://avatars.discourse-cdn.com/v4/letter/s/ea5d25/32.png) [@SmellMyWort](https://boards.straightdope.com/u/SmellMyWort)\ **Post date:** [October 1, 2010, 9:15pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/26 "2010-10-01T21:15:13Z")
Of course your buddy could by his own Tylenol, but he buys yours to help you out because you needed to by 5 bottles or lose the last $30 in your FSA. I don’t think this behavior is why the law was made, it’s just a new drawback for people who use these accounts. ---
**Author:** ![NinetyWt](https://avatars.discourse-cdn.com/v4/letter/n/cc9497/32.png) [@NinetyWt](https://boards.straightdope.com/u/NinetyWt)\ **Post date:** [October 2, 2010, 2:58pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/27 "2010-10-02T14:58:32Z")
This is what puzzled me about it being allowed in the first place: Why should I get my OTC stuff tax-free when my neighbor, with regular medical insurance, cannot? Seemed like a tax loophole. Put me down as someone who doesn’t give a flip about it changing. I never used the option anyway - I always had plenty of medical expenses to use up my yearly contribution. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [October 2, 2010, 6:29pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/28 "2010-10-02T18:29:03Z")
> [@NinetyWt](#): > > This is what puzzled me about it being allowed in the first place: Why should I get my OTC stuff tax-free when my neighbor, with regular medical insurance, cannot? Seemed like a tax loophole. I don’t understand. Your neightbor with “regular medical insurance” can get “OTC stuff tax-free” if his employer provides an option for a flex spending account. It has nothing to do with insurance. ---
**Author:** ![NinetyWt](https://avatars.discourse-cdn.com/v4/letter/n/cc9497/32.png) [@NinetyWt](https://boards.straightdope.com/u/NinetyWt)\ **Post date:** [October 2, 2010, 9:25pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/29 "2010-10-02T21:25:24Z")
> [@CookingWithGas](#): > > Your neightbor with “regular medical insurance” can get “OTC stuff tax-free” if his employer provides an option for a flex spending account. It has nothing to do with insurance. Sorry to be unclear. If he doesn’t have an FSA then he can’t buy OTC meds tax free. ---
**Author:** ![BigT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bigt/32/12044_2.png) [@BigT](https://boards.straightdope.com/u/BigT)\ **Post date:** [October 3, 2010, 12:10am UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/30 "2010-10-03T00:10:13Z")
My problem with the over-the-counter stuff is that a lot of once prescription stuff has been changed. So doctors won’t prescribe it anymore. They tell you to just take it, and freak out when you tell them you can’t afford it. You know, there’s a reason I get all my medicines for $1 from Medicaid–I can’t afford it otherwise. Anyways, the fact that you can get a prescription for over-the-counter medications may really help. But why in the world do doctors not know this? ---
**Author:** ![king\_gorilla](https://avatars.discourse-cdn.com/v4/letter/k/9fc29f/32.png) [@king\_gorilla](https://boards.straightdope.com/u/king_gorilla)\ **Post date:** [October 3, 2010, 5:32am UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/31 "2010-10-03T05:32:50Z")
It immediately made me think of a lady I used to work with. If she had any money left at the end of the year, she would buy large quantities of OTC. She then submitted copies of the receipts to her employer for reimbursement and returned the unopened meds to the store for a refund. She was very open about it and recommended it to everyone. Despite it being Tax Fraud, I thought it seemed like a big pain in the butt, and recommended she take her kids to the dentist for an extra cleaning a year or something proactive. She looked at me like I was an alien. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [October 3, 2010, 11:39am UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/32 "2010-10-03T11:39:36Z")
> [@Si\_Amigo](#): > > And if they make it difficult for you to buy OTC meds you may forfiet some cash at the end of the year. That’s total gravy for the tax man. No it’s not - it doesn’t go to the tax man. The employer keeps it but can only spend it on certain things, or donate it to charity. ---
**Author:** ![Virginia933](https://avatars.discourse-cdn.com/v4/letter/v/c37758/32.png) [@Virginia933](https://boards.straightdope.com/u/Virginia933)\ **Post date:** [November 20, 2010, 6:32pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/33 "2010-11-20T18:32:12Z")
So, in Summary what I’m reading and understanding: [ul] [li]Silly, consumer-unfriendly legislation[/li][li]Effectively raises our taxes (by eliminating tax reduction mechanism)[/li][li]Increases the paperwork and time for Doctors, increasing cost of delivering healthcare[/li][li]Wastes time for consumers…I picked-up cold medicine on way home from work last nite…was I to leave work early and take 2 hours to see a doctor and get a prescription first?[/li][li]All this from the ‘Patient Protection and Affordable Care Act (PPACA)’. Who are they kidding? This makes healthcare LESS affordable.[/li][li]And maximum tax deductible DECREASED from $5,000 to $2,500 in 2013!!![/li][/ul] This is inconvenient Tax Increases on hard-working Americans so that the Socialists in Government can give free Healthcare to the freeloaders in our society. This is irresponsible legislation that makes healthcare LESS affordable, and actually raises the COST and INCONVENIENCE of healthcare delivery. We didn’t vote enough of them out of office in November. Go Tea Party! ---
**Author:** ![Uncertain](https://avatars.discourse-cdn.com/v4/letter/u/6a8cbe/32.png) [@Uncertain](https://boards.straightdope.com/u/Uncertain)\ **Post date:** [November 20, 2010, 11:05pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/34 "2010-11-20T23:05:57Z")
> [@Virginia933](#): > > So, in Summary what I’m reading and understanding: Dude (or dudette), take it to Great Debates or something. We’re not interested in your political rants here in GQ. ---
**Author:** ![Colibri](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/colibri/32/1841_2.png) [@Colibri](https://boards.straightdope.com/u/Colibri)\ **Post date:** [November 21, 2010, 12:12am UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/35 "2010-11-21T00:12:58Z")
> [@Virginia933](#): > > So, in Summary what I’m reading and understanding: > [ul] > [li]Silly, consumer-unfriendly legislation[/li][li]Effectively raises our taxes (by eliminating tax reduction mechanism)[/li][li]Increases the paperwork and time for Doctors, increasing cost of delivering healthcare[/li][li]Wastes time for consumers…I picked-up cold medicine on way home from work last nite…was I to leave work early and take 2 hours to see a doctor and get a prescription first?[/li][li]All this from the ‘Patient Protection and Affordable Care Act (PPACA)’. Who are they kidding? This makes healthcare LESS affordable.[/li][li]And maximum tax deductible DECREASED from $5,000 to $2,500 in 2013!!![/li][/ul] > > This is inconvenient Tax Increases on hard-working Americans so that the Socialists in Government can give free Healthcare to the freeloaders in our society. > > This is irresponsible legislation that makes healthcare LESS affordable, and actually raises the COST and INCONVENIENCE of healthcare delivery. > > We didn’t vote enough of them out of office in November. > > Go Tea Party! [Moderator Note] **Virginia933** , politic rants of this kind are not appropriate for General Questions. If you want to comment in this fashion, take it to the Pit. No warning issued, but don’t do this again. Colibri General Questions Moderator ---
**Author:** ![daytonahr](https://avatars.discourse-cdn.com/v4/letter/d/7bcc69/32.png) [@daytonahr](https://boards.straightdope.com/u/daytonahr)\ **Post date:** [December 31, 2010, 1:49am UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/36 "2010-12-31T01:49:07Z")
> [@Baracus](#): > > Less money put into FSA’s to pay for OTCs = more tax revenues I would be most likely looking at the possible lobbyists who influenced Congress for their part in this legislation…ummmm, could Big Pharma have a reason to want folks to have restrictions on how they can spend their pain relief/sleeping aid/upset tummy/cough and flu/heartburn and yeast infection dollars…why, of course! Why take an OTC med, when they can sell you an Rx at a much higher per dose cost…even the cheapest generic at a consumer cost $7-$10 is more expensive than a bottle of Advil! (and that doesn’t take into consideration the insurance company’s portion) As folks much wiser than I have said for years…follow the money!!! My only question is … why aren’t more people outraged at this!!! ---
**Author:** ![asterion](https://avatars.discourse-cdn.com/v4/letter/a/4da419/32.png) [@asterion](https://boards.straightdope.com/u/asterion)\ **Post date:** [December 31, 2010, 4:12am UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/37 "2010-12-31T04:12:22Z")
Remember, too, that it was only recently (well, 2003) that the IRS allowed the purchase of OTCs using an FSA to begin with. In any case, using an FSA to purchase OTCs was always a pain in the ass unless the retailer and debit card supported the IIAS. So it’s really only been in the last couple of years that it was really easy to buy OTC using an FSA. ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [December 31, 2010, 4:28am UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/38 "2010-12-31T04:28:27Z")
Note that for most people, the expenditures on OTC meds aren’t huge amounts of money. A few dollars a week perhaps. If you’re spending more than that you’re probably under a doctor’s care for whatever chronic condition mandates the meds. So, the requirement for a prescription wouldn’t impact the 5 bucks here, 10 bucks there crowd all that much. I’m more annoyed at the limits which will be imposed in a year or so (2500 a year). We’ve spent far more than that on prescription medications, copays and other out-of-pocket costs every year for a very long time. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [December 31, 2010, 3:45pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/39 "2010-12-31T15:45:06Z")
> [@asterion](#): > > Remember, too, that it was only recently (well, 2003) that the IRS allowed the purchase of OTCs using an FSA to begin with. The IRS does not make these decisions. They just collect the taxes according to laws enacted by Congress. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [December 31, 2010, 3:50pm UTC](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648/40 "2010-12-31T15:50:22Z")
> [@daytonahr](#): > > …Why take an OTC med, when they can sell you an Rx at a much higher per dose cost…even the cheapest generic at a consumer cost $7-$10 is more expensive than a bottle of Advil! Sorry to pop your balloon of outrageous indignation but you can ask your doctor to write you a prescription for OTC Advil and then it will be an allowable FSA expense. [Previous page](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648.md?page=1) [Next page](https://boards.straightdope.com/t/what-was-the-logic-behind-exempting-otc-meds-from-flex-spending-accounts/555648.md?page=3)