Wednesday, December 14, 2005

Fun with government

It's election time for the various exotic medical benefits. The flexible spending account, specifically. I have this internal battle every year, and it occasionally spills externally.

For those who are unaware of the concept, the point is that congress wanted to make medical expenses tax deductable. Instead of making it "easy" by letting taxpayers collect receipts and then deduct it at tax time, someone decided it would be better to involve private enterprise. So, your employer pays AFLAC (or whoever) to service the plan. You decide in December what your health care costs will be for the next year, and have a fraction of that amount deducted from each paycheck. So if you think you're going to have $1200 in medical expenses in a year, you have $100 taken out every month.

Now you go out into the world and incurr your costs. You then fill out a form, fax or mail it with copies of your reciepts to AFLAC, they approve or deny it, and cut you a reimbursement check. And, oh yeah, if you don't spend all the money by the end of the year, you don't get it back. If you get fired, the account is locked- if you incurred any expenses before the termination date, you can submit those. But suppose you save $20 each month in anticipation of a $250 full physical each November. You get canned in October. You just lost $200. You don't just lose the tax benefit, you lose the whole thing.

Nobody has yet explained to me who actually does keep it.

So, in effect, our government has:

  • Created a system where AFLAC gets to hold your money for a portion of the year, and profit from using it.
  • If you want it back, you have to fill out forms.
  • If you happen to be healthier than expected over the course of a year, you lose your money.
  • Added a layer of inefficiency to the health care and tax system similar to the manufacturer's rebates you get at Best Buy. Which were specifically designed to be an inefficient system.

    Fast fun facts?

    Not covered: Medical insurance premiums, vitamins, health club fees, drugs primarily for the benefit of general health, cosmetic dental surgery, veneers

    Covered: Orthodontia, fertility enhancement and service fees for Christian Science practicioners.

    So only certain kinds of vanity are acceptible. Also acceptible is if you happen to be stupid enough to believe that prayer cures cancer, and then to be even more incredibly stupid to pay for someone for said prayer. But if I want to hit the treadmill after work, I'm on my own.

    All this to save $35 (what I save by making a couple boxes of contact lenses, two office visits, various pharmaceuticals tax free).

    PS- [Insert a subtle reminder here for CO to expound on the economics of health care, especially as I mentioned earlier where the US spends twice as much per capita than any other country, including those with free healthcare]

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