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H.R. 436: Obama, House Republicans Duel Over FSA Use-It-Or-Lose-It Bill

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House Republicans may be heading toward a veto battle with President Obama over H.R. 436, a health package that includes the text of H.R. 1004 — a bill that would kill the much-loathed requirement that flexible spending account (FSA) holders forfeit any unused FSA balances at the end of the plan year.

The best-known provision in H.R. 436 would eliminate a 2.3% excise tax on medical devices that’s set to be imposed by the Patient Protection and Affordable Care Act of 2010 (PPACA).

To keep H.R. 436, the Health Care Cost Reduction Act package, from increasing the federal budget deficit, the Republicans have added a provision that would claw back any extra health insurance purchase tax credits that low-income and moderate-income taxpayers get as a result of implementation of PPACA.

The White House says President Obama’s senior advisors will recommend that he veto H.R. 436 if the bill reaches his desk.

PPACA is improving individuals’ health, giving American families and small business owners more control of their health care, and “ending the worst practices of insurance companies,” administration officials say in a policy statement.

The medical device excise tax would be a way for the health care system to share some of the extra sales revenue device makers get as PPACA expands access to health insurance and health care, and imposing stiff demands on low-income and middle-income families is is a bad way to fund industry tax breaks, administration officials say.

“Instead of working together to reduce health care costs, H.R. 436 chooses to refight old  political battles over health care,” administration officials say.

Rep. Erik Paulsen, R-Minn., says the core excise tax repeal provision in H.R. 436 would help the United States keep its lead in medical technology innovation.

“This new excise tax would force many companies to lay off workers, move jobs overseas, or worse yet, close their doors altogether,” Paulsen says.

Some Democrats, including Sens. Amy Klobuchar, D-Minn., and Al Franken, D-Minn., support the idea of repealing the excise tax.

In addition to bundling H.R. 1004, the FSA use-it-or-lose-it bill, into H.R. 436, Republican leaders are using H.R. 436 as the vehicle to get H.R.  5842 and H.R. 5858 through the House.

H.R. 5858 would change health savings account (HSA) tax rules. H.R. 5842 would repeal a PPACA provision that prohibits holders of FSAs and HSAs from using account assets to pay for over-the-counter (OTC) drugs unless the drugs are prescribed by a doctor.

Several Democratic senators have sponsored or cosponsored the Senate versions of the bills now included in the new H.R. 436 package.

The PPACA tax-credit provision would affect implementation of a key part of PPACA: An effort to use advance payments of tax credits to help low-income and middle-income taxpayers buy health insurance.

PPACA opponents are fighting the law in Congress and in the courts. If the law takes effect as written and works as expected, the individual health insurance tax credit program would start in 2014. Taxpayers would apply for the tax credit using income estimates. Program designers expect some taxpayers to get excess results as a result of income increases or other changes that will take place during the course of the year.

Current law would limit the amount of excess health insurance subsidy payments that low-income and middle-income taxpayers would have to pay back.

The new version of H.R. 436 would require all recipients of the tax credit to pay back all excess credit money received.

Originally, analysts at the Joint Committee on Taxation (JCT) had estimated that the medical device tax repeal and the health account bills could increase the federal budget deficit by $41 billion over 10 years. Adding the tax credit rule change to that collection of proposals could lead the combined package to improve the deficit by $6.7 billion over 10 years, the analysts say.

Floor debate on H.R. 436 started today. House Majority Leader Eric Cantor, R-Va.,has said that H.R. 436 could come up for a vote on the House floor Friday. 

The House Rules Committee has adopted guidelines for debate of H.R. 436 that allow for 90 minutes of debate on the package, with the time to be equally divided between the Republicans and the Democrats. The rule waives all points of order against consideration of the bill but will allow opponents to offer one motion to send the bill back to committee.