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COVID-19 law expands FSA OTC options & ends Rx rule

OTC cold allergy sinus medications

The hubby and I are self-isolating, meaning I only get out of the house every 10 days or so to pick up some perishables. This week, though, my grocery list was a bit longer.

On top of COVID-19 concerns, it's been a bad allergy and sinusitis season for me. I'm relatively lucky, though. Most of the time over-the-counter (OTC) medications do a decent job of stifling the sneezing, sniffles, headaches and itchy eyes. So I loaded up on the shelf ready antihistamines, as well as cold and flu meds that treat many of the same symptoms without as much drowsiness. Gotta keep working from home!

I'm not alone. Lots of folks have relatively minor medical issues. They, too, depend on OTC treatments for their seasonal ailments, as well as everyday scrapes and minor medical complaints.

Now, one big tax-related headache in purchasing these products has been eliminated. If you have a medical spending account, you can once again use that money to cover OTC treatment costs without having to get a prescription from your doctor.

That reversion to previous OTC reimbursement rules is part of the Coronavirus Aid, Relief and Economic Security (CARES) Act that became law at the end of March.

And you can thank women for the change. (You're welcome.) The elimination of the overall Rx requirement came in a CARES Act provision that expands spending account OTC usage to menstrual products.

COVID-19 changes to medicine: Beyond the OTC changes, which we'll get to in a minute, the coronavirus pandemic has changed the larger medical world.

Doctors, nurses and all medical staff worldwide are overworked. But on the plus side, new treatments are being tried and researchers are working on potential vaccines.

The virus also has changed day-to-day level medical situations for almost every American.

As a preventative precaution, many of us are limiting doctor visits, turning instead to telemedicine. In place of pre-pandemic scheduled doctor appointments, I've had two virtual visits with my physicians via my laptop and smartphone.

The CARES Act has expanded insurance coverage for these social distancing medical meetings.

A decade of OTC limits ends: Since we're not seeing our doctors face-to-face or as often, more of us are self-treating. That generally means turning to non-prescription meds we can pick up at (or, social distancing still, have delivered by) our local grocery or pharmacy.

Now, again per the CARES Act, we can use our tax-favored medical savings account money — be it in a health savings account (HSA), medical flexible spending account (FSA), Archer medical savings account (MSA) or health reimbursement arrangements (HRA) — to pay for these OTC items without having to hassle with getting approval from our doctors.

Specifically, the COVID-19 law eliminates the Rx requirement, letting us again use spending account funds to pay for more of our OTC meds. This essentially takes us back to the OTC FSA etc. rules that were in place before Affordable Care Act (ACA) limited them.

When the ACA, still popularly known as Obamacare, was developed, lawmakers looked for creative ways to help pay for the legislation. One of those was by limiting what was covered by medical spending accounts.

Before the ACA, medical spending accounts regularly were used to pay for a wide variety of OTC meds. The ACA stopped that, mandating that these non-prescription treatments only counted for OTC reimbursement if they were prescribed by a doctor.

Yes, you had to get an Rx for your Nyquil or no FSA money. I know. Makes no sense unless you're on Capitol Hill pulling pennies from wherever to pay for a law.

As soon as the OTC restrictions took effect, many in Congress began trying to change it back to the more open OTC approach. None of the proposals gained traction, however, until we were in the midst of a deadly pandemic.

Retroactive and ongoing: The OTC without a doctor's script change is retroactive to Jan. 1, 2020, so you might want to see if you can find those old receipts. Or at least find a charge for them on your credit card statement.

Even better, there's no sunset date in the CARES Act for this return to the old OTC reimbursement eligibility standard. It's in place and doesn't expire, at least not until Congress changes its mind again.

Feminine hygiene products covered: In addition, the CARES Act also now allows for FSA etc. money to be used for menstrual care products. In fact, it's the inclusion of these products that got us back to the good old OTC reimbursement days.


The CARES law specifies that newly eligible OTC covered items include tampons, pads, liners, cups, sponges or similar products used by consumers with respect to menstruation. Since it's silly to demand a doctor's script for a naturally occurring biology reality, the law did away with that provision.

And technically, it was this legislative act of making OTC menstrual products spending account eligible without doctor involvement that erased the entire ACA OTC prescription requirement.

The CARES Act replaced the ACA OTC language in the U.S. Code Title 26, better known as the Tax Code, with the new language, specifically —

Subsec. (d)(2)(A). Pub. L. 116–136, §3702(a)(1), substituted "For purposes of this subparagraph, amounts paid for menstrual care products shall be treated as paid for medical care." for "Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin."

Not that I'm a spokesman for my gender at large, but I'm feeling a bit proud and thankful that finally the natural biological needs of millions of women have been recognized as being worthy of more equitable tax treatment, at least in this small medical area.

And yes, I'm also a bit smug that the literal legislative act of making this change helps so many others who aren't directly affected by the reason. Again, all of us women say, "You're welcome!"

You also might find these items of interest:


Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.

But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.






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