You'd be surprised how much OTC stuff a family with active kids and a few headache-prone members can use. This includes our bandages, antibiotic ointments, allergy medicines, contact lens solutions, eyeglasses, pain killers, etc. It's quite a bit when you add it up, and as others have said, it's a way to mop up any remaining balances at the end of the year so they aren't lost. Reducing the maximum allowable contribution to $2500 isn't so nice either. Try putting kids in braces. Even with a decent dental/orthodontic plan, there can be a lot of extra costs. They are currently eligible for FSA treatment, but the cap will be an issue for families.
But we eat up a lot of OTC stuff for bumps, bruises, colds, fevers, etc. (just as you outlined). As I told someone in the office the other day we don't get a sick child, we get an epidemic. One gets a cold or virus and they go like dominos.
And I didn't even know there was a dental plan that still existed that covered braces. Shoot the regular dental plans are really only partial plans. They don't cover things completely. Same with vision. And I was planning to use the FSA to pay for braces ... which is on the horizon. Still got to buy the braces, except now I get to pay taxes on that medical expense instead of pulling from an FSA.
All that said, what this really amounts to is a TAX INCREASE (and I make way less than 250K a year). They cut in half what I can contribute of my money to the plan. I will still spend the same amount on medical expenses (actually more as they get older). The difference is that I will now pay increased payroll taxes on the half I cannot now put in the FSA but still spend on medical stuff.
Someone explain to me how that is not a TAX INCREASE!!! I wasn't paying taxes on that money before (except sales tax). But now I am.