4/1/2011 1:12 PM ET|
A prescription for diaper rash cream?
A provision in the health care overhaul encourages people with flexible spending accounts to seek a doctor's OK before buying over-the-counter medications.
Sandy Chung is grappling with a new kind of request at her pediatrics office in Fairfax, Va.: prescriptions for aspirin and diaper rash cream.
Patients are demanding doctors' orders for over-the-counter products because of a provision in the health care overhaul that slipped past nearly everyone's radar. It says people who want a tax break to buy such items with what's known as a flexible spending account need to get a prescription first.
- Calculator:How much will long-term care cost?
The result is that Americans are visiting their doctors before making a trip to the drugstore, hoping their physician will help them out by writing the prescription. The new requirements create not only an added burden for doctors, but also new complications for retailers and pharmacies.
"It drives up the cost of health care as opposed to reducing it," says Chung, who rejected much of a 10-item request from a mother of four that included pain relievers and children's cold medicine.
Unintended side effects
Though the new rules on over-the-counter drugs amount to a small part of the massive overhaul of the health care system, the unintended side effects show how difficult it can be to predict how such game-changing legislation will play out in the real world.
Some doctors, irked by the paperwork and worried about lawsuits, are balking at writing the new prescriptions. Pharmacists and retailers say the changes mean they have to apply a personalized label on 15,000 different everyday products for customers paying with certain debit cards.
The over-the-counter provision isn't the only part of the health care law that has defied expectations:
- Health policy experts predicted that new insurance pools for high-risk patients would attract so many expensive enrollees that funding would be quickly exhausted. In fact, enrollment is running at just 6% of expectations, partly because of high premiums.
- A provision preventing insurers from denying coverage to children with pre-existing health conditions prompted insurers in dozens of states to stop selling child-only policies.
- And a piece of the law designed to centralize patient care by encouraging health care providers to collaborate is running into antitrust concerns from regulators.
To the handful of congressional aides who came up with the idea to limit tax breaks on over-the-counter drugs, it was supposed to be a minor tweak to raise revenue and to discourage wasteful spending on health products.
Squeezing out tax savings
About 33 million Americans are in families that have flexible spending accounts, which are funded through payroll deductions and allow consumers to pay for health expenses with tax-free dollars.
The change also applies to health savings accounts designed for consumers in insurance plans with high deductibles. If fewer people use these accounts to buy drugs, the government gets more tax revenue. Retail sales of over-the-counter medicines amounted to about $17 billion in 2010, not counting sales at Wal-Mart, according to Nielsen Co.
What the law's writers didn't anticipate was the determination of some people to squeeze every last drop of tax savings from their accounts.
When Dianna Greer of San Diego and her son came down with a cold, she wanted a $13 bottle of NyQuil and daytime cold medicine -- and she wanted to pay for it by tapping the $5,000 in her flexible spending account.
Greer says her doctor wouldn't write prescriptions without an office visit, so she went without the drugs. Later, she got the prescriptions from a doctor at the emergency room, where she was diagnosed with pneumonia.
"It feels like you're begging for something when it's your money," she says.
Much of the health law, which passed last year despite overwhelming opposition by Republicans, doesn't take effect until 2014. The nonpartisan Congressional Budget Office has projected that an additional 32 million Americans will get insurance, and the law has already extended tax credits to small businesses for buying insurance and allowed many parents to keep their children on their health plan until their 26th birthday.
But opponents say it costs too much and gives the federal government too much control over health care. Republicans in the House voted this year to repeal the law, though the measure died in the Senate. Opponents are trying to get it struck down in the courts, a fight that is likely to last until at least next year.
Target for change
As that larger battle plays out, the over-the-counter provision is emerging as a top target for change. Republicans in both the House and Senate have introduced legislation to repeal it and return to the old system. The largest chain-drugstore lobbying group is backing the effort, arguing that the new rules are inefficient and limit access to the medicines. Asked whether she would support such legislation, Kathleen Sebelius, the secretary of Health and Human Services, said: "I'd take a look at it."
A spokeswoman for the Treasury Department, which oversees tax policy, says the provision "enjoyed bipartisan support in Congress, but, as the president said, anything can be improved, and we are always willing to listen to ideas about how to make health care better and more affordable."
Tax breaks for over-the-counter drugs date to 2003, as popular drugs like the allergy medicine Claritin began switching to over-the-counter status. The Internal Revenue Service loosened the rules on flexible spending accounts so consumers could use them to buy thousands of nonprescription medications. The tax-free dollars can also go for insurance co-payments, eyeglasses and other out-of-pocket health costs.
Critics say the accounts encourage overconsumption of medical services. Since consumers typically must forfeit unused money by year's end, they often ended up scrambling in December to drain their funds by loading up on aspirin, antacid and the like.
"The entire flexible spending account thing is a waste of our taxpayer dollars," says Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology and a former paid consultant on the health law to the Department of Health and Human Services. "If you're going to scale it back, this is a natural place to start." (Another part of the law limits the amount consumers can save in flexible spending accounts to $2,500 a year, starting in 2013.)
Peeling back tax breaks for health plans was on the table in 2009 when lawmakers began drafting the health overhaul. Inside the Senate Finance Committee, aides to three Democratic and three Republican senators hashed out the blueprint for what ultimately became the final bill.
Compromise not 'ideal'
Some big ideas -- like limiting the tax break for employer-sponsored health insurance -- lacked support, so committee aides lowered their sights. Making people pay the full price for over-the-counter medicines seemed like a way to reduce wasteful spending and generate money for the law's main goal: expanding health insurance to nearly every American.
An objection came from William Pewen, a senior health-policy adviser to Sen. Olympia Snowe, R-Maine.
He believed the tax-free treatment could lower health costs and thought everyone should have access to a flexible spending account. He told the group that he was taking over-the-counter Prilosec, a heartburn medication, which meant he didn't need a more expensive prescription drug.
"I didn't want to see us set up perverse incentives for people to use more costly drugs than they needed," Pewen says.
He proposed a compromise that he concedes "was not the ideal solution." People could spend tax-free dollars on over-the-counter drugs, but only if they got a doctor's prescription. It wasn't exactly a new idea: Medicaid, the federal-state program for the poor, already covers some over-the-counter drugs if they are prescribed.
Congress' number-crunchers estimated the change would generate $5 billion over a decade. Hardly anyone noticed it, even as it stayed in the bill through passage in March 2010.
Only after the president's signature was dry did the American Medical Association realize what had happened and send a letter to the government warning of unintended consequences, including more office visits and extra paperwork.
Extra burden for doctors
Sure enough, when the change took effect Jan. 1, patients began bringing lists of over-the-counter drugs to office visits and also requesting over-the-counter prescriptions by phone, doctors says.
While it may not be worth the trouble for some patients, the savings can add up for those with chronic conditions, especially if the doctor writes multiple refills. A survey late last year by Nielsen found that nearly half of consumers with flexible-spending accounts would request the prescriptions as a result of the changes.
Among those most upset by the changes are pediatricians, who say that small sizes of children's medicines and multiple children per family make the requests particularly burdensome.
"It's an amazingly disruptive policy," says Dr. Jesse Hackell, a Pomona, N.Y., pediatrician who is charging $5 to fill such requests via phone. "I am now doing the IRS' work, and that's what I resent most."
After writing two over-the-counter prescriptions free of charge in January, Dr. Richard Schwartz of Vienna, Va., a pediatrician, began imposing a $10 surcharge for each prescription, on top of the office co-payment. That is likely to discourage some patients from asking for a prescription, as the surcharge could outweigh the tax savings from using a flexible spending account.
Doctors are also concerned about malpractice lawsuits, since a prescription potentially puts them on the hook for any problems a patient suffers from over-the-counter drugs.
Some malpractice insurers are urging doctors not to write any prescription without seeing the patient in person, says Lawrence Smarr, the president of the Physician Insurers Association of America, which represents malpractice insurance providers.
Drugstores caught flat-footed
Retailers and pharmacies, meanwhile, say another aspect of the change caught them flat-footed. Many flexible spending accounts come with a debit card, making it easy for consumers to draw down the money in the accounts when they shop at a pharmacy. But under the original IRS guidance, people couldn't use those cards for the prescribed over-the-counter medications.
An industry group representing Wal-Mart, CVS Caremark, Visa and other large corporations warned that could temporarily halt use of the debit cards for any pharmacy purchase. The IRS eventually decided the cards could be used, as long as the pharmacist labels and processes the over-the-counter item exactly like a prescription.
That had another unintended effect. Thousands of over-the-counter products now must pass behind the pharmacist's counter when the customer pays with the special debit card.
"At the moment it's considered a prescription, it's subject to all the regulatory requirements," says Mike DeAngelis, a spokesman for CVS. "It runs through our quality assurance process. We have to generate a label." The chain also puts each of the prescribed drugs in an individual paper bag.
Despite the hopes of Pewen in the Senate, some consumers think they will be better off getting a prescription-only drug in place of an over-the-counter medication.
In the Nielsen survey, 37% of flexible spending account users said they would ask their doctor about prescription drugs that could replace their over-the-counter medicines.
Chung, the pediatrician in Fairfax, Va., says she recently imposed a policy under which her office writes prescriptions only for chronic conditions, like allergies. That deflects pleas from parents wanting a quick Rx for their child's cold, but she's worried about pushback. "It makes us look like the bad guy," she says.
This article was reported by Janet Adamy for The Wall Street Journal.
VIDEO ON MSN MONEY
You know there is this group of doctors that group together and limit the number of people that can go into medicine? I forget their name, but it's for real - straight from a doctor's mouth.
If you ask me half the medical system could be replaced by online questionnaire flowchart logic. If you want to abuse it and O.D. on something go right ahead, that will be one less car on the highway when I go to work. The best info I ever got for my skin problem came from a logical flowchart I found on the internet, not from my doctor's assembly line approach to making money and rushing patients out the door.
We have a f.s.a. and i would never buy over the counter meds with it. I like that we have a plan to set aside our money for that reason. I have a son with aspengers and he goes to the doctor every three months for an evaluation and meds. With out that we would not be able to afford his meds and visits. I do not like the health care insurance that we have but it is better than paying what was ahead if his company stayed with the insurance provider that went up 30% in cost. And we have till 2013 for them to have a lock on how much the can raise rates. Each state is different in how much they can raise rates. We do not get to decide. Bty we have a $4000.00 deductable to meet and by my caculations we will not meet that in a year.(And i praying we dont) I am only hoping that there will be a change in the system. Its a no win situation that has the goverments hand in how we pay,how our doctor treats and diagnoses. Obamas health care plan was to see that everyone would have healthcare insurance and that it be more affordable. This plan has made us pay more for the total package and not helped us. Thank you obama for putting us in this crisis. But im glad to have my f.s.a. to use.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
RECENT ARTICLES ON HEALTH INSURANCE
Saving just a single month of expenses may take longer than you think. See how your savings rate affects how quickly you can build a solid emergency fund.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'