In Health Law Rx for Trouble
Wednesday, March 09, 2011
In Health Law, Rx for Trouble
By: Janet Adamy, Wall Street Journal
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 flexible-spending
accounts need to get a prescription first.
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 Dr. Chung, who rejected much of a 10-item request from a
mother of four that included pain relievers and children's cold
medicine.
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 some 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
altogether.
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.
Some 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 Stores
Inc., 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.
Ms. 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.
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, 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 funds 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.
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, senior health-policy
adviser to Maine Republican Sen. Olympia Snowe.
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 takes 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," Mr. 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's 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.
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 Jesse Hackell, a
Pomona, N.Y., pediatrician who is charging $5 to fill such requests
via phone. "I am now doing the IRS's work, and that's what I resent
most."
After writing two over-the-counter prescriptions free of charge
in January, pediatrician Richard Schwartz of Vienna, Va., says he
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, president of the Physician Insurers Association of America,
which represents malpractice insurance providers.
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 Corp.,
Visa Inc. 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 Mr. 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.
Dr. 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.