ObamaCare restrictions on the use of over-the-counter (OTC) medications will begin on January 1, 2011. The new OTC regulations will make the convenient inconvenient, eliminate cost-effective treatments and increase costs, change tax advantages to tax penalties, and decrease choice. Patients with Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs), or Health Savings Accounts (HSAs) who purchase OTC medicines with their account debit cards will find denial, confusion, and disappointment at the pharmacy checkout counter.
Those with FSAs or HRAs who expect to be reimbursed from their accounts will have their claims rejected. Those with HSAs may find themselves with an IRS audit and a 20-percent excise tax penalty for making an ineligible withdrawal. That’s not all. In 2011, ObamaCare will reduce the amount of money that can be set aside in FSAs for medical care from $5,000 to $2,500.
Many healthcare plans allow patients to pay for their medications with debit cards. As part of their insurance plans, families can use HSAs, HRAs, and FSAs to purchase OTC medications to treat specific conditions.
Under ObamaCare, OTC drugs, medicines, and biologicals will need a doctor’s prescription in order to be defined by the IRS as a qualified medical expense (QME) eligible for HSA, HRA, or FSA reimbursement. Under ObamaCare, patients will need doctors’ prescriptions even for medications that are available over the counter. In addition, on January 1, 2011, the excise tax penalty for using HSA funds for ineligible medical expenses will increase from 10 percent to 20 percent.
It is all very confusing. Depending on the plan’s interpretation of the new law, the following are examples of medications that may require a doctor’s prescription in order to be an IRS-eligible QME:
Allergy and sinus
Anti-itch and insect bite
Cold sore remedies
Feminine anti-fungal and anti-itch
Sleep aids and sedatives
Bandages, home health-aids and other OTC items may still be eligible QMEs. The following are examples of some of the items that may remain available without a physician’s prescription:
Contact lens supplies and solutions
Hearing aids and batteries
Insulin and diabetic supplies
Pregnancy test kits
Wheelchairs, walkers and canes
The intended restrictions and unintended consequences of ObamaCare OTC changes are staggering:
- Plan members, pharmacists, and doctors will be confused by the new restrictive rules requiring a “prescription for non-prescription OTC medications.”
- Pharmacists and checkout clerks will not be able to over-ride the debit card processing system.
- Previously covered claims submitted for FSA and HRA reimbursements will be denied.
- IRS audits and unexpected HSA excise tax penalties will shock taxpayers.
- Plan members may need to go to the doctor’s office to get a prescription for an OTC medication.
- With new exposure to liability, doctors may need to see the patient before prescribing anything.
- Additional office visits and follow up visits may be generated.
- To avoid calls, confusion, and assure insurance coverage, physicians may begin prescribing stronger “real” prescription drugs.
- Drug card vendors will be changing their cards to deny coverage for OTC medications.
ObamaCare OTC is a simple example of how government control of the healthcare system will confuse and inconvenience millions of Americans. Purchasing pain relief medication at your neighborhood pharmacy shouldn’t be complicated. After experiencing ObamaCare, getting rid of it may be the only pain relief Americans will want.
Ronald E. Bachman FSA, MAAA, president & CEO of Healthcare Visions. He is a Senior Fellow at the Center for Health Transformation, an organization founded by former U.S. House Speaker Newt Gingrich, a Senior Fellow at the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. He is also and a Senior Fellow at the National Center for Policy Analysis (NCPA). To better understand health reform and the new preventive care guidelines, go to www.healthreformnavigator.net.
For more information on qualified medical expense see IRS bulletin 502 at http://www.irs.gov/pub/irs-pdf/p502.pdf