Parts of the health care law that kick in

Now that it’s 2011, parts of the Health Care Reform Bill kick in.  The linked article summarizes changes in Medicare, giving seniors cheaper prescription drugs and giving them some free preventative tests.  Also a $2.5 billion tax on the pharmaceutical industry, which can only mean higher prices and less money to invest in new miracle drugs. Here are some of the changes that will affect everyone:

For those insured outside Medicare, 2011 starts a new requirement that insurers must spend 80% of revenue for small-group plans and 85% of revenue for large-group plans on medical care. The requirement is designed to rein in industry profit and administrative costs. Carriers that don’t meet the requirement will have to issue rebates to consumers, though those won’t go out until 2012.

Consumers will no longer be able to use their flexible spending accounts—tax-free funds set aside for medical costs—to pay for most over-the-counter items unless they are purchased with a prescription.

For many consumers, Jan. 1 will mark the first opportunity to tap into a slate of benefits that began taking effect Sept. 23. That’s when the law called for insurers to allow parents to keep a child on their policy until their 26th birthday, among other things. Employers didn’t need to make that batch of changes until they started a new plan year.

Nurse midwives also will see change in the new year. Until now, certified nurse midwives were paid 65% the rate of physicians for performing the same services by Medicare. Now they will be paid at the same rate.

via Big Health-Care Changes Arrive in New Year – WSJ.com.

I don’t understand.  First of all, 80% of revenue for one thing plus 85% percent of revenue for something else adds up to 165%.  That must be a misprint.  But it seems wrong for the government to “rein in profits and administrative costs.”  How does the government know how much administrative costs will be, much less how much profit a business should be allowed to make?

And why limit flexible spending plans?  How will that help consumers?  And how will paying midwives as much as doctors hold down health care costs?

How is any of this a good thing?

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Tom Hering

    “… insurers must spend 80% of revenue for small-group plans and 85% of revenue for large-group plans on medical care.” – WSJ.

    “… 80% of revenue for one thing plus 85% percent of revenue for something else adds up to 165%. That must be a misprint.” – Dr. Veith.

    Put another way, 80% of what’s paid into a small group plan must be paid out to the plan’s participants in the form of medical care. And 85% of what’s paid into a large group plan must be paid out to the plan’s participants in the form of medical care. That leaves 20% and 15%, respectively, for profit and administrative costs.

    Let’s remember that the insurance companies helped to write the reform, and overall, they like it – because everyone is required to buy their product. Their profits, though regulated, will increase by billions.

  • Tom Hering

    “… insurers must spend 80% of revenue for small-group plans and 85% of revenue for large-group plans on medical care.” – WSJ.

    “… 80% of revenue for one thing plus 85% percent of revenue for something else adds up to 165%. That must be a misprint.” – Dr. Veith.

    Put another way, 80% of what’s paid into a small group plan must be paid out to the plan’s participants in the form of medical care. And 85% of what’s paid into a large group plan must be paid out to the plan’s participants in the form of medical care. That leaves 20% and 15%, respectively, for profit and administrative costs.

    Let’s remember that the insurance companies helped to write the reform, and overall, they like it – because everyone is required to buy their product. Their profits, though regulated, will increase by billions.

  • WebMonk

    Why all the inanities in the bill? For many reasons, but one is that the goal of the bill wasn’t just to provide better healthcare and/or decrease costs. A major goal was to make a lot of the healthcare system operate differently to make it more “fair”, “equitable”, “equal”, etc.

    Of course, those terms were defined in such a way as to fit various niche concerns. In other words the bill is laden with pork and pork-like products. In fact, the bill is mostly those sorts of porky bits with various bits of meat tacked onto the outside.

    And just to take this metaphor to the extreme – most of those meaty bits are actually just bacon bits glued together with grease.

    Have I missed any pig-like associations for this bill?

  • WebMonk

    Why all the inanities in the bill? For many reasons, but one is that the goal of the bill wasn’t just to provide better healthcare and/or decrease costs. A major goal was to make a lot of the healthcare system operate differently to make it more “fair”, “equitable”, “equal”, etc.

    Of course, those terms were defined in such a way as to fit various niche concerns. In other words the bill is laden with pork and pork-like products. In fact, the bill is mostly those sorts of porky bits with various bits of meat tacked onto the outside.

    And just to take this metaphor to the extreme – most of those meaty bits are actually just bacon bits glued together with grease.

    Have I missed any pig-like associations for this bill?

  • http://facebook.com/mesamike Mike Westfall

    Nurse midwives also will see change in the new year. Until now, certified nurse midwives were paid 65% the rate of physicians for performing the same services by Medicare.

    What, exactly does this mean? That midwives will get more, or that doctors will get less?

    > And why limit flexible spending plans?
    > How will that help consumers?

    The effect is to remove the tax deduction for over-the-counter stuff. Remember, though, that Obama care won’t raise your taxes by a dime.

    Webmonk: “In other words the bill is laden with pork and pork-like products.”

    You mean like, scrapple (which I find disgusting). My Pennsylvania relatives will disown me, now.

  • http://facebook.com/mesamike Mike Westfall

    Nurse midwives also will see change in the new year. Until now, certified nurse midwives were paid 65% the rate of physicians for performing the same services by Medicare.

    What, exactly does this mean? That midwives will get more, or that doctors will get less?

    > And why limit flexible spending plans?
    > How will that help consumers?

    The effect is to remove the tax deduction for over-the-counter stuff. Remember, though, that Obama care won’t raise your taxes by a dime.

    Webmonk: “In other words the bill is laden with pork and pork-like products.”

    You mean like, scrapple (which I find disgusting). My Pennsylvania relatives will disown me, now.

  • http://www.bikebubba.blogspot.com Bike Bubba

    For what it’s worth, my favorite healthcare plans would fail the 80% rule utterly. The trick is that high deductible/major medical plans have a higher ratio of expenses other than payments–which is repaid as people have a bigger incentive to control costs.

    Like WebMonk notes, it’s a payoff to health insurance companies, who despite lower margins on comprehensive plans, do make more money on them because the premiums are far higher–two to three times higher. If you make 15% on $17k, vs. 25% on 6K, do the math…..and yes, these are real numbers from my experience.

    And of course, this does NOTHING to reduce healthcare costs, but does set the stage for an even more comprehensive healthcare program like Canada’s. Suffice it to say that I’m glad my gallbladder is already out–they have a four month wait there for gallbladder surgery.

  • http://www.bikebubba.blogspot.com Bike Bubba

    For what it’s worth, my favorite healthcare plans would fail the 80% rule utterly. The trick is that high deductible/major medical plans have a higher ratio of expenses other than payments–which is repaid as people have a bigger incentive to control costs.

    Like WebMonk notes, it’s a payoff to health insurance companies, who despite lower margins on comprehensive plans, do make more money on them because the premiums are far higher–two to three times higher. If you make 15% on $17k, vs. 25% on 6K, do the math…..and yes, these are real numbers from my experience.

    And of course, this does NOTHING to reduce healthcare costs, but does set the stage for an even more comprehensive healthcare program like Canada’s. Suffice it to say that I’m glad my gallbladder is already out–they have a four month wait there for gallbladder surgery.

  • DonS

    A major reason why U.S. healthcare is so expensive is because of comprehensive coverage, and the resultant isolation of patients from the cost of healthcare. If everything is “free” or available for the price of a very low copayment, over-utilization is inevitable. It’s the basic law of economics which those on the left never seem to grasp. These changes worsen that problem.

    Once you’ve removed the patient as a price-conscious consumer, the only remaining control on costs is the insurance company. But now, with these profit restrictions, you are turning health insurance companies into public utilities. And, just as is true with utilities, you have now incentivized them to increase costs, because 15% or 20% of a bigger number is a bigger profit. In other words, if costs are $1 million, the insurance company is only allowed to make 20% of that, or $200,000. But, if costs rise to $2 million, now the insurance company gets to pocket a $400,000 profit.

    Because public utilities are regulated the same way, people found that they were permitting or even encouraging utility rates to increase. So, public utilities commissions now have the authority to set utility rates. That will be coming to American healthcare in future years. All, of course, a fairly rapid march toward inevitable single payer health care, its necessary rationing of care, and resultant extreme wait times.

    Mike is right, as well, that the real initial target of these profit control provisions are the very high deductible, catastrophic care policies which offer the best way to affordable, responsible health care. But the left hates them, because they leave power of choice to the patient, rather than governmental authorities, where they think power rightly belongs.

    As a former eastern Pennsylvanian, Mike is also right about scrapple ;-) .

  • DonS

    A major reason why U.S. healthcare is so expensive is because of comprehensive coverage, and the resultant isolation of patients from the cost of healthcare. If everything is “free” or available for the price of a very low copayment, over-utilization is inevitable. It’s the basic law of economics which those on the left never seem to grasp. These changes worsen that problem.

    Once you’ve removed the patient as a price-conscious consumer, the only remaining control on costs is the insurance company. But now, with these profit restrictions, you are turning health insurance companies into public utilities. And, just as is true with utilities, you have now incentivized them to increase costs, because 15% or 20% of a bigger number is a bigger profit. In other words, if costs are $1 million, the insurance company is only allowed to make 20% of that, or $200,000. But, if costs rise to $2 million, now the insurance company gets to pocket a $400,000 profit.

    Because public utilities are regulated the same way, people found that they were permitting or even encouraging utility rates to increase. So, public utilities commissions now have the authority to set utility rates. That will be coming to American healthcare in future years. All, of course, a fairly rapid march toward inevitable single payer health care, its necessary rationing of care, and resultant extreme wait times.

    Mike is right, as well, that the real initial target of these profit control provisions are the very high deductible, catastrophic care policies which offer the best way to affordable, responsible health care. But the left hates them, because they leave power of choice to the patient, rather than governmental authorities, where they think power rightly belongs.

    As a former eastern Pennsylvanian, Mike is also right about scrapple ;-) .

  • http://www.toddstadler.com/ tODD

    “But it seems wrong for the government to ‘rein in profits and administrative costs.’” Always? What about war profiteering? Seems we might have had government-mandated profit levels numerous times in the past (WWI, WWII, Korean War).

    “How will paying midwives as much as doctors hold down health care costs?” I don’t think that everything in that bill was intended to “hold down health-care costs”. Seems like Medicare had some antiquated pay ideas that, frankly, might have been a bit sexist. I guess my question would be: why would having the government pay some people 65% of what other people make — for the same work — be a good thing? As to Mike’s question (@3) of whether midwives will get more or doctors less, I’d imagine that the immediate answer is that midwives will make more, with a long term effect of slightly pulling down some doctors’ income.

    “Why limit flexible spending plans?” Well, again, the question could also be asked: why should FSAs be used for routine, OTC stuff? This boils down to: what is the goal of FSAs? Should they cover everything, such that all purchases are made pre-tax? Surely that would “help consumers”, but at the expense of government funds.

    And yes, Tom’s reading (@1) of the 80/85% thing is correct.

  • http://www.toddstadler.com/ tODD

    “But it seems wrong for the government to ‘rein in profits and administrative costs.’” Always? What about war profiteering? Seems we might have had government-mandated profit levels numerous times in the past (WWI, WWII, Korean War).

    “How will paying midwives as much as doctors hold down health care costs?” I don’t think that everything in that bill was intended to “hold down health-care costs”. Seems like Medicare had some antiquated pay ideas that, frankly, might have been a bit sexist. I guess my question would be: why would having the government pay some people 65% of what other people make — for the same work — be a good thing? As to Mike’s question (@3) of whether midwives will get more or doctors less, I’d imagine that the immediate answer is that midwives will make more, with a long term effect of slightly pulling down some doctors’ income.

    “Why limit flexible spending plans?” Well, again, the question could also be asked: why should FSAs be used for routine, OTC stuff? This boils down to: what is the goal of FSAs? Should they cover everything, such that all purchases are made pre-tax? Surely that would “help consumers”, but at the expense of government funds.

    And yes, Tom’s reading (@1) of the 80/85% thing is correct.

  • DonS

    The issue of midwife compensation is complicated, but my guess is that the result will be a minor loss of business for midwives. I say “minor” because I don’t think there are very many routine baby deliveries (or even complicated ones, for that matter) that are covered by Medicare, so we are probably only talking about routine female physical examinations. People use midwives for two reasons. The first is because they prefer a less interventional birth event and treatment style. We used a midwife in hospital for our second child, and a midwife for home births for our last three, for this reason. My wife still occasionally sees her midwife for routine health care. The second reason, however, is because midwives charge less. They have to undergo less training than physicians and only are allowed to handle routine births or physical examinations. You don’t need the training of a physician for every birth — only for those which are more difficult. So why pay physician rates? For similar reasons, other nurse practitioners and physicians assistants handle a lot of routine medical procedures nowadays, and rightly so.

    If you take away the cost advantage for midwives, by paying them the same as physicians, then you only have the first reason remaining for using them. That is why I think the result will be a loss of business for midwives.

    The sexism issue is ridiculous. We’re talking about different levels of compensation for differently trained people, regardless of gender. There are plenty of female ob-gyn’s, and they get paid the same as other male physicians already. Why should a midwife, who had far less training and educational cost than an ob-gyn, and cannot handle many of the complications a physician can handle, get paid the same rate as the physician? It’s bad economics and will ultimately function to price the lesser-trained practitioner out of the market. It’s stupid, and it’s typical government.

  • DonS

    The issue of midwife compensation is complicated, but my guess is that the result will be a minor loss of business for midwives. I say “minor” because I don’t think there are very many routine baby deliveries (or even complicated ones, for that matter) that are covered by Medicare, so we are probably only talking about routine female physical examinations. People use midwives for two reasons. The first is because they prefer a less interventional birth event and treatment style. We used a midwife in hospital for our second child, and a midwife for home births for our last three, for this reason. My wife still occasionally sees her midwife for routine health care. The second reason, however, is because midwives charge less. They have to undergo less training than physicians and only are allowed to handle routine births or physical examinations. You don’t need the training of a physician for every birth — only for those which are more difficult. So why pay physician rates? For similar reasons, other nurse practitioners and physicians assistants handle a lot of routine medical procedures nowadays, and rightly so.

    If you take away the cost advantage for midwives, by paying them the same as physicians, then you only have the first reason remaining for using them. That is why I think the result will be a loss of business for midwives.

    The sexism issue is ridiculous. We’re talking about different levels of compensation for differently trained people, regardless of gender. There are plenty of female ob-gyn’s, and they get paid the same as other male physicians already. Why should a midwife, who had far less training and educational cost than an ob-gyn, and cannot handle many of the complications a physician can handle, get paid the same rate as the physician? It’s bad economics and will ultimately function to price the lesser-trained practitioner out of the market. It’s stupid, and it’s typical government.

  • DonS

    Now, let’s address the issue of FSA’s. Again, another stupid government policy, in the short-sighted interest of gaining some immediate additional tax revenue. So, if you purchase a prescription drug, you get to do so tax-free, using your FSA money. However, if you decide to use a cheaper, non-prescription drug to treat the same malady, you must use after-tax dollars. Hmmm, what does that incentivize? Oh, I get it — people will opt for prescription medication more often. But, what does that mean? Oh, yes, prescription medication is a lot more expensive and often covered by insurance. Which the government often pays for.

    So, in the long run, will this small increase in government revenue be overwhelmed by the increased payment of government benefits for prescription drugs? I’m thinking yes.

  • DonS

    Now, let’s address the issue of FSA’s. Again, another stupid government policy, in the short-sighted interest of gaining some immediate additional tax revenue. So, if you purchase a prescription drug, you get to do so tax-free, using your FSA money. However, if you decide to use a cheaper, non-prescription drug to treat the same malady, you must use after-tax dollars. Hmmm, what does that incentivize? Oh, I get it — people will opt for prescription medication more often. But, what does that mean? Oh, yes, prescription medication is a lot more expensive and often covered by insurance. Which the government often pays for.

    So, in the long run, will this small increase in government revenue be overwhelmed by the increased payment of government benefits for prescription drugs? I’m thinking yes.

  • http://www.toddstadler.com/ tODD

    Don (@8), how often do you find yourself in a situation where a a prescription drug and an OTC one are equally effective? This has never happened to me.

  • http://www.toddstadler.com/ tODD

    Don (@8), how often do you find yourself in a situation where a a prescription drug and an OTC one are equally effective? This has never happened to me.

  • DonS

    tODD @ 9: I’m not sure of the purpose of your question. Effectiveness is often a subjective standard. Different medications work differently in different people. Very few homeopathic remedies are prescription. Additionally, a lot of formerly prescription-only medications, such as Cetirizine (Zyrtec) are now OTC. All I am saying that someone previously tending to use an OTC remedy might find it perversely cheaper (to them) to now use a prescription remedy for the same ailment because of this change, even though the use of the prescription medication actually costs the health care system a lot more money. The new rules incentivize the use of prescription, rather than OTC, medications, and will ultimately drive up costs to the government.

  • DonS

    tODD @ 9: I’m not sure of the purpose of your question. Effectiveness is often a subjective standard. Different medications work differently in different people. Very few homeopathic remedies are prescription. Additionally, a lot of formerly prescription-only medications, such as Cetirizine (Zyrtec) are now OTC. All I am saying that someone previously tending to use an OTC remedy might find it perversely cheaper (to them) to now use a prescription remedy for the same ailment because of this change, even though the use of the prescription medication actually costs the health care system a lot more money. The new rules incentivize the use of prescription, rather than OTC, medications, and will ultimately drive up costs to the government.

  • http://www.toddstadler.com/ tODD

    Don (@10), the purpose of my question was to determine if your proposed scenario is at all likely or worth worrying about.

    You had said (@8) that this FSA change means that “people will opt for prescription medication more often,” adding that “prescription medication is a lot more expensive and often covered by insurance. Which the government often pays for.” So, to summarize, this FSA change will result in (1) people using more prescription meds in lieu of the OTC meds they used to take, and (2) an increase in cost to the taxpayers.

    In order for the first point to be true, though, it must be a common scenario in which people are taking OTC meds to treat an illness, but for which there are equally effective prescription meds they are not taking. The end result being that, as you have predicted, many of those formerly taking OTC meds will now, somehow, start taking prescription meds. But I cannot think of a specific situation for which this could occur. It obviously does not apply in a scenario in which a prescription med becomes available OTC, since that does not meet the condition in which someone was already using the OTC version. Are you suggesting that someone might find it economically beneficial to use the prescription version of a drug also available OTC? Once they go OTC, are they even available via prescription any more?

    And how are you suggesting that this works in the consumer’s favor? In order to get a prescription, I have to incur a copay for the doctor’s visit (at least I do if I previously was only taking OTC meds). Plus the copay for prescription medicine. What are the odds that those two copays together are less than the pre-tax cost of my OTC meds, if we assume that this scenario is even possible in the first place?

    I mean, seriously, can you name a specific situation in which this might happen? Because your argument requires that it be rather common, or else what’s the point? I was using Neosporin, which costs $8.49 at Walgreens, or effectively $6.37, assuming a 25% tax rate (someone check my math) — but with these FSA changes, it’s back to $8.49. Ah, but I can get Amoxicillin for $4 at the Super Target, and that’s cheaper! I call up my doctor, asking for a prescription, but he says I have to come in, so I pay my $25 copay and then he asks me what I want it for, and I say, “For when I scrape my knee”, and he refuses to write me a prescription and I’m out $25, but it would have been $29 for the prescription. I still lose, either way. What scenario are you imagining?

    And if you can’t think of any obvious examples, is it really much of a threat to “ultimately drive up costs to the government”?

  • http://www.toddstadler.com/ tODD

    Don (@10), the purpose of my question was to determine if your proposed scenario is at all likely or worth worrying about.

    You had said (@8) that this FSA change means that “people will opt for prescription medication more often,” adding that “prescription medication is a lot more expensive and often covered by insurance. Which the government often pays for.” So, to summarize, this FSA change will result in (1) people using more prescription meds in lieu of the OTC meds they used to take, and (2) an increase in cost to the taxpayers.

    In order for the first point to be true, though, it must be a common scenario in which people are taking OTC meds to treat an illness, but for which there are equally effective prescription meds they are not taking. The end result being that, as you have predicted, many of those formerly taking OTC meds will now, somehow, start taking prescription meds. But I cannot think of a specific situation for which this could occur. It obviously does not apply in a scenario in which a prescription med becomes available OTC, since that does not meet the condition in which someone was already using the OTC version. Are you suggesting that someone might find it economically beneficial to use the prescription version of a drug also available OTC? Once they go OTC, are they even available via prescription any more?

    And how are you suggesting that this works in the consumer’s favor? In order to get a prescription, I have to incur a copay for the doctor’s visit (at least I do if I previously was only taking OTC meds). Plus the copay for prescription medicine. What are the odds that those two copays together are less than the pre-tax cost of my OTC meds, if we assume that this scenario is even possible in the first place?

    I mean, seriously, can you name a specific situation in which this might happen? Because your argument requires that it be rather common, or else what’s the point? I was using Neosporin, which costs $8.49 at Walgreens, or effectively $6.37, assuming a 25% tax rate (someone check my math) — but with these FSA changes, it’s back to $8.49. Ah, but I can get Amoxicillin for $4 at the Super Target, and that’s cheaper! I call up my doctor, asking for a prescription, but he says I have to come in, so I pay my $25 copay and then he asks me what I want it for, and I say, “For when I scrape my knee”, and he refuses to write me a prescription and I’m out $25, but it would have been $29 for the prescription. I still lose, either way. What scenario are you imagining?

    And if you can’t think of any obvious examples, is it really much of a threat to “ultimately drive up costs to the government”?

  • http://steadfastlutherans.org/ SAL

    I live in Alabama. I’m frankly disgusted people in other states would consider themselves better than us and attempt to impose their rule on our Alabama healthcare system.

    I frankly don’t think the federal government composed mostly of representatives from other states should be in any way involved with medical transaction that proceed entirely within our borders of Alabama.

    If the Supreme Court doesn’t rule the Health Law unconstitutional, I think we ought to practice civil disobedience and nonviolent resistance until such time as the people of the other states return our freedom from outside interference in our domestic affairs.

    It is vile and disgusting that my fellow citizens would attempt to take away our freedoms for temporary and largely unfeasible benefits.

  • http://steadfastlutherans.org/ SAL

    I live in Alabama. I’m frankly disgusted people in other states would consider themselves better than us and attempt to impose their rule on our Alabama healthcare system.

    I frankly don’t think the federal government composed mostly of representatives from other states should be in any way involved with medical transaction that proceed entirely within our borders of Alabama.

    If the Supreme Court doesn’t rule the Health Law unconstitutional, I think we ought to practice civil disobedience and nonviolent resistance until such time as the people of the other states return our freedom from outside interference in our domestic affairs.

    It is vile and disgusting that my fellow citizens would attempt to take away our freedoms for temporary and largely unfeasible benefits.

  • Tom Hering

    For SAL, the bad guys are “representatives from others states” and the “people of the other states,” but then he also considers we non-Alabamans “my fellow citizens.” Hmm. I think I’ll hide my money in my shoe if I’m ever in SAL’s part of Alabama. :-D

  • Tom Hering

    For SAL, the bad guys are “representatives from others states” and the “people of the other states,” but then he also considers we non-Alabamans “my fellow citizens.” Hmm. I think I’ll hide my money in my shoe if I’m ever in SAL’s part of Alabama. :-D

  • DonS

    tODD @ 11: The FSA issue is, by far, the most minor part of all of this. The major deal, of course, is the perverse attempt to regulate health insurance companies by restricting their profits to a percentage of total costs, thus incentivizing them to increase costs.

    Keeping that in perspective, I already mentioned Zyrtec above, but another one is loratadine (Claritin). These kinds of antihistamines (another one is Benadryl) are used frequently by those suffering from chronic allergies. When they were prescription only, refillable prescriptions were issued, lessening the impact of doctor visit costs. Descarboethoxyloratadine, trade name Clarinex, is a prescription version of Claritin. Schering-Plough developed Clarinex specifically because Claritin went off-patent and non-prescription, and they wanted another higher profit product. A 2003 study comparing the two drugs found that “There is no clinical advantage to switching a patient from loratadine to desloratadine. However, it may be an option for patients whose medical insurance no longer covers loratadine if the co-pay is less than the cost of the over-the-counter product.” http://www.aafp.org/afp/2003/1115/p2015.html

    Obviously, were one to have previously paid for Claritin OTC using FSA funds, the change in tax status of OTC drugs, in combination with good prescription insurance coverage, could well make Clarinex a cheaper substitute for a chronic allergy sufferer.

  • DonS

    tODD @ 11: The FSA issue is, by far, the most minor part of all of this. The major deal, of course, is the perverse attempt to regulate health insurance companies by restricting their profits to a percentage of total costs, thus incentivizing them to increase costs.

    Keeping that in perspective, I already mentioned Zyrtec above, but another one is loratadine (Claritin). These kinds of antihistamines (another one is Benadryl) are used frequently by those suffering from chronic allergies. When they were prescription only, refillable prescriptions were issued, lessening the impact of doctor visit costs. Descarboethoxyloratadine, trade name Clarinex, is a prescription version of Claritin. Schering-Plough developed Clarinex specifically because Claritin went off-patent and non-prescription, and they wanted another higher profit product. A 2003 study comparing the two drugs found that “There is no clinical advantage to switching a patient from loratadine to desloratadine. However, it may be an option for patients whose medical insurance no longer covers loratadine if the co-pay is less than the cost of the over-the-counter product.” http://www.aafp.org/afp/2003/1115/p2015.html

    Obviously, were one to have previously paid for Claritin OTC using FSA funds, the change in tax status of OTC drugs, in combination with good prescription insurance coverage, could well make Clarinex a cheaper substitute for a chronic allergy sufferer.

  • http://steadfastlutherans.org/ SAL

    #13 Outsiders imposing their rule on locals are usually harmful even if they have good intentions.

    It is the same error to assume Washington can best control healthcare in localities as to assume Washington can best control Iraq or Afghanistan.

  • http://steadfastlutherans.org/ SAL

    #13 Outsiders imposing their rule on locals are usually harmful even if they have good intentions.

    It is the same error to assume Washington can best control healthcare in localities as to assume Washington can best control Iraq or Afghanistan.

  • http://www.toddstadler.com/ tODD

    Thanks, Don (@14). Those examples are a little more helpful. I was not aware of drug companies making prescription clones of meds that had gone OTC.

    And while I agree that this is a “minor” issue, I will remind you that you were the one trying to make a case against this change based on “driving up costs to the government”. You haven’t really convinced me that this will incur any significant costs, mainly because you have only convinced me that it is possible for someone to revert to prescription meds from OTC, not that it is likely.

    Again, any prescription for me will incur $40 in fees — $25 for a doctor visit copay, and $15 for the prescription (some prescriptions can be filled for less than that, in which case I wouldn’t charge it to insurance). Refills would amortize the doctor copay, of course, especially assuming I can get a large number of refills. I realize there are other insurance plans out there, but I think mine is neither the best or worst, and so perhaps somewhat typical.

    I just don’t see this as worth complaining about, is my point. Why did you make such a big deal out of it by singling it out (@8)?

  • http://www.toddstadler.com/ tODD

    Thanks, Don (@14). Those examples are a little more helpful. I was not aware of drug companies making prescription clones of meds that had gone OTC.

    And while I agree that this is a “minor” issue, I will remind you that you were the one trying to make a case against this change based on “driving up costs to the government”. You haven’t really convinced me that this will incur any significant costs, mainly because you have only convinced me that it is possible for someone to revert to prescription meds from OTC, not that it is likely.

    Again, any prescription for me will incur $40 in fees — $25 for a doctor visit copay, and $15 for the prescription (some prescriptions can be filled for less than that, in which case I wouldn’t charge it to insurance). Refills would amortize the doctor copay, of course, especially assuming I can get a large number of refills. I realize there are other insurance plans out there, but I think mine is neither the best or worst, and so perhaps somewhat typical.

    I just don’t see this as worth complaining about, is my point. Why did you make such a big deal out of it by singling it out (@8)?

  • Rose

    Something really troubles me. It’s that the “Living Will” doctor-patient discussion is not what Sarah Palin refers to as “Death Panels”. These are panels of federal agents who determine your QALY “Quality Adusted Life Years” and detemine if you’re too old or sick for a certain treatment. Why don’t we hear more about this?

  • Rose

    Something really troubles me. It’s that the “Living Will” doctor-patient discussion is not what Sarah Palin refers to as “Death Panels”. These are panels of federal agents who determine your QALY “Quality Adusted Life Years” and detemine if you’re too old or sick for a certain treatment. Why don’t we hear more about this?

  • Rose

    Also, there’s a new Hippocratic oath that’s eerie:
    “Most especially must I tread with care in matters of life and death. If it is given me to save a life, all thanks. But it may also be within my power to take a life; this awesome responsibility must be faced with great humbleness and awareness of my own frailty. Above all, I must not play at God.”

  • Rose

    Also, there’s a new Hippocratic oath that’s eerie:
    “Most especially must I tread with care in matters of life and death. If it is given me to save a life, all thanks. But it may also be within my power to take a life; this awesome responsibility must be faced with great humbleness and awareness of my own frailty. Above all, I must not play at God.”

  • DonS

    tODD @ 16: Answering your last question first, I was generally responding to the points you made @ 6. After I posted, I realized I hadn’t addressed the FSA point, so I posted again. In other words, I didn’t originally intend single out FSA’s by giving them a separate post.

    I used to have an FSA, years ago, when I worked for a large company. More recently, I have had an HSA for the last three or so years, which is similar in many ways to an FSA, but also substantially different in that you must couple an HSA to a high deductible insurance policy and you do not forfeit unspend funds at the end of the year, as is the case with an FSA.

    I have never purchased OTC medications using FSA or HSA funds. The reason is simple — I didn’t know you could until the issue came up last spring. But even had I known, I doubt that I would have done so. We don’t buy that many medications, and when we do it is typically during a grocery shopping outing, with many other items. Sorting all of that out, and recordkeeping would be onerous for such a small savings.

    So, the real reason I wanted to respond to your point is that this is typical government. These changes were made in an effort to increase governmental revenues, to try to balance the books and show that Obamacare had no net cost. Assumptions were made that X dollars would be gained in revenue because of this change. I was trying to point out that this is not necessarily so. I suspect that only people who purchase a lot of OTC medications would bother to purchase them using an FSA. Such people might typically include chronic allergy sufferers. Because allergy medication prescriptions are typically refillable many times between doctor visits, and because those who have FSA’s typically work for large companies having good prescription drug plans, this change may well make prescription medications cheaper to them than OTC medications paid for with after tax dollars. This, in turn, raises utilization of insurance, ultimately raising premiums and increasing health care costs. Additionally, the employers will now deduct the higher premiums and ….. pay less tax. So, the projections of greater revenues may be wrong.

    This kind of thing is typical, because government budgets assume static conditions. Raise taxes by X percent, increase revenues by Y dollars. They don’t account for the dynamics of taxpayers changing their behavior in response to changes in the tax code. One reason why we habitually run huge deficits.

    So, bottom line, my point really wasn’t about this particular issue. It was more about the inanity of static budgeting, a larger point.

  • DonS

    tODD @ 16: Answering your last question first, I was generally responding to the points you made @ 6. After I posted, I realized I hadn’t addressed the FSA point, so I posted again. In other words, I didn’t originally intend single out FSA’s by giving them a separate post.

    I used to have an FSA, years ago, when I worked for a large company. More recently, I have had an HSA for the last three or so years, which is similar in many ways to an FSA, but also substantially different in that you must couple an HSA to a high deductible insurance policy and you do not forfeit unspend funds at the end of the year, as is the case with an FSA.

    I have never purchased OTC medications using FSA or HSA funds. The reason is simple — I didn’t know you could until the issue came up last spring. But even had I known, I doubt that I would have done so. We don’t buy that many medications, and when we do it is typically during a grocery shopping outing, with many other items. Sorting all of that out, and recordkeeping would be onerous for such a small savings.

    So, the real reason I wanted to respond to your point is that this is typical government. These changes were made in an effort to increase governmental revenues, to try to balance the books and show that Obamacare had no net cost. Assumptions were made that X dollars would be gained in revenue because of this change. I was trying to point out that this is not necessarily so. I suspect that only people who purchase a lot of OTC medications would bother to purchase them using an FSA. Such people might typically include chronic allergy sufferers. Because allergy medication prescriptions are typically refillable many times between doctor visits, and because those who have FSA’s typically work for large companies having good prescription drug plans, this change may well make prescription medications cheaper to them than OTC medications paid for with after tax dollars. This, in turn, raises utilization of insurance, ultimately raising premiums and increasing health care costs. Additionally, the employers will now deduct the higher premiums and ….. pay less tax. So, the projections of greater revenues may be wrong.

    This kind of thing is typical, because government budgets assume static conditions. Raise taxes by X percent, increase revenues by Y dollars. They don’t account for the dynamics of taxpayers changing their behavior in response to changes in the tax code. One reason why we habitually run huge deficits.

    So, bottom line, my point really wasn’t about this particular issue. It was more about the inanity of static budgeting, a larger point.


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