Wednesday, March 9, 2011

Health Care Law’s Taxing Side Effects

This morning’s Wall Street Journal has an excellent article highlighting the consequences of one provision in the health care law – new restrictions on consumer-directed health accounts like Flexible Spending Arrangements (FSAs) and Health Savings Accounts (HSAs).  Specifically, the law requires that individuals seeking tax-free reimbursement for over-the-counter medications using FSA or HSA funds obtain a prescription to do so.  The story contains numerous examples of this one provision’s ill effects on American families, businesses, and doctors:

Rising Costs:  “Americans are visiting their doctors before making a trip to the drugstore, hoping their physician will help them out by writing a prescription….‘It drives up the cost of health care as opposed to reducing it,” said one physician.

Sicker Patients:  “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.’”

Bureaucratic Hassles for Doctors and Businesses:  “Some doctors, irked by the paperwork…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….‘I am now doing the IRS’s work, and that’s what I resent most,” said one pediatrician.

Potential Lawsuits:  “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 [sic] without seeing the patient in person.”

A Microcosm of Other Problems:  “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.”

As a reminder, the health care law includes more than $500 billion in tax increases, of which only $17 billion comes from the restrictions outlined in the Wall Street Journal piece – meaning that the American people will soon suffer more of these heretofore hidden consequences as the law’s other tax increases begin to take effect.  Speaking of which, the American Action Forum has a paper out today highlighting the tax on insurers, and quantifying its impact on consumers – families could pay $5,000 more in insurance premiums over a 10-year period due to the tax, undermining candidate Obama’s promise to CUT premiums by an average of $2,500 per family.