Monday, January 3, 2011


A very happy New Year to all readers of Health Care REFORM UPDATE!

And, also, some happy New Year gifts from the Obama administration, by way of the Affordable Care Act… January 1, 2011 is the date that a number of the ACA changes designed to make health care coverage more attractive become effective, along with a few that will be less popular—notably to insurance companies.

Most Medicare beneficiaries will indeed be beneficiaries of the ACA changes. The Part D doughnut hole will effectively shrink, with 50 percent discounts on brand-name drugs for those whose expenditures put them “in the hole.” All Medicare plans, including traditional fee-for-service Medicare, will also cover all preventive care with no out-of-pocket charges (although many Medicare Advantage plans already provided this benefit). Meanwhile, physicians may bail out of the program less rapidly as a new ten percent bonus is added to payments to primary care docs and general physicians. On the other side of the ledger, however, wealthier beneficiaries will see lower subsidies and the beginning of higher Part B premiums.

Also on the negative side, it will no longer be possible for individuals with HRAs or HSAs to treat reimbursement for over-the-counter medications in the same way as prescription drugs. Only if prescribed by a physician will OTC items be eligible for HRA or HSA tax-free reimbursement.

Finally, insurers will take some more hits. New “fees” will be levied on drug companies based on their sales of brand-name pharmaceuticals. The much-debated medical loss ratio restrictions [see earlier REFORM UPDATE posts] will also take effect, while the “confess and explain” rule for premium increases over ten percent will be effective upon final rulemaking. And, going back to Medicare, insurers with Medicare Advantage plans will have their 2011 payments frozen at 2010 levels, with a start also being made on reducing the excess of Advantage payments over FFS costs.

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