Friday, November 19, 2010

Over-the-Counter Drugs Must Be Prescribed?

A friend, an early retiree from the State of Illinois, sent me the following e-mail a couple of days ago. The subject title was “One consequence of the new health reform law.”

“I learned on the news (NBC) last night that the new law will require physicians to write prescriptions for otc products, costing everyone more time and money. What's with that?”

Don’t you love it? It is no wonder that the public is worked up about health reform, when the general media give them incomplete or incorrect information. Fortunately for my friend, she knows I can give her the correct information about the revised treatment of over-the-counter drugs, and other health reform provisions.

So I explained: Effective Jan. 1, 2011, expenses for over-the-counter drugs other than insulin will not be considered a deductible medical expense that can be claimed under a medical flexible spending account, or other medical account, unless the OTC drug is prescribed. Health insurance plans rarely cover OTC drugs. Currently, people can claim reimbursement under health reimbursement or Sec. 125 flexible spending accounts for such items as aspirin, Tylenol, cough syrup, as well as OTC versions of allergy and digestive system medications. I never claim such expenses (fortunately, I have little need for drugs) since I save any medical account funds for larger expenses that are not covered by my insurance. As far as I am concerned, the "foul" cries over the removal of OTC drugs from the definition of covered medical costs is much ado about nothing--the great majority of people are not affected.

The Internal Revenue Service provides the following Questions and Answers on the subject of OTC drug treatment beginning Jan. 1, 2011.

Q. How are the rules changing for reimbursing the cost of over-the-counter medicines and drugs from health flexible spending arrangements (health FSAs) and health reimbursement arrangements (HRAs)?
A. Section 9003 of the Affordable Care Act established a new uniform standard for medical expenses. Effective Jan. 1, 2011, distributions from health FSAs and HRAs will be allowed to reimburse the cost of over-the-counter medicines or drugs only if they are purchased with a prescription. This new rule does not apply to reimbursements for the cost of insulin, which will continue to be permitted, even if purchased without a prescription.

Q. How are the rules changing for distributions from health savings accounts (HSAs) and Archer Medical Savings Accounts (Archer MSAs) that are used to reimburse the cost of over-the-counter medicines and drugs?
A. In accordance with Section 9003 of the Affordable Care Act, only prescribed medicines or drugs (including over-the-counter medicines and drugs that are prescribed) and insulin (even if purchased without a prescription) will be considered qualifying medical expenses and subject to preferred tax treatment.

If you have an HSA or Archer MSA, the amount of the distribution for expenses that are not qualifying medical expenses will be includable in your gross income and subject to an additional tax of 20%.

The news report my friend heard led her, and the NBC news report’s other listeners, to believe that she would have to get a doctor’s prescription for every OTC drug for her medicine cabinet. I was able to set my friend straight, but the rest of the public likely swallowed the wrong pill, while the health of the U.S. population is at risk. The U.S. news media needs CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act.


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