Big Health-Care Changes Arrive in New Year
By JANET ADAMY
New taxes on drug makers, lower prescription-drug costs for seniors and restrictions on tax-free medical spending accounts are among a slate of health-law provisions that kick in Saturday.
The changes show how the law will begin to reshape American health care, even as opponents try to overturn the measure in Congress and the courts.
Although House Republicans are threatening to starve the law of funding and stage a symbolic repeal vote, those actions aren't likely to block any significant pieces of the law aimed at consumers for 2011. That's because the changes generally involve new rules and don't require spending.
"The debate over defunding and repeal is going to be much more of a political story in 2011 than something that actually means something for consumers immediately," said Larry Levitt, vice president at the nonprofit Kaiser Family Foundation.
Over the longer term, however, Republicans could succeed in thwarting funding for staff and grants needed to put the law in place. The biggest changes, including new health-insurance exchanges and subsidies for lower earners, are set to happen in 2014.
Medicare recipients who fall into a prescription-drug coverage gap known as the "doughnut hole" may reap the biggest windfall of the law in 2011. Enrollees whose total drug costs for the year fall between $2,840 and $6,448 will get a 50% discount on branded prescriptions. That's compared with a $250 rebate the law gave them in 2010 to offset the cost of paying for those drugs entirely out of pocket. The seniors' group AARP estimates more than three million people fall into the doughnut hole each year.
The cost of drug coverage, however, will go up for some seniors. Medicare beneficiaries with annual incomes above $85,000 for individuals and $170,000 for couples will get a smaller government subsidy for Medicare Part D prescription-drug coverage.
In 2011, pharmaceutical manufacturers will see the first major industry tax of the law, a $2.5 billion levy that will be distributed across drug makers based on their sales volume for the year. The industry worries the tax will eat into companies' budgets for finding new drugs.
"It diminishes the amount of capital we have to invest in research and development," said John Castellani, president and chief executive of the Pharmaceutical Research and Manufacturers of America, the industry's main lobbying group. The industry spent $65.3 billion on research in 2009, according to the group.
Drug makers agreed to make concessions with the hope of getting millions of newly insured customers under the law.
Also under the law, about 20 preventive health services, including colorectal cancer screenings, mammograms and smoking cessation services, will be free for people on Medicare.
Seniors with privately administered Medicare Advantage plans may see fewer extra benefits, such as eyeglasses and free gym memberships, as insurers prepare for federal reimbursement cuts to those plans in 2012.
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.
Such practitioners provide senior women with basic medical services, such as Pap smears and cholesterol screenings, as well as providing gynecologic services to the three million women of child-bearing age who receive Medicare because they are disabled. The payment change was designed to bolster such care in rural areas, where physicians can be scarce, said Patrick Cooney, lobbyist for the American College of Nurse Midwives.
Write to Janet Adamy at janet.adamy@wsj.com
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