Omnibus Budget Reconciliation Act of 1990

The Omnibus Budget Reconciliation Act of 1990 (or OBRA-90, Pub.L. 101-508, 104 Stat. 1388, enacted November 5, 1990) is a United States statute enacted pursuant to the budget reconciliation process to reduce the United States federal budget deficit.

It included the Budget Enforcement Act of 1990 which established the "pay-as-you-go" or "PAYGO" process for discretionary spending and taxes. It increased income taxes by creating a new 31 percent individual income tax rate, but capped the capital gains rate at 28 percent. Personal exemptions were temporarily phased out through 1995.

The tax limit cap on Medicare taxes was raised from a $53,400 income to $125,000 in income. Itemized deductions were temporarily limited through 1995.

The gasoline tax was temporarily extended and increased through September 30, 1995. Air transportation excise taxes were extended and increased through 1995. The federal telephone excise tax put into place in 1898 as a tax on the rich was permanently extended.

OBRA 1990 gave states permission to create Drug Utilization Review ("DUR") boards to manage state specific drug purchasing and formulary decisions for state purchased health care such as Medicaid programs, injured workers programs, and state employee benefits. As a result, these boards (now sometimes called "pharmacy and therapeutics" committees), define lists of drugs classes and drugs within those classes in which no drug on the list is felt to be any more effective or less safe than another. This decision is made by a body of independent physicians and pharmacists who are not seen as having a financial conflict of interest. OBRA stipulates the decision must be made in conjunction with a compilation of evidence, as well as public comment, to generate the class wide drug comparison. Once the drug makes the list, it can also be chosen as a "preferred drug". Preferred drugs are typically cheap generic drugs. OBRA specified that pharmacists can substitute for a preferred drug, (if one exists in that state), and must offer counseling to the patient on the substitution. OBRA 1990 also allows drugs listed as preferred to be eligible for "sealed non-transparent rebates" to occur from the manufacturer of the drug to the state agency. These are legally sanctioned kickbacks in which the public by federal law does not have a right to know the amount of the rebate below the average wholesale price (AWP). In cases where "no sufficient evidence exists" a drug is any less safe, (according to the evidence report) the drug is declared "substitutable", and eligible for placement on the PDL, and for the supplemental rebate program.

It was signed into law by President George H. W. Bush on November 5, 1990, counter to his 1988 campaign promise not to raise taxes. This became an issue in the presidential election of 1992.

A.D. Banker's textbook defines the Omnibus Budget Reconciliation Act of 1990 (or OBRA-90), as "a law that requires all Medicare Supplement policies to be standardized." This excerpt is taken from the A.D. Banker and Company Ohio Life and Health Insurance textbook valid as of January 2010.