Omnibus Budget Reconciliation Act of 1990

The Omnibus Budget Reconciliation Act of 1990 (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.

Individual income tax rates were increased. The top statutory tax rate increased from 28 percent to 31 percent, and the individual alternative minimum tax rate increased from 21 percent to 24 percent. The capital gains rate was capped at 28 percent. The value of high income itemized deductions was limited: reduced by 3 percent times the extent to which AGI exceeds $100,000. It temporarily created the personal exemption phase out applicable to the range of taxable income between $150,000 and $275,000.

Itemized deductions were temporarily limited through 1995. The payroll tax rate increased. The cap on taxable wages for Hospital Insurance (Medicare) was raised from $53,400 to $125,000. Social security taxes to state and local employees was extended without other pension coverage. A supplemental 0.2 percent unemployment insurance surtax was imposed.

The Act imposed a 30 percent excise tax on the amount of price over $30,000 for autos, $100,000 for boats, $250,000 for airplanes, and $10,000 for furs. It also increased motor fuels taxes by 5 cents per gallon, and increased taxes on tobacco and alcoholic beverages: by 8 cents per pack of cigarettes, by $1.00 per proof gallon of liquor; by 16 cents per six-pack of beer; and by 18 cents per bottle of table wine. It extended Airport and Airway trust fund taxes, increasing them by 25 percent, and permanently extended the 3 percent federal telephone excise tax on telephone service.

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.