CBO report examines bill designed to lower health care costs

The Congressional Budget Office (CBO) released a cost estimate stemming from S.1895, Lower Health Care Costs Act, which is intended to lower the cost of health care to individuals as well as to the federal government. The CBO and JCT estimate that several of the bill’s provisions would result in a reduction in the cost of health insurance that is subsidized through the federal government, through the Patient Protection and Affordable Care Act (ACA), or from employment-based plans. Overall, the agencies found that if S.1895 is enacted, there would be an increase in direct spending by approximately $18.7 billion in conjunction with an increase in revenues by $26.7 billion over the period spanning from 2019 to 2029, for a net decrease in the deficit of $7.6 billion (CBO Report, July 16, 2019).

The bill is divided into five titles, which the CBO considers individually in its cost estimate. The first title is related to surprise medical bills. Title I contains patient protections against surprise medical billing, such as prohibition against balance billing and by requiring insurers to treat out-of-network care as in-network care for purposes of computing copayments, coinsurance, deductibles and spending toward out-of-pocket limits. Moreover, Title I of the bill “would require insurers to reimburse out-of-network providers at the median in- network rate for a given provider type and geographic area.”

Title I would also affect private insurance premiums in four ways, each explained in the report. According to the CBO and JCT, estimated changes in the cost of these premiums varied according to insurance market and the type of plan. The net effect would be lower insurance premiums and savings to the federal budget. Additionally, in light of the creation of a means by which out-of-network services are reimbursed at median in-network rates, payments to all providers “would converge around those median rates.” This would reduce payments for in-network care. According to the CBO and JCT the most significant effects of Title I stem from these lower payments for in-network care. However, private insurance premiums are also affected by changes in payment rates.

Title II of the bill relates to reduction in the price of prescription drugs. The bill would modify the FDA’s framework for approval of certain drugs and biologics, which would ultimately pave the way for certain generics or biosimilar medications to make an earlier entry into the market. In the report, the CBO and JCT break down their estimates into various sections, citing the impact on direct spending and revenues for each section.

The CBO and JCT explain that in Title III, the bill imposes new rules governing insurers’ contracts with health care providers and pharmacy benefit managers, noting that sections 302, 303 and 306 of the bill specifically affect direct spending or revenues. The report describes the impact of tiered plans and estimates that increased enrollment in those type of plans would reduce spending for certain care, thereby reducing average health insurance premiums for employment-based coverage. The report also details the new requirements on pharmacy benefit managers.

The CBO and JCT also analyzes Title IV of the bill, noting that this section sets out to extend funding for certain federal health care programs, among other things raising the minimum age for the sale of tobacco products. One section of Title V delineates the requirements that health insurers create and maintain “application programming interfaces” the creation and maintenance of which would create new administrative costs. The CBO and JCT estimate the costs would be passed on to enrollees in the form of higher premiums. They estimate that balancing the increase in direct spending with the decrease in revenues, there would be an increase in the deficit for the relevant period.

The report also explains the estimates arising from the various sections of the bill are subject to uncertainty and lays out the nature of that uncertainty relating to different issues. It also explains that the bill imposes intergovernmental and private-sector mandates. CBO estimates that the former would average about $100 million annually and the latter, $15 billion annually. In each instance, the CBO estimates that in each of the first five years the mandates are in effect, those costs would exceed the respective threshold established in Unfunded Mandates Reform Act (UMRA). The CBO and JCT examine each mandate and estimate the impact upon outlays and revenues, as well as whether it applied to public, private or both types of entitles.

Economic, job losses predicted with BCRA

The Better Care Reconciliation Act (BCRA), the Senate alternative to the American Health Care Act (AHCA), would lead to significantly larger job losses and reductions in states’ economies by 2026, if passed into law. Both bills seek to partially repeal and replace the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). According to an issue brief by the Commonwealth Fund, both the draft BCRA and the AHCA, which passed the House earlier (see The AHCA strikes back, May 4, 2017), would have similar effects on the number of uninsured Americans. The Congressional Budget Office (CBO) estimated that this draft version of the BCRA would lead to 22 million fewer insured Americans by 2026, roughly the same as the 24 million uninsured estimated for the AHCA (see BCRA would curb Medicaid spending growth, increase uninsured numbers, Health Law Daily, June 30, 2017; Revised AHCA costlier with same number of uninsured, Health Law Daily, March 24, 2017).

The issue brief noted that, generally, federal health funds are used to purchase health care, with fiscal effects from these purchases spreading throughout the rest of the economy by creating jobs and other economic growth. Federal health funds pay hospitals, doctors’ offices, and other providers; these facilities use revenue to pay their employees and buy goods and services, such as rent or equipment. In turn, health care employees or other businesses (and eventually their workers) use their income to purchase consumer goods like housing, transportation, or food. An analogous effect is when federal taxes are reduced, the expectation is that consumers or businesses retain income and purchase goods and services, invest, or save.

Impact on jobs

The Commonwealth Fund noted that Medicaid expansion states would be hardest hit under the BCRA. In terms of job creation or losses, the proposed BCRA would add over 750,000 jobs in 2018, but employment would then deteriorate. It is projected that in 2026, under the BCRA, there would be 1.45 million fewer jobs with the health care sector bearing the brunt of the losses at over 900,000 fewer jobs. State coffers would be reduced by $162 billion.

BCRA would repeal a number of taxes along with a phase-in of coverage-related spending reductions, including Medicaid. The tax repeals would increase federal deficits by more than $50 billion in 2018 and 2019. However, as noted, the number of jobs outside of the health care sector in 2018 would rise. Health care sector jobs would fall immediately with the loss of 30,000 jobs.

By 2026, 1.45 million fewer people would have jobs. Additionally, gross state products would drop by $162 billion and business output would be $265 billion lower, while overall 919,000 jobs would be lost in health care. The issue brief estimated that more than 534,000 jobs in other sectors, including construction, real estate, finance, retail trade, and public employment, would be lost by 2026.

States that expanded Medicaid were estimated to have deeper and faster losses. Having earned more federal funds under the ACA, these states lose more when Medicaid matching rates are cut. In addition to cutting funds to states that expanded health insurance for low-income Medicaid populations, BCRA also increases funding to states that did not expand Medicaid. Nonetheless, the issue brief noted that states that did not expand Medicaid, like Florida and Maine, would also experience job and economic losses after a few years. For instance, Florida would have the sixth highest level of job loss in the nation by 2026.

Senate hearing on individual market goes off-track fast, gets partisan

A Senate committee hearing on how to stabilize the individual health insurance market quickly devolved into a platform to make partisan comments and score political points regarding the proposed repeal and replacement of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). This occurred despite the efforts of the committee chairman to focus the committee on a transition plan for the individual market and the statements of the committee witnesses, which were non-partisan and conciliatory.

The Chairman’s remarks. In his introductory remarks, Sen. Lamar Alexander (R-TN), Chairman of the Senate Committee on Health, Education, Labor & Pensions, expressed his hope that the committee could put aside the partisan talking points and come together to find solutions to ensure the viability of the individual health insurance market during the transition from the ACA. The individual mandate to obtain health insurance was created by section 1510 of the ACA.

Alexander noted that the individual market makes up only 6 percent (18 million beneficiaries nationwide) of the total health insurance market, with only 4 percent covered through the ACA Exchanges. He further noted that some health care plans have pulled out of the Exchanges and many individuals may have only one plan to choose from. He asked the panel and the committee to focus on three questions: (1) Is there really instability in the individual markets? (2) If so, what needs to be done? (3) By what date must it be done?

The Ranking Member’s remarks. Ranking Member Patty Murray’s (D-WA) opening statement showed that she had no intention of following Alexander’s plea for a non-partisan hearing. Instead, she began by stating that while the individual market had always been a problem, the ACA helped to solve that problem, and now the Republican’s plan to repeal the ACA without a concrete plan for replacement is creating chaos in the health care system. She also went outside the individual market focus of the hearing and claimed that Republican policies would cut Medicare and Planned Parenthood. She termed the Trump Administration efforts as “TrumpCare by sabotage” and urged the Republicans to reverse their course and stop repeal of the ACA. She concluded by sarcastically suggesting that you “can’t repair the roof while Republican Party is burning the house down.”

Sen. Tim Scott (R-SC) responded to Sen. Murray’s comments with “the house may be on fire, but it was on fire before we got here.” He was also able to get one witness to concede that the individual market had already been destabilized by specific provisions of the ACA itself, including the essential health benefit requirement, special enrollment periods and extended grace periods that have allowed individuals to game the system, medical loss ratios, and having premiums for young people set higher than the penalties for not having coverage.

The witnesses. The committee witnesses included Julie Mix McPeak, Comissioner of the Tennessee Department of Commerce and Insurance; Marilyn Tavenner, former CMS Administrator and current President and Chief Executive Officer of America’s Health Insurance Plans; Janet Trautwein, Chief Executive Officer of the National Association of Health Underwriters; and Steve Beshear former Democrat Governor of Kentucky from 2007 to 2015.

All of the witnesses were in agreement that the individual health insurance market does not react well to the uncertainty that currently exists. And three of the four witness agreed that the number of plans available are dropping and the premiums are rising.

When asked by Alexander for a deadline for when Congress must act, the witness stated by the end of March at the latest. This, they stated, was because rates must be set by mid-July and plans approved by the various states by August.

McPeak. In her statement, McPeak testified that, “In short, Tennessee’s ACA individual market experience since 2014 has meant fewer marketplace carriers for Tennessee consumers, less competition across the state, and higher priced premiums for available products. In addition, we have seen existing FFM carriers move towards narrower networks, further limiting consumers’ access to providers of their choosing.”

She stated that there are only three ACA carriers in Tennessee, with only one choice in 73 of the 85 counties. In addition, she stated that premium rate increases have ranged from 42 to 62 percent in her state. She did not call for a delay in the repeal of the ACA, but, instead, asked Congress to allow states to tailor health care plans to fit their needs and urged an open and transparent repeal and replace process so that carriers can prepare adequately.

Tavenner. In her statement, Tavenner admitted that parts of the ACA have not worked well. She stressed that certainty in the individual market is essential. She recommended: (1) continuing to provide subsidies such as the advanced premium tax credits and cost-sharing reduction payments in their entirety; and (2) making full federal reinsurance payments for 2016, as this funding is important for plans to effectively cover the needs of high-need patients, including those with chronic conditions.

Tavenner also recommended several policies to help promote a more stable and workable transition for consumers and families, including:

  • Using premium tax credits to encourage younger people to get coverage.
  • Creating incentives for people to keep their coverage through the transition.
  • Beginning in 2017, establish a federally funded, transitional risk pool program would offset some of the costs of serving patients who have the most complex health conditions and need the most care.
  • Eliminating taxes and fees such as the health insurance tax, which will reduce premiums and promote affordability.
  • Effectively verifying the eligibility of those signing up for coverage during special enrollment periods, and shortening the 3-month grace period for non-payment of premiums so that it is better aligned with state laws and regulations (e.g. 30-day period).
  • Protecting people who are eligible for public programs from being inappropriately steered into the commercial insurance market.

Trautwein. Trautwein called for immediate stabilization of the individual market. She attributed the higher cost of individual plans to rules allowing healthy individuals to drop in and out of plans without consequences and allowing special enrollment periods without requiring upfront documentation and allowing inappropriate coaching by enrollers. She recommended:

  • Requiring guaranteed access to individual coverage and with state-level financial backstops for catastrophic risks.
  • Giving pre-existing condition credit for prior individual market coverage to ensure true heath insurance portability from one individual market policy to another.
  • Standardizing state requirements regarding the consideration of pre-existing conditions.
  • Improving federal group-to-individual coverage portability provisions so that people can transition directly from employer coverage to individual coverage without hurdles.
  • Stabilizing individual market rates by requiring more standardization as to how individual market carriers determine pricing.
  • Increasing consumer protections regarding individual market coverage rescissions.
  • Making it easier for employers to help people purchase individual health insurance.
  • Providing federal financial assistance to keep individual health insurance coverage affordable, including enhanced deductibility, subsidies for low-income individuals, and federal financial support for qualified state financial backstop programs.
  • Ensuring that all Americans have health insurance coverage.
  • Allowing state implementation of enhanced consumer protections with a federal fallback enforcement mechanism.

Beshear. In his statement, Beshear gushed about the ACA and what it did to increase the number of people with health coverage in Kentucky. He claimed that his creation of a state exchange and the expansion of Medicaid added 500,000 to the insured roles in Kentucky. He stated that he does not view the ACA as a partisan issue, but rather a tool to address health insurance problems. He believes that the ACA works and that Congress’ challenge is to make it work better.

FDA relaxes guidelines for abortion-inducing drug, flames abortion controversy

The FDA announced a labeling change for the drug Mifeprex®, which, when used together with another drug called misoprostol, will terminate a pregnancy in the early stages. The labeling change will relax certain guidelines in prescribing practices and expand the time in which women can take this drug in order to induce an abortion. This change comes at a controversial time as the Supreme Court just heard oral arguments, and oddly asked parties for additional briefing, in a challenge to the contraception mandate under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). At the same time, anti-abortion candidates in the race to the White House have recently fueled the fire with inflammatory remarks while some pro-life proponents are framing the FDA’s change as a political move.

Labeling changes

While the FDA first approved Mifeprex in 2000, the latest announcement outlines a new approved regimen which was found to be safe and effective after a supplement application was submitted by the manufacturer. The FDA stated that the drug may be appropriately used to end a pregnancy through 70 days of gestation and through the following procedure:

  • The ingestion of 200g of Mifeprex on day one;
  • The ingestion of 800mcg of misoprostol 24 to 48 hours after taking the Mifeprex; and
  • A follow-up with a health care provider seven to 14 days after taking the Mifeprex.

The FDA also outlined an appropriate risk evaluation and mitigation strategy (REMS) for Mifeprex, as follows: (1) that it must be ordered, prescribed, and dispensed under the supervision of a health care provider with certain qualifications; (2) that those health care providers must complete a Prescriber Agreement Form before prescribing; (3) that it only may be dispensed in clinics, medical offices, and hospitals; and (4) the provider must obtain a Patient Agreement Form before dispensing it.

Effect

Other than extending the time in which this medication can be prescribed from seven weeks to 10 weeks, the new labeling reflects a change in dosage and procedure that, according to some sources, was adopted by physicians that prescribed Mifeprex off-label long ago. “The change brings the direction for taking the drug . . . in line with what has become standard medical practice in most states: reducing the dosage to 200 milligrams from 600 milligrams, decreasing the number of visits a woman must make to the doctor to two from three, and extending the period when she can take the pill to 10 weeks of pregnancy from seven weeks,” according to the New York Times. There is also evidence that fewer side effects accompany the lower dosage. The same article notes that while the new labeling might be applicable to all states at the moment, at least one state is already working to pass a law that would hold provider’s to the stricter standards imposed in the past.

Context

This FDA approval came at an interesting time for the abortion and contraceptive coverage controversy as, the day before this announcement, the Supreme Court issued an order asking for supplemental briefing in a case on which it had heard oral arguments the previous week and which challenged the contraception coverage mandate of the ACA. Some experts see this as the eight-Justice Court potentially looking for an avenue to strike a compromise on an issue and avoid a 4-4 vote, which would effectively result in the continuation of a circuit split and different laws applying in different jurisdictions on this issue. In this context, pro-life proponents argued that the FDA announcement is a politically fueled move to satisfy the “abortion industry” and pro-choice groups. Others defended it as unrelated to election year politics and as simply part of the FDA’s regulatory responsibility in the face of a supplement drug application.