Committee for a Responsible Federal Budget
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$12 Billion Cures Bill Advances in House

Jun 2, 2015 | Health Care

Update: This blog was updated on June 30 to reflect a CBO estimate published on June 23. Our original estimate was $13 billion, based on staff calculations and information published in The Hill.

The House Energy and Commerce Committee recently advanced a bill (H.R. 6) unanimously intended to facilitate research into and the development of medical cures. The bill finds savings from elsewhere in the budget to pay for its $12 billion cost, abiding by pay-as-you-go (PAYGO) rules.

The 21st Century Cures Act intends to promote biomedical research, streamline drug and device development, and make the development of cures more efficient. Among other things, it reauthorizes the National Institutes of Health (NIH) through FY 2018, creates a $2 billion per year NIH Innovation Fund through 2020, makes several changes to facilitate drug development and Food and Drug Administration (FDA) approval, utilizes health IT and telehealth to increase access to new developments, and creates a flexible $110 million per year Cures Innovation Fund through 2020.

Abiding by longstanding PAYGO rules, the bill also includes offsets to pay for its $12 billion ten-year cost with a combination of permanent and temporary reforms (and one timing shift). Specifically, the bill would limit Medicaid payments for durable medical equipment (DME) to Medicare rates (saving $2.5 billion), encourage the transition to digital X-rays by reducing payments for film X-rays starting in 2017, (saving $150 million), sell 8 million barrels of oil per year from the Strategic Petroleum Reserve between 2018 and 2025 (raising $5.4 billion based on CBO's current projection of oil prices), and change the timing of Medicare Part D reinsurance payments over the course of the year (saving $5 billion). Unfortunately, this last policy's savings is predominantly a timing shift (not actual savings), although it at least permanently shifts the timing of payments and generates some small interest savings as a result.

Estimate of Budgetary Effect of H.R. 6, 21st Century Cures Act
  Budgetary Cost/Savings (-)
Establish NIH Innovation Fund $10 billion
Establish Cures Innovation Fund $0.5 billion
Enact Other Changes ~$1.5 billion
Total Cost ~$12 billion
   
Limit Medicaid DME to Medicare Rates -$2.5 billion
Sell Oil From Strategic Petroleum Reserve -$5.4 billion
Change the Timing of Part D Reinsurance Payments -$5 billion
Reduce Payments for Film X-Rays -$0.1 billion
Total Savings ~-$12 billion

Source: CBO, CRFB calculations. CBO's estimated the bill as if the new costs were discretionary spending under the spending caps, which do not need to be offset with other savings. That is apparently a drafting error, as the Committee has stated that the new spending was intended to be mandatory. The table reflects if the new spending was made mandatory.

HR 6 should be commended for abiding by PAYGO, but it would be better to avoid the one timing shift, and it is disheartening to hear reports that the Committee's original offset package was more structural in nature. Nonetheless, it is good to see Congress paying for the important reforms they desire.