House Considers ACA Expansion and Drug Pricing Bill

Today, the House will consider legislation to expand the Affordable Care Act (“Obamacare”) and lower prescription drug prices. The Patient Protection and Affordable Care Enhancement Act (H.R. 1425) would increase subsidies in the insurance exchanges, expand Medicaid eligibility, and enact additional policies to expand health insurance coverage. To offset these costs, the legislation would establish a process for the government to negotiate non-competitive public and private drug prices and cap those prices at 120 percent of an international average where applicable.

According to the Congressional Budget Office (CBO), the coverage provisions would cost $586 billion over a decade while the drug provisions would save $582 billion and interactions would save $23 billion. Overall, the bill would be fully paid for over a decade ($18 billion of net deficit reduction) and would likely reduce deficits and spending in future decades.

CBO estimates the bill would reduce the number of uninsured by 4 million people per year and reduce pre-subsidy (but post-reinsurance) non-group premiums by about 10 percent. CBO previously estimated similar legislation would also reduce the cost of negotiated drugs by 40 to 55 percent and reduce the number of new drugs developed annually by about 10 percent.

Policy 2021-2025 2026-2030 2021-2030
Increase ACA premium subsidies $79 billion $134 billion $212 billion
Provide 12-month continuous eligibility in Medicaid $58 billion $147 billion $205 billion
Increase Medicaid payments for primary care physicians $43 billion $9 billion $52 billion
Fix the "family glitch" for subsidy eligibility $16 billion $29 billion $45 billion
Establish a Health Insurance Affordability Fund for reinsurance $40 billion $50 billion $90 billion
Premium savings from Health Insurance Affordability Fund -$37 billion -$37 billion -$74 billion
Require Marketplace outreach and enrollment targets $3 billion $8 billion $11 billion
Increase Medicaid matching for late expansion states $14 billion $3 billion $17 billion
Expand Medicaid post-partum eligibility to 12 months $3 billion $3 billion $6 billion
Other coverage expansions $9 billion $13 billion $22 billion
Subtotal, Coverage Expansions $228 billion $358 billion $586 billion
Reduce Medicare drug costs through negotiation and a cap -$37 billion -$491 billion -$528 billion
Extend negotiated prices to private insurance* -$7 billion -$46 billion -$53 billion
Subtotal, Drug Savings -$44 billion -$537 billion -$582 billion
Interactions -$13 billion -$10 billion -$23 billion
Total $171 billion -$189 billion -$18 billion

Source: Congressional Budget Office. Positive numbers represent deficit increases, negative represent deficit reduction.

*For simplicity, we assume all spending reductions are attributable to Medicare savings and all revenue is attributable to lower private insurance costs. The distribution of these savings might differ slightly from our chart.

As the legislation reduces deficits by $61 billion per year in the final three years of this decade, it is likely to reduce deficits in the second decade by $500 billion to $1 trillion due to the drug savings. We encourage policymakers to consider these and other ideas to reduce prescription drug spending, lower the cost of Medicare, and reduce economy-wide health care costs.

We will publish a longer analysis of the Patient Protection and Affordable Care Enhancement Act shortly.