Summary of Major Health Care Legislation

Lower Health Care Costs Act (S. 1895)

The Lower Health Care Costs Act (S. 1895) was introduced on a bipartisan basis by  the Senate HELP Committee leadership and was ordered reported by a 20-3 vote. CBO estimates the bill would save $8 billion on net over ten years. The cost-reducing provisions would save the federal government $32 billion, and we estimate they would reduce national health expenditures by $125 billion.

The centerpiece of the bill is a policy to address surprise billing – where a person uses an in-network emergency room but receives care from an out-of-network physician. The legislation would ban the practice of charging out-of-pocket cost-sharing and cap most related out-of-network costs at 225 percent of the Medicare rate, roughly the median in-network payment rate.

The legislation would also reduce drug costs by closing the REMS loophole that allows brand-name drug manufacturers to deny generic competitors drug samples, preventing the first generic competitor from delaying the start of its exclusivity period, prohibiting meritless citizen petitions, allowing generic drugs to use exclusivity-protected safety label information in their approval application without being subject to legal challenges, prohibiting anticompetitive terms in insurer-provider contracts, and prohibiting PBMs from engaging in spread pricing or not passing through savings from rebates.

These provisions would save a combined $32 billion, but most savings would be spent on extending funding for Community Health Centers, the National Health Service Corps, Teaching Health Centers, and the Special Diabetes Program.

Prescription Drug Pricing Reduction Act (S. 2543)

The Prescription Drug Pricing Reduction Act (S. 2543) was introduced by Senate Finance Committee leadership and was ordered reported by a bipartisan 19-9 vote. The legislation includes numerous changes to reduce prescription drug costs. CBO’s preliminary estimate finds that it would reduce deficits by at least $100 billion and reduce premiums and cost-sharing by at least $31 billion. We estimate the bill would reduce deficits by over $120 billion and total national health spending by at least $160 billion.

The Prescription Drug Pricing Reduction Act would:

  1. Redesign the Medicare Part D benefit by eliminating the 5 percent co-insurance on catastrophic costs (creating a new catastrophic cap), modifying various thresholds for different coverage levels, eliminating the coverage “donut hole” and related drug manufacturer contributions, and requiring insurance plans and drug manufacturers to cover most of the federal government’s share of catastrophic costs. See more here. For example, the federal government currently pays 80 percent of costs above the current catastrophic threshold, while the plans pay 15 percent and beneficiaries pay 5 percent. Under this plan, the government would pay 20 percent, while the plans pay 60 percent, and drug manufacturers pay 20 percent.
  2. Limit drug price growth in Medicare Part B and Part D to inflation by requiring manufacturers to pay rebates on cost growth in excess of inflation.
  3. Prohibit PBM “spread pricing” whereby pharmacy benefit managers charge purchasers a higher price for drugs than the amount they paid.
  4. Strengthen Medicaid drug rebates by increasing the maximum inflation rebates from 100 percent to 125 percent of the drug’s price and excluding authorized generics from calculation of average manufacturer prices used for rebate calculations.
  5. Reduce Part B drug costs by including patient coupons in the Average Sales Price calculation, equalizing payments for physician-administered drugs across sites of service, and reducing payments for new drugs.

Other Legislation

The Lower Drug Costs Now Act (H.R. 3) is a bill proposed by House Democratic leadership that would redesign the Medicare Part D benefit, cap drug price growth at inflation, and require the HHS secretary to negotiate drug prices for many drugs that lack a generic competitor. The bill gives the Secretary substantial leverage by capping prices at 120 percent of a six-country international average and imposing a prohibitively large penalty on those who don’t negotiate. The price agreed to in negotiations must be made available to private insurance companies as well. A preliminary CBO estimate of the drug negotiation provisions found it would reduce Medicare spending by $345 billion over ten years, and capping drug price growth at inflation would produce additional savings. A Medicare actuary estimate finds the negotiation provisions would save the federal government $124 billion and inflation rebates would save $94 billion for total federal savings of $219 billion and a $481 billion reduction in national health expenditures.

The Reauthorizing and Extending America’s Community Health Act (H.R. 2328) is a House Energy & Commerce Committee bill that would end surprise billing and increase health spending in several ways. The bill ends surprise billing by limiting patient cost-sharing to in-network rates and limiting payments to 225 percent of the Medicare physician rate while providing an arbitration process to settle disputes. The bill would also extend several public health and Medicare extenders, eliminate DSH cuts in 2020 and 2021 and reduce them in 2022, and increase Medicaid funding for Puerto Rico and other territories. The bill generates $22 billion of gross savings but would increase net deficits by $20 billion due to the spending increases.

The House and Senate Judiciary Committees have advanced multiple bills intended to reduce barriers to generic drug competition, saving a combined $5 billion ($20 billion of NHE):

  • The Stop STALLING Act (H.R. 2374 and S. 1224) would prohibit meritless citizen petitions and save $117 million over ten years (House and Senate)
  • The Preserve Access to Affordable Generics and Biosimilars Act (H.R. 2375) would prohibit pay-for-delay agreements and save $613 million (House)
  • The CREATES Act (H.R. 965) would close the REMS loophole that allows manufacturers to deny generic competitors drug samples and save $4 billion (House)
  • The Affordable Prescriptions for Patients Act of 2019 (S. 1416) would prohibit “product hopping” – when a company switches out a drug for a similar but slightly different one to essentially extend patent protection – and save $507 million (Senate).

The Strengthening Health Care and Lowering Prescription Drug Costs Act (H.R. 987) bundled several bills together and passed the House on a near-party line 234-183 vote. It would encourage the introduction of generic drugs by prohibiting “pay-for-delay” agreements where generic manufacturers agree to delay entry, closing the REMS loophole that allows manufacturers to deny generic competitors drug samples, and preventing the first generic competitor from delaying the start of its exclusivity period. It would also cancel the Trump Administration’s Short-Term, Limited Duration Insurance rule. These provisions would save a combined $14 billion, almost all of which would be spent on outreach for enrollment on the insurance exchanges.