By Sheryl Allenson, J.D.
The CBO cost estimate (done in tandem with the Joint Commission on Taxation (JCT)) details estimated spending, as well as estimated revenues from certain of the bill’s five titles, each broken down further into sections.
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.
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