After months of negotiations, House Democrats on Friday passed their version of the Build Back Better bill—an expansive $1.7 trillion package that contains some of the largest health reforms since the Affordable Care Act's passage in 2010.
While the overall scope of the bill is roughly half the size of President Biden's original $3 trillion proposal, many of Democrats' key health care provisions made it in, albeit with some modifications. What's more, the Congressional Budget Office projected that while the overall bill would add $367 billion to the deficit over the 10 year period, the health care provisions would all be largely paid for by provisions aimed at lowering drug prices.
Below, I round up the five biggest health care changes included in the House bill.
1. Health care coverage expansions
The House bill leverages the ACA's exchanges and federal tax credits to expand access to coverage in two ways. First, the bill would extend the American Rescue Plan's enhanced ACA tax credits through 2025. The enhanced tax credits, which are currently slated to expire in 2023, fully subsidize coverage for people with annual incomes up to 150% of the federal poverty level (FPL) and have enabled people above 400% FPL to qualify for subsidies and capped their premium costs at 8.5% of their incomes.
While Democrats had originally proposed to permanently expand those subsidies, they ultimately had to scale back this—and other proposals—to ensure they could cover the costs. But as we've seen in the past, it is much harder to take away an existing benefit or subsidy than it is to create a new one—so while the current bill was able to cover the cost of the health care provisions by making them temporary, lawmakers will have to revisit the tax credits before 2025 and find new money to either further extend them or permanently authorize them. This is one of several health care provisions we could see the Senate take a closer week at in the coming weeks.
Second, the House bill takes aim at the so-called Medicaid coverage gap. The bill would enable residents below 138% FPL who live in states that have not expanded their Medicaid programs to qualify for fully subsidized exchange plans through 2025. While an earlier version of the House bill included language for a new federal Medicaid program covering those below 138% FPL who live in non-expansion states to begin in 2025, the final House bill contains no such program.
Instead, the bill aims to encourage non-expansion states to expand their Medicaid programs by reducing their Disproportionate Share Hospital (DSH) payments by 12.5% beginning in 2023—a significant cut that the American Hospital Association (AHA) estimates would reduce DSH payments in those states by $2.2 billion over five years and $4.7 billion over 10 years. At the same time, expansion states would see their federal match for spending on the Medicaid expansion population rise from 90% to 93% from 2023 through 2025.
While the AHA and others are pushing back against the proposed DSH payment cuts—the move addresses the moral hazard component that critics raised about earlier versions. It no longer rewards holdout states for not expanding their programs—effectively punishing those who did and are now on the hook for 10% of their expansion population's costs. It's a clever move, and one we'll be watching to see if it survives the Senate.
2. New Medicare benefits.
The House bill adds a hearing benefit to Medicare beginning in 2023. The hearing benefits would cover hearing aids and aural rehabilitation, among other services. While this is certainly a win for many Medicare beneficiaries who do not have or cannot afford private Medicare Advantage plans, this is significantly scaled back from the original proposal to add hearing, as well as dental and vision benefits.
However, given that Sen. Bernie Sanders (I-Vt.) has named Medicare benefit expansions as one of his top priorities, it's possible we could see this topic revisited in the Senate. But any meaningful change would mean Democrats need to find more money to cover the costs—and so far, that has proved challenging.
3. Medicaid home and community care.
The House bill allocates $150 billion for home- and community-based care. The funding would be used to help increase home care provider reimbursement rates and help states bolster home- and community-based care infrastructure.
While the funding is down from an original proposal of $400 billion, the Biden administration—and the Covid-19 pandemic—have made it clear that home-based health care will continue to grow and be a key player in the U.S. health care delivery system. Providers looking at their offerings should keep an eye on how states are investing these funds and building out home-based health care delivery in their areas.
4. Lowering the costs of prescription drugs.
Democrats scored a huge win in the House bill, and that is securing Medicare authority—albeit narrower authority than they sought—to negotiate prices for some of the highest-priced Part B or Part D drugs. Under the bill, HHS would be able to select 10 drugs to negotiation in 2025, up to 15 drugs in 2026 and 2027, and then up to 20 drugs per year in 2028. To be eligible for negotiation, a drug could no longer be subject to market exclusivity.
Drug manufacturers that do not negotiate eligible drug prices could be subject to an excise tax. This was perhaps one of the most contentious provisions debated in the health care portions of this bill. Democrats for years have been seeking to give Medicare drug pricing authority, but intense lobbying and Republican—and some Democrat—objections have kept this proposal on the shelf. While it's not the first time the House has passed a bill with drug price negotiation—it is the first time we are in a place where the Senate could reasonably pass either this or a modified version of the proposal.
The bill also would redesign the Medicare Part D benefit to create an annual cap of $2,000 on seniors’ out-of-pocket drug costs, and impose an inflation rebate on drug manufacturers' whose drug prices rise faster than inflation (based on 2021) in a given year.
5. Other notable provisions.
The House bill also includes provisions to permanently fund CHIP, bolster the country's pandemic preparedness and response, and bolster the health care workforce through new training and workforce programs, the nation's first permanent federal paid family and medical leave program, investments in childcare, and more.
While the health care provisions in the House bill are notable, it's important to remember that this is not the end of the road. The House bill now goes to the Senate, where the Senate parliamentarian will check provisions against the Byrd rule—a Senate rule requiring reconciliation bills to meet certain budgetary requirements.
Democrats also will enter a new round of negotiations, and industry groups—including PhRMA and AHA—are expected to launch a new round of lobbying. PhRMA objects to the bill's drug price negotiation provision and AHA is fighting the provision to reduce DSH payments in non-Medicaid expansion states by 12.5%. Any Senate-passed reconciliation bill will need to go back to the House for final approval before it can go to Biden's desk.
But this is not the only thing on lawmakers' plates in December. Members of Congress also face several other deadlines, including addressing looming physician payment cuts and passing end of the year spending bills. The short-version is, while there's a lot to learn from the House-passed bill, it's possible the Senate version could look very different—and it may take several weeks before we see that bill take shape.