BACKGROUND: This summer, the Democratic majority in Congress advanced two major bills to enact President Biden’s American Jobs Plan and American Families Plan. First is the bipartisan infrastructure package (the jobs plan), which has passed the US Senate and is now pending in the US House of Representatives. This bill would make roughly $1 trillion of infrastructure investments that range from bridges and roads to broadband, as well as electricity grid investments and investments to address climate risks. Second is the Democratic “human infrastructure” reconciliation bill that is under development in the House now. It includes up to $3.5 trillion in spending to carry out the president’s priorities for education, healthcare, childcare, transportation, climate and more.

SEPTEMBER PREVIEW: September projects to be an incredibly contentious and potentially momentous month in Congress. Congress has a slew of important issues that it must address, needs to address or wants to address before September 30, which is the end of the federal government’s fiscal year. This preview focuses on health policies and associated bills, recognizing that other priorities may also take Congress’ time in September, including the recent Supreme Court decision striking down the eviction moratorium and withdrawal from Afghanistan.

Must address:

• To avoid a government shutdown, Congress must pass and the president must sign some form of government funding bill, likely a continuing resolution (CR), prior to the September 30 fiscal year deadline. Otherwise, a government shutdown begins October 1.

Needs to address:

• The House needs to a have floor vote on the Senate-passed bipartisan infrastructure bill by September 27, because it committed to that date as a key concession to obtain the votes of 10 moderate Democrats to pass the budget resolution. Failure to meet that deadline is likely to negatively affect Democrats’ ability to move the budget reconciliation bill, which will contain their “human infrastructure” priorities not included in the bipartisan package.

Wants to address:

• Congressional Democrats want to address the federal debt limit as part of the government funding bill. It is not necessary to address this in September, because the US Department of the Treasury has noted that it can use extraordinary measures to extend the debt limit deadline to October or November. However, the sooner Congress addresses the federal debt limit, the easier it is for Congress to focus on completing the reconciliation bill. While Congress can enact a CR of limited time period while negotiations on the debt limit continue, Democrats will likely try to force Republicans to take politically difficult votes on the debt limit in September. Republicans generally do not want to be held responsible for increasing the federal debt, but they also don’t want to be blamed for potentially shutting down the government, if Democrats link a debt ceiling increase to fiscal year 2022 government funding.

• Congressional Democrats want to show significant progress toward developing the “human infrastructure” legislation authorized by the $3.5 trillion budget resolution. Failure to do so is likely to negatively impact House Democrats’ ability to pass the bipartisan infrastructure bill by the September 27 deadline stated in the budget resolution.

Key Healthcare Spending Provisions Likely to Be Included in the Reconciliation Bill:

• Permanent expansion of temporarily increased Affordable Care Act (ACA) tax credits. The American Rescue Plan Act temporarily expanded the availability of federal health insurance exchange marketplace advanced premium tax credits (APTCs) for two years (2021 and 2022). It increased subsidies to the existing eligible population (those at or below 400% of the federal poverty level (FPL)) and expanded tax credit amounts for those below 400% of the FPL. Under the American Rescue Plan Act, individuals whose income is between 100% and 150% of the FPL are eligible for full coverage of their premiums. Individuals with incomes above 400% of the FPL have their premiums capped at 8.5% of their income. The reconciliation bill is expected to make these expanded tax credits permanent. Making the expansion permanent is also part of President Biden’s American Families Plan and is a priority policy for Speaker Pelosi.

  • Outlook: Extending the ACA tax credits is the most likely healthcare provision to be included in this bill. It should face no challenges under the Senate rules for reconciliation.

• Addition of dental, vision and hearing benefits to the Medicare program. Congress can use several levers to expand benefits for Medicare recipients. The Congressional Budget Office (CBO) previously estimated that adding dental, vision and hearing benefits to the Medicare program would cost at least $358 billion over a 10-year period. That’s significant money for a program that runs about $800 billion annually. The cost of adding such benefits could mean limits on the eligibility, amount, duration or scope of coverage that beneficiaries receive.

  • Outlook: Adding benefits to the Medicare program will face opposition from some healthcare stakeholders. The opposition is unlikely to be significant enough to prevent Democrats from acting to add these benefits, however. The more problematic issues for Democrats will be the cost of adding these benefits and whether policy decisions to limit the scope or eligibility of these benefits can be achieved within the Senate rules for reconciliation. Other proposals to expand Medicare, such as lowering the age of eligibility, are not likely to be included in this bill.

• Significant increased funding for home and community-based services (HCBS). President Biden’s American Jobs Plan included $400 billion directed at HCBS. That money, in part, was intended to expand the healthcare workforce to permit Medicaid beneficiaries to remain in their homes or communities. It also provided additional support for the Money Follows the Person program, which helps individuals transition to non-institutional settings to receive care.

  • Outlook: HCBS is politically popular with Democrats, but the $400 billion figure from the President’s plan is unlikely to survive in the reconciliation package. It also remains to be seen how reconciliation rules will impact the policy that can be put forth in this provision.

• Policy to cover individuals in the 12 states that have not expanded their Medicaid programs to include childless adults (the “Medicaid gap”). The American Rescue Plan Act sought to incentivize non-expansion states to expand Medicaid eligibility for all adults with income up to 138% of the FPL by providing a five-percentage-point increase in the Medicaid Federal Medical Assistance Percentage (FMAP) for eight calendar quarters. This FMAP increase is only available to states that have not yet expanded coverage or started paying for the expansion population prior the enactment of the law. So far, none of the remaining non-expansion states have expanded, even with additional FMAP funding, and it is not expected that any will do so. Democrats therefore will explore expansion alternatives that provide insurance coverage without requiring non-expansion states to expand their Medicaid programs. The design of that coverage alternative is not agreed upon at this time. Some favor a federalized Medicaid approach, while others favor an ACA APTC expansion for this population. It is possible those two approaches could even be combined into a short-term ACA approach with a requirement to develop a permanent Medicaid solution. Another complicating factor is how to ensure that states that have already expanded coverage to this population are not incentivized to roll that coverage back and push the full cost to the federal government.

  • Outlook: Democrats have argued strenuously for a policy to ensure that individuals in the states that have yet to expand their Medicaid programs under the ACA is a priority for this bill. Of the four major spending priorities outlined here, closing the Medicaid gap is the most tenuous because of disagreements in Congress over the appropriate policy, the associated cost, and the political reality that the vast majority of states targeted by the policy are Republican strongholds.

Key Healthcare Savings Provisions Likely to Be Included in the Reconciliation Bill

• Prescription drug pricing reform of undefined scope. While it is unclear what can ultimately be enacted, consensus seems to be building for giving the government the ability to negotiate drug prices. Other policies for consideration include Medicare Part D benefit redesign (inclusive of caps on out-of-pocket costs and changing the catastrophic portion of the benefit), bans on spread pricing, and increased transparency requirements across all sectors interacting with prescription drugs (e.g., pharmacy benefit managers).

  • Outlook: This is the most controversial healthcare issue that Democrats will tackle within this bill, and potentially the most controversial issue in the entire bill, period. Given the amount of savings that more aggressive drug pricing proposals achieve, the extremely limited margins that Democrats have in both houses, the pharmaceutical industry’s lobbying clout and the lack of conceptual middle ground on the issue, Democrats may have to concede on other healthcare spending in order to win on drug pricing. It remains unclear how much the Byrd rule will limit Democrats’ ability to achieve their policy goals on drug pricing.

• Repeal of the Trump Administration’s policy relating to pharmacy benefit manager (PBM) rebates. In November 2020, the Trump Administration published a final rule excluding rebates on prescription drugs paid by manufacturers to PBMs and Part D plans from safe harbor protection under the Anti-Kickback Statute. The rule created a new safe harbor for discounts reflected at the point of sale, as well as a new safe harbor for fixed-fee service arrangements between manufacturers and PBMs. There have been concerns that this rule would limit PBMs’ ability to negotiate lower drug prices and would increase premiums for Part D Medicare beneficiaries. The CBO estimates that this rule, if permitted to go into effect, would actually increase federal drug spending. Since its publication, the rule has been challenged in the courts and paused by the Biden Administration. The bipartisan infrastructure package also includes a three-year delay of the rule (from 2023 to 2026), which the CBO scored as saving $50 billion over 10 years.

  • Outlook: The PBM rebate repeal is certain to be in the reconciliation bill. It is an extremely rare opportunity to achieve significant budgetary savings, which are necessary to pay for other spending priorities. Because this rule never went into effect, there are minimal impacts to healthcare stakeholders.

• Savings from other healthcare policies that would be used as “pay-fors” for the health policy spending listed above. Such policies may include reforms to reduce upcoding and/or modify benchmarking in the Medicare Advantage program and to redirect remaining money in the Provider Relief Fund (PRF). The US Government Accountability Office previously reported that $43 billion of the PRF is still unused. However, the Health Resources and Services Administration subsequently noted that it has already allocated about half of that amount, leaving just $24 billion available.

  • Outlook: Democrats will need to find healthcare policy changes that achieve additional savings, and the remaining PRF dollars seem like an easy source. The challenge for healthcare stakeholders will be influencing the outcome of these policy decisions.

Key Political Considerations

• All provisions in the budget reconciliation bill are required to comply with the rules of the Senate, most importantly the Byrd rule, which is likely to significantly limit many provisions that Democrats would like to include in the bill. The Byrd Rule requires that provisions passed as part of reconciliation are not extraneous to the budget.

• The budget instruction to the Senate Finance Committee requires that it achieve net savings of $1 billion or greater. This means that the panel will need to offset all of the Medicare and Medicaid spending provisions likely to be included in the bill, most of which will go through the Senate Finance Committee, while also saving $1 billion. In the House, the Ways and Means Committee has the same instruction (although that committee does not have jurisdiction over the Medicaid program). The ability to agree upon tax policies that raise money, and on drug pricing and other health policies that save money, directly affects the amount of money that will be able to be spent on new policies. The reconciliation bill will also include significant spending on non-health policies, including education, child tax credits, paid family leave and climate change.

• Democrats can only lose four of their party’s votes in the House and must achieve unanimity in the Senate to pass reconciliation. Democrats must settle substantive differences within and between both the House and the Senate to advance the budget reconciliation bill. • Democrats want to use consideration of the CR inclusive of the debt limit to put Republicans in a position to be blamed for any government shutdown, especially because Democratic control of Congress will be at risk in the 2022 midterm elections. It is worth noting that the last two times the government shut down prior to a midterm election (2013 and 2017), the party considered to have caused the shutdown saw significant electoral gains in the midterm election.

Healthcare Opportunities

• The government funding bill is considered a “must-pass vehicle.” Because the government will shut down if Congress does not pass a funding bill by September 30, there is tremendous political pressure on both sides of the aisle to do so. In a CR, Congress could address the impending cuts to Medicare providers through sequestration and statutory Medicare paygo requirements. Other bipartisan health priorities, such as addressing telehealth restrictions and other flexibilities related to the public health emergency, could also find a home in a CR. There may be numerous CRs with short-term funding extensions before negotiations result in a CR that goes into effect some time in 2022. Expect negotiations about add-on items to a CR to extend past September.

• Congress could consider many healthcare policy issues in September. Additional policies that spend money will be considered, along with additional opportunities to save money. It is difficult to discern what policies will make it into a package while debates are ongoing over the top-tier issues discussed above.