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A STAND-ALONE “Reconciliation” Bill?

A STAND-ALONE “Reconciliation” Bill?

 

by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.

 

  1. Remember when I said that I highly doubt that we will see a STAND-ALONE “reconciliation” bill (i.e., a “reconciliation” bill that ONLY includes 1 singe provision) because it has NEVER been done before. Well, maybe there is a first time for everything…

 

  1. Analysis: In short, Sen. Manchin has voiced concerns about agreeing to the type of “reconciliation” bill I have recently talked about (i.e., a bill that includes climate change reforms and deficit reductions paid for with drug pricing reforms and business tax increases). Sen. Manchin’s concerns stem from the recent inflation report showing inflation at 9.1% relative to last year.  Media reports indicate that this is the highest increase since 1981. And that is causing Sen. Manchin to “be cautious” in what Congress should and should not pass. Sooooooo, Sen. Manchin is now saying that maybe Congress should NOT pass billions of dollars in new spending programs, for fear that increased government spending will only “inflame” the already high inflation numbers. BUT, Sen. Manchin is also saying that Congress SHOULD pass the drug pricing reforms. Ummmmmm, does Sen. Manchin mean passing the drug pricing reforms ONLY? Through a “reconciliation” bill?!? ANSWER: At least based on what Sen. Manchin said, it appears the answer is YES. Sen. Manchin has also said that IF the drug pricing reforms are passed in a STAND-ALONE “reconciliation” bill, he wants ALL of the $280+ billion in government spending reductions to go toward reducing the deficit. BUT, I am SUPER skeptical that all 50 Senate Democrats and a majority of House Democrats will agree to deficit reductions ONLY instead of using at least some of this money for spending programs. Enter Stage Left…An extension of the “enhanced premium subsidies”…

 

How Would An Extension of the “Enhanced Premium Subsidies” Fit In?                 

  1. Remember when I told you that I think an extension of the “enhanced premium subsidies” has a 1% chance of happening.  But also, remember when I recently told you that maybe we see a “reconciliation” bill with (1) an extension of the “enhanced premium subsidies” paid for with (2) drug pricing reforms, which may change that 1% chance to something higher. Well, that is something we could see happen based on Sen. Manchin’s most recent comments.

 

  1. Analysis: Does that mean I am WRONG in my original 1% chance prediction? Not necessarily. Why? Let me put a finer point on my prediction (which I never fully articulated to you until now). My statements surrounding an extension of the “enhanced premium subsidies” centered on an extension of BOTH (1) the increased premium subsidy amounts for consumers with income BELOW 400% of the Federal Poverty Level (FPL) AND (2) the expanded eligibility that allows consumers with income ABOVE 400% of FPL to access a premium subsidy for the first time. My statements also contemplated a permanent extension, or at least a 10-year extension. Again, for ALL of this to happen, a 1% chance. BUT, here is what I could see happening: Sen. Manchin has said in the past that he prefers any social spending program – like spending for the premium subsidies – to be “means tested” (meaning, the spending should be targeted to lower-income Americans and higher-income Americans should NOT benefit). Based on this, I could very well see an extension of the increased the premium subsidies for consumers BELOW 400% of FPL – BUT – NO extension for the expanded eligibility that allows consumers with income ABOVE 400% of FPL to access a premium subsidy. That keeps my 1% prediction intact. And, this presents a NEW scenario of which I will give at least a 20% chance of happening. I will also go out on a limb and suggest that ONLY extending the increased premium subsidies for consumers BELOW 400% of FPL will ONLY be for 2 or maybe 4 years.

 

ONLY an Extension of the Increased Premium Subsidies for Consumers BELOW 400% of FPL?

  1. Let me take a step back to explain why ONLY extending the increased premium subsidy amounts for consumers BELOW 400% of FPL makes sense:

 

  1. Analysis: First, Sen. Manchin gets to say that he is open to agreeing to MORE government spending (even in these inflationary times) because this spending is “means tested” and this helps low- to middle-income Americans ONLY. Second, this allows Congressional Democrats to avoid a HUGE catastrophe right before the mid-term elections because the vast majority of consumers who are benefiting from the “enhanced premium subsidies” are low- to middle-income Americans (i.e., consumers BELOW 400% of FPL). AND, for the limited number of consumers ABOVE 400% of FPL who are currently benefiting from the “enhanced premium subsidies,” maybe some of these Americans will NOT be voting Democrat in the upcoming elections regardless of what Congress does on any type of extension (i.e., maybe Congressional Democrats do NOT need to extend this aspect of the “enhanced premium subsidies” provision to get these consumers’ votes because they may NOT be voting Democrat anyway for a variety of non-health care-related reasons). Third – and this gets back to Sen. Manchin – a good amount of the $280+ billion spending reductions can STILL go toward deficit reduction which may not make Democratic voters particularly happy (because these voters want that spending to go toward things like climate change) – BUT – this will arguably resonate with Independent voters out there. And, Democrats desperately need Independent voters with them on Nov. 8th. Having said all of that, I am still only at a 20% chance of this scenario happening because there are sooooooo many OTHER headwinds for getting ANY type of “reconciliation” bill across the finish line. Case-in-point, at least 7 Mid-Atlantic House Democrats (in high-tax States) have signaled they will vote NO on any “reconciliation” bill that does NOT include an increase in the State and Local Tax (SALT) tax deduction. Ummmm, the type of “reconciliation” bill discussed above would ONLY include (1) extending the increased premium subsidies for consumers BELOW 400% of FPL AND (2) drug pricing reforms. Do the math (Speaker Pelosi can’t lose 5 Democratic votes). In addition, both House and Senate Democrats have lamented that passing this type of “reconciliation” bill without addressing climate change would be a hard pill to swallow. It would NOT be surprising at all if some House and Senate Democrats dig their heels in on demanding climate change reforms, which would end up messing up the entire balancing act, and could doom getting ANY type of “reconciliation” bill across the finish line. Stay tuned over the next 2 to 3 weeks as the DRAMA continues…

 

Drug Pricing Reforms – What Are They?

  1. I don’t want to bore you with a long, drawn out summary of the drug pricing reforms because they may change AFTER the Senate Parliamentarian reviews whether the legislative language for the drug pricing reforms satisfy the “reconciliation” rules or not. Once we get a ruling from the Parliamentarian, I will know more, and I will provide more detail then.

 

  1. Analysis: But in the meantime, here are some important points for you know as the Senate Parliamentarian reviews the language: First, the requirement that fully-insured and self-insured plans must place a $35 cap on insulin is NOT included in the drug pricing reforms that were submitted to the Parliamentarian. Maybe this $35 cap on insulin gets added at some point, but I do NOT see that happening, as most of us thought that this provision violated the “reconciliation” rules to begin with (so we figured it would get bounced by the Parliamentarian if this was included in the submitted language). Second, the current drug pricing reforms are similar to what we saw in last year’s version of the Build Back Better Act, and they include:

 

  1. Medicare Drug Price Negotiations: Among the 50 prescription drugs that Medicare Parts B and D spend the most money on, HHS can negotiate the prices of up to 10 prescription drugs (starting in 2026), growing to up to 20 Rx drugs (in 2029 and future years), that – in the opinion of the Secretary of HHS – lack price competition.
  2. Out-of-Pocket Limits and Part D Reforms: A $2,000 per beneficiary out-of-pocket maximum limit would be added to Medicare Part D. There are other Part D reforms, including a 6% cap on premium growth starting in 2025 through 2029.
  3. Inflationary Caps: If the prices of drugs covered by Medicare Parts B and D – along with the prices of drugs covered by “individual” AND “group” market health plans – increase faster than inflation, drug makers MUST pay the above-inflation amount back to Medicare’s Trust Fund or face penalties.

 

Third, the current drug pricing reforms also repeal the Trump Administration’s Part D Rebate Rule which upon its repeal, raises money for the government (because the Rebate Rule has been scored as SPENDING government $$$, so by repealing it, the score now shows a $$$ SAVINGs). As stated, we are all waiting for the Parliamentarian to rule on whether some of these drug pricing reforms violate the “reconciliation” rules, and thus, must FALL OUT of the underlying “reconciliation” bill.  One aspect of these reforms that could FALL OUT relates to the inflationary cap provision which contemplates the prices charged by individual” AND “group” market plans (i.e., private insurance health plans). An argument can be made that anything private insurance-based does NOT have a “direct” impact on government spending, and therefore, pulling private insurance health plans into the calculus for determining whether the inflationary caps have been exceeded is a NO-NO. If we are talking about Medicare Part B and Part D drugs, sure…there is a “direct” impact, considering the government is the payer here. BUT, private health plans are too far afield. HOWEVER, a counter-argument here is this:  If the inflationary caps are exceeded, the payments MUST go to the Medicare Trust Fund. Soooooooo, the overall provision “directly” impacts government spending, and including the prices charged by private health plans into the calculus does NOT change that.  AND, the policy of including prices charged by private health plans into the calculus is NOT SO GREAT so as to outweigh the budgetary impact of the inflationary cap provision. We’ll just have to wait and see which argument carries the day…

 

Attention Turns to the Prescription Drug Reporting Requirement Enacted as Part of the No Surprises Act

  1. Now that the July 1st effective date for disclosing in-network rates and out-of-network allowed amounts on a public website through “machine-readable files” is behind us, health care payers (i.e., insurance carriers and self-insured plans) and their services providers (i.e., TPAs and PBMs) are turning their attention to the Prescription Drug Reporting required under the Consolidated Appropriations Act (CAA). Note, the CAA also included the No Surprises Act, which is why I tie this Prescription Drug Reporting requirement to the No Surprises Act (because – call me crazy – I like referring to the No Surprises Act as opposed to the CAA).

 

  1. Analysis: Here is how I have summarized this Prescription Drug Reporting Requirement in the past: TheNo Surprises Act requires insurance carriers and self-insured plans to report to the Federal government specific and detailed information about the cost of the prescription drugs covered by the carriers/plans, as well as rebates, discounts, or fees. BUT, it is important for me to emphasize this: The Prescription Drug Reporting requirement is MORE than just reporting information on prescription drug coverage under fully-insured and self-insured plans. These Reports must ALSO include TOTAL SPENDING on health claims related to the following categories of medical services: Hospital, Primary Care, Specialty Care, and Other Medical Costs and Services (like radiology and laboratory services, non-hospital ambulatory services, dental and vision, and wellness services). These Reports must ALSO include the TOTAL AMOUNT of premiums paid to the insurance carrier or the plan, and also, the number of ALL of the COVERED LIVES under the plan/policies during the course of a calendar year (regardless of whether those participants left employment or no longer had coverage during the year). ALSO, the amount of cost-sharing ALL participants of the plans/policies spent during a calendar year must be reported.

 

Multiple Reporting Entities?

  1. In most if not all cases, (1) insurance carriers offering fully-insured products, (2) insurance carriers acting as a TPA for self-insured plans, and (3) independent TPAs providing services to self-insured plans will have access to the information on (a) total spending on health claims, (b) total premiums and covered lives, and (c) the participant cost-sharing payment amounts (which is what I will call the “health care”/“plan/policy-related” information). BUT, in many cases, these carriers and TPAs will NOT have access to any of the “prescription drug” information. Instead, the PBMs providing services to the carriers and self-insured plans possess this information.

 

  1. Analysis: This means that – to complete these Reports – (1) the insurance carriers and TPAs will have to report the “health care”/“plan/policy-related” information AND (2) the PBMs will have to report ALL of the “prescription drug” information. This means MULTIPLE entities will be completing and submitting these Reports. Let me take a step back to say this: Employers with fully-insured plans can enter into an agreement with their insurance carrier to complete and submit these Reports on behalf of the employer-sponsor. Insurance carriers selling fully-insured individual market plans (both on- and off-Exchange) will also complete and submit their own Reports. In cases where an insurance carrier “owns” their own PBM, completing and submitting these Reports will NOT require multiple entities reporting because the carrier and its PBM can coordinate and compile all of the (1) “health care”/“plan/policy-related” AND (2) “prescription drug” information. This makes things a bit easier for these carriers. HOWEVER, in cases where a carrier does NOT “own” a PBM (rather the carrier works separately with a PBM), these carriers will need to coordinate with their PBM to ensure that (1) the carrier compiles and submits the “health care”/“plan/policy-related” while (2) the PBM compiles and submits the “prescription drug” information. Same is true for insurance carriers serving as a TPA, as well independent TPAs working with self-insured plans. Here, the carrier-TPA or independent-TPA (as the case may be) will need to coordinate with the PBM that the self-insured plan sponsor is working with to ensure that (1) the carrier-TPA or independent-TPA compiles and submits the “health care”/“plan/policy-related” while (2) the PBM compiles and submits the “prescription drug” information. Note similar to employers with fully-insured plans, self-insured plan sponsors can enter into an agreement with BOTH their TPA and PBM to complete and submit these Reports on behalf of the self-insured plan sponsor. Note that although plan sponsors can submit the reports on their own, most plan sponsor will contract these obligations away to their TPA and PBM. The Federal Departments even encourages plan sponsors NOT to report on their own, but rather to work with their TPA and PBM. Soooooooo, as you can see, there needs to be coordination between carriers, TPAs, and PBMs when it comes to (1) compiling all of the information, (2) completing the Reports, and (3) submitting these Reports on behalf of employers and other entities sponsoring fully-insured and self-insured health plans.

 

A High-Level Discussion of What Must Go In the Prescription Drug Reports

  1. I recognize that I haven’t told you about ALL of the DETAILED information that must be included in these Reports (because I could write 20 pages). BUT, let me at least add this:

 

  1. Analysis: There are 8 “data elements” that must be included in the Reports:

 

  1. D1 – Premiums paid and # of covered lives during course of the year
  2. D2 – Total Spending by Category
  3. D3 – Top 50 Most Frequently Dispensed Brand Name Drugs
  4. D4 – Top 50 Most Costly Drugs
  5. D5 – Top 50 Drugs With the Greatest Spending Increase
  6. D6 – Drug Totals
  7. D7 – Rebates by Therapeutic Class
  8. D8 – Top 25 Drugs With the Greatest Rebate Amounts

 

As stated above, carriers and TPAs will report the “health care”/“plan/policy-related” information, which are D1 and D2. The PBMs will report the “prescription drug” information, or D3 to D8. One helpful thing is that the carriers, the TPAs, and the PBMs are being asked to report aggregated data. By saying “aggregated data,” I mean this:

 

  1. For fully-insured “individual” and “group” coverage, the carrier (and its PBM) will report the required information for each State in which a fully-insured plan/policy is offered. Carriers (and its PBM) may aggregate ALL of the data elements for ALL of its plans/policies by “market segment” in each State. For example, ALL of the information relating to the carrier’s “individual” market plans offered in a particular State may be aggregated and reported in 1 big bundle (same for “small group” and same “large group”).

 

  1. For self-insured plans, the TPA and PBM will report information for the State in which the sponsor of the self-insured plan has its principal place of business (there are special rules for MEWAs). The TPA and PBM may aggregate ALL of the data elements for ALL of the plans the TPA/PBM provides services to by “plan size” (e.g., “small self-insured plans” and “large self-insured plans”). “Small” is 50 or fewer employees while “large” is 51 or more employees, determined by looking at full-time, part-time, and seasonal employees and doing an FTE count (like what you do for the “employer mandate”)).

 

Again, there is a TON of detail as it relates to ALL of the information that must be reported under each of the D1 through D8 data elements, and in the interest of space and time, I cannot go into ALL of this detail. I will look to provide more detail in future updates.