Alexander: CBO Says Lower Health Care Costs Act Will Reduce Health Insurance Premiums, Lower Prescription Drug Costs

WASHINGTON, July 16, 2019 — The non-partisan Congressional Budget Office (CBO) today said that the Lower Health Care Costs Act—legislation sponsored by Senate health committee Chairman Lamar Alexander (R-Tenn.) and Ranking Member Patty Murray (D-Wash.), which contains 55 specific provisions from 65 different Senators—will reduce health insurance premiums and lower prescription drug costs.

“The Lower Health Care Costs Act contains 55 provisions from 65 different Senators all aimed at reducing what Americans pay out of their pockets for health care. According to today’s Congressional Budget Office report, the legislation will reduce health insurance premiums, and lower prescription drug costs by speeding generic drug competition and eliminating middleman markups. Additionally, the legislation raises the tobacco age to 21, and extends funding for community health centers, diabetes research and other important public health programs,” Alexander said.

“A recent Gallup poll found that the cost of health care was the biggest financial problem facing American families. So instead of remaining stuck in a perpetual partisan argument over Obamacare, the Senate should pass this bill to lower the cost of what Americans pay for health care out of their own pockets,” Alexander concluded.

In June, the Senate health committee passed the legislation by a vote of 20-3. The legislation ends surprise medical billing, lowers prescription drug prices, increases transparency, improves public health, makes electronic medical records work better, and raises the minimum age for purchasing any tobacco product from 18 to 21. The legislation also extends funding for Community Health Centers, Special Diabetes Programs, the National Health Services Corps, and the Teaching Health Centers Graduate Medical Education Program.

Excerpts from the CBO report:

 Protects patients from surprise bills, and in doing so, lowers patients’ premiums: “CBO and JCT estimate that in affected markets in most years, premiums would be just over 1 percent lower than they are projected to be under current law.”

Increases generic and biosimilar drug competition: CBO estimates the bill “would expedite the market entry of some lower-priced generic or biosimilar drugs, CBO and JCT estimate that federal spending for prescription drugs and subsidies for health insurance would decline.” CBO says that “enacting section 203 would reduce the average prices of drugs that are paid for by federal health programs that purchase drugs or provide health insurance that covers drugs.”

Reduces delays of generic and biosimilar drugs: CBO expects section 205 “would allow generic drugs to enter the market earlier than they would under current law… and would accelerate initial competition from generic products for affected drugs by on year, on average.” CBO estimates that “the entry of certain generic or biosimilar products could be accelerated by one or two years, on average, as a result of more timely access to samples for premarket testing and shorter regulatory delays” under section 214.

Helps small employers with drug costs: “CBO expects that the disclosure of information required by section 306—especially information on total amounts in rebates and about other fees and payments tied to prescription drug use that flow from manufacturers to PBMs—would help a subset of PBMs’ clients obtain better terms. In particular, CBO expects that sponsors of smaller plans would benefit because many currently have only limited access to such information.”

Improves competition in the Pharmacy Benefit Manager Industry: “CBO expects that those provisions would allow some plan sponsors to better evaluate the trade-offs among contract provisions and could lead to more efficient competition among PBMs. CBO estimates, on net, section 306 would initially reduce plan costs by roughly 1 percent for prescription drugs across all plans in the private health insurance market.”

Increases access to health insurance plans that prioritize higher quality and lower costs: “CBO and JCT estimate that section 302 would decrease average premiums for private health insurance by roughly 0.05 percent after the effects are fully in place… [The changes in this section] would allow more insurers to offer tiered provider networks and other incentives for enrollees to use lower-cost health care providers or those with higher quality ratings….CBO and JCT estimate that increased enrollment in such plans would reduce spending for nonemergency medical care and therefore reduce average health insurance premiums for employment-based coverage.”

Increases employee wages: “CBO and JCT estimate that section 302 would decrease average premiums for private health insurance by roughly 0.05 percent after the effects are fully in place. As a result, employees’ compensation would shift somewhat to taxable wages…CBO estimates that section 306 would lower private health insurance premiums, thereby reducing federal subsidies for insurance purchased through the marketplaces, and shift employees’ compensation somewhat from tax-favored health insurance to taxable wages.

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