Public is Less Optimistic and More Frustrated with State of Vaccinations Now Than in January

Nearly a quarter (23%) of fully vaccinated adults have already received a COVID-19 booster shot, more than double the share who had done so in October (10%), the latest KFF COVID-19 Vaccine Monitor report reveals.

Most other vaccinated adults say they definitely (37%) or probably (19%) will get a booster shot as recommended, while about a fifth say they will probably (10%) or definitely (8%) not do so.

The survey was fielded from Nov. 8-22 during a period when booster shots were regularly in the news. On Nov. 19, federal authorities made all vaccinated adults eligible for boosters. After the field period, on Monday, the Centers for Disease Control and Prevention issued guidance encouraging all vaccinated adults to get boosters. News also broke last week after the field period about the new omicron variant.

The report shows that more than half, but not all, fully vaccinated adults across racial and ethnic groups, ages, and political identification either have or likely will get a booster once eligible six months after their initial vaccination. If everyone who expects to get a booster shot at this point follows through, 53% of all adults would receive a booster. Guidance issued Monday from CDC encouraging all vaccinated adults to get a booster shot and the threat posed by the omicron variant may increase the share of the public eager to get booster shots beyond these levels.

About a third (33%) of fully vaccinated older adults (ages 50 and up), representing a quarter (25%) of all adults in that age range, say they already received a booster shot, including similar shares of older White, Black and Hispanic adults. People in this age group were among the first groups eligible and encouraged to get booster shots.

Among partisans, a larger share of vaccinated Democrats say they received a booster (32%) compared to independents (21%) and Republicans (18%), reflecting Democrats’ broader enthusiasm for vaccinations. Nearly one-third of vaccinated Republicans say they definitely or probably won’t get a booster (31%).

A Third of Workers at Employers with At Least 100 Workers Say They Face a Vaccine Requirement

The report also looks at workers’ views and experiences with workplace vaccine requirements in light of a Biden administration policy to require employers with at least 100 workers to require their employees to get a COVID-19 vaccine or be tested weekly for the virus.

While a federal appeals court has put that policy on hold, a majority of workers at such firms say they already face such a requirement (36%) or want their employer to impose one (17%). Fewer (41%) say their employer does not now require a vaccine and they don’t want such a requirement.

Workers at smaller firms, whose employers would not be subject to the federal policy, are much less likely to say they already face a vaccine requirement (11%) or that they want one (20%).

The public overall is split on the Biden administration policy, with slightly more saying they support (52%) than oppose (45%) the federal government requiring large employers to mandate vaccines or weekly tests.

Most unvaccinated adults (79%) and Republicans (79%) oppose the policy, while most vaccinated adults (65%) and Democrats (86%) favor it. Independents are divided (48% favor, 50% oppose). 

Public is Less Optimistic and More Frustrated with State of Vaccinations Now Than in January

Even before news about the omicron variant, the report captures the public’s rising frustration and waning optimism about the state of COVID-19 vaccinations across the country.

Most (58%) of the public now says they feel “frustrated,” up from January (50%) as the nation began its mass vaccination effort. Now half (48%) say they are “optimistic,” down from two thirds (66%). The shifts largely reflect higher frustration and lower optimism among Republicans and, to a lesser extent, independents.

When asked about President Biden’s handling of the pandemic, the public is split – with similar shares saying they approve (44%) and disapprove (48%). A larger share of independents disapprove (52%) than approve (39%), while Democrats overwhelmingly approve (83%) and Republicans overwhelmingly disapprove (88%).

No Movement in the Share of the Public That Received At Least an Initial Vaccine Dose

Despite enthusiasm for booster shots among those already vaccinated, the report shows no significant movement in the share of adults getting an initial vaccine, with 73% now saying they have done so, virtually unchanged since September (72%).

Another 2% say they plan to get vaccinated “as soon as possible” and 6% say they want to “wait and see” how it works for others before getting it. Others are more reluctant, either saying they would get it “only if required” (3%) for work, school or other reasons, or will “definitely not” get it (14%).

While majorities across all demographic groups have received a COVID-19 vaccine, a quarter of Republicans (26%), White Evangelical Christians (25%) and people without health insurance (25%) continue to say they will “definitely not” get a COVID-19 vaccine. There are also gaps in vaccine uptake between college graduates and those without a college degree (83% vs. 68%) and across age groups, with those ages 65 and older more likely to have gotten vaccinated than adults under age 30 (89% vs. 67%).

Among women who are pregnant or planning to become pregnant, less than two thirds (64%) received a vaccine dose compared to nearly three quarters (73%) among similarly aged women who aren’t pregnant or trying to become so. This may reflect worries about the vaccine’s effects on pregnancy, as less than half (39%) of women who are pregnant or planning to get pregnant are confident the vaccines are safe for pregnant people.

The report also notes:

• More than half (53%) of adults say the pandemic has affected their mental health negatively, including 21% who say it has had a major negative impact. More women (58%) than men (47%) report a negative impact, as do more adults under age 30 (64%) than adults over age 65 (37%).

• When asked about the pandemic’s economic impact, 43% say it’s made it harder for them to pay for basic necessities like housing, utilities, and food. This includes most Black (56%) and Hispanic (52%) adults, as well as most people with household incomes under $40,000 annually (56%).

About half of adults say that the government has not done enough to help small businesses (48%) and low-income people (48%) during the pandemic. Nearly as many say the same about Black people (41%), rural residents (41%), and Hispanic people (39%). Small shares say the government has not done enough to help people like them (32%), White people (26%) and big companies (18%).

Designed and analyzed by public opinion researchers at KFF, the KFF Vaccine Monitor survey was conducted from Nov. 8-22 among a nationally representative random digit dial telephone sample of 1,820 adults. Interviews were conducted in English and Spanish by landline (192) and cell phone (1,628). The margin of sampling error is plus or minus 3 percentage points for the full sample. For results based on subgroups, the margin of sampling error may be higher.

The KFF COVID-19 Vaccine Monitor is an ongoing research project tracking the public’s attitudes and experiences with COVID-19 vaccinations. Using a combination of surveys and qualitative research, this project tracks the dynamic nature of public opinion as vaccine development and distribution unfold, including vaccine confidence and acceptance, information needs, trusted messengers and messages, as well as the public’s experiences with vaccination.

The Supreme Court on Dec. 1 heard an abortion case that could result in Roe v. Wade being overturned. The case, Dobbs v. Jackson Women’s Health Organization, involves a Mississippi law banning most abortions after 15 weeks of pregnancy, much earlier than the fetal viability standard established by the 1973 decision in Roe.

In this video, KFF Associate Director for Women’s Health Policy Laurie Sobel describes how a ruling overturning Roe could affect abortion access in the United States. Many states have laws intended to immediately ban abortion after such a ruling, while others have laws protecting the right to an abortion. For many people living in states where abortion is banned, it would be difficult for them to obtain abortion care out of state.

This is the first video in our new series “In Focus with KFF,” featuring insights from our experts on major health care issues in the news.

As the House-passed Build Back Better Act moves to the Senate, a new explainer from KFF summarizes the key prescription drug provisions within the broader budget reconciliation bill.

These provisions would lower prescription drug costs paid by people with Medicare and private insurance and curb drug spending by the federal government and private payers. The Congressional Budget Office estimates federal budget savings from the drug pricing provisions would be $297 billion over 10 years. Although the bill passed the House with no Republican votes, the prescription drug proposals have taken shape amidst strong bipartisan support among the public for the government to address high and rising drug prices.

The key prescription drug proposals in the legislation would:

• Allow the federal government to negotiate prices for some high-cost drugs covered under Medicare Part B and Part D;
• Require inflation rebates to limit annual increases in drug prices in Medicare and private insurance;
• Cap out-of-pocket spending for Medicare Part D enrollees and implement other Part D benefit design changes;
• Limit cost sharing for insulin for people with Medicare and private insurance;
• Eliminate cost sharing for adult vaccines covered under Part D, and
• Repeal the Trump Administration’s drug rebate rule.

KFF will continue to track these and other measures as the bill works its way through the Senate. A separate explainer summarizes and analyzes a wider array of the health policy provisions in the budget reconciliation package.

For these and other analyses related to the Build Back Better Act, visit kff.org.

The Build Back Better Act, H.R. 5376, (BBBA), adopted by the House of Representatives on November 19, 2021 with the support of President Biden, includes a broad package of health, social, climate change and revenue provisions. The total package includes $1.7 trillion in spending, according to the Congressional Budget Office (CBO), which also projects that three of the health provisions would reduce the number of uninsured by 3.4 million people. This brief summarizes the version that passed the House, which may be modified as it moves through the Senate.

Here, we walk through 11 of the major health coverage and financing provisions of the Build Back Better Act, with discussion of the potential implications for people and the federal budget. We summarize provisions relating to the following areas and provide data on the people most directly affected by each provision and the potential costs or savings to the federal government.

1. ACA Marketplace Subsidies
2. New Medicare Hearing Benefit
3. Lowering Prescription Drug Prices and Spending
4. Medicare Part D Benefit Redesign
5. Medicaid Coverage Gap
6. Maternal Care and Postpartum Coverage
7. Other Medicaid / Children’s Health Insurance Changes CHIP Changes
8. Other Medicaid Financing and Benefit Changes
9. Medicaid Home and Community Based Services and the Direct Care Workforce
10. Paid Family and Medical Leave
11. Consumer Assistance, Enrollment Assistance, and Outreach

A recent KFF poll found broad support for many of these provisions, though it did not probe on the costs or trade-offs associated with them. The poll also found that the vast majority of the public supports allowing the federal government to negotiate drug prices, after hearing arguments made by proponents and opponents.

Major Provisions of the Build Back Better Act and their Potential Costs and Impact

1. ACA Marketplace Subsidies

Background

Under the Affordable Care Act, people purchasing Marketplace coverage could only qualify for subsidies if they met other eligibility requirements and had incomes between one and four times the federal poverty level. People eligible for subsidies would have to contribute a sliding-scale percentage of their income toward a benchmark premium, ranging from 2.07% to 9.83%. Once income passed 400% FPL, subsidies stopped and many individuals and families were unable to afford coverage.

In 2021, the American Rescue Plan Act (ARPA) temporarily expanded eligibility for subsidies by removing the upper income threshold. It also temporarily increased the dollar value of premium subsidies across the board, meaning nearly everyone on the Marketplace paid lower premiums, and the lowest income people pay zero premium for coverage with very low deductibles. The ARPA also made people who received unemployment insurance (UI) benefits during 2021 eligible for zero-premium, low-deductible plans.

However, the ARPA provisions removing the upper income threshold and increasing tax credit amounts are only in effect for 2021 and 2022. The unemployment provision is only in effect for 2021.

Provision Description

Section 137301 of The Build Back Better Act would extend the ARPA subsidy changes that eliminate the income eligibility cap and increase the amount of APTC for individuals across the board through the end of 2025.

Additionally, Section 30605 of The Build Back Better Act would extend the special Marketplace subsidy rule for individuals receiving UI benefits for an additional 4 years, through the end of 2025.

Section 137303 of the Act would, for purposes of determining eligibility for premium tax credits, disregard any lump sum Social Security benefit payments in a year. This provision would be permanent and effective starting in the 2022 tax year. Starting in 2026, people would have the option to have the lump sum benefit included in their income for purposes of determining tax credit eligibility.

Finally, Section 137302 modifies the affordability test for employer-sponsored health coverage. The ACA makes people ineligible for marketplace subsidies if they have an offer of affordable coverage from an employer, currently defined as requiring an employee contribution of no more than 9.61% of household income in 2022. The Build Back Better Act would reduce this affordability threshold to 8.5% of income, bringing it in line with the maximum contribution required to enroll in the benchmark marketplace plan. This provision would take effect for tax years starting in 2022 through 2025. Thereafter the affordability threshold would be set at 9.5% of household income with no indexing.

People Affected

CBO projects that the enhanced tax credits in Section 137301 would reduce the number of uninsured by 1.2 million people. As of August 2021, 12.2 million people were actively enrolled in Marketplace plans – an 8% increase from 11.2 million people enrollees as of the close of Open Enrollment for the 2021 plan year. HealthCare.gov and all state Marketplaces reopened for a special enrollment period of at least 6 months in 2021, enrolling 2.8 million people (not all of whom were necessarily previously uninsured). Of these, 44% selected plans with monthly premiums of $10 or less.

The US Department of Health and Human Services (HHS) reports that ARPA reduced Marketplace premiums for the 8 million existing Healthcare.gov enrollees by $67 per month, on average. If the ARPA subsidies are allowed to expire, these enrollees will likely see their premium payments double.

HHS also reports that between July 1 and August 15, more than 280,000 individuals received enhanced subsidies due to the ARPA UI provisions. Individuals eligible for these UI benefits can continue to enroll in 2021 coverage through the end of this year.

The ARPA changes made people with income at or below 150% FPL eligible for zero-premium silver plans with comprehensive cost sharing subsidies. 40% of new consumers who signed up during the SEP are in a plan that covers 94% of expected costs (with average deductibles below $200). As a result of the ARPA, HHS reports the median deductible for new consumers selecting plan during the COVID-SEP decreased by more than 90% (from $750 in 2020 to $50 in 2021).

With the ARPA and ACA subsidies, as well as Medicaid in states that expanded the program, we estimate that at least 46% of non-elderly uninsured people in the U.S. are eligible for free or nearly-free health plans, often with low or no deductibles.

Budgetary Impact

CBO estimates that extension of the ARPA marketplace subsidy improvements through 2025 (Section 13701) will cost $73.9 billion over the ten-year budget window, with “cost” reflecting both direct spending and on-budget revenue losses. This total also includes the cost of modifying the affordability threshold for employer-sponsored coverage (Section 13602)

CBO further estimates the cost of extending the enhanced marketplace subsidies for people receiving unemployment benefits (Section 13705) will be $1.8 billion over the ten-year budget window.

The cost of disregarding lump sum Social Security benefits payments for purposes of determining premium tax credit eligibility (Section 13703) is $416 million over the ten-year budget window.

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2. New Medicare Hearing Benefit

background

Medicare currently does not cover hearing services, except under limited circumstances, such as cochlear implantation when beneficiaries meet certain eligibility criteria. Hearing services are typically offered as an extra benefit by Medicare Advantage plans, and in 2021, 97% of Medicare Advantage enrollees in individual plans, or 17.1 million people, are offered some hearing benefits, but according to our analysis, the extent of that coverage and the value of these benefits varies. Some beneficiaries in traditional Medicare may have private coverage or coverage through Medicaid for these services, but many do not.

Provision Description

Section 30901 of the Build Back Better Act would add coverage of hearing services to Medicare Part B, beginning in 2023. Coverage for hearing care would include hearing rehabilitation and treatment services by qualified audiologists, and hearing aids. Hearing aids would be available once per ear, every 5 years, to individuals diagnosed with moderately severe, severe, or profound hearing loss. Hearing services would be subject to the Medicare Part B deductible and 20% coinsurance. Hearing aids would be covered similar to other Medicare prosthetic devices and would also be subject to the Part B deductible and 20% coinsurance. For people in traditional Medicare who have other sources of coverage such as Medigap or Medicaid, their cost sharing for these services might be covered. Payment for hearing aids would only be on an assignment-related basis. As with other Medicare-covered benefits, Medicare Advantage plans would be required to cover these hearing benefits.

Effective Date: The Medicare hearing benefit provision would take effect in 2023.

People Affected

Adding coverage of hearing services, including hearing aids, to Medicare would help beneficiaries with hearing loss who might otherwise go without treatment by an audiologist or hearing aids, particularly those who cannot afford the cost of hearing aids. It would also lower out-of-pocket costs for some beneficiaries who would otherwise pay the full cost of their hearing aids without the benefit. Among beneficiaries who used hearing services in 2018, average out-of-pocket spending according to our analysis was $914, although many hearing aids are considerably more expensive than the average.

While the majority of enrollees in Medicare Advantage plans have access to a hearing benefit, a new defined Medicare Part B benefit could also lead to enhanced and more affordable hearing benefits for Medicare Advantage enrollees. Because costs are often a barrier to care, adding this benefit to Medicare could increase use of these services, and contribute to better health outcomes.

BUDGETARY IMPACT

CBO estimates that the new Medicare Part B hearing benefit would increase federal spending by $36.7 billion over 10 years (2022-2031).

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3. Lowering Prescription Drug Prices and Spending

background

Currently, under the Medicare Part D program, which covers retail prescription drugs, Medicare contracts with private plan sponsors to provide a prescription drug benefit. The law that established the Part D benefit includes a provision known as the “noninterference” clause, which stipulates that the HHS Secretary “may not interfere with the negotiations between drug manufacturers and pharmacies and PDP [prescription drug plan] sponsors, and may not require a particular formulary or institute a price structure for the reimbursement of covered part D drugs.” For drugs administered by physicians that are covered under Medicare Part B, Medicare reimburses providers 106% of the Average Sales Price (ASP), which is the average price to all non-federal purchasers in the U.S, inclusive of rebates, A recent KFF Tracking Poll finds large majorities support allowing the federal government to negotiate and this support holds steady even after the public is provided the arguments being presented by parties on both sides of the legislative debate (83% total, 95% of Democrats, 82% of independents, and 71% of Republicans).

In addition to the inability to negotiate drug prices under Part D, Medicare lacks the ability to limit annual price increases for drugs covered under Part B (which includes those administered by physicians) and Part D. In contrast, Medicaid has an inflationary rebate in place. Year-to-year drug price increases exceeding inflation are not uncommon and affect people with both Medicare and private insurance. Our analysis shows that half of all covered Part D drugs had list price increases that exceeded the rate of inflation between 2018 and 2019.

provision description

Drug Price Negotiations. Sections 139001, 139002, and 139003 of the Build Back Better Act would amend the non-interference clause by adding an exception that would allow the federal government to negotiate prices with drug companies for a small number of high-cost drugs lacking generic or biosimilar competitors covered under Medicare Part B and Part D. The negotiation process would apply to no more than 10 (in 2025), 15 (in 2026 and 2027), and 20 (in 2028 and later years) single-source brand-name drugs lacking generic or biosimilar competitors, selected from among the 50 drugs with the highest total Medicare Part D spending and the 50 drugs with the highest total Medicare Part B spending (for 2027 and later years). The negotiation process would also apply to all insulin products.

The legislation exempts from negotiation drugs that are less than 9 years (for small-molecule drugs) or 13 years (for biological products, based on the Manager’s Amendment) from their FDA-approval or licensure date. The legislation also exempts “small biotech drugs” from negotiation until 2028, defined as those which account for 1% or less of Part D or Part B spending and account for 80% or more of spending under each part on that manufacturer’s drugs.

The proposal establishes an upper limit for the negotiated price (the “maximum fair price”) equal to a percentage of the non-federal average manufacturer price: 75% for small-molecule drugs more than 9 years but less than 12 years beyond approval; 65% for drugs between 12 and 16 years beyond approval or licensure; and 40% for drugs more than 16 years beyond approval or licensure. Part D drugs with prices negotiated under this proposal would be required to be covered by all Part D plans. Medicare’s payment to providers for Part B drugs with prices negotiated under this proposal would be 106% of the maximum fair price (rather than 106% of the average sales price under current law).

An excise tax would be levied on drug companies that do not comply with the negotiation process, and civil monetary penalties on companies that do not offer the agreed-upon negotiated price to eligible purchasers.

Effective Date: The negotiated prices for the first set of selected drugs (covered under Part D) would take effect in 2025. For drugs covered under Part B, negotiated prices would first take effect in 2027.

Inflation Rebates. Sections 139101 and 139102 of the Build Back Better Act would require drug manufacturers to pay a rebate to the federal government if their prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under Part D increase faster than the rate of inflation (CPI-U). Under these provisions, price changes would be measured based on the average sales price (for Part B drugs) or the average manufacturer price (for Part D drugs). For price increase higher than inflation, manufacturers would be required to pay the difference in the form of a rebate to Medicare. The rebate amount is equal to the total number of units multiplied by the amount if any by which the manufacturer price exceeds the inflation-adjusted payment amount, including all units sold outside of Medicaid and therefore applying not only to use by Medicare beneficiaries but by privately insured individuals as well. Rebate dollars would be deposited in the Medicare Supplementary Medical Insurance (SMI) trust fund.

Manufacturers that do not pay the requisite rebate amount would be required to pay a penalty equal to at least 125% of the original rebate amount. The base year for measuring price changes is 2021.

Effective Date: These provisions would take effect in 2023.

Limits on Cost Sharing for Insulin Products. Sections 27001, 30604, 137308, and 139401 would require insurers, including Medicare Part D plans and private group or individual health plans, to charge no more than $35 for insulin products. Part D plans would be required to charge no more than $35 for whichever insulin products they cover for 2023 and 2024 and all insulin products beginning in 2025. Coverage of all insulin products would be required beginning in 2025 because the drug negotiation provision (described earlier) would require all Part D plans to cover all drugs that are selected for price negotiation, and all insulin products are subject to negotiation under that provision. Private group or individual plans do not have to cover all insulin products, just one of each dosage form (vial, pen) and insulin type (rapid-acting, short-acting, intermediate-acting, and long-acting) for no more than $35.

Effective Date: These provisions would take effect in 2023.

Vaccines. Section 139402 would require that adult vaccines covered under Medicare Part D that are recommended by the Advisory Committee on Immunization Practices (ACIP), such as for shingles, be covered at no cost. This would be consistent with coverage of vaccines under Medicare Part B, such as the flu and COVID-19 vaccines.

Effective Date: This provision would take effect in 2024.

Repealing the Trump Administration’s Drug Rebate Rule. Section 139301 would prohibit implementation of the November 2020 final rule issued by the Trump Administration that would have eliminated rebates negotiated between drug manufacturers and pharmacy benefit managers (PBMs) or health plan sponsors in Medicare Part D by removing the safe harbor protection currently extended to these rebate arrangements under the federal anti-kickback statute. This rule was slated to take effect on January 1, 2022, but the Biden Administration delayed implementation to 2023 and the infrastructure legislation passed by the House and Senate includes a further delay to 2026.

Effective Date: This provision would take effect in 2026.

People affected

The number of Medicare beneficiaries and privately insured individuals who would see lower out-of-pocket drug costs in any given year under these provisions would depend on how many and which drugs were subject to the negotiation process, and how many and which drugs had lower price increases, and the magnitude of price reductions relative to current prices under each provision.

Neither CBO nor the Biden Administration have published estimates of beneficiary premium and out-of-pocket budget effects associated with the provision to allow the HHS Secretary to negotiate drug prices. An earlier version of the negotiations proposal in H.R.3 that passed the House of Representatives in 2019 would have lowered cost sharing for Part D enrollees by $102.6 billion in the aggregate (2020-2029) and Part D premiums for Medicare beneficiaries by $14.3 billion. Based on our analysis of the H.R. 3 version of this provision, the negotiations provision in H.R. 3 would have reduced Medicare Part D premiums for Medicare beneficiaries by an estimated 9% of the Part D base beneficiary premium in 2023 and by as much as 15% in 2029. However, the effects on beneficiary premiums and cost sharing under the drug negotiation provision in the BBBA are expected to be more modest than the effects of H.R. 3 due to the smaller number of drugs eligible for negotiation and a different method of calculating the maximum fair price.

While it is expected that some people would face lower cost sharing under these provisions, it is also possible that drug manufacturers could respond to the inflation rebate by increasing launch prices for new drugs. In this case, some individuals could face higher out-of-pocket costs for new drugs that come to market, with potential spillover effects on total costs incurred by payers as well.

In terms of insulin costs, a $35 cap on monthly cost sharing for insulin products could lower out-of-pocket costs for many insulin users with private insurance and those in Medicare Part D without low-income subsidies. While formulary coverage and tier placement of insulin products vary across Medicare Part D plans, our analysis shows that in 2019, a large number of Part D plans placed insulin products on Tier 3, the preferred drug tier, which typically had a $47 copayment per prescription during the initial coverage phase. However, once enrollees reach the coverage gap phase, they face a 25% coinsurance rate, which equates to $100 or more per prescription in out-of-pocket costs for many insulin therapies, unless they qualify for low-income subsidies. Paying a flat $35 copayment rather than 25% coinsurance could reduce out-of-pocket costs for many people with diabetes who use insulin products.

In terms of vaccines, providing for coverage of adult vaccines under Medicare Part D at no cost could help with vaccine uptake among older adults and would lower out-of-pocket costs for those who need Part D-covered vaccines. Our analysis shows that in 2018, Part D enrollees without low-income subsidies paid an average of $57 out-of-pocket for each dose of the shingles shot, which is generally free to most other people with private coverage.

budgetary impact

Drug Price Negotiations. CBO estimates $78.8 billion in Medicare savings over 10 years (2022-2031) from the drug negotiation provisions.

Inflation Rebates. CBO estimates a net federal deficit reduction of $83.6 billion over 10 years (2022-2031) from the drug inflation rebate provisions in the BBBA. This includes net savings of $49.4 billion ($61.8 billion in savings to Medicare and $7.7 billion in savings for other federal programs, such as DoD, FEHB, and subsides for ACA Marketplace coverage, offset by $20.1 billion in additional Medicaid spending) and higher federal revenues of $34.2 billion.

Limits on Cost Sharing for Insulin Products. CBO estimates additional federal spending of $1.4 billion ($0.9 billion for Medicare and $0.5 billion in other federal spending) and a reduction in federal revenues of $4.6 billion over 10 years associated with the insulin cost-sharing limits in the BBBA.

Vaccines. CBO estimates that this provision would increase federal spending by $3.3 billion over 10 years (2022-2031).

Repealing the Trump Administration’s Drug Rebate Rule. Because the rebate rule was finalized (although not implemented), its cost has been incorporated in CBO’s baseline for federal spending. Therefore, repealing the rebate rule is expected to generate savings. CBO estimates savings of $142.6 billion from the repeal of the Trump Administration’s rebate rule between 2026 (when the BBBA provision takes effect) and 2031. In addition, CBO estimated savings of $50.8 billion between 2023 and 2026 for the three-year delay of this rule included in the Infrastructure Investment and Jobs Act.

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4. Medicare Part D Benefit Redesign

background

Medicare Part D currently provides catastrophic coverage for high out-of-pocket drug costs, but there is no limit on the total amount that beneficiaries pay out-of-pocket each year. Medicare Part D enrollees with drug costs high enough to exceed the catastrophic coverage threshold are required to pay 5% of their total drug costs unless they qualify for Part D Low-Income Subsidies (LIS). Medicare pays 80% of total costs above the catastrophic threshold and plans pay 15%. Medicare’s reinsurance payments to Part D plans now account for close to half of total Part D spending (45%), up from 14% in 2006.

Under the current structure of Part D, there are multiple phases, including a deductible, an initial coverage phase, a coverage gap phase, and the catastrophic phase. When enrollees reach the coverage gap benefit phase, they pay 25% of drug costs for both brand-name and generic drugs; plan sponsors pay 5% for brands and 75% for generics; and drug manufacturers provide a 70% price discount on brands (there is no discount on generics). Under the current benefit design, beneficiaries can face different cost sharing amounts for the same medication depending on which phase of the benefit they are in, and can face significant out-of-pocket costs for high-priced drugs because of coinsurance requirements and no hard out-of-pocket cap.

provision description

Sections 139201 and 139202 of the Build Back Better Act amend the design of the Part D benefit by adding a hard cap on out-of-pocket spending set at $2,000 in 2024, increasing each year based on the rate of increase in per capita Part D costs. It also lowers beneficiaries’ share of total drug costs below the spending cap from 25% to 23%. It also lowers Medicare’s share of total costs above the spending cap (“reinsurance”) from 80% to 20% for brand-name drugs and to 40% for generic drugs; increases plans’ share of costs from 15% to 60% for both brands and generics; and adds a 20% manufacturer price discount on brand-name drugs. Manufacturers would also be required to provide a 10% discount on brand-name drugs in the initial coverage phase (below the annual out-of-pocket spending threshold), instead of a 70% price discount.

The legislation also increases Medicare’s premium subsidy for the cost of standard drug coverage to 76.5% (from 74.5% under current law) and reduces the beneficiary’s share of the cost to 23.5% (from 25.5%). The legislation also allows beneficiaries the option of smoothing out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month.

Effective Date: The Part D redesign and premium subsidy changes would take effect in 2024. The provision to smooth out-of-pocket costs would take effect in 2025.

people affected

Medicare beneficiaries in Part D plans with relatively high out-of-pocket drug costs are likely to see substantial out-of-pocket cost savings from this provision. While most Part D enrollees have not had out-of-pocket costs high enough to exceed the catastrophic coverage threshold in a single year, the likelihood of a Medicare beneficiary incurring drug costs above the catastrophic threshold increases over a longer time span.

Our analysis shows that in 2019, nearly 1.5 million Medicare Part D enrollees had out-of-pocket spending above the catastrophic coverage threshold. Looking over a five-year period (2015-2019), the number of Part D enrollees with out-of-pocket spending above the catastrophic threshold in at least one year increases to 2.7 million, and over a 10-year period (2010-2019), the number of enrollees increases to 3.6 million.

Based on our analysis, 1.2 million Part D enrollees in 2019 incurred annual out-of-pocket costs for their medications above $2,000 in 2019, averaging $3,216 per person. Based on their average out-of-pocket spending, these enrollees would have saved $1,216, or 38% of their annual costs, on average, if a $2,000 cap had been in place in 2019. Part D enrollees with higher-than-average out-of-pocket costs could save substantial amounts with a $2,000 out-of-pocket spending cap. For example, the top 10% of beneficiaries (122,000 enrollees) with average out-of-pocket costs for their medications above $2,000 in 2019 – who spent at least $5,348 – would have saved $3,348 (63%) in out-of-pocket costs with a $2,000 cap.

budgetary impact

CBO estimates the benefit redesign and smoothing provisions of the BBBA would reduce federal spending by $1.5 billion over 10 years (2022-2031), which consists of $1.6 billion in lower spending associated with Part D benefit redesign and $0.1 billion in higher spending associated with the provision to smooth out-of-pocket costs.

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5. Medicaid Coverage Gap

background

There are currently 12 states that have not adopted the ACA provision to expand Medicaid to adults with incomes through 138% of poverty. The result is a coverage gap for individuals whose below-poverty-level income is too high to qualify for Medicaid in their state, but too low to be eligible for premium subsidies in the ACA Marketplace.

provision description

Section 137304 of the Build Back Better Act would allow people living in states that have not expanded Medicaid to purchase subsidized coverage on the ACA Marketplace for 2022 through 2025. The federal government would fully subsidize the premium for a benchmark plan. People would also be eligible for cost sharing subsidies that would reduce their out-of-pocket costs to 1% of overall covered health expenses on average.

Section 30608 includes adjustments to uncompensated care (UCC) pools and disproportionate share hospital (DSH) payments for non-expansion states. These states would not be able draw down federal matching funds for UCC amounts for individuals who could otherwise qualify for Medicaid expansion, and their DSH allotments would be reduced by 12.5% starting in 2023.

Section 30609 would increase the federal match rate for states that have adopted the ACA Medicaid expansion from 90% to 93% from 2023 through 2025, designed to discourage states from dropping current expansion coverage.

people affected

We estimate that 2.2 million uninsured people with incomes under poverty fall in the “coverage gap”. Most in the coverage gap are concentrated in four states (TX, FL, GA and NC) where eligibility levels for parents in Medicaid are low, and there is no coverage pathway for adults without dependent children. Half of those in the coverage gap are working and six in 10 are people of color.

CBO estimates that provisions to address the coverage gap would result in 1.7 million fewer uninsured people.

budgetary impact

CBO estimates that the net federal cost of extending Marketplace coverage to certain low-income people would increase federal spending by $57 billion over the next decade (this reflects $43.8 billion in federal costs and a loss of federal revenues of $13.2 billion).

CBO estimates provisions to limit DSH and uncompensated care pool funding for non-expansion states would reduce federal costs by $18.3 billion over 5 years and $34.5 billion over the next 10 years and federal costs would increase by $10.4 billion due to the increase in the match rate for current expansion states from 90% to 93% for expansion states for 2023 through 2025.

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6. Maternity Care and Postpartum Coverage

background

Medicaid currently covers almost half of births in the U.S. Federal law requires that pregnancy-related Medicaid coverage last through 60 days postpartum. After that period, some may qualify for Medicaid through another pathway, but others may not qualify, particularly in non-expansion states. In an effort to improve maternal health and coverage stability and to help address racial disparities in maternal health, a provision in the American Rescue Plan Act (ARPA) of 2021 gives states a new option to extend Medicaid postpartum coverage to 12 months. This new option takes effect on April 1, 2022 and is available to states for five years.

provision description

Section 30721 of the Build Back Better Act would require states to extend Medicaid postpartum coverage from 60 days to 12 months, ensuring continuity of Medicaid coverage for postpartum individuals in all states. This requirement would take effect in the first fiscal quarter beginning one year after enactment and also applies to state CHIP programs that cover pregnant individuals.

Section 30722 would create a new option for states to coordinate care for Medicaid-enrolled pregnant and post-partum individuals through a maternal health home model. States that take up this option would receive a 15% increase in FMAP for care delivered through maternal health homes for the first two years. States that are interested in pursuing this new option can receive planning grants prior to implementation.

Sections 31031 through 31048 of the Build Back Better Act provide federal grants to bolster other aspects of maternal health care. The funds would be used to address a wide range of issues, such as addressing social determinants of maternal health; diversifying the perinatal nursing workforce, expanding care for maternal mental health and substance use, and supporting research and programs that promote maternal health equity.

people affected

Largely in response to the new federal option, at least 26 states have taken steps to extend Medicaid postpartum coverage. Pregnant people in non-expansion states could see the biggest change as they are more likely than those in expansion states to become uninsured after the 60-day postpartum coverage period. For example, in Alabama, the Medicaid eligibility level for pregnant individuals is 146% FPL, but only 18% FPL (approximately $4,000/year for a family of three) for parents.

Some states have piloted maternal health homes and seen positive impacts on health outcomes. The federal grant provisions related to maternal health could affect care for all persons giving birth, but the focus of these proposals is on reducing racial and ethnic inequities. There were approximately 3.7 million births in 2019, and nearly half were to women of color. There are approximately 700-800 pregnancy-related deaths annually, with the rate 2-3 times higher among Black and American Indian and Alaska Native women compared to White women. Additionally, there are stark racial and ethnic disparities in other maternal and health outcomes, including preterm birth and infant mortality.

budgetary impact

CBO estimates that requiring 12 month postpartum coverage in Medicaid and CHIP would have a net federal cost of $1.2 billion over 10 years (new costs of $2.2 billion offset by new revenues of $1.0 billion. CBO estimates that the option to create a maternal health home would increase federal spending by $1.0 billion over 10 years.

CBO estimates that federal outlays for the grant sections in the Build Back Better Act related to maternal health care outside of the postpartum extension and maternal health homes are $1.1 billion.

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7. Other Medicaid and Children’s Health Insurance (CHIP) Changes

background

Under current law, states have the option to provide 12-months of continuous coverage for children.  Under this option, states allow a child to remain enrolled for a full year unless the child ages out of coverage, moves out of state, voluntarily withdraws, or does not make premium payments. As such, 12-month continuous eligibility eliminates coverage gaps due to fluctuations in income over the course of the year.

To help support states and promote stability of coverage during the COVID-19 pandemic, the Families First Coronavirus Response Act (FFCRA) provides a 6.2 percentage point increase in the federal share of certain Medicaid spending, provided that states meet maintenance of eligibility (MOE) requirements that include ensuring continuous coverage for current enrollees.

Under current law, Medicaid is the base of coverage for low-income children. CHIP complements Medicaid by covering uninsured children in families with incomes above Medicaid eligibility levels. Unlike Medicaid, federal funding for CHIP is capped and provided as annual allotments to states. CHIP funding is authorized through September 30, 2027. While CHIP generally has bipartisan support, during the last reauthorization funding lapsed before Congress reauthorized funding.

provision description

Section 30741 of the Build Back Better Act would require states to extend 12-month continuous coverage for children on Medicaid and CHIP.

Section 30741 of the Build Back Better Act would phase out the FFCRA enhanced federal funding to states. States would continue to receive the 6.2 percentage point increase through March 31, 2022, followed by a 3.0 percentage point increase from April 1, 2022 through June 30, 2022, and a 1.5 percentage point increase from July 1, 2022 through September 30, 2022.

Section 30741 also would modify the FFCRA MOE requirement for continuous coverage. From April 1 through September 30, 2022, states could continue receiving the enhanced federal matching funds if they only terminate coverage for individuals who are determined no longer eligible for Medicaid and have been enrolled at least 12 consecutive months. The legislation includes other rules for states about conducting eligibility redeterminations and when states can terminate coverage.

Section 30801 of the Build Back Better Act would permanently extend the CHIP program.

people affected

As of May 2021, there were 39 million children enrolled in Medicaid and CHIP (nearly half of all enrollees). As of January 2020, 34 states provide 12-month continuous eligibility to at least some children in either Medicaid or CHIP. A recent MACPAC report found that the overall mean length of coverage for children in 2018 was 11.7 months, and also that rates of churn (in which children dis-enroll and reenroll within a short period of time) were lower in states that had adopted the 12-month continuous coverage option and in states that did not conduct periodic data checks. Another recent report shows that children with gaps in coverage during a year are more likely to be children of color with lower incomes.

As of May 2021, there were 6.9 million people (mostly children) enrolled in CHIP.

budgetary impact

CBO estimates that Section 30741 would reduce federal costs by a net $3.5 billion over 10 years. This 10 year number reflects $17.1 billion in federal savings in FY 2022 that is likely related to the provisions to end the enhanced fiscal relief and the continuous coverage requirements and then federal costs starting in FY 2024.  CBO estimates that permanently extending the CHIP program would reduce federal costs by $1.2 billion over 10 years.

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8. Other Medicaid Financing and Benefit Changes

background

Unlike in the 50 states and D.C., annual federal funding for Medicaid in the U.S. Territories is subject to a statutory cap and fixed matching rate. The funding caps and match rates have been increased by Congress in response to emergencies over time.

Vaccines are an optional benefit for certain adult populations, including low-income parent/caretakers, pregnant women, and persons who are eligible based on old age or a disability. For adults enrolled under the ACA’s Medicaid expansion and other populations for whom the state elects to provide an “alternative benefit plan,” their benefits are subject to certain requirements in the ACA, including coverage of vaccines recommended by the Advisory Committee on Immunization Practices (ACIP) with no cost sharing.

Under the Families First Coronavirus Response Act, coverage of testing and treatment for COVID-19, including vaccines, is required with no cost sharing in order for states to access temporary enhanced federal funding for Medicaid which is tied to the public health emergency. The American Rescue Plan Act (ARPA) clarified that coverage of COVID-19 vaccines and their administration, without cost sharing, is required for nearly all Medicaid enrollees, through the last day of the 1^st calendar quarter beginning at least 1 year after the public health emergency ends. The ARPA also provides 100% federal financing for this coverage.

provision description

Section 30731 of the Build Back Better Act would increase the Medicaid cap amount and match rate for the territories. The FMAP would be permanently adjusted to 83% for the territories beginning in FY 2022, except that Puerto Rico’s match rate would be 76% in FY 2022 before increasing to 83% in FY 2023 and subsequent years. The legislation would also require a payment floor for certain physician services in Puerto Rico with a penalty for failure to establish the floor.

Section 30751 of the Build Back Better Act would establish a 3.1 percentage point FMAP reduction from October 1, 2022 through December 31, 2025 for states that adopt eligibility standards, methodologies, or procedures that are more restrictive than those in place as of October 1, 2021 (except the penalty would not apply to coverage of non-pregnant, non-disabled adults with income above 133% FPL after December 31, 2022, if the state certifies that it has a budget deficit).

Section 139405 of the Build Back Better Act would require state Medicaid programs to cover all approved vaccines recommended by ACIP and vaccine administration, without cost sharing, for categorically and medically needy adults. States that provide adult vaccine coverage without cost sharing as of the date of enactment would receive a 1 percentage point FMAP increase for 8 quarters.

people affected

In June 2019 there were approximately 1.3 million Medicaid enrollees in the territories (with 1.2 million in Puerto Rico).

From February 2020 through May 2021 Medicaid and CHIP enrollment has increased by 11.5 million or 16.2% due to the economic effects of the pandemic and MOE requirements.

All states provide some vaccine coverage for adults enrolled in Medicaid who are not covered as part of the ACA’s Medicaid expansion, but as of 2019, only about half of states covered all ACIP-recommended vaccines.

budgetary impact

CBO estimates that the changes in Medicaid financing for the Territories would increase federal spending by $9.5 billion over 10 years.

CBO estimates that the provision to impose a penalty in the match rate if states implement eligibility or enrollment restrictions through 2025 would increase federal costs by $7.0 billion.

CBO estimates that extending vaccines to adults on Medicaid would increase federal spending by $2.8 billion over 10 years.

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9. Medicaid Home and Community Based Services and the Direct Care Workforce

background

Medicaid is currently the primary payer for long-term services and supports (LTSS), including home and community-based services (HCBS), that help seniors and people with disabilities with daily self-care and independent living needs. There is currently a great deal of state variation as most HCBS eligibility pathways and benefits are optional for states.

PROVISION DESCRIPTION

Sections 30711-30713 of the Build Back Better Act would create the HCBS Improvement Program, which would provide a permanent 6 percentage point increase in federal Medicaid matching funds for HCBS. To qualify for the enhanced funds, states would have to maintain existing HCBS eligibility, benefits, and payment rates and have an approved plan to expand HCBS access, strengthen the direct care workforce, and monitor HCBS quality. The bill includes some provisions to support family caregivers. In addition, the Act would include funding ($130 million) for state planning grants and enhanced funding for administrative costs for certain activities (80% instead of 50%).

Section 30714 of the Build Back Better Act would require states to report HCBS quality measures to HHS, beginning 2 years after the Secretary publishes HCBS quality measures as part of the Medicaid/CHIP core measures for children and adults. The bill provides states with an enhanced 80% federal matching rate for adopting and reporting these measures.

Sections 30715 and 30716 of the Build Back Better Act would make the ACA HCBS spousal impoverishment protections and the Money Follows the Person (MFP) program permanent.

Sections 22301 and 22302 of the Build Back Better Act would provide $1 billion in grants to states, community-based organizations, educational institutions, and other entities by the Department of Labor Secretary to develop and implement strategies for direct service workforce recruitment, retention, and/or education and training.

Section 25005 of the Build Back Better Act would provide $20 million for HHS and the Administration on Community Living to establish a national technical assistance center for supporting the direct care workforce and family caregivers.

Section 25006 of the Build Back Better Act would provide $40 million for the HHS Secretary to award to states, nonprofits, educational institutions, and other entities to address the behavioral health needs of unpaid caregivers of older individuals and older relative caregivers.

people affected

The majority of HCBS are provided by waivers, which served over 2.5 million enrollees in 2018. There is substantial unmet need for HCBS, which is expected to increase with the growth in the aging population in the coming years. Nearly 820,000 people in 41 states were on a Medicaid HCBS waiver waiting list in 2018. Though waiting lists alone are an incomplete measure, they are one proxy for unmet need for HCBS. Additionally, a shortage of direct care workers predated and has been intensified by the COVID-19 pandemic, characterized by low wages and limited opportunities for career advancement. The direct care workforce is disproportionately female and Black.

A KFF survey found that, as of 2018, 14 states expected that allowing the ACA spousal impoverishment provision to expire would affect Medicaid HCBS enrollees, for example by making fewer individuals eligible for waiver services.

Over 101,000 seniors and people with disabilities across 44 states and DC moved from nursing homes to the community using MFP funds from 2008-2019. A federal evaluation of MFP showed about 5,000 new participants in each six month period from December 2013 through December 2016, indicating a continuing need for the program.

Budgetary Impact

CBO estimates that all of the Medicaid-related HCBS provisions together will increase federal spending by about $150 billion in the 10-year budget window. The new HCBS Improvement Program (Section 30712) accounts for most of this spending ($146.5 billion).

CBO scores the Department of Labor direct care workforce provisions according to the amount of spending authorized for each in the bill: $1 billion for grants to support the direct care workforce (Section 22302), $20 million for a technical assistance center for supporting direct care and caregiving (Section 25005), and $40 million for funding to support unpaid caregivers (Section 25006).

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10. Paid Family and Medical Leave

background

The U.S. is the only industrialized nation without a minimum standard of paid family or medical leave. Although six states and DC have paid family and medical leave laws in effect, and some employers voluntarily offer these benefits, this has resulted in a patchwork of policies with varying degrees of generosity and leaves many workers without a financial safety net when they need to take time off work to care for themselves or their families.

provision description

Section 130001 of the Build Back Better Act would guarantee four weeks per year of paid family and medical leave to all workers in the U.S. who need time off work to welcome a new child, recover from a serious illness, or care for a seriously ill family member. Annual earnings up to $15,080 would be replaced at approximately 90% of average weekly earnings, plus about 73% of average weekly earnings for annual wages between $15,080 and $32,248, capping out at 53% of average weekly earnings for annual wages between $32,248 and $62,000. While all workers taking qualified leave would be eligible for at least some wage replacement, the progressive benefits formula means that the share of pay replaced while on qualified leave is highest for workers with lower wages. The original Act called for 12 weeks of paid leave for similar qualified reasons, plus three days of bereavement leave, and benefits began at 85% of average weekly earnings for annual wages up to $15,080 and were capped at 5% of average weekly earnings for annual wages up to $250,000.

people affected

According to the Bureau of Labor Statistics (BLS), approximately one in four (23%) workers has access to paid family leave through their employer. Data on the share of workers with access to paid medical leave for their own longer, serious illness are limited, although BLS also reports that 40% of workers have access to short-term disability insurance.​

It is estimated that 53 million adults are caregivers for a dependent child or adult and 61% of them are women. Sixty percent (60%) of caregivers reported having to take a leave of absence leave from work or cut their hours in order to care for a family member. Workers who take leave do so for different reasons: Half (51%) reported taking leave due to their own serious illness, one-quarter (25%) for reasons related to pregnancy, childbirth, or bonding with a new child, and one-fifth (19%) to care for a seriously ill family member. In total, four in ten (42%) reported receiving their full pay while on leave, one-quarter (24%) received partial pay, and one-third (34%) received no pay.

budgetary impact

CBO estimates that the federal cost of these provisions would be about $205.5 billion over the 2022-2031 period. The estimate accounts for funding the paid leave benefits and administration, grants for the state administration option for states that already have a comprehensive paid leave law, and partial reimbursements for employers that provide equally comprehensive paid leave as a benefit to all their workers. The CBO estimate is modestly offset by application fees paid by employers participating in the reimbursement option for employer-sponsored paid leave benefits.

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11. Consumer Assistance, Enrollment Assistance, and Outreach

background

Consumer Assistance in Health Insurance – The Affordable Care Act (ACA) established a new system of state health insurance ombudsman programs, also called Consumer Assistance Programs, or CAPs. These programs are required to conduct public education about health insurance consumer protections and help people resolve problems with their health plans, including filing appeals for denied claims. By law, private health plans, including employer-sponsored plans, are required to include contact information for CAPs on all explanation-of-benefit statements (EOB) with notice that CAPs can help consumers file appeals.

To help inform oversight, CAPs are also required to report data to the Secretary of HHS on consumer experiences and problems. The ACA permanently authorized CAPs and appropriated seed funding of $30 million in 2010. Forty state CAPs were established that year; since then, Congress has not appropriated CAP funding.

Enrollment Assistance and Outreach in the Marketplace – The Affordable Care Act also requires marketplaces to establish Navigator programs that help consumers apply for and enroll in coverage through the marketplace. And it requires marketplaces to conduct public education and outreach about the availability of coverage and financial assistance. As noted above, the Build Back Better Act would create new eligibility for marketplace coverage and financial assistance for low-income adults in states that have not expanded Medicaid.

provision description

Section 30603 appropriates $100 million for state consumer assistance programs (CAPs) over the 4-year period, 2022-2025.

Section 30601(d) appropriates $105 million to conduct public education and outreach in non-expansion states so people will learn about new coverage and subsidy options. $15 million is appropriated for 2022 and $30 million for each of 2023-2025. In addition, this section requires the Secretary to obligate no less than $70 million of marketplace user-fee revenues for additional Navigator funding to support enrollment assistance for the new coverage-gap population (at least $10 million in FY 2022 and at least $20 million in each of FY 2023-2025).

people affected

CAP Funding – More than 175 million Americans are covered by private health insurance plans today. Consumers generally find health insurance confusing and have limited understanding of even basic health insurance terms and concepts. Four-in-ten have difficulty understanding what their health plan will cover or how much they will have to pay out-of-pocket for needed care; when faced with unaffordable bills, only one-in-ten even try to get providers to lower their price. When claims are denied, consumers rarely appeal. These are the kinds of problems CAPs could help address with expanded funding. Most of the state CAPs established in 2010 continue to operate today, though at reduced capacity without federal financial support; programs rely on state funding (many CAPs are housed in state Insurance Departments or Attorney General offices) and philanthropic support today. With recent enactment of the federal No Surprises Act, as well as amendments to the Mental Health Parity and Addiction Equity Act (MHPAEA), CAPS can help consumers understand and navigate new federal health insurance protections and inform oversight by federal and state agencies.

Marketplace Enrollment Assistance and Outreach – After years of cuts in funding for Navigator enrollment assistance and outreach, the Biden Administration took steps this year to restore federal marketplace funding for these activities. During the 2021 COVID special enrollment opportunity, when expanded subsidies enacted by ARPA first became available, more than 2.2 million people newly signed up for marketplace coverage. However, KFF found only 1 in 4 people who are uninsured or buy their own health insurance checked to see if they would qualify for affordable coverage. This finding is consistent with earlier KFF surveys that find 3 in 4 uninsured don’t look for health coverage because they assume it is not affordable. Investments in public education, outreach, and enrollment assistance can help inform the 2.2 million uninsured adults in the coverage gap of new affordable health coverage options through the marketplace.

budgetary impact

New appropriations for Consumer Assistance Programs would cost $100 million over 5 years.

New appropriations for marketplace outreach would cost $105 million over 5 years. Additional funding for Navigator enrollment assistance in coverage gap states would not come from new appropriations; these resources will come from user fee revenue collected by the marketplace.(Back to top)

For a summary of the prescription drug provisions in the Inflation Reduction Act, see “Explaining the Prescription Drug Provisions in the Inflation Reduction Act”

On November 19, 2021, the House of Representatives passed H.R. 5376, the Build Back Better Act (BBBA), which includes a broad package of health, social, and environmental proposals supported by President Biden. The BBBA includes several provisions that would lower prescription drug costs for people with Medicare and private insurance and reduce drug spending by the federal government and private payers. These proposals have taken shape amidst strong bipartisan, public support for the government to address high and rising drug prices. CBO estimates that the drug pricing provisions in the BBBA would reduce the federal deficit by $297 billion over 10 years (2022-2031).

The key prescription drug proposals included in the BBBA would:

• Allow the federal government to negotiate prices for some high-cost drugs covered under Medicare Part B and Part D
• Require inflation rebates to limit annual increases in drug prices in Medicare and private insurance
• Cap out-of-pocket spending for Medicare Part D enrollees and other Part D benefit design changes
• Limit cost sharing for insulin for people with Medicare and private insurance
• Eliminate cost sharing for adult vaccines covered under Part D
• Repeal the Trump Administration’s drug rebate rule

This brief summarizes these provisions and discusses the expected effects on people, program spending, and drug prices and innovation. We incorporate the estimated budgetary effects released by CBO on November 18, 2021, and to provide additional context for understanding the expected budgetary effects, we point to past projections of similar legislative proposals from CBO and others. This summary is based on the legislative language included in the House-passed bill that may be modified as it moves through the Senate.

Allow the Federal Government to Negotiate Prices for Some High-Cost Drugs Covered Under Medicare Part B and Part D

Under the Medicare Part D program, which covers retail prescription drugs, Medicare contracts with private plan sponsors to provide a prescription drug benefit. The law that established the Part D benefit includes a provision known as the “noninterference” clause, which stipulates that the HHS Secretary “may not interfere with the negotiations between drug manufacturers and pharmacies and PDP [prescription drug plan] sponsors, and may not require a particular formulary or institute a price structure for the reimbursement of covered part D drugs.” In addition, under current law, the Secretary of HHS does not negotiate prices for drugs covered under Medicare Part B (administered by physicians). Instead, Medicare reimburses providers based on a formula set at 106% of the Average Sales Price (ASP), which is the average price to all non-federal purchasers in the U.S, inclusive of rebates.

The Part D non-interference clause has been a longstanding target for some policymakers because it limits the ability of the federal government to leverage lower prices, particularly for high-priced drugs without competitors. And with the rise in the number of high-priced drugs coming to market, including the recently-approved Alzheimer’s drug priced at $56,000, which would be covered under Part B, there is renewed interest in proposals to allow the federal government to negotiate drug prices for Medicare beneficiaries. A recent KFF Tracking Poll finds large majorities support allowing the federal government to negotiate and this support holds steady even after the public is provided the arguments being presented by parties on both sides of the legislative debate.

Provision Description

The BBBA would amend the non-interference clause by adding an exception that would allow the federal government to negotiate prices with drug companies for a small number of high-cost drugs covered under Medicare Part D (starting in 2025) and Part B (starting in 2027). The negotiation process would apply to no more than 10 (in 2025), 15 (in 2026 and 2027), and 20 (in 2028 and later years) single-source brand-name drugs or biologics that lack generic or biosimilar competitors. These drugs would be selected from among the 50 drugs with the highest total Medicare Part D spending and the 50 drugs with the highest total Medicare Part B spending. The negotiation process would also apply to all insulin products.

The legislation exempts from negotiation drugs that are less than 9 years (for small-molecule drugs) or 13 years (for biological products, based on the Manager’s Amendment) from their FDA-approval or licensure date. The legislation also exempts “small biotech drugs” from negotiation until 2028, defined as those which account for 1% or less of Part D or Part B spending and account for 80% or more of spending under each part on that manufacturer’s drugs, as well as drugs with Medicare spending of less than $200 million in 2021 (increased by the CPI-U for subsequent years) and drugs with an orphan designation as their only FDA-approved indication.

The proposal establishes an upper limit for the negotiated price (the “maximum fair price”) equal to a percentage of the non-federal average manufacturer price: 75% for small-molecule drugs more than 9 years but less than 12 years beyond approval; 65% for drugs between 12 and 16 years beyond approval or licensure; and 40% for drugs more than 16 years beyond approval or licensure. Part D drugs with prices negotiated under this proposal, including insulin, would be required to be covered by all Part D plans. Medicare’s payment to providers for Part B drugs with prices negotiated under this proposal would be 106% of the maximum fair price (rather than 106% of the average sales price under current law). (In a separate provision of the BBBA, section 13940, Medicare payments to providers for the administration of biosimilar biologic products would be increased to 108% between April 1, 2022 through March 31, 2027.)

An excise tax would be levied on drug companies that do not comply with the negotiation process. Manufacturers would face an escalating excise tax on total sales of the drug in question, starting at 65% and increasing by 10% every quarter to a maximum of 95%. In addition, manufacturers that refuse to offer an agreed-upon negotiated price for a selected drug to “a maximum fair price eligible individual” (i.e., Medicare beneficiaries enrolled in Part B and/or Part D, depending on the selected drug) or to a provider of services to maximum fair price eligible individuals (such as a physician or hospital) would pay a civil monetary penalty equal to 10 times the difference between the price charged and the maximum fair price.

The timeline for the negotiation process spans a roughly two-year period (Figure 1). To make negotiated prices available in 2025, the list of selected drugs for negotiation would be published on February 1, 2023, based on data for a 12-month period prior to October 31, 2022. The period of negotiation between the Secretary and manufacturers of Part D drugs would occur between February 28, 2023 and November 1, 2023, and the negotiated “maximum fair prices” would be published on the website CMS.gov no later than November 15, 2023. The initial period of negotiation for Part B drugs would take place between February 28, 2025 and November 1, 2025, for prices established for 2027.

The legislation appropriates 10-year (2022-2031) funding of $3 billion for implementing the drug price negotiation provisions.

Effective Date: The negotiated prices for the first set of selected drugs (covered under Part D) would take effect in 2025. For drugs covered under Part B, negotiated prices would take effect in 2027.

People affected

The provision to allow the Secretary to negotiate drug prices would put downward pressure on both Part D premiums and out-of-pocket drug costs, although the number of Medicare beneficiaries who would see lower out-of-pocket drug costs in any given year under this provision, and the magnitude of savings, would depend on how many and which drugs were subject to the negotiation process and the price reductions achieved through the negotiations process relative to current prices.

Neither CBO nor the Administration have published estimates of beneficiary premium and out-of-pocket budget effects associated with the BBBA proposal to allow the HHS Secretary to negotiate drug prices. An earlier version of the negotiations proposal in H.R.3 that passed the House of Representatives in 2019 would have lowered cost sharing for Part D enrollees by $102.6 billion in the aggregate (2020-2029) and Part D premiums for Medicare beneficiaries by $14.3 billion, according to estimates from the CMS Office of the Actuary (OACT). Based on our analysis of the H.R. 3 version of this provision, the negotiations provision in H.R. 3 would have reduced Medicare Part D premiums for Medicare beneficiaries by an estimated 9% of the Part D base beneficiary premium in 2023 and by as much as 15% in 2029. However, the effects on beneficiary premiums and cost sharing under the drug negotiation provision in the BBBA are expected to be more modest than the effects of H.R. 3 due to the smaller number of drugs eligible for negotiation and a different method of calculating the maximum fair price.

budgetary impact

CBO estimates $78.8 billion in Medicare savings over 10 years (2022-2031) from the drug negotiation provisions in the BBBA.

Based on earlier legislation (H.R. 3) that would have allowed the Secretary to negotiate prices for a larger number of drugs and apply negotiated rates to private insurance, CBO estimated over $450 billion in 10-year (2020-2029) savings from the Medicare drug price negotiation provision, including $448 billion in savings to Medicare and $12 billion in savings for subsidized plans in the ACA Marketplace and the Federal Employees Health Benefits Program. CBO also estimated an increase in revenues of about $45 billion over 10 years resulting from lower drug prices available to employers, which would reduce premiums for employer-sponsored insurance, leading to higher compensation in the form of taxable wages.

A separate CBO estimate of the same Medicare drug price negotiation provision included in another House bill in the 116^th Congress (H.R. 1425, the Patient Protection and Affordable Care Enhancement Act) estimated higher 10-year (2021-2030) savings of nearly $530 billion, mainly because it would allow the Secretary to negotiate prices for a somewhat larger set of drugs in year 2 of the negotiation program.

Effects on the Development of New Drugs

CBO estimates that the drug pricing provisions in the Build Back Better Act will have a very modest impact on the number of new drugs coming to market in the U.S. over the next 30 years: 10 fewer out of 1,300, or a reduction of 0.8% (about 1 over the 2022-2031 period, about 4 over the subsequent decade, and about 5 over the decade after that). The expected impact on drug development is more limited than suggested by a prior estimate from CBO in part because the drug price negotiation proposal in the BBBA would affect prices for fewer drugs, and with a different upper limit, than H.R. 3. CBO had estimated that a drug price negotiation proposal along the lines of that which was included in H.R. 3 would lead to 2 fewer drugs in the first decade (a reduction of 0.5%), 23 fewer drugs over the next decade (a reduction of 5%), and 34 fewer drugs in the third decade (a reduction of 8%).(Back to top)

Require Inflation Rebates to Limit Annual Increases in Drug Prices in Medicare and Private Insurance

Under current law, Medicare has no authority to limit annual price increases for drugs covered under Part B (which includes those administered by physicians) or Part D. In contrast, Medicaid has a rebate system that requires drug manufacturers to provide refunds if prices grow faster than inflation. Year-to-year drug price increases exceeding inflation are not uncommon and affect people with both Medicare and private insurance. Our analysis shows that half of all covered Part D drugs had list price increases that exceeded the rate of inflation between 2018 and 2019. A separate analysis by the HHS Office of Inspector General showed average sales price (ASP) increases exceeding inflation for 50 of 64 studied Part B drugs in 2015.

provision description

The BBBA would require drug manufacturers to pay a rebate to the federal government if their prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under Part D increase faster than the rate of inflation (CPI-U). Under these provisions, price changes would be measured based on the average sales price (for Part B drugs) or the average manufacturer price (for Part D drugs). If price increases are higher than inflation, manufacturers would be required to pay the difference in the form of a rebate to Medicare.

The rebate amount is equal to the total number of units multiplied by the amount if any by which the manufacturer price exceeds the inflation-adjusted payment amount, including all units sold outside of Medicaid and therefore applying to use by Medicare beneficiaries, privately insured, and uninsured individuals. This means drug manufacturers would effectively have to rebate to the government any revenues from price increases in excess of inflation in Medicare or private insurance plans. Rebate dollars would be deposited in the Medicare Supplementary Medical Insurance (SMI) trust fund.

Manufacturers that do not pay the requisite rebate amount would be required to pay a penalty equal to at least 125% of the original rebate amount. The base year for measuring cumulative price changes relative to inflation is 2021.

The legislation appropriates 10-year (2022-2031) funding of $160 million to the Centers for Medicare & Medicaid Services (CMS) for implementing the inflation rebate provisions ($80 million for Part B and $80 million for Part D).

Effective Date: These provisions would take effect in 2023.

People affected

This proposal is expected to limit out-of-pocket drug spending growth for people with Medicare and private insurance and put downward pressure on premiums by discouraging drug companies from increasing prices faster than inflation. The number of Medicare beneficiaries and privately insured individuals who would see lower out-of-pocket drug costs in any given year under this provision would depend on how many and which drugs had lower price increases and the magnitude of price reductions relative to current prices under each provision. Based on our analysis, prices have increased faster than inflation for many Part D covered drugs, suggesting that inflation rebates would produce savings for a large number of Medicare beneficiaries.

budgetary impact

CBO estimates a net federal deficit reduction of $83.6 billion over 10 years (2022-2031) from the drug inflation rebate provisions in the BBBA. This includes net savings of $49.4 billion ($61.8 billion in savings to Medicare and $7.7 billion in savings for other federal programs, such as DoD, FEHB, and subsides for ACA Marketplace coverage, offset by $20.1 billion in additional Medicaid spending) and higher federal revenues of $34.2 billion.

Previously, CBO estimated savings from the drug inflation rebate provisions in legislation under consideration in 2019  (H.R. 3 and S. 2543, Senate Finance Committee legislation considered in the 116^th Congress) amounting to $36 billion for H.R. 3 (2020-2029) and $82 billion for S. 2543 (2021-2030); 10-year savings were estimated to be lower under H.R. 3 because the inflation provision would not apply to drugs subject to the government negotiation process that would be established by that bill. This same exception applies in the BBBA, but fewer drugs could be exempted because fewer drugs are subject to negotiations in the BBBA than H.R.3.

Effects on Launch Pricing

Drug manufacturers may respond to the inflation rebates by increasing launch prices, which could result in some Medicare beneficiaries and Medicare itself paying higher prices for new drugs, and potentially lead to higher costs for other payers and privately insured patients. While Part D and commercial insurance plans can negotiate with drug companies and refuse to cover drugs with very high launch prices, they may have less leverage in some instances, such as when there are no therapeutic alternatives available or when drugs are covered under a “protected class”. If launch prices rise for Part B drugs, the HHS Secretary would have no authority to negotiate lower prices unless and until the new drug meets the criteria for selection for drug price negotiation under the separate BBBA provision described above.(Back to top)

Cap Out-of-Pocket Spending for Medicare Part D Enrollees and Other Part D Benefit Design Changes

Medicare Part D currently provides catastrophic coverage for high out-of-pocket drug costs, but there is no limit on the total amount that beneficiaries pay out of pocket each year. Medicare Part D enrollees with drug costs high enough to exceed the catastrophic coverage threshold are required to pay 5% of their total drug costs above the threshold unless they qualify for Part D Low-Income Subsidies (LIS). Medicare pays 80% of total costs above the catastrophic threshold (known as “reinsurance”) and plans pay 15%. Medicare’s reinsurance payments to Part D plans now account for close to half of total Part D spending (45%), up from 14% in 2006 (increasing from $6 billion in 2006 to $48 billion in 2020).

Under the current structure of Part D, there are multiple phases, including a deductible, an initial coverage phase, a coverage gap phase, and the catastrophic phase. When enrollees reach the coverage gap benefit phase, they pay 25% of drug costs for both brand-name and generic drugs; plan sponsors pay 5% for brands and 75% for generics; and drug manufacturers provide a 70% price discount on brands (there is no discount on generics). Under the current benefit design, beneficiaries can face different cost-sharing amounts for the same medication depending on which phase of the benefit they are in, and can face significant out-of-pocket costs for high-priced drugs because of coinsurance requirements and no hard out-of-pocket cap.

provision description

The BBBA amends the design of the Part D benefit by adding a hard cap on out-of-pocket spending set at $2,000 in 2024, increasing each year based on the rate of increase in per capita Part D costs (Figure 2). It also lowers beneficiaries’ share of total drug costs below the spending cap from 25% to 23%. The provision lowers Medicare’s share of total costs above the spending cap (“reinsurance”) from 80% to 20% for brand-name drugs and to 40% for generic drugs; increases plans’ share of costs from 15% to 60% for both brands and generics; and adds a 20% manufacturer price discount on brand-name drugs. The BBBA also requires manufacturers to provide a 10% discount on brand-name drugs in the initial coverage phase (below the annual out-of-pocket spending cap), instead of a 70% price discount in the coverage gap phase under the current benefit design.

The legislation increases the Medicare premium subsidy for the cost of standard drug coverage to 76.5% (from 74.5% under current law) and reduces the beneficiary share of the cost to 23.5% (from 25.5%). The legislation also allows beneficiaries the option of smoothing out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month.

Effective Date: The Part D benefit redesign, including the $2,000 out-of-pocket cap and the premium subsidy changes would take effect in 2024. The provision to smooth out-of-pocket costs would take effect in 2025.

people affected

Medicare beneficiaries in Part D plans with relatively high out-of-pocket drug costs are likely to see substantial out-of-pocket cost savings from this provision. This would include Medicare beneficiaries with spending above the catastrophic threshold due to just one very high-priced specialty drug for medical conditions such as cancer, hepatitis C, or multiple sclerosis and beneficiaries who take a handful of relatively costly brand or specialty medications to manage their medical condition.

While most Part D enrollees have not had out-of-pocket costs high enough to exceed the catastrophic coverage threshold in a single year, the likelihood of a Medicare beneficiary incurring drug costs above the catastrophic threshold increases over a longer time span. Our analysis shows that in 2019, nearly 1.5 million Medicare Part D enrollees had out-of-pocket spending above the catastrophic coverage threshold. Looking over a five-year period (2015-2019), the number of Part D enrollees with out-of-pocket spending above the catastrophic threshold in at least one year increases to 2.7 million, and over a 10-year period (2010-2019), the number of enrollees increases to 3.6 million.

Based on our analysis, 1.2 million Part D enrollees in 2019 incurred annual out-of-pocket costs for their medications above $2,000 in 2019, averaging $3,216 per person. Based on their average out-of-pocket spending, these enrollees would have saved $1,216, or 38% of their annual costs, on average, if a $2,000 cap had been in place in 2019. Part D enrollees with higher-than-average out-of-pocket costs could save substantial amounts with a $2,000 out-of-pocket spending cap. For example, the top 10% of beneficiaries (122,000 enrollees) with average out-of-pocket costs for their medications above $2,000 in 2019 – who spent at least $5,348 – would have saved $3,348 (63%) in out-of-pocket costs with a $2,000 cap.

While a $2,000 out-of-pocket spending cap and the reduction in beneficiary coinsurance from 25% to 23% below the cap are expected to lower out-of-pocket drug spending by Part D enrollees, it is also possible that enrollees could face higher Part D premiums resulting from higher plan liability for drug costs above the spending cap. To mitigate the potential premium increase, the BBBA increased the federal portion of the Medicare premium subsidy from 74.5% to 76.5% and reduced the beneficiary share of cost from 25.5% to 23.5%. Plans could also adopt strategies to exercise greater control of costs below the cap, such as through more utilization management or a stronger push for generic utilization, which could also limit potential premium increases.

budgetary impact

CBO estimates the benefit redesign and smoothing provisions of the BBBA would reduce federal spending by $1.5 billion over 10 years (2022-2031), which consists of $1.6 billion in lower spending associated with Part D benefit redesign and $0.1 billion in higher spending associated with the provision to smooth out-of-pocket costs.(Back to top)

Limit Cost Sharing for Insulin for People with Medicare and Private Insurance

For Medicare beneficiaries with diabetes who use insulin, coverage is provided under Medicare Part D, the outpatient prescription drug benefit. Because Part D plans vary in terms of the insulin products they cover and costs per prescription, what enrollees pay for insulin products also varies. Insulin coverage and costs also vary for people with private coverage.

Medicare beneficiaries can choose to enroll in a Part D plan participating in an Innovation Center model in which enhanced drug plans cover insulin products at a monthly copayment of $35 in the deductible, initial coverage, and coverage gap phases of the Part D benefit. Participating plans do not have to cover all insulin products at the $35 monthly copayment amount, just one of each dosage form (vial, pen) and insulin type (rapid-acting, short-acting, intermediate-acting, and long-acting). In 2022, a total of 2,159 Part D plans will participate in this model, a 32% increase in participating plans since 2021. Based on August 2021 enrollment, 45% of non-LIS enrollees are in PDPs that will participate in the insulin model in 2022. This model is not available to people outside of Medicare, however. The model was launched in response to rising prices for insulin, which have attracted increasing scrutiny from policymakers, leading to congressional investigations and overall concerns about affordability and access for people with diabetes who need insulin to control blood glucose levels.

provision description

The BBBA would require insurers, including Medicare Part D plans and private group or individual health plans, to charge patient cost-sharing of no more than $35 per month for insulin products. Private group or individual plans would not be required to cover all insulin products, just one of each dosage form (vial, pen) and insulin type (rapid-acting, short-acting, intermediate-acting, and long-acting), for no more than $35.

Medicare Part D plans, both stand-alone drug plans and Medicare Advantage drug plans, would be required to charge no more than $35 for whichever insulin products they cover in 2023 and 2024 and all insulin products beginning in 2025. Coverage of all insulin products would be required beginning in 2025 because the drug negotiation provision described earlier would require all Part D plans to cover all negotiation-eligible drugs, and all insulin products are subject to negotiation under that provision.

Effective Date: These provisions would take effect in 2023.

People affected

A $35 cap on monthly cost sharing for insulin products is expected to lower out-of-pocket costs for insulin users with private insurance and those in Medicare Part D without low-income subsidies. In 2017, 3.1 million Medicare Part D enrollees used insulin. Among insulin users without Part D low-income subsidies (LIS), average annual per capita out-of-pocket spending on insulin increased by 79% over these years, from $324 in 2007 to $580 in 2017. Average annual growth in costs was 6%, which exceeded the 1.6% average annual rate of growth in inflation over this period. If Part D enrollees had paid 12 months of $35 copays for insulin in 2017, annual costs for one insulin product would have been $420, or $160 (28%) lower than average annual costs paid by non-LIS Part D insulin users in 2017.

According to our analysis of 2019 Part D formularies, a large number of Part D plans placed insulin products on Tier 3, the preferred drug tier, which typically had a $47 copayment per prescription during the initial coverage phase. However, once enrollees reached the coverage gap phase, they faced a 25% coinsurance rate, which equates to $100 or more per prescription in out-of-pocket costs for many insulin therapies, unless they qualified for low-income subsidies. Paying a flat $35 copayment rather than 25% coinsurance or a higher copayment amount could reduce out-of-pocket costs for many insulin products. These provisions are also expected to provide savings to millions of insulin users with private coverage.

budgetary impact

CBO estimates additional federal spending of $1.4 billion ($0.9 billion for Medicare and $0.5 billion in other federal spending) and a reduction in federal revenues of $4.6 billion over 10 years associated with the insulin cost-sharing limits in the BBBA.(Back to top)

Eliminate Cost Sharing for Adult Vaccines Covered Under Part D

Medicare covers vaccines under both Part B and Part D. This separation of coverage for vaccines under Medicare is because there were statutory requirements for coverage of a small number of vaccines under Part B before the 2006 start of the Part D benefit. Vaccines for COVID-19, influenza, pneumococcal disease, and hepatitis B (for patients at high or intermediate risk), and vaccines needed to treat an injury or exposure to disease are covered under Part B. All other commercially available vaccines needed to prevent illness are covered under Medicare Part D.

For the influenza, pneumococcal pneumonia, hepatitis B, and COVID-19 vaccines covered under Medicare Part B, patients currently face no cost sharing for either the vaccine itself or its administration. For other Part B vaccines, such as those needed to treat an injury or exposure to a disease such as rabies or tetanus, Medicare covers 80% of the cost, and beneficiaries are responsible for the remaining 20%. Unlike most vaccines covered under Part B, vaccines covered under Part D can be subject to cost sharing, because Part D plans have flexibility to determine how much enrollees will be required to pay for any given on-formulary drug, including vaccines. (Part D enrollees who receive low-income subsidies (LIS) generally pay relatively low amounts for vaccines and other covered drugs.) Under Part D, cost sharing can take the form of flat dollar copayments or coinsurance (i.e., a percentage of list price).

provision description

The BBBA would require that adult vaccines covered under Medicare Part D that are recommended by the Advisory Committee on Immunization Practices (ACIP), such as for shingles, be covered at no cost. This would be consistent with coverage of vaccines under Medicare Part B, such as the flu and COVID-19 vaccines.

Effective Date: This provision would take effect in 2024.

People affected

Eliminating cost-sharing for adult vaccines covered under Medicare Part D could help with vaccine uptake among older adults and would lower out-of-pocket costs for those who need Part D-covered vaccines. Our analysis shows that in 2018, Part D enrollees without low-income subsidies paid an average of $57 out of pocket for each dose of the shingles shot, which is generally free to most other people with private coverage.

budgetary impact

CBO estimates that this provision would increase federal spending by $3.3 billion over 10 years (2022-2031).(Back to top)

Repeal the Trump Administration’s Drug Rebate Rule

provision description

The BBBA would prohibit implementation of the November 2020 final rule issued by the Trump Administration that would have eliminated rebates negotiated between drug manufacturers and pharmacy benefit managers (PBMs) or health plan sponsors in Medicare Part D by removing the safe harbor protection currently extended to these rebate arrangements under the federal anti-kickback statute. This rule was slated to take effect on January 1, 2022, but the Biden Administration delayed implementation to 2023 and the infrastructure legislation signed into law on November 15, 2021 includes a further delay to 2026.

Effective Date: This provision would take effect in 2026.

People affected

Since the rebate rule never took effect, repealing it is not expected to have a material impact on Medicare beneficiaries. Had the rule taken effect, it was expected to increase premiums for Medicare Part D enrollees, according to both CBO and the HHS Office of the Actuary (OACT). OACT estimated that a small group of beneficiaries who use drugs with significant manufacturer rebates could have seen a substantial decline in their overall out-of-pocket spending under the rule, assuming manufacturers passed on price discounts at the point of sale, but other beneficiaries would have faced out-of-pocket cost increases.

budgetary impact

Because the rebate rule was finalized (although not implemented), its cost has been incorporated in CBO’s baseline for federal spending. Therefore, repealing the rebate rule is expected to generate savings. CBO estimates savings of $142.6 billion from the repeal of the Trump Administration’s rebate rule between 2026 (when the BBBA provision takes effect) and 2031. In addition, CBO estimated savings of $50.8 billion between 2023 and 2026 for the three-year delay of this rule included in the Infrastructure Investment and Jobs Act. This is because both CBO and Medicare’s actuaries estimated substantially higher Medicare spending over 10 years as a result of banning drug rebates under the Trump Administration’s rule – up to $170 billion higher, according to CBO, and up to $196 billion higher, according to the HHS Office of the Actuary (OACT).

(Back to top)

The Build Back Better Act (BBB) seeks to temporarily close the coverage gap for over 2 million uninsured people living in the 12 states that have not adopted the Medicaid expansion by allowing these individuals to purchase federally subsidized coverage on the Affordable Care Act (ACA) Marketplace through 2025. By filling the coverage gap, analysis finds uncompensated care (UCC) would decrease. Uncompensated care costs occur because, although people who are uninsured use less care than people with coverage, most who are uninsured have limited income or resources and cannot afford the high cost of medical care, if and when they do need and use care. To reflect expected decreases in UCC from filling the coverage gap and encourage holdout states to expand Medicaid, the BBB proposes reducing disproportionate share hospital (DSH) allotments by 12.5% starting in federal fiscal year (FFY) 2023 and places limits on Medicaid UCC pools for non-expansion states. This policy watch explains what these payments are, what changes have been tied to the ACA, and examines potential implications of changes included in the BBB.

What are DSH payments and UCC Pools?

Medicaid provides DSH payments to states to disperse to hospitals that serve a large number of Medicaid and low-income uninsured patients. These funds are intended to help offset hospital costs due to UCC of uninsured individuals and where Medicaid payments fall short of hospital costs, helping hospitals maintain financial stability. While states have considerable discretion in determining the amount of DSH payments to each DSH hospital, federal DSH funds are capped for the state and also capped at the facility level. Federal DSH allotments vary by state and totaled $13.0 billion in FFY 2021.

A number of states have also used Section 1115 waivers to create UCC pools to help providers finance funding shortfalls from uncompensated care. Funds in these pools go directly to health care providers and are not tied to costs for specific people and services, but more broadly are intended for hospital UCC.

How has the ACA affected DSH and UCC?

The ACA called for a reduction in federal DSH allotments starting in FFY 2014, but the cuts, $8 billion a year for four years, have been delayed several times and are currently set to take effect in FFY 2024. The reduction under the ACA was based on the assumption that health coverage would increase and therefore reduce UCC costs. The DSH Health Reform Reduction Methodology (DHRM) would be used to calculate allotment reductions for states, applying, for example, larger reductions to states with lower uninsured rates and states that do not target their payments to hospitals with more UCC costs or more Medicaid beneficiaries.

Although the post-ACA Obama administration began phasing down UCC pool funding in Section 1115 waivers, the Trump administration subsequently showed a willingness to continue such waivers. Following implementation of the ACA, the Obama administration sent letters notifying states that they could not use UCC pool funding to cover costs for individuals who could be covered under the Medicaid expansion, noting that states could instead lower UCC burdens by obtaining federal financing for covering expansion adults, with the federal government picking up 90% of the cost. However, the Trump administration did not continue this policy and approved increased UCC pool funding for two non-expansion states, Texas and Florida, in December 2017. The Trump administration subsequently approved 10-year renewals of both states’ waivers, including extended UCC funding, in January 2021. Currently, four non-expansion states have Section 1115 waivers with UCC pools (Florida, Kansas, Tennessee, and Texas), though elements of the Texas and Tennessee waivers are under review by CMS under the Biden Administration.

A large body of research finds that states that expanded Medicaid under the ACA have seen improvements in hospital financial performance, including decreased UCC costs. Studies find associations between Medicaid expansion and improvements in payer mix (declines in uninsured patients and increases in Medicaid-covered patients) and decreases in UCC costs overall and for specific types of hospitals, including those in rural areas. Studies also indicate that payer mix improvements and UCC declines in expansion states translated to improvements in hospital operating margins and other measures of financial performance, including decreased likelihood of hospital closure. However, a smaller number of studies suggests that these financial improvements may vary by hospital type and that UCC declines may have been partially offset by increases in unreimbursed Medicaid care and declines in commercial revenue.

What are potential implications of the DSH and UCC changes included in the BBB?

The BBB proposes to reduce DSH allotments by 12.5% in non-expansion states starting in FFY 2023 and places limits on Medicaid UCC pools for non-expansion states by excluding expenditures for the expansion population from federal assistance. Hospitals argue that DSH payments help address Medicaid shortfall (due to payment rates below costs) and provide financial stability on top of offsetting UCC costs; they further argue that the proposed reductions could hurt their ability to care for their patients. Hospitals also argue that they have faced financial instability during the COVID-19 pandemic, especially providers with low operating margins like many of those receiving DSH payments. Recent analysis shows that annual increases in hospital revenues from measures to close the coverage gap should more than offset the reduction in DSH allotments; however, the analysis did not account for the restrictions to UCC pool funding. Another analysis similarly finds improvements in hospital margins mostly due to reductions in UCC. The Congressional Budget Office (CBO) recently estimated that these provisions would decrease federal spending by $18 billion over the five-year period (2022-2026) and $35 billion over the ten-year period (2022-2031).

The BBB DSH cuts would be in addition to the ACA’s DSH reductions scheduled to go into effect in 2024, and in the current version of the bill, the additional cuts would remain in place after the provisions to close the coverage gap expire. However, states could adopt Medicaid expansion at any time and take advantage of the additional financial incentives in the American Rescue Plan Act (ARPA) that more than offset the state costs to expand for two years. BBB would also temporarily increase the federal share of costs for the Medicaid expansion from 90% to 93%. Further, even without federal legislation, the Biden administration could withdraw approved UCC pool Section 1115 waiver authorities or decline to renew or renegotiate these waivers as they expire. The net effects of the reductions relative to the new revenues from coverage remain in question both overall and for specific hospitals, but the debate highlights some of the trade-offs between DSH and UCC funding versus new coverage.

As states expand COVID-19 vaccination efforts to reach newly eligible children ages 5 to 11, a new KFF analysis highlights several tools state Medicaid programs have at their disposal to increase access to, and take up of, vaccines among lower-income children.

Among the key findings:

• States can request Medicaid administrative federal matching funds for state-funded monetary incentives to encourage uptake of the vaccine. In recent months, several states reported activities and incentives within contracted Medicaid managed care organizations to promote vaccine take-up among Medicaid enrollees, including gift cards for members and provider incentives.
• Federal Medicaid matching funds can be used for community outreach targeting beneficiaries and providers, including disseminating information or materials and providing trainings. Strategies employing trusted and diverse messengers of vaccine information can help with education and outreach to parents and other caregivers.
• Some state Medicaid programs have reported providing assistance with scheduling vaccinations and coordinating transportation to increase access to vaccines, as well as partnering with community-based organizations to provide vaccines where people can easily access them.

Thirty-six percent of children ages 5-11 are covered by Medicaid, including the vast majority of low-income children and a disproportionate share of children of color. In recent KFF polling, low-income parents reported more concerns about accessing the vaccine, such as taking time off work or traveling to a place to receive a vaccine.

For more polling, data and analyses about COVID-19 and vaccination efforts, visit kff.org.

Recent policy attention has focused on efforts to reduce the number of uninsured people in the U.S. by expanding eligibility for coverage assistance, including enhanced premium subsidies in the Affordable Care Act (ACA) Marketplace and filling the Medicaid “coverage gap.”

A new KFF analysis shows that a majority of the 27.4 million people who remained uninsured in 2020 already are eligible for financial assistance for coverage through Medicaid/CHIP or the Marketplace, suggesting that policies in the Build Back Better Act as well as outreach for the current ACA open enrollment period could help reduce that number. That group includes more than 10 million people who qualify for subsidized plans in the Marketplace and 7 million who are eligible for Medicaid or the Children’s Health Insurance Program. Many people eligible for coverage remain uninsured due to lack of knowledge of coverage options, difficulty signing up, or other reasons.

The new analysis examines the characteristics of the 7 million people who are uninsured and eligible for Medicaid or CHIP. Key findings include:

• 4.2 million of this group are adults and 2.8 million are children
• Nearly two-thirds are people of color and nearly three out of four live in working families

Three quarters, or 5.2 million people, reside in Medicaid expansion states, which have more people living in them and have higher income eligibility for adults than non-expansion states

For the full analysis, as well as other data and analyses about the uninsured, visit kff.org.

Following the recent US Food & Drug Administration’s (FDA) authorization and the Centers for Disease Control and Prevention’s (CDC) recommendation, children ages 5-11 are now eligible to receive Pfizer-BioNTech’s COVID-19 vaccine. There may be unique challenges to vaccinating young children, particularly those from low-income families who may face additional barriers to access. Among all children ages 5-11, over one-third (36%) are covered by Medicaid, and 70% of children ages 5-11 with incomes below 200% of the Federal Poverty Level (FPL) are covered by Medicaid (Figure 1). State Medicaid programs and Medicaid managed care plans are looking at a range of policy options to facilitate access to vaccines for young, low-income children.

Low-income children may face barriers to vaccine access. KFF polling recently found that parents of children ages 5-11 with household incomes under $50,000 are more likely than those with higher incomes to say they are very or somewhat concerned about issues related to the coronavirus vaccine. In particular, low-income parents reported more concerns about accessing the vaccine, such as taking time off work or traveling to a place to receive a vaccine. Research prior to the pandemic similarly shows lower overall immunization rates for low-income children, likely stemming from difficulties with access such as a lack of information and outreach or transportation.

Low rates of vaccination among low-income children could have implications for ongoing disparities in prevalence of COVID-19 among communities of color. KFF analysis of the 2021 Current Population Survey Annual Social and Economic Supplement (CPS ASEC) finds over two-thirds of children ages 5-11 covered by Medicaid are children of color, including approximately 37% who are Hispanic and 21% who are Black. Black and Hispanic people have been less likely than their White counterparts to have received a vaccine over the course of the vaccine rollout; though the disparity is narrowing over time, disparities in children’s take-up of the vaccine could reverse that trend.

States report adopting a range of Medicaid strategies aimed at increasing vaccine uptake, several of which could extend to low-income children covered by the program. The Centers for Medicare & Medicaid Services (CMS) has highlighted several Medicaid flexibilities and funding opportunities states can use to promote vaccine access. For example, states can request Medicaid administrative federal matching funds for state funded monetary incentives for enrollees to encourage vaccine uptake. In KFF’s annual budget survey, several states reported Medicaid managed care organization (MCO) activities and incentives to promote vaccine take-up among Medicaid enrollees, including financial incentives for MCOs that meet vaccination targets. States also report using member incentives, such as gift cards, and provider incentives. Given that MCOs provide services to over the vast majority of child Medicaid enrollees, these activities may reach many children and families covered by the program. Other state activities focus on using providers to address vaccine hesitancy, which may be especially needed for parents with young children; Medicaid options in this area include vaccine administrative payment rates and financial incentives for achieving or increasing vaccination rates.

Strategies to target outreach can help improve vaccine uptake among low-income children. CMS notes Medicaid administrative federal matching funds can be used for beneficiary and provider community outreach such as disseminating information or materials and providing trainings. Several states in KFF’s annual budget survey reported using data collection and tracking to better target outreach and reduce disparities in COVID-19 vaccination rates. Strategies to employ trusted and diverse messengers of vaccine information can help with education and outreach to parental/caregivers (which is important because their consent for vaccines is required in all states, though DC and Philadelphia allow 11-year-olds to self-consent for the COVID-19 vaccine). For example, MCOs in Michigan report using community health workers to provide education and outreach to address vaccine hesitancy. Further, KFF analysis from June 2021 found community health centers were vaccinating larger shares of people of color compared to overall vaccination efforts, reflecting their established trusted relationships with communities of color.

While the cost of a COVID-19 vaccine is covered for all individuals, other policies can help to address additional barriers to accessing vaccines for low-income children. While the federal government recently implemented a paid leave policy for federal workers taking their children to vaccine appointments, other employers have not, and lower income workers may have more difficulty taking time off to get their children vaccinated. Additionally, arranging transportation to and from a vaccine appointment may be difficult for some, especially if a vaccine provider is not close by. In KFF’s annual budget survey states reported including assistance with vaccination scheduling and transportation coordination to increase access, as well as partnering with community-based organizations to provide vaccines where people can easily access them. Strategies that help parents more easily make and travel to vaccine appointments can help increase vaccine uptake among low-income children and reduce disparities in COVID-19 vaccination rates.