EPI: "A technical report on the Congressional Progressive Caucus budget for fiscal year 2013"

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The Budget for All

A technical report on the Congressional Progressive Caucus budget for fiscal year 2013

By Andrew Fieldhouse and Rebecca Thiess | March 28, 2012

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Budget priorities and policy choices

The policy options comprising the Budget for All fall into six broad categories: investing in job creation and economic growth, realigning Department of Defense priorities, building on health care reform, reforming government, strengthening Social Security for future generations, and reforming and modernizing the tax code. What follows is a detailed description of the policy choices included in the Budget for All and the outlay or revenue impact of those policies.

I. Investing in job creation and economic growth

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II. Realigning Department of Defense priorities

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III. Building on health care reform

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The Budget for All would adopt policies that build on the Patient Protection and Affordable Care Act of 2010 (ACA) to ensure access to affordable, quality care and expand coverage to millions of Americans. The Budget for All thus does not rely on benefit cuts or reducing beneficiary rolls to find budgetary savings. The approach to health care policy taken in this budget is diametrically opposed to the approach taken by House Budget Committee Chairman Paul Ryan (R-Wis.) in his Chairman’s mark, i.e., the Ryan budget (House Budget Committee 2012). The Budget for All would implement a public insurance option, negotiate drug prices with pharmaceutical companies, adopt the administration’s reforms for drug development, and take steps to reduce fraud and waste in Medicaid, all for estimated ten-year cost savings of $278 billion (above the savings projected from the implementation of the ACA). Additionally, the Budget for All would crack down on Medicare Hospital Insurance (HI) payroll tax avoidance (ten-year savings of $13.1 billion) and end subsidies for junk and fast food advertising to children to promote health (ten-year savings of $15 billion). The Ryan budget, on the other hand, relies on Medicare cost-shifting as well as dramatic cuts to Medicaid and the Children’s Health Insurance Program (CHIP) in order to achieve budgetary savings—savings that would principally finance large tax cuts for the most affluent American households.

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Public insurance plan

The Budget for All would begin building on the efficiencies already enacted in the ACA by implementing a public insurance option to compete with private insurance plans. Beginning in 2014, the ACA will establish health insurance exchanges, through which individuals and families may purchase private coverage. This will increase choice and competition relative to today’s largely fragmented, regional insurance markets. With the addition of a public option, the Secretary of the Department of Health and Human Services would administer a public health insurance plan to be offered alongside private plans through the exchanges. The public plan would exploit economies of scale to negotiate payment rates for prescription drugs, would pay physicians roughly 5 percent more than Medicare reimbursement rates, and would pay hospitals and providers comparable rates as paid under Medicare. Based on the potential for administrative and other savings, the CBO estimates that insurance premiums for the public plan would be roughly 5–7 percent lower than those of private plans offered in the insurance exchanges (CBO 2011b).

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Negotiate drug prices with pharmaceutical companies

The Budget for All would implement the president’s proposal to align Medicare drug payment policies with Medicaid policies for lower-income beneficiaries. Under current law, drug dispensers pay specified rebates for drugs consumed by Medicaid beneficiaries, while Medicare Part D (the prescription drug benefit) plan sponsors negotiate drug prices with manufacturers at unspecified levels. When enacted, Medicare Part D failed to harness the purchasing power of the federal government to negotiate wholesale prices for pharmaceutical drugs. There are substantial differences in the rebate amounts and net prices for brand-name drugs; Medicare receives lower rebates and pays higher prices than Medicaid (OMB 2011a). Additionally, Medicare per capita spending is growing significantly faster in Part D than in Parts A or B (HI and Medical Insurance, respectively). This proposal would allow Medicare to receive the same rebates that Medicaid receives for brand-name and generic drugs provided to low-income beneficiaries. OMB estimates this policy would save $155.6 billion over FY2013–22 (OMB 2012a).

Adopt administration proposals for drug development

The Budget for All would additionally adopt the administration’s proposals to build on the ACA by prohibiting brand-name and generic drug companies from delaying the availability of new generic drugs and biologics. The high cost of prescription drugs causes hardship for many Americans and can result in people forgoing medications or skipping doses. These proposals would increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission (FTC) to prohibit companies from entering in “pay-for-delay” agreements that block consumer access to safe and effective generics. A 2010 FTC study found that these types of agreements delayed entry of generics and cost consumers as much as $3.5 billion per year (OMB 2011a). The administration’s proposals would additionally accelerate access to affordable generic biologics by modifying the length of exclusivity on brand-name biologics, shortening the exclusivity period for brand-name biologic manufacturers from 12 years to seven years. Reducing this period would increase availability and encourage faster development of generic biologics. Together, these proposals would save $14.8 billion over FY2013–22 (OMB 2012a).

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http://www.epi.org/publication/wp293-cpc-budget-for-all-2013/

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