Insulin Bill Makes for Dubious Policy, Includes Fake Offsets

As the calendar turns to April, the U.S. House of Representatives is planning to vote on legislation that would cap insulin costs for all Americans who are privately insured or on Medicare Part D at no more than $35 per month in out-of-pocket payments. While the bill’s sponsors may have good intentions, and while Congress can certainly act to provide support for Americans facing high prescription drug costs, NTU has several concerns about the impact the “Affordable Insulin Now Act” will have on America’s taxpayers and broader health care system.

The legislation would impose new cost-sharing limits on insulin for almost all privately insured Americans, and would extend these limitations to the tens of millions of Americans on Medicare Part D. According to a Congressional Budget Office (CBO) cost estimate, the bill’s requirements would cost federal taxpayers around $11 billion ($6.6 billion in higher spending and $4.8 billion in reduced revenues). It is likely this cost estimate is due to anticipated higher premiums in both Medicare Part D and the Affordable Care Act individual marketplace. In these programs, higher premiums usually mean higher federal subsidies for health coverage that are paid for by taxpayers.

Indeed, proponents of the legislation have not properly addressed the impact this legislation would have on premiums in both Part D and the private marketplace. The Affordable Insulin Now Act puts a cap on the out-of-pocket costs owed by insured enrollees for insulin products, but it does not ultimately change the price of insulin paid for by health insurers. If insurers face higher costs for covering these drugs, they will likely be forced to pass those costs on to customers in the form of higher premiums or higher cost-sharing on other health products and services. And, as noted above, some higher premiums will result in higher costs for taxpayers, who bear some of the burden for covering seniors under Part D and low- and middle-income Americans on the ACA marketplace.

Perhaps the most troubling part of the legislation, though, is the proposed offset for the cost of the legislation. House Democratic leadership is proposing to ‘pay for’ the legislation’s $11 billion cost with a shameless budget gimmick that NTU and NTU Foundation have called out before: delaying a Trump administration “rebate” regulation that was projected to raise federal government costs but was never likely to be implemented in the first place.

As NTU wrote in July of last year, when a bipartisan group of lawmakers proposed using rebate rule delay as a pay-for in the major infrastructure bill:

“This phantom $49 billion “pay for” was called “Washington at its worst” by one health industry lobbyist speaking to The Washington Post. In short, the Biden administration has delayed until 2023 a Trump administration regulation that would change how prescription drug discounts are handled by insurers and pharmacy benefit managers (PBMs). Because the Congressional Budget Office projected that the so-called rebate rule would increase federal spending in Medicare and Medicaid by about $177 billion over a decade, due to a rise in Medicare premiums (and therefore, taxpayer-funded subsidies for Medicare premiums), lawmakers get to count a further delay in the rule (beyond the Biden administration’s one-year delay) as “savings” for the federal government. Reports indicate Congressional Democrats may use additional phantom “savings” from the rebate rule in their larger reconciliation bill by repealing the rebate rule entirely.

…This rule has never been implemented, and there’s no clear indication that the Biden administration would have followed through on implementing the regulation even after their one-year delay. And even if the Biden administration had implemented the rule, there’s little clarity as to whether the rebate rule would have actually cost federal taxpayers over $177 billion over the decade. In short, delaying the rebate rule does not present real, tangible savings to taxpayers, like a reduction in federal spending would.”

Unfortunately, it seems like the rebate rule is becoming yet another tried-and-true budget gimmick that Congress dips into again and again, in order to appear as if they are paying for new spending. And according to the CBO estimate cited above, because the rebate rule is projected to offer $20 billion in phantom savings – not just the $11 billion needed to cover the insulin bill’s costs – the revised insulin legislation proposes spending another $9 billion on a broad-based Medicare Improvement Fund. That means $9 billion more will ultimately be spent without real offsets and, in our view, be paid for by taxpayers in the long run with higher debt and deficits.

To be clear, high out-of-pocket costs for insulin are a real issue for many Americans. NTU continues to support several bipartisan and meaningful proposals that would provide relief for many Americans, including:

  • An out-of-pocket cap in Medicare Part D, along with Part D benefit redesign that would actually save taxpayers money in the long run;
  • An ongoing Medicare insulin model that represents a public-private partnership between the federal government, insurers, and drug manufacturers that has the potential to meaningfully reduce out-of-pocket insulin costs for up to millions of seniors on Part D; and
  • Allowing Part D enrollees to spread their out-of-pocket burdens over the 12 months of a plan year, rather than having to owe major bills in the first or second months of a new plan year.

This legislation could undermine the ongoing Medicare insulin model, Part D redesign efforts, and reported bipartisan work in the Senate to provide insulin cost relief for American patients who are struggling. The House should go back to the drawing board and focus on more bipartisan opportunities.