The sweeping Senate healthcare bill that tackles surprise billing and a number of provisions aimed at boosting transparency around provider-payer contracts would result in savings of $7.6 billion for the federal government over the next 10 years, according to an estimate released Tuesday by the Congressional Budget Office and Joint Committee on Taxation.
The biggest savings come from banning surprise bills. The legislation essentially caps payments to out-of-network providers in the event of a surprise bill. It would allow insurers to pay out-of-network providers the local median in-network rate based on contracts they have with others in a geographic region. Patients would be allowed to pay in-network rates for out-of-network care.
The CBO expects premiums to decline at least 1% as a result of insurers having to pay less to out-of-network providers. This downward push on premiums would in turn help reduce government spending as it provides subsidies to help some Americans purchase coverage on the Affordable Care Act exchanges.
The estimate from budget scorekeepers could add momentum to the bill's passage.
The association that advocates for large employers cheered the CBO's findings and said the analysis proves the bill works as intended. The ERISA Industry Committee called for Congress to act swiftly.
"Employees in every industry sector would benefit under S. 1895, as would Veterans, those on Medicare and insurance exchanges, etc. More generic drugs would be available, including biosimilars, and families would no longer face financial peril from egregious surprise medical bills," the ERISA Industry Commitee said in a statement.
Bill sponsor Sen. Lamar Alexander, R-Tenn., urged the Senate to pass the bill, with healthcare costs a top concern for many Americans.
"So instead of remaining stuck in a perpetual partisan argument over Obamacare, the Senate should pass this bill to lower the cost of what Americans pay for health care out of their own pockets," he said in a statement.
The bill comes amid increasing pressure from consumers hit with bills they weren't expecting after an emergency air ambulance ride or a surgical procedure. The Lower Health Care Costs Act passed out of committee with bipartisan support last week. Alexander touted that 65 senators contributed to the bill's 55 provisions.
There are also competing proposals in Congress, however.
They take different approaches to solving the surprise billing dilemma. Some, like the bill CBO just scored, set benchmark rates for out-of-network services, which payers advocate. Others focus on an arbitration process for determining payment, an approach favored by providers.
A House bill, one version of which took that approach, is being marked up in the Energy and Commerce Committee on Wednesday.
While much of the focus has been on the bill's efforts to thwart surprise billing, it tackles many other topics, including drug costs, and prohibits contract agreements between payers and providers. The bill also targets practices of pharmacy benefit managers in the commercial market, banning spread pricing and requiring PBMs to pass back 100% of drug manufacturer rebates to a health plan.
There are five main sections to the bill.
One section, focused on public health, is expected to primarily increase federal deficit, while most others come at a savings, the CBO estimates. The fifth section on information sharing is expected to increase the deficit though, quite smaller in comparison to public health. The drug pricing section would result in total savings of $4.6 billion, according to the report.
The final tally for the full bill shows a direct spending increase of about $18.7 billion, but a revenue increase of $26.2 billion, outpacing direct spending. The surprise billing ban provision alone would increase revenues by $23.8 billion and reduce direct spending by $1.1 billion, according to the report.
However, the CBO cautioned there are many uncertainties within the bill.
Using surprise billing as an example, the legislation does not define how to calculate the in-network median rate. It also doesn't specify how to define the market for calculating those in-network rates, raising questions about how broad or narrow insurers may interpret a market, the report notes.
It's also unclear how federal and state agencies would implement the law.