The Build Back Better Act Would Improve Health Care and Lower Costs
The Build Back Better Act, or H.R. 5376, is aimed at bolstering the recovery from the COVID-19 pandemic while also making major changes to strengthen the U.S. economy and support American families in the long run. The bill, recently passed by the U.S. House of Representatives, contains important provisions to lower health costs, improve access to care, and improve public health.
H.R. 5376 would expand the availability of affordable health insurance by building on the Affordable Care Act (ACA) to close the so-called Medicaid coverage gap and enhance financial assistance to people who buy coverage on their own through the marketplaces. The Congressional Budget Office (CBO) projects that these changes would reduce the number of uninsured people in the United States by 3.4 million. It would also dramatically lower prescription drug costs by limiting seniors’ out-of-pocket drug spending, allowing Medicare to negotiate prices for high-cost drugs, addressing drug price hikes, and capping cost-sharing for insulin at $35. This column highlights these major changes and several other important provisions related to health in the House-passed version of the bill.
Closing the Medicaid coverage gap
The Build Back Better Act would close a major hole in health coverage, ensuring that people in all states can access affordable, comprehensive health insurance. In 2019, an estimated 2.2 million low-income, uninsured Americans had incomes too low to qualify for marketplace plan subsidies yet were not eligible for Medicaid because their state refused to implement the ACA expansion. The legislation would make individuals with family incomes up to 138 percent of the federal poverty level (FPL)—including roughly 4 million who are uninsured—in the 12 nonexpansion states eligible to obtain marketplace plans with no premium and a 99 percent actuarial value so that they would face only minimal out-of-pocket costs. This fix for the Medicaid coverage gap would be available through 2025.
Better access to regular care, preventive services, screenings, and continuous coverage can improve health outcomes and reduce health disparities.
Closing the Medicaid gap would confer substantial benefits beyond expanded coverage eligibility. A previous Center for American Progress analysis estimated that covering people in the gap would save 7,000 lives per year, while also resulting in nearly 50,000 fewer evictions annually and a $2 billion reduction in medical debt in collection. It would also benefit populations in need of better care: An estimated 15 percent of people in the coverage gap have a disability, and better Medicaid access would help people with chronic conditions maintain their health. Furthermore, closing the Medicaid coverage gap is a major step toward reducing racial health inequities, as approximately 60 percent of uninsured people in the Medicaid coverage gap are people of color. Better access to regular care, preventive services, screenings, and continuous coverage can improve health outcomes and reduce health disparities.
Finally, closing the Medicaid coverage gap would improve rural communities’ access to care. Rural residents tend to have lower incomes, but many of the states that have not expanded Medicaid have extremely restrictive eligibility requirements. By reducing the demand for uncompensated care, the coverage expansion will also improve the financial sustainability of rural hospitals. Of the 10 states that have seen the most rural hospital closures since 2010, eight of them have not expanded Medicaid, and the other two only expanded Medicaid this year.
While the Build Back Better Act does offer a solution to one of the ACA’s glaring holes in coverage, states should still fully expand Medicaid under the ACA even if the bill becomes law. The bill’s fix for the Medicaid coverage gap is temporary and leaves enrollees at risk of becoming uninsured again in 2025. Additionally, by expanding Medicaid properly, states could reduce low-income families’ churn between the Medicaid program and marketplace plans as their incomes fluctuate or other life circumstances change. Expanding Medicaid would also allow state policymakers to better tailor coverage to the unique needs of their low-income residents.
Lowered prescription drug prices
The Build Back Better Act would make landmark changes to the federal government’s ability to obtain fair prescription drug prices, thereby lowering costs for patients. The House-passed legislation would authorize Medicare to negotiate the price of certain drugs directly with manufacturers, require rebates from drug price increases above the rate of inflation, and cap Medicare Part D out-of-pocket costs at $2,000 per year.
The bill also limits cost-sharing for insulin and insulin products at $35 for a 30-day supply in Part D plans as well as in private insurance. This means that diabetics with private coverage—which includes marketplace coverage and employer-sponsored insurance—would be protected from high out-of-pocket costs for life-sustaining medication.
In addition to ensuring lower prices for payers and patients, prescription drug reform also produces savings critical for other items in the legislative package. In total, the CBO estimates that the bill’s provisions related to prescription drugs would result in $297 billion in federal savings.
Negotiated prices for high-cost drugs
Currently, federal law prevents the government from participating in drug price negotiation, regulating drug prices, or limiting annual drug price increases for Medicare. As a result, drug companies often set prices as high as the market will bear; in 2021, some hiked drug prices by as much as 10 percent.
The Build Back Better Act would allow the secretary of the U.S. Department of Health and Human Services to negotiate prescription drug prices for Medicare drugs with the highest total expenditures, including those administered in physician offices (Part B) and those taken at home by patients (Part D). Beginning in 2025, a maximum of 10 drugs would be negotiation-eligible, increasing to 15 drugs in 2026 and 2027 and to 20 drugs in 2028. Eligibility for negotiation is limited to brand drugs with no competitors, which are usually more expensive as a result of the lack of competition, as well as all insulin products. The cap for negotiated prices would be proportional to a drug’s average manufacturer price. Negotiated prices would not take effect until nine years after approval or licensure for small molecule drugs or 13 years after for biologics. In addition to Medicare negotiation, some insulin products would be subject to a cost-sharing cap of $35 for Medicare and private insurance enrollees.
Critically, drug companies that do not participate in negotiation would face a steep excise tax, and companies that did not give access to a drug at the negotiated price would face civil monetary penalties. The CBO estimates that negotiation would save around $79 billion over the next 10 years, with minimal effects on new drug releases: It would result in one less U.S. drug launch over the next decade, and only 10 drugs out of an estimated 1,300 would not be developed over the next 30 years.
In addition to addressing the high prices of drugs, the Build Back Better Act also limits drug price increases. Prescription drug prices have been rising at a rate faster than inflation, compounding the issue of high launch prices. By requiring drug companies that increase the list price of a drug faster than the rate of inflation to pay a rebate to the federal government, the bill would produce $49 billion in federal savings over the next decade. The inflation rebates would apply to drugs without a competitor covered under Medicare Part B and to nearly all drugs covered under Part D.
Critically, the inflation rebate provisions also apply to private insurance, lowering out-of-pocket costs and premiums for individuals in employer-sponsored coverage and other commercial plans. The Purchaser Business Group on Health estimates that over 10 years, the inflation rebate could generate $250 billion in savings in the privately insured market.
The base year for these price increases—the year against which future price increases are measured—is 2021 in the House-passed bill. As the U.S. Senate takes up the legislation, it is important to note that pushing the base year into the future could erode the inflation rebate’s savings by incentivizing drug companies to hike prices going into 2022 or in later years in order to secure an even higher baseline price. Moreover, increasing the baseline price for these drugs would eliminate much of the savings that would accrue over time.
Medicare cap for out-of-pocket drug costs
There is currently no statutory limit to the amount seniors pay out of pocket for their prescriptions, despite Medicare beneficiaries having a median income of just $26,000 per year. Under Medicare Part D, seniors who reach a $4,130 drug spending threshold are responsible for 25 percent of the costs of their prescriptions until they qualify for catastrophic coverage at $6,550, at which point they are still responsible for 5 percent coinsurance on drug costs. The current benefit design exposes seniors to high and variable out-of-pocket costs; 9 in 10 older adults take prescription medications, and more than half of older adults take four or more medications.
The Build Back Better Act would cap Medicare Part D out-of-pocket expenses at $2,000 beginning in 2024, with adjustments for future changes in drug spending. This would produce substantial savings for many seniors: According to the Kaiser Family Foundation, 1.2 million Part D beneficiaries had out-of-pocket drug costs above $2,000 in 2019 and would have saved $1,216 per year had the cap been in place. Starting in 2025, seniors would also be able to spread their drug cost-sharing throughout the year, paying in monthly installments rather than facing high costs in the early months.
9 in 10
Share of older adults in the United States who take prescription medication
Estimated reduction in the number of uninsured people in the United States after closing the Medicaid coverage gap
Other reforms to improve health
The House-passed Build Back Better Act includes additional provisions that expand health care access and support better health. The bill would make Medicaid coverage permanently available 12 months postpartum, extend enhanced ACA marketplace subsidies, and add hearing services to Medicare Part B. It also contains policies to address social determinants of health and bolster investments in the nation’s public health infrastructure.
Improved maternal health
To improve maternal health outcomes, Build Back Better would require states to extend Medicaid postpartum coverage to a full 12 months after birth, rather than the current minimum of 60 days. The bill also grants an additional 15 percentage point increase in federal Medicaid funds to states that implement a maternal home health model, coordinating care between a pregnant person’s whole care team. This provision is particularly critical because Medicaid covers nearly half of all births in the United States. For people with employer-sponsored insurance, the majority of postpartum spending occurs past the 60-day threshold, which may shed light on postpartum spending patterns for other populations and underscore the importance of 12-month postpartum Medicaid coverage.
The Build Back Better Act also includes provisions from the Black Maternal Health Momnibus Act, a package of 12 bills that aims to address the Black maternal health crisis in the United States by investing in the maternal health care system, addressing maternal social determinants of health, and ensuring pregnant and postpartum people are protected from the effects of COVID-19. Collectively, these changes will not only improve maternal health but also help address the wide racial disparities in maternal mortality: Black and Native American women are around three times more likely to die from pregnancy-related complications than white women.
More affordable health insurance
The American Rescue Plan Act (ARPA) temporarily enhanced the financial assistance available through the ACA by increasing existing premium tax credits and making financial assistance newly available to people with family incomes above 400 percent of the FPL. The Build Back Better Act extends these changes through 2025, ensuring that these enrollees can continue to receive high-quality, affordable coverage. The CBO projects that this part of the bill would reduce the number of uninsured people by 1.2 million.
Importantly, these provisions will greatly benefit communities that faced high premiums under the original ACA subsidy formula. Rural areas consistently have higher uninsurance rates than urban communities and also face higher premiums, fewer plan options, and greater premium increases. ARPA helped close the affordability gap, making $0-premium coverage available to about two-thirds of uninsured individuals in rural areas.
Public health and pandemic preparedness
Chronic underinvestment in the public health system has led to declining health, widening health disparities, and a lackluster response to the pandemic, immeasurably costing the United States in lives lost and economic damage. Federal investments are needed to build a strong and resilient public health system to meet future needs.
The Build Back Better Act would invest $10 billion for pandemic preparedness, including $7 billion for the Centers for Disease Control and Prevention (CDC), along with grants to state, territorial, local, or tribal health departments to support core public health infrastructure activities; $1.4 billion for federal, state, and local public health laboratory infrastructure; $1.3 billion to strengthen the Strategic National Stockpile and support manufacturing of vaccines; and $300 million for improving infrastructure at the U.S. Food and Drug Administration. These investments are crucial for upgrading labs and information technology infrastructure, growing the public health workforce, developing and deploying vaccines and treatments, tracking threats, and supporting ongoing efforts to defend against enduring and emerging disease and illness.
Investment toward social determinants of health
The most powerful predictors of an individual’s health are education, income, employment, housing, and healthy neighborhoods. Where people are born, live, learn, work, play, worship, and age has a wide-ranging impact on people’s health, well-being, and quality of life; these conditions in turn contribute to persistent health disparities and inequities across the country. The Build Back Better Act would invest in critical programs that address social determinants of health such as education, child care, housing, nutrition, and climate change. Expanding the child tax credit and helping families afford stable housing, for instance, would help provide economic stability for families, which is critical for health. The legislation also makes meaningful investments to fund initiatives that combat climate change and reduce the federal carbon footprint.
Hearing services coverage under Medicare
Currently, Medicare does not cover hearing services for most beneficiaries, even though around 45 percent of Medicare beneficiaries report difficulty hearing. Hearing care is one of the most expensive services that Medicare does not currently cover, with average annual out-of-pocket spending reaching more than $900 in 2018—higher than either dental or vision out-of-pocket spending. Starting in 2023, the Build Back Better Act would require Medicare Part B and Medicare Advantage plans to cover hearing services. The benefit would include hearing aids for enrollees with moderately severe to profound hearing loss.
The Build Back Better agenda makes important investments toward U.S. economic stability, families’ well-being, and better health. By passing the House’s Build Back Better legislation, the Senate can expand coverage to millions and grant Americans relief from high prescription care costs. Closing the Medicaid coverage gap would finally deliver an affordable option for coverage to more than 2 million uninsured people. The drug pricing reforms would place a check on drug companies’ ability to set high drug prices and give seniors new protection from out-of-pocket costs. And the bill would improve maternal health and help ensure that the country’s health care system is more resilient against and better prepared for future pandemics.
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