House Edges Closer to Vote on Paid Leave, Drug Pricing Reforms

House Democratic leaders hope to pass a revised budget reconciliation package within weeks that adds back new versions of earlier paid leave and drug pricing reforms and drops a host of prior health care proposals. A planned House vote last week on the Build Better Act was put off when centrist Democrats wary of further deficit spending demanded to see official Congressional Budget Office estimates of how much the measure will cost and how much will be offset by new revenue. While those estimates are expected shortly, it is not clear if they will clear the way for House approval, and steep obstacles lie ahead in the Senate. 

Paid leave battle.  After scrapping a paid leave proposal to cut costs, House Democrats revived an earlier plan in the revised bill that would establish a new entitlement program guaranteeing paid family and medical leave for all workers. Starting in 2024, the program would guarantee up to four weeks (reduced from 12 weeks) of paid family and medical leave for all workers, which would be available through either a public program administered by the Social Security Administration, existing state paid leave programs, or employer programs.  

Funding for these benefits would come from general federal revenues, and eligible employers could receive partial reimbursement from the government for paid leave benefits they provide to their workers instead of the benefits their workers could receive from the Treasury program, under certain conditions. 

Notably, the new proposal retains a potential reimbursement for eligible employers of 90% of certain paid leave costs. The measure also keeps a “grandfathering” option for states with already-enacted laws that meet the federal standard and allows those programs to be reimbursed by the Treasury. The legislation does not preclude any new state and local paid leave laws, but such “non-legacy” states would be ineligible for federal reimbursement.

While large employer groups have expressed support for universal paid leave, the American Benefits Council and others have voiced concerns with the proposal and continue to urge Congress to provide a nationally uniform compliance standard for multistate employers now dealing with a patchwork of state and local requirements. 

Soon after learning of the new House leave proposal, a key Senate Democratic holdout on the reconciliation bill registered his opposition. Senator Joe Manchin, D-WV, who could block the bill in the evenly divided Senate, said he did not support adding paid leave to the package because of cost concerns. Manchin also said that he may vote to kill a final package over concerns about its effects on the debt and inflation.  

Agreement on drug costs. After weeks of haggling, Democrats in both chambers last week also came together on a plan to control drug prices after another prominent holdout, Senator Kyrsten Sinema, D-AZ, signed off on the deal. Based on a more extensive proposal in an earlier House version of the Build Back Better Act, new bill language would allow Medicare to negotiate with manufacturers on a limited number of drugs in the Part B outpatient and Part D retail drug programs.  The program would negotiate prices for 10 drugs beginning in 2023, with those prices taking effect during the 2025 plan year. That number would increase up to 20 drugs per year starting in 2028. 

The bill also caps seniors' out-of-pocket costs at $2,000 annually and limits monthly out-of-pocket costs, including limiting patient cost-sharing for insulin at $35 per month.

Unlike the original legislation, the bill does not extend Medicare-negotiated prices to the commercial market.  It would require drugmakers to rebate to the government any profits made from increasing the price of their products beyond the level of inflation starting in 2022.  Employers would not receive a rebate directly, but the prices they pay would be included in calculating the rebate, which could limit future price increases. In addition, the bill sets new PBM reporting requirements to employers regarding rebates. 

Holdover provisions.  Proposals held over in the bill from earlier versions of the Build Back Better Act include the following:  

  • Temporary (2022-2025) reduction of the Affordable Care Act employer shared-responsibility affordability threshold percentage to 8.5%; after 2025, threshold reverts to 9.5% (not indexed).

  • Civil monetary penalties against plan sponsor/administrator/insurer for mental health parity violations.

  • Reinstate, expand bicycle commuting benefits.

  • Extend temporary expanded/enhanced ACA marketplace premium tax credits through 2025 (currently set to expire after 2022).

  • Medicare hearing benefit.

Deleted provisions. Earlier proposals dropped from the new bill include: 

  • Continuation of the temporary increase of dependent care tax credits (expires in 2021).

  • Continuation of the temporary increase in the exclusion amount for employer-provided dependent care assistance (expires in 2021). 

  • Continuation of the temporary HSA/HDHP-friendly telehealth rule (expires 12/31/2021).

  • Medicare dental and vision benefits.

Uncertain Senate future. If the bill clears the House, an uncertain future awaits in the Senate, where moderate Democrats are set to make extensive changes. Democrats need all of their 50 senators to pass the bill under the reconciliation process, which requires a simple majority instead of the 60 usual votes. The process also requires the legislation to be directly related to the federal budget, so the Senate parliamentarian could knock out some provisions. Both chambers must pass identical legislation for the president’s signature, so intraparty negotiations over the final size and scope of the package will likely continue into December.

Geoff Manville
by Geoff Manville

Partner, Mercer’s Law & Policy Group

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