1 Big Winner and 1 Big Loser From Congress’s Year-End Spending Deal

1 Big Winner and 1 Big Loser From Congress’s Year-End Spending Deal

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Plus, US health-care prices are off the charts
Tuesday, December 17, 2019

1 Big Winner and 1 Big Loser From Congress’s Year-End Spending Deal

Christmas came early on Capitol Hill as lawmakers racing to finalize a nearly $1.4 trillion year-end deal to fund the government through September 30 loaded up their must-pass 2,300-plus-page package of spending bills with enough policy goodies to make sure almost everybody gets something to show off over the holidays.

The House on Tuesday passed two packages comprising the 12 required annual spending bills, sending them to the Senate, which is expected to approve them before leaving for the holidays.

“The number of issues handled in this bill is stunning. It contains major changes in health care policy, extends flood insurance, reauthorizes the Export-Import Bank for seven years, extends the terrorism insurance program and reauthorizes money to rebuild the Kennedy Center, and so much more,” Politico’s Playbook noted. “If you are a company or an entity with a legislative priority, and you couldn't get it in this year-end package, call your lobbyist for a chat. Or better yet, look for a new one.”

Republicans get to tout a $22 billion increase in defense spending, among other things, while Democrats can point to $25 million in federal funding for gun violence research, $425 million in election security grants and a $208 million increase for the Environmental Protection Agency.

And there’s much more. As part of the whirlwind dealmaking, congressional leaders and White House officials reached a late-night agreement Monday to extend some tax breaks through 2020, with longer extensions for provisions covering biodiesel production and short-line railroad maintenance.

“The deal would renew numerous tax provisions that either expired at the beginning of 2018 or this year, or were set to expire as of Jan. 1, 2020,” Roll Call reports. “They include deductions for mortgage insurance premiums, college costs and large medical expenses; excise tax breaks for craft brewers and distillers; credits for employer-paid family and medical leave, investors in low-income communities, and faster depreciation for racehorses and motor sports complexes, among others." Democrats failed to get some of what they had pushed for, though, including an expansion of tax breaks for renewable energy and electric vehicles and tax credits for low-income families.

In all, the package passed by the House Tuesday would increase spending by $49 billion over fiscal 2019 and raise deficits by $391 billion over 10 years, while the agreement to extend some lapsed or expiring tax breaks and other provisions will cost about $54 billion more.

While there were plenty of winners from the year-end scramble, here’s a look at a one that stood out — and one obvious loser.

1 Big Winner: The Health Care Industry

The repeal of the Affordable Care Act’s health insurance, medical device and “Cadillac” health plan taxes was a massive win for the health care industry. The industry also got at least a temporary reprieve on two other key issues as Congress failed to pass major legislation addressing surprise medical bills and prescription drug prices. (On the latter, the year-end deal includes legislation to help generic drugs get to market faster, but broader, more aggressive plans to lower drug prices have thus far failed to win consensus among lawmakers.)

These two tweets, from Bloomberg News reporter John Tozzi and billionaire philanthropist and health-care activist John Arnold sum up the scoreboard.

The question now is whether Congress will be able to tackle major legislation to lower drug prices and health-care costs in the middle of next year, with the November elections looming. By agreeing to fund community health-care centers and other health-care programs until May 22, lawmakers set themselves a new deadline to potentially address surprise medical bills and drug prices — and provided themselves with must-pass legislation that could be used as a vehicle for billing and prescription pricing reforms. “There are some reasons the strategy might work,” The Washington Post’s Paige Winfield Cunningham writes. “And there are plenty of reasons it might not.”

Sen. Lamar Alexander (R-TN), the chair of the Senate Committee on Health, Education, Labor and Pensions, said Monday that he intends to keep surprise medical billing at the top of Congress’s to-do list in 2020 until the legislation gets done. “Protecting patients from surprise billing is something almost everyone wants fixed,” he said in a statement. “The only people who don’t want this fixed are the people who benefit from these excessive fees, including the private equity groups which control three of the largest companies that handle billing and staffing for emergency rooms.”

1 Big Loser: Deficit Hawks

The relatively small group of lawmakers and budget watchdogs concerned about the rapid rise of the federal debt and deficit took it on the chin … again. Washington analysts had long forecast that deficit-financed increases in both defense and non-defense spending, as agreed to by Congress in July, was the surest path to a bipartisan budget deal for fiscal year 2020. But the burst of year-end dealmaking raised projected deficits significantly.

The repeal of three taxes meant to help pay for the Affordable Care Act combined with Congress’s renewal of a bundle of tax extenders will add $500 billion to the federal budget gap over 10 years once added interest costs are factored in, according to the Committee for a Responsible Federal Budget — and that’s on top of the effects of the 2017 tax cuts and the additional spending from the two-year budget deal passed this summer.

After the tax extenders legislation passed, CRFB President Maya MacGuineas tweeted, “What a bucket of garbage this bill is.”

It’s just the latest in a long string of setbacks for fiscal hawks. “The only things designed to reduce spending since the debt ceiling-created Super Committee nearly ten years ago have ALL been eliminated. The conversion of the Tea Party to born-again supply-side, modern monetary theorists is now complete...at least until a Democrat wins the White House when we suspect their inner deficit hawks will soar,” Cowen Washington Research Group analyst Chris Krueger wrote in a note to clients.

Op-Ed of the Day

“I find it curious that few of the ‘deficit hawks’ are asking if it is fiscally prudent to be spending more on defense than the next 10 countries combined — more than half of our nation’s discretionary budget.”

– Sen. Bernie Sanders (I-VT), a Democratic presidential contender, in a Washington Post op-ed decrying what he calls the hypocrisy of deficit hawks regarding increases in military spending, tax breaks for the wealthy and subsidies for the fossil fuel industry.

US Health-Care Prices Are Off the Charts

A CT scan of the abdomen typically costs more than $1,000 in the U.S., but the same procedure in the U.K. costs $470, while in the Netherlands it costs just $140. Those numbers come from a new report, released Tuesday by the Health Care Cost Institute and the International Federation of Health Plans, that compares private insurance health-care prices in the U.S. to those in a sample of other wealthy countries — and finds that the U.S. is just about always the most expensive.

“The median prices paid by private insurance for health care services in the United States was almost always higher than the median prices in the eight other countries included in the iFHP study,” the report says. “Figure 1 [below] shows the prices paid for medical services in each country as a percent of the US price.” Note that U.S. prices are marked by the red dots. In almost every case, the prices in other countries are just a fraction of the U.S. price. (Avoid getting cataract surgery in New Zealand, apparently.)

The report also looks at drug prices, and finds that with only one exception, prices in the U.S. are the highest in the group. Harvoni, used to treat hepatitis C, costs $4,840 in South Africa and $12,780 in the Netherlands, but it costs more than twice that ($31,620) in the U.S. Similarly, a Humira pen, used to treat arthritis, costs $860 in the U.K., but $4,480 in the U.S.

“Drug prices for most countries were less than half the US price for most of the administered and prescription drugs included in the study,” the report says.

Writing about the report Tuesday, Vox’s Dylan Scott said that high medical prices in the U.S. have many causes, but one in particular stands out: “The US is still the wealthiest country in the world. It’s home to the world’s leading biopharmaceutical industry. It tends to have the most cutting-edge treatments. All this contributes to higher prices here than elsewhere. But one big and unavoidable culprit is the lack of price regulation.”

Surprise Medical Billing Drives Up Spending by $40 Billion a Year: Report

It looks like Congress won’t be doing anything about surprise medical bills this year, but a new study in Health Affairs shows why the issue will likely remain font and center next year.

Analyzing reams of insurance data, researchers found that many out-of-network bills come from a small percentage of medical specialists who typically work in emergency rooms at for-profit hospitals and who therefore cannot be avoided by patients. While out-of-network charges are produced by only a small percentage of hospitals and practitioners, the bills that do emerge are sometimes much higher than average and push up spending by private insurers by billions of dollars — costs that are eventually reflected in everyone’s premiums.

“When physicians whom patients cannot avoid can work out of network from in-network hospitals, it exposes patients to significant financial risk and raises physicians’ in-network payments,” the study says. “Anesthesiologists, pathologists, radiologists, and assistant surgeons are out of network in approximately 10 percent of cases [in the study]. We estimated that these specialists’ ability to bill out of network raises total health care spending for people with employer-sponsored insurance by approximately 3.4 percent ($40 billion).”

Dan O'Neill, a health policy fellow at the Robert Wood Johnson Foundation, did some quick back-of-the-envelope math to calculate the average cost for policyholders, based on the study in Health Affairs: “To boil this down to a headline: The business practice of surprise billing costs a typical American family on a private health plan about $1,000 per year (+/-).”

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