Senate passes infrastructure bill that restarts sequester cuts, delays rebate rule

The Senate passed a roughly $1 trillion bipartisan infrastructure package paid for in part by delaying a controversial rebate rule and restarting Medicare payment cuts.

The package, which passed the chamber by a 69 to 30 vote on Tuesday, now heads to the House which is expected to approve it.

The legislation includes new funding for various projects involving roads, broadband access and other infrastructure areas.

But to help pay for the bill, the Senate looked to several healthcare policies that provided a mixed bag to providers and payers.

The package would reinstall starting in 2022 a 2% payment cut to all Medicare payments to providers. The cut was installed as part of sequestration, but Congress paused it last year at the onset of the pandemic.

The moratorium on the cut has been extended several times since then, but now expires after this year.

Several provider advocacy groups have decried resuming the cuts, noting that COVID-19 cases are surging again due to the highly transmissible Delta variant.

“Extending sequestration imposes a destabilizing element to health care access in the face of years of experience with cost increases that are not adequately accounted for in Medicare payments,” according to a July 15 letter from a group that included the American Hospital Association and American Medical Association to congressional leaders.

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But the bill would restart the cuts next year and run them through 2031. Doing so will add roughly $8 billion to help pay for the infrastructure package.

Another pay-for calls for an additional three-year delay of a controversial rule that gets rid of the safe harbor for Medicare Part D drug rebates.

The rule was originally expected to go into effect in 2022 but was delayed by the Biden administration until 2023.

The Trump-era regulation gets rid of the safe harbor for Part D rebates and replaces it with a new safe harbor for point-of-sale discounts. Former Health and Human Services Secretary Alex Azar previously said that the rule would get rid of a “kickback” that drugmakers have to pay to get on the Part D formulary for pharmacy benefit managers and insurers.

PBMs and insurers launched a stiff opposition effort against the rule, arguing that it will raise Part D premiums for seniors.

The additional delay of three years deals a major blow to the pharmaceutical industry, a major proponent of the regulation.

But the legislation does include some healthcare priorities, chief among them a requirement for the federal government to only purchase personal protective equipment from domestic manufacturers. The package also calls for any contract to buy PPE to run for at least two years, a nod to the economic uncertainty domestic PPE makers face.

Most of the PPE supply chain is located overseas, which hit major delays and constrained supplies of vital equipment just as demand started to accelerate at the onset of the pandemic.

Now that the Senate has finished the bipartisan package, Democrats will turn their attention to crafting a $3.5 trillion package. The legislation is expected to include major Democratic healthcare priorities such as expanding hearing, dental and vision benefits to Medicare and giving the program the power to negotiate lower drug prices.