CBO: Senate surprise billing legislation would save feds $7B over next decade

Marriott International CEO Arne Sorenson has been called to testify at a March 7 Senate hearing regarding data breaches in the private sector.
The Congressional Budget Office estimates a Senate package tackling surprise billing and drug prices will save the government $7 billion. (Getty Images/lucky-photographer)

Major Senate legislation to tackle surprise medical bills and high drug prices would save the federal government roughly $7 billion over the next decade, according to the nonpartisan Congressional Budget Office (CBO).

The estimate released Tuesday could bolster the package’s chances for passage through the Senate by allaying concerns over the impact on the deficit. The Senate Health, Education, Labor and Pensions Committee advanced the legislation out of committee to the full Senate earlier this month.

RELATED: Sweeping Senate healthcare proposal would address surprise billing, transparency

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The proposal did not say what savings might be realized under alternative proposals that might have called for arbitration, a tactic for addressing surprise bills that has been heavily backed by providers.

CBO estimates the legislation would increase federal spending by about $18.7 billion and increase revenue by $26.2 billion from 2019 to 2029, resulting in savings of $7.6 billion. 

“That estimate accounts for effects on federal subsidies for insurance purchased through the marketplaces and for the effects that arise from lower premiums for employment-based insurance,” the CBO said.

The legislation aims to boost transparency on drug prices and address surprise billing. 

A majority of the increased federal revenue would come from the portion of the legislation that targets surprise medical bills. The legislation calls on insurers to pay a median in-network rate for out-of-network care for surprise bills. It would also ban balance billing, a practice where a provider bills the patient for any difference between the insurer payment and the provider’s charges.

CBO estimates that the surprise medical bill portion would increase revenue by $23.8 billion and reduce direct spending by $1.1 billion for total savings of $24.9 billion through 2029.

“That estimate accounts for effects on federal subsidies for insurance purchased through the marketplaces and for the effects that arise from lower premiums for employment-based insurance,” the CBO said.

RELATED: Moody's: Surprise billing solutions hurt hospitals

The CBO says the strategy employed in the bill would carry some additional costs for insurers such as the cost of calculating the median in-network rates. Still, it says premiums would decline because the bill would require insurers to reimburse out-of-network providers through their own median rates for an in-network provider.

CBO also estimates that there will be a small decline in the number who claim the itemized medical tax deduction, which would boost federal revenue.

The second major portion of the legislation would modify the Food and Drug Administration’s regulatory framework for approving drugs and biologics. The legislation would incorporate the CREATES Act, a bill that would improve the ability of generic and biosimilar drug companies to sue brand-name companies for denying samples for FDA-required testing.

A major increase in federal spending under the estimate is the extensions for funding for community health centers, the Indian Health Services and several other federal programs. Overall, these extensions will increase the deficit by $24.3 billion through 2029.

But other savings and increased revenue throughout the package will on net decrease federal spending by $7 billion over the next decade.

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