On August 7, 2022, the United States Senate passed the Inflation Reduction Act of 2022, the reconciliation agreement reached between Senate Majority Leader Chuck Schumer and Senator Joe Manchin. The bill contains provisions aimed at lowering the cost of health care for American families and dedicates more than $300 billion over ten years toward reducing the deficit. These provisions are largely similar to the versions contained in the reconciliation bill the House passed in late 2021, the Build Back Better Act—but there are significant differences between the two chambers’ bills.
This commentary describes the health care provisions that are included in the Inflation Reduction Act and the impact they would have on access to health care in the United States. After this, it describes several provisions from the Build Back Better Act that were not included and makes the case for why Congress should include these policies in future legislation this session.
What the Inflation Reduction Act Does Right:
- Requires Medicare to negotiate drug prices and limits out of pocket drug spending for seniors
- Extends the American Rescue Plan’s health insurance subsidies
Where Congress Still Needs to Act:
- Close the Medicaid coverage gap
- Invest in maternal health
- Extend postpartum Medicaid nationwide
The Inflation Reduction Act Would Improve Access to Health Care
The Inflation Reduction Act of 2022 has two major provisions that would significantly expand access to health care: requiring the secretary of the Department of Health and Human Services (HHS) to negotiate prices for prescription drugs under the Medicare program, and extending the subsidies for marketplace coverage established by the American Rescue Plan Act of 2021.
Lowering Prescription Drug Prices
Like the Build Back Better Act, the Inflation Reduction Act includes a significant change to prescription drug pricing policy by allowing the HHS secretary to negotiate the prices of drugs paid for by the program, though the provision requiring negotiation of all insulin products was not included. This provision would eliminate a prohibition on price negotiation that has existed since the inception of Medicare Part D, and it is one of the most significant aspects of the bill.
Under the text the Senate passed…the secretary would be required to negotiate prices for ten drugs in 2026, increasing to twenty drugs in 2029 and subsequent years.
The bill would also prohibit drug companies from raising the price Medicare pays for a drug faster than inflation, and it would cap out-of-pocket spending at $2,000 for Part D drugs (the drugs that Medicare enrollees take at home). About 1.4 million seniors without subsidies had out-of-pocket spending on drugs of $2,000 or more in 2020, according to the Kaiser Family Foundation.
However, these provisions differ from the House version in a significant, beneficial way. The Build Back Better language allowed, but did not require, the secretary of HHS to negotiate drug prices. Under the text the Senate passed, however, the secretary would be required to negotiate prices for ten drugs in 2026, increasing to twenty drugs in 2029 and subsequent years.
The Congressional Budget Office (CBO) estimates that this section as written would save the federal government nearly $290 billion over the next ten years. These savings are used to fund much of the rest of the bill, constituting around 40 percent of the total revenue raised.
Making Marketplace Coverage More Affordable
In addition to the drug pricing provisions, the Inflation Reduction Act also extends the enhanced subsidies that the American Rescue Plan Act (ARPA) established for two years. Passed in March 2021, ARPA expanded the eligibility for marketplace insurance premium subsidies, and it made those subsidies more generous for people who were already eligible. These provisions significantly drove enrollment in marketplace coverage: more than 2.8 million people newly enrolled during the COVID-19 Special Enrollment Period (SEP) in 2021, and more than 3 million people newly enrolled in marketplace coverage during the 2022 Open Enrollment Period (OEP).
During these enrollment periods, people of color were more likely to enroll in coverage than in previous years’ periods. Black people were four percentage points more likely to enroll in marketplace coverage during the COVID-19 SEP than the 2020 OEP, and one percentage point more likely during the 2022 OEP than the 2021 OEP. Similarly, Hispanic/Latino people were three percentage points more likely to enroll during the COVID-19 SEP and one percentage point more likely during the 2022 OEP than the 2020 and 2021 OEPs, respectively.
These subsidies are crucial to achieving universal coverage and closing disparities in coverage rates.
These subsidies were temporary and are currently set to expire at the end of this year, meaning millions of Americans enrolled in marketplace coverage will face significantly higher premiums during the 2023 OEP. Recent research estimated that, without extending these tax credits, three million people would lose health care coverage. Under both Build Back Better and the Inflation Reduction Act, however, these subsidies will be extended through the 2025 plan year, costing about $64 billion over the same period and ensuring that marketplace enrollees will have continued access to more affordable coverage and promoting more equitable health coverage. These subsidies are crucial to achieving universal coverage and closing disparities in coverage rates.
Congress Still Needs to Pass Build Back Better’s Historic Investments in Health Equity
Despite pulling from—and even improving upon—some provisions of Build Back Better, the Inflation Reduction Act excluded several aspects that were present in the House-passed reconciliation bill that are vital to achieving the goals of lowering the cost of and improving the value of health care for the American people. This section outlines three provisions that Congress should pass separately to improve health equity. In total, these provisions would cost around $60 billion over the next ten years, making them a low-cost, high-value investment in Americans’ health.
Closing the Medicaid Coverage Gap
Under the Affordable Care Act, states were required to expand Medicaid to all adults in their state who earn 138 percent or less of the federal poverty level. The Supreme Court ruling in NFIB v. Sebelius, however, eliminated this requirement, making expansion optional for states. This ruling created the so-called Medicaid coverage gap, where individuals have incomes that are too high to qualify for traditional Medicaid but too low to be eligible for ACA subsidies. To date, thirty-eight states and the District of Columbia have expanded their Medicaid programs under this provision.
The remaining twelve states that have not expanded Medicaid are primarily located in the South, and are generally considered unlikely to expand their programs. Around 2.2 million people with incomes below the federal poverty level but too high for their state’s Medicaid program lived in these states in 2019, putting them in the Medicaid coverage gap. This population is disproportionately likely to be people of color, with around 60 percent being Latino or Black, despite being only around 35 percent of the non-expansion states’ populations. Expanding Medicaid is consequently an issue of health equity.
The House-passed Build Back Better Act would have closed this coverage gap by allowing people in non-expansion states to purchase subsidized marketplace coverage through 2025. Under this approach, enrollees would pay no premiums and have their cost-sharing subsidized to around one percent of annual costs. While this approach is less ideal than a full expansion under the ACA, it would provide an estimated 4 million uninsured people access to high-quality, low-cost health coverage for several years. The CBO estimated that this provision in Build Back Better would cost $57 billion over ten years.
As states throughout the South and Midwest move to ban abortion care, access to health coverage through Medicaid is even more essential for the more than 800,000 women of reproductive age in the coverage gap.
Closing the Medicaid coverage gap is crucial to achieving the Inflation Reduction Act’s goal of lowering health care costs for the population who faces the largest financial barrier to care. This is especially important in the light of the Dobbs decision, which overturned the federal right to abortion established in Roe v. Wade. As states throughout the South and Midwest move to ban abortion care, access to health coverage through Medicaid is even more essential for the more than 800,000 women of reproductive age in the coverage gap. Eliminating abortion access and forcing an individual to carry a pregnancy to term is unacceptable in any circumstance, but is particularly worrying in states where so many people who can become pregnant lack basic health coverage. The Medicaid coverage gap, maternal health crisis, and abortion access crisis all disproportionately impact women and pregnant people of color, making closing the coverage gap crucial to reproductive and maternal health outcomes—a policy all the more necessary now that Roe has been overturned.
Addressing the Maternal Health Crisis through the Momnibus
In addition to not closing the Medicaid coverage gap, the Senate reconciliation bill also does not include the provisions of the Black Maternal Health Momnibus Act included in Build Back Better. The Momnibus, first introduced in 2020 and bolstered with additional legislation for its reintroduction in 2021, is a comprehensive package of twelve bills aiming to address a range of drivers of the maternal mortality crisis in the United States. Maternal health outcomes are still steadily worsening in this country, with Black women and birthing people bearing the brunt of the crisis. Black women are around three times more likely to die from pregnancy-related causes than white women. If passed, the Momnibus would make crucial strides in eliminating racial disparities in maternal health outcomes.
While not every portion of the Momnibus is eligible for reconciliation legislation, a number of much-needed investments were included in the House-passed Build Back Better legislation. For example, Build Back Better included funding to address the social determinants for health that impact pregnancy outcomes (factors such as housing and transportation), investments in community-based organizations addressing the maternal health crisis at a local level, growing and diversifying the perinatal workforce, addressing maternal mental health, and so much more.
Passing the Momnibus is a necessary and overdue step toward ending the maternal health crisis and improving pregnancy outcomes for Black women in particular. The recent overturning of Roe has only made these investments more necessary, in that bans and limitations on abortion access threaten to restrict the reproductive autonomy of Black and Brown women—and other individuals who can become pregnant—even further.
These investments, though they made up an incredibly small portion of the funding in Build Back Better, would have an outsized and life-saving impact on maternal health equity. The CBO estimated that these funds would only cost around $1.1 billion over 10 years.
Improving Medicaid Pregnancy and Postpartum Coverage
Finally, Build Back Better included two related provisions that would improve the value of Medicaid coverage for pregnant and postpartum people that are missing from the Inflation Reduction Act. First, the law would require all states to extend Medicaid coverage to a full twelve months postpartum, rather than the current requirement of only sixty days. Second, the law would have granted a fifteen-percentage-point increase in federal Medicaid funds to states that implement a maternal health home model.
While ARPA allowed states to opt to extend postpartum coverage through a state plan amendment, fifteen states have not done so, and another two states are pushing to limit this extension of needed coverage. The funding included in Build Back Better would have built off of the option established in ARPA by making postpartum coverage extension both mandatory and permanent. About 12 percent of pregnancy-related deaths occur after the first six weeks, and more than 80 percent of private insurance spending occurs between sixty and 365 days postpartum. Requiring this extension for all Medicaid programs will ensure that Medicaid enrollees’ pregnancy and postpartum coverage is equal across state lines and on par with privately insured pregnant people’s. Extending Medicaid coverage to a full year postpartum is necessary for reducing maternal mortality and morbidity and achieving maternal health equity.
The maternal health home provision would work to improve the value of this extended pregnancy and postpartum care. The provision would require practices or care coordinators to create an individualized care plan for a pregnant Medicaid beneficiary’s needs that addresses their primary and behavioral health care, plans for future changes in health coverage, and coordinates all services related to labor, delivery, and postpartum care. As Medicaid covers nearly half of all births in the United States, this provision would improve care for millions of low-income women and other pregnant people throughout the country. The provision would also improve health equity, as people of color are more likely to have their births covered by Medicaid.
These investments would also have a relatively small cost compared to the overall spending of the package and their impact on people’s lives. The CBO estimated that both of these provisions as written in Build Back Better would only cost $2.2 billion over ten years.
The Inflation Reduction Act Is a First Step to Improve Health Care for American Families
The passage of the Inflation Reduction Act of 2022 is good news for the country. The law makes several steps toward its goal of making health care more affordable for American households. It requires Medicare to negotiate prescription drug prices, and it ensures that low-income patients across the country will have access to subsidies to make health coverage more affordable.
The provisions from the House-passed Build Back Better Act, however, would make even more progress toward this goal. The exclusion of the evidence-based policies to close the Medicaid coverage gap and improve maternal health coverage and outcomes undermine the other provisions of the Senate version. These exclusions are especially dire in the light of the Supreme Court decision in Dobbs v. Jackson Women’s Health Organization. As Congress considers future must-pass legislation, it should include these additional provisions that would further improve health equity.