Cures Bill Has Been Released

Note: This blog has been updated from its original posting to account for the manager's amendment, which strikes the child and family services section from the bill.

After working on different versions for most of the duration of the 114th Congress, lawmakers recently released a new version of the 21st Century Cures Act. The bill contains a wide variety of policies, but its centerpiece is the establishment of Innovation Funds within the National Institutes of Health (NIH) and the Food and Drug Administration (FDA). The bill also includes funding to combat opioid abuse and for foster care prevention services and contains several small policies that on net reduce health care spending. As a whole, the bill is roughly deficit-neutral.

The main section of the bill is $6.3 billion of spending for Innovation Funds within the NIH ($4.8 billion over ten years) and the FDA ($500 million) to advance medical research for cures and $1 billion of funding over two years to combat opioid abuse. The bill authorizes transfers to these funds in each year beginning from Fiscal Year (FY) 2017 through FY 2026. The money in the funds would be used to offset appropriations for those purposes, effectively allowing increased spending for those programs that would not be subject to discretionary spending caps. Unlike previous versions of the legislation that would have provided mandatory spending, the funding in this bill would be subject to the annual appropriations process. The increased discretionary spending allowed by these transfers is offset with an equivalent amount of savings from mandatory programs in that portion of the bill. This approach allows for nearly guaranteed increased spending for the purposes of the act that is offset with mandatory savings while keeping spending subject to the review and oversight of the annual appropriations process.

The mandatory savings includes a $3.5 billion reduction in the Prevention and Public Health Fund, $1 billion from drawing down the Strategic Petroleum Reserve, $660 million for reducing payments for drugs administered using durable medical equipment (DME), and $370 million for accelerating the date when Medicaid DME reimbursements are limited to Medicare rates. The total savings from these policies is $6.3 billion in budget authority and $5.8 billion in outlays. The outlay savings are slightly less than the increased discretionary spending allowed by this section of the bill because it includes a rescission of mandatory funds for ACA implementation in territories that were unlikely to be spent and produces no outlay savings according to the Congressional Budget Office (CBO). The net mandatory savings from this section of the bill, which are dedicated to offsetting the increased discretionary spending in the bill, are excluded from the PAYGO scorecard to prevent them from being double-counted as an offset for other legislation that increases mandatory spending or reduces revenues.

While the increased spending for NIH, FDA, and opioid abuse is largely offset over ten years, the legislation does create risk of deficit spending beyond the ten-year window. Although the bill only authorizes increased spending for ten years for the Innovation Funds, it would increase the baseline for spending on those programs and sets up a funding "cliff" if the higher spending levels are not continued. Most of the offsets in the bill are one-time or temporary savings that would not produce savings beyond the ten-year window to offset costs of continuing spending at the higher levels provided in this legislation.

Other policies in the bill relate to other health care issues and would be deficit-neutral. In terms of spending increases, this section would increase mental health services for children covered by Medicaid ($285 million) and exempt certain hospital outpatient departments from the site-neutral payment policy enacted in last year's budget deal ($760 million). Some of the largest savings policies include reducing the payment increases specified for hospital inpatient services in last year's doc fix from 0.5 percent to 0.4588 percent ($760 million) and using an electronic visit verification system for personal care and home health services in Medicaid ($290 million).

Ten-Year Budgetary Effect of 21st Century Cures Act

^{Source: Congressional Budget Office
*The bill would authorize $6.3 billion of budget authority over ten years, but it is likely that some of this money would not be spent within ten years or at all. CBO does not indicate how much they think will actually be spent in this time period, so this number is a rough estimate.
**Less than $50 million.}

Though the bill is not perfect in terms of fiscal responsibility, it is commendable that the negotiators who worked on the 21st Century Cures Act sought to comply with the PAYGO principle by offsetting increased spending with savings and largely succeeded in doing so.