CBO: Defunding healthcare law could end drug benefits

Permanently defunding the healthcare reform law could lead to the end of Medicare coverage for prescription drugs, according to the Congressional Budget Office.

Although the Medicare drug benefit predates healthcare reform, the new law made changes to the program — most notably eliminating the so-called “doughnut hole,” in which seniors must pay for their drugs out of pocket. 

If the new healthcare law is defunded, the changes to the prescription drug program could not be implemented and Medicare would be unable to offer the benefit, CBO said.

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CBO offered the new analysis in response to Rep. Henry Waxman (D-Calif.), who asked the budget office to analyze the impact of a permanent ban on funding for implementation of the new law. 

A permanent ban on using appropriations to implement the law could prevent Medicare from signing contracts to administer the drug benefit, known as Medicare Part D. It also wouldn’t be able to set rates for Medicare Advantage, so that program might also end.

"As contracts expired on December 31, 2012, there would probably be nothing to replace them and therefore no MA and Part D plans for Medicare beneficiaries," CBO said. "If there were no Part D drug benefit, federal spending would decline."

CBO and the Joint Committee on Taxation said there’s no way to tell whether permanently defunding healthcare reform would save money or cost money — let alone how much. Prohibiting the use of congressional appropriations to implement the new law would raise government spending in some cases and lower it in others, CBO said in a letter to Waxman.

Some pieces of the healthcare law are funded through mandatory spending, rather than the annual appropriations process. The permanent ban discussed in CBO’s report would not cut off mandatory funding. That means some programs — including a highly controversial cost-cutting panel — would remain intact.

The cost-cutting panel — the Independent Payments Advisory Board — is a top target for Republicans hoping to chip away at healthcare reform. It would still exist under a permanent defunding and its recommendations would still technically have the force of law, CBO said, but the Health and Human Services Department wouldn’t be able to spend money implementing the board’s cuts.