• Budget Outlook for Fiscal Years 2017 and 2018
  • Drug Importation Legislation Introduced in Senate
  • Leaked Draft of House Republican ACA Repeal and Replace Legislation Aligns with Policy Brief Document

Budget Outlook for Fiscal Years 2017 and 2018

This week, the Trump administration directed agencies to begin identifying funding sources for reductions in non-defense discretionary spending without affecting Social Security or Medicare. The administration is seeking to increase defense spending by $54 billion in Fiscal Year 2018, an increase of approximately 10 percent, while finding an equal amount of non-defense discretionary spending to be reduced. These cuts are expected to be part of “skinny” budget submitted by the President to Congress in mid-March. However, while these cuts will generate headlines and opposition, is it important to bear in mind the wider landscape of where the appropriations process stands for Fiscal Years 2017 and 2018.

Fiscal Year 2017, which began on October 1, 2016, and ends on September 30, 2017, is currently funded through a Continuing Resolution (CR) approved in December 2016. While the CR expires on April 28, 2017, it is unclear whether Congress will pass another CR or work to pass appropriations legislation. Complicating this process is the President’s desire to pursue an appropriations bill that includes supplemental funding for immigration, border security, and defense while reducing non-defense discretionary spending. In recent years, Democrats have demanded an equal increase in non-defense discretionary spending for increases in defense spending.

Amid this process, on March 15, 2017, the debt limit will be re-imposed, which governs how much money the federal government can borrow. However, “extraordinary measures,” which have been used in the past, will allow the federal government to reallocate money without issue likely into the summer. At that point, Congress will have to raise the debt ceiling or risk default. While past Republican Congresses had showdowns with the Obama administration on the debt ceiling, it is unclear whether Democrats will now seek to extract concessions over this issue. This issue could be addressed sooner as part of an appropriations package.

For Fiscal Year 2018, which starts on October 1, 2017, the appropriations process is expected to kick off once the President submits his budget proposal later this month. Importantly, the President’s budget is a starting point for Congress’ work. The President’s budget often has recommendations on policy and funding levels; however, the document is a wholly non-binding policy marker that is routinely ignored by the Appropriations Committees. As part of this process, Congress will consider a new budget resolution, which is expected to include reduced budget levels as well as create a budget reconciliation vehicle for tax reform.

There is still significant uncertainty on how funding for the remainder of Fiscal Year 2017 will be resolved. The outcome of this process will be heavily influenced by Congress’ progress in other legislative areas, particularly repealing and replacing the Affordable Care Act and beginning to pursue tax reform.

Drug Importation Legislation Introduced in Senate

On February 28, 2017, Sens. Bernie Sanders (I-VT), Cory Booker (D-NJ), and Bob Casey (D-PA) introduced legislation to allow the importation of prescription drugs. The legislation, S. 469, the Affordable and Safe Prescription Drug Importation Act, is also supported by 17 additional Democratic cosponsors. Similar legislation was introduced in the House as H.R. 1245 by Reps. Elijah Cummings (D-MD) and Lloyd Doggett (D-TX), along with 16 Democratic cosponsors. The legislation would allow the importation of prescription drugs from Canada by wholesalers, pharmacies, and individuals from facilities that have been certified by the Food and Drug Administration and meet other criteria. After two years, importation from other countries that meet certain requirements could be allowed. More information on the legislation and the press conference announcing its introduction is available here.

This legislation comes amid blowback Sens. Booker and Casey received from the grassroots of their own party after joining 11 other Democrats in opposing an amendment related to drug importation offered by Sens. Sanders and Amy Klobuchar (D-MN) during consideration of the budget resolution in January. Sens. Booker and Casey had expressed concern with the language of the non-binding amendment to the budget resolution and ensuring the safety of imported prescription drugs. Industry leaders have pointed to recent examples of counterfeit Hepatitis C medications to support arguments for continuing the prohibition on drug importation as part of protecting the safety of the drug supply.

This legislation comes as the drug pricing issue continues to generate significant debate and division among Democrats in the Senate. In addition, President Trump highlighted the issue of high drug prices during his recent address to a Joint Session of Congress, garnering bipartisan applause.

Leaked Draft of House Republican ACA Repeal and Replace Legislation Aligns with Policy Brief Document

On February 24, 2017, a leaked draft of House Republican legislative text on repealing and replacing the Affordable Care Act (ACA) was released by Politico. While the document is purported to be an older draft proposal, dated February 10th in the document, it nonetheless provides important insight into what legislation House Republicans may seek to advance.

The leaked draft contains policy proposals that align with the policy brief document House Republicans released on February 16, 2017, in preparation for the recent district work period and engaging with constituents. The leaked draft includes provisions Republicans sought to repeal in the 2015 reconciliation bill, including the Medicaid expansion, Disproportionate Share Hospital payment reductions, the individual and employer mandates, and a number of taxes. It then establishes a new refundable tax credit for purchasing insurance in the individual market, allowing unspent dollars to be deposited in a Health Savings Account. The draft also includes reforms to Medicaid for a per-capita cap and establishes “State Innovation Grants” for supporting high risk pools or other policies that reduce costs for insured persons. Furthermore, the draft legislation includes a provision on penalties for failing to maintain continuous insurance coverage and allows states to define essential health benefits, among other provisions.

However, key House Republicans, including Freedom Caucus Chair Mark Meadows (R-NC) and Republican Study Committee Chair Mark Walker (R-NC), have come out against the proposal. Other Republicans have expressed concern with moving forward with this legislation without a broader plan for replacing the law. The Congressional Budget Office (CBO) score will be an important assessment of a final version, as both the cost savings and changes to the number of insured Americans will be an important barometer for the bill’s legislative prospects. To advance this legislation from the House, House Republicans can only lose 22 votes.