With the November 2 election day, many are watching Virginia to see if the gubernatorial race is a harbinger for the 2022 Congressional elections. It is a dead heat between former Governor Terry McAuliffe (D) and Glenn Youngkin (R). Meanwhile, the House is aiming to vote on the latest version of the Build Back Better Act as soon as this week, despite the fact that progressives and moderates within the Democratic party are still battling over the details and the legislation has not yet been scored by the Congressional Budget Office (CBO). Finally, with the Continuing Resolution enacted to avoid a government shutdown expiring December 3, the House and Senate are trying to move the FY2022 appropriations bills.
The Build Back Better Plan
On October 28, President Joe Biden made his final pitch in a closed-door meeting with Democrats on the Hill for the Build Back Better Act (BBB), which was scaled down from $3.5 trillion to a $1.75 trillion plan. It aims to spend $555 billion to combat climate change, create millions of jobs, spur long-term growth, and incentivize clean energy with electric vehicle credits, $2 billion for R&D and other measures. The plan includes $150 billion in affordable housing investments and $40 billion for higher education and workforce by raising the maximum Pell Grant and providing support to Historically Black Colleges and Universities and investing in community college workforce programs, sector-based training, and apprenticeships. There is another $90 billion targeted for equity and other investments. Biden’s revamped tax plan also includes a new surtax on millionaires. Democrats are now sorting out final details of this reconciliation bill that only needs a simple majority to pass.
House Democrats released a rough draft of legislation (HR 5376) to enact the plan that will take days to be ready for a vote, but they are trying to get it done this week. Significant progress was made in securing the support of the House progressives led by Congresswoman Pramila Jayapal (D-WA) even though this new bill is half the size they originally wanted. However, the deal is still tenuous as this same group again blocked a vote on the separate $550 billion roads and rail infrastructure bill (HR 5763), a second piece of Biden’s agenda, until the larger package is ready. This upset the fiscally conservative wing of the party, which is led by Congresswoman Stephanie Murphy (D-FL), a co-chair of the centrist Blue Dog Coalition. Speaker Pelosi (D-CA) had to last minute scrap a plan to act on the infrastructure measure and instead pass another temporary extension for highway funding until December 3, which is the same day as the Continuing Resolution and debt ceiling extension expire. The measure passed the House on a 358-59 vote and Senators agreed by unanimous consent to support the extension. Within the Senate, Senator Joe Manchin (D-WV) asked for more time to assess the impact of President Biden’s revised tax and spending package on the economy and the national debt and Senator Kyrsten Sinema (D-AZ) is the other hold-out within the party. Winning these two over is key to clinching a deal that can pass both chambers and become law this year.
Research Funding Details in the BBB Deal
The Department of Energy would receive $2 billion in total for R&D programs, down from over $15 billion in the original version. The bill would allocate $985 million for the Office of Science, entirely dedicated to domestic fusion energy R&D efforts and low-dose radiation research.
The National Science Foundation (NSF) would receive $3.5 billion, of which $1.5 billion is for setting up the agency’s new Technology, Innovation, and Partnerships directorate. Of the remainder, $500 million would be for climate research and another $500 million for infrastructure. The original bill included $11 billion for NSF and did not allocate a specific amount for the new directorate. NASA would receive $1.1 billion, with $750 million dedicated to infrastructure and facilities modernization, which is $4 billion less than originally proposed. It also would spend $365 million on climate-related R&D, a little less than originally proposed.
Other details include $1.25 billion for the National Institutes of Standards and Technology (NIST), $650 million for facilities maintenance and upgrades, $260 million for the Hollings Manufacturing Extension Partnership (MEP), and $220 million for advanced manufacturing research, development, and testbeds.
New Surtax on Millionaires
The proposed framework includes $2 trillion in taxes, a new 15% minimum levy for revenue corporations, and a stock buyback tax. This leaves the bulk of former President Donald Trump’s 2017 tax reductions intact. Also missing is Biden’s plan to end a benefit that allows assets to be passed to heirs without taxing their capital gains. The SALT tax deduction was not included but some are working to get it added back in, key for states such as New York. Several changes could still be made as congressional Democrats wrangle the final legislative text. Senate Finance Committee Chair Ron Wyden (D-OR) is pressing for a new annual levy on the appreciation of billionaires’ wealth. Details on new tax measures proposed include:
Levy on Corporations - The new levy would put a 15% minimum tax on the financial statement profits of companies who have little-to-no taxable income.
Stock Buybacks Tax ($125 billion) - This tax would put a 1% surcharge on stock buybacks to encourage companies to invest in their operations rather than re-purchase shares.
International Tax ($350 billion) - The framework calls for a 15% country-by-country global minimum tax. The new rules would also impose penalties on foreign corporations in countries that don’t impose the minimum tax rate.
Millionaires Surtax ($230 billion) - The new surtax would place a 5% levy on incomes above $10 million and an additional 3% on incomes above $25 million, on top of the top tax rate, which is currently 37%. About 0.02% of Americans would be affected, according to the White House.
Expand Medicare Tax on Wealthy ($250 billion) - The plan would close provisions in the tax code that allow some wealthy taxpayers to avoid paying the 3.8% Medicare surtax on their earnings.
Limit Business Losses ($170 billion) - This provision would limit excess business losses for partnerships, limited liability companies and other pass-through entities.
IRS Enforcement ($400 billion) - The IRS would receive more funding to hire more revenue agents, modernize technology and update customer service to increase tax compliance. Expanded audit capabilities would be targeted to those making more than $400,000 a year.
Prescription Drug Savings ($145 billion) - The plan would end a Trump-era rule that allows drugmakers to offer rebates to pharmacy benefit managers.
There was no mention of a billionaires’ tax, a proposal pushed by Wyden but seen by a number of other Democratic lawmakers as difficult to craft and administer so this looks unlikely.
Funding for Regional Economic Growth Efforts
Amid current focus on BBB, the ARP funding has resulted in big wins for state and local economic development efforts. The Economic Development Administration within the Department of Commerce announced that 529 regions from all 50 states and five territories have submitted applications for Phase 1 of the $1 billion Build Back Better Regional Challenge. As awards are made in early 2022, this infusion of funding is focused on regional economic growth strategies.
Ending Trump’s Retrospective Review at Health and Human Services Department
October 28, the department announced it will withdraw or repeal a last-minute Trump administration rule pushed forward in his final day in office that would have caused health regulations to expire if they weren’t reviewed every 10 years. The HHS released a proposal that would do away with the rule, (RIN 0991-AC24), which was initially published in the Federal Register on January 19, one day before Biden took office. In an attempt to end many regulations, under the rule, the HHS would have had five years to assess regulations that are more than 10 years old, and the department could have extended that deadline one time per regulation, for up to a year.
Following the Biden administration’s approval granted earlier this year for one-year Medicaid postpartum coverage for Missouri and Illinois and six months of continuous coverage in Georgia (with Virginia’s and Massachusetts’ 1115 waivers to extend coverage still pending), HHS just granted New Jersey’s 1115 waiver to extend Medicaid postpartum coverage from 60 days to one year. An estimated 8,700 New Jersey residents will benefit from the extension beginning April 1, 2022 as postpartum women will have a yearly income of up to 200% of the federal poverty level to qualify for one-year continuous enrollment in Medicaid and an income between 194% and 200% of the federal poverty level in order to qualify under CHIP. Related language is included in the Build Back Better plan that keeps the earlier bill’s one-year continuous eligibility requirement for kids and postpartum women and its permanent extension of the Children’s Health Insurance Program (CHIP) intact. Some in Congress and outside organizations are pushing CMS to issue comprehensive guidance on how states can use the American Rescue Plan (ARP) to extend postpartum coverage to one year after giving birth as states can enact state plan amendments for their ARP funding to extend coverage. This new, streamlined pathway means states can extend postpartum coverage to one year without going through CMS. More than 15 states are planning to extend postpartum coverage via an 1115 waiver or the state plan amendment, which goes into effect April 1, 2022: California, Colorado, Connecticut, Indiana, Maryland, Maine, Michigan, Minnesota, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Washington, Wisconsin and West Virginia.
Orphan Drug Tax Credit
The current version of the Build Back Better Act includes a provision limiting the number of rare disease drugs that can qualify for tax credits under the Orphan Drug Act. Orphan Drug Act allows orphan drug developers to qualify to receive a tax credit for 25% of their clinical trial costs for new orphan drugs. The law only specifies that clinical testing must be for a rare disease or condition. But section 138141 of House Democrats’ BBB would amend the Orphan Drug Act so only the first approved uses or indications for orphan drugs can qualify for the Orphan Drug Tax Credit. Clinical testing expenses for any drugs that have been approved for any other use or indication would not qualify for the credit. Rare disease organizations point out that limiting the tax credit could impede innovation and development of rare disease drugs that are direly needed for the 7,000 rare diseases, 95% of which have no therapies. This on top of the Orphan Drug Tax Credit already being slashed from 50% to 25% in 2017 under the Tax Cut and Jobs Act, is a huge blow to patients and industry. With the high risk to develop such drugs and the low return on investment and the difficulty in accessing treatments due to delays in diagnosis, reimbursement policies and restrictive labeling many in Congress and outside groups are fighting hard to repair this in the final legislation.
Temporary Enhanced ACA Credits and Medicaid Gap Fix
President Biden’s BBB framework includes a temporary extension of the higher Affordable Care Act tax credits through 2025 as well as closure of the so-called Medicaid gap in non-expansion states by providing premium tax credits through 2025 to affected people in those states so they can access exchange plans with no premium. This would provide 3 million additional people with insurance through the extension of the increased premium tax credits and 4 million through the closed Medicaid gap via tax credits for marketplace plans. Both policies are expected to cost a total of $130 billion. It also includes $35 billion for a new Medicare hearing benefit and repeals the Trump administration’s drug rebate rule. The framework left out what progressive Democrats made a top priority: adding Medicare dental and vision benefits and giving Medicare power to negotiate drug prices. The president said the framework was a product of working with Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), two key swing votes on reconciliation. The Democrats are still wrangling over these issues as they finalize their bill to bring to the floor for a vote.
Home Care Funding
The Biden framework includes $150 billion for home and community-based services in what the White House calls the most transformative investment in caregiving in a generation. But that funding is significantly lower than the $400 billion initially pushed by the president. The goal is to get states to buy into home care and increase wages to address workforce issues because home and community-based services waitlists can’t be dealt with until the workforce exists to provide those services.
FY2022 Funding Bills
The House passed their 12 appropriations bills in the form of mini-bus bills in early summer, but the Senate still has not completed their bills. Some key appropriations subcommittees just released proposed reports that accompany appropriations bills and spell out directives for funding and a return of earmarks after the 11-year moratorium. However, because they did not result from a subcommittee mark-up of legislation, they have little to no weight as the two chambers start to configure a year-end omnibus appropriations bill. The Democrats and several Republicans are committed to the return of earmarks, which may grease the wheels to getting something done by mid-to-late December that includes these pet projects.
FY2022 Funding Bills
Appropriators in the House and Senate both aim to boost funding for the National Institutes of Health (NIH) by more than 10% in FY2022. They also endorse the creation of an Advanced Research Projects Agency for Health (ARPA-H) although they would provide less than half the initial funding the administration requested for it. The Senate bill, released last week, proposes to increase NIH’s current $43 billion topline by $5 billion and fund ARPA-H with $2.4 billion, while the House bill proposes a $6.5 billion increase for NIH and $3 billion for ARPA-H. While neither quite reaches the $9 billion increase included in President Biden’s FY2022 budget proposal, it would be by far the largest increase among the string of multi-billion-dollar boosts Congress has provided NIH in each of the past six years. Also, both chambers would allow NIH to spend the funds until the end of FY2024, as requested by the administration.
To see more details of the FY2022 appropriations bills, check out the House Appropriations Committee and Senate Appropriations Committee. As mentioned in last month's update, the full breakdown of the status of each of the 12 appropriations bills is in our September update, but some highlights from the House where bills passed the floor include:
House Labor, Health and Human Services, Education, and Related Agencies (LHHS-Ed)
- The full Appropriations Committee marked up and approved the LHHS-Ed bill on July 15 by a vote of 33-25.
- The House of Representatives passed the LHHS-Ed bill as part of a seven-bill minibus on July 29, by a vote of 219-208.
House Commerce, Justice, Science, and Related Agencies
- The House Appropriations Committee marked up and approved the CJS bill on July 15 by a vote of 33-26.
- The House Appropriations Committee marked up and approved the Defense bill on July 13 by a vote of 33-23.
To see ARPA funding opportunities see September’s update.