With a key offset now stripped from the $579 billion Senate infrastructure bill, the bipartisan negotiators who crafted that plan are searching for a new revenue stream to help offset its costs.
Among the provisions being looked at is the Trump-era Medicare rebate rule, Sen. Rob Portman, R-Ohio, told CNN’s “State of the Union” Sunday.
That rule, which has not been implemented, would block drug manufacturers from giving percentage-based rebates to pharmacy benefit managers that manage drugs for insurance plans. Critics of the practice say the rebates encourage higher list prices and don’t reach patients at the pharmacy counter.
Federal scorekeepers predicted insurers would increase premiums to account for the lost discounts, but that rule was delayed in court and has not taken effect.
Portman said that potential pay-for “provides significant revenue.” A 2019 CBO estimate was that implementing the rule would cost $177 billion over a decade.
Repealing the rule was among the offsets listed in a $3.5 trillion reconciliation agreement reached by Senate Democrats and the White House last week. A decision to include a delay of the rule or full repeal in the bipartisan bill would mean Democrats would not be able to use those savings in the reconciliation measure.
The bipartisan group of senators, 11 Republicans and 11 Democrats, have premised their agreement on the infrastructure framework as being completely paid for. But the decision over the weekend to remove a tax enforcement offset from that agreement was a setback.
Negotiators originally said the IRS enforcement provision would have cost $40 billion but generated $140 billion, netting $100 billion in revenue, though the CBO later tentatively estimated it would only net $60 billion in revenue, according to an aide familiar with the negotiations.
The enforcement proposal quickly ran into objections.
Negotiators were concerned that the Congressional Budget Office would not score it as revenue, taking away a key argument that the plan was fully paid for.
Some conservatives, such as Sen. Ted Cruz, R-Texas, expressed concern that the IRS unfairly targets conservatives, fretting openly that the provision would lead to harassment of ordinary taxpayers.
And Portman said on CNN’s “State of the Union” Sunday that Democrats removed the provision in order to use it for their partisan reconciliation bill.
“It will be in the larger reconciliation bill, we are told,” he said, referring to the Democrats’ $3.5 trillion reconciliation agreement, which Democratic leadership hopes to consider in tandem with the infrastructure bill.
That move irritated Sen. Bill Cassidy, R-La., a negotiator who said Democrats’ decision to use that pay-for for the partisan reconciliation agreement did not demonstrate good faith.
“We’ve offered pay-fors, Republicans have. Good faith pay-fors that both sides agree are good. And we offer them and the White House takes them and says, no, we want them. We want them for our $3.5 trillion.”
The continued debate over pay-fors comes as Senate Majority Leader Charles E. Schumer, D-N.Y., has scheduled a key procedural vote on the infrastructure package for Wednesday, despite the package not yet being complete.
Schumer will need 10 GOP votes to advance the measure. But even some of the Republicans involved in the agreement say they’re not prepared to do so until the negotiations are complete.
“How can I vote for cloture when the bill isn’t written?” Cassidy asked Sunday.
“I just don’t know how you have a cloture vote when you don’t have the bill written, when you don’t have the pay-fors established,” he added, saying a deal could be ready given more coordination with the White House and Schumer.
Portman, meanwhile, dismissed the deadline as “arbitrary.”
On Sunday, he criticized Schumer’s decision to hold the vote to start debate on Wednesday, saying, “Start debate on what? We don’t have a product yet.”
Even without a bill to score, individual negotiators have been consulting with the CBO for guidance on what seemingly could become potential revenue sources.
The CBO last week posted two letters to negotiator Kyrsten Sinema, D-Ariz., who is leading the group along with Portman, as well as a third letter to Sen. Mark Warner, D-Va., who is also a member of the Senate Budget Committee.
One Sinema letter focused on the cost of extending expanded unemployment compensation enacted during the COVID-19 pandemic. That letter found that the pandemic unemployment insurance would cost $53 billion less than expected because of states cutting off added benefits early, as well as the improving economy.
The other Sinema letter focused on the budgetary impacts of the employee retention tax credit and other tax credit money that had not been spent. The Warner letter, meanwhile, focused on pandemic-related sick and family leave tax credits. In both cases, the CBO said the tax credits cost less than originally projected.
The group previously agreed to a long list of pay-fors including auctioning off the 5G spectrum, selling some of the Strategic Petroleum Reserve, repurposing broadband funding from previous legislation, adjusting customs fees and dynamic scoring.
“That’s important, that it be paid for,” Portman said. "It’s also important to recognize this is about long-term investments in infrastructure, which is different than government spending for a new social program, as an example. This is spending that will be spent not next year, and it won’t be spent, for the most part, until the next five to 10 years or more.”
The plan, agreed upon in June, would spend $579 billion in new money, with $973 billion in new and baseline dollars over five years and $1.2 trillion in new and baseline spending over eight years.
The initial deal would include $109 billion for roads, bridges and major projects, $11 billion for safety, $49 billion for transit, $66 billion for rail and $7.5 billion for electric vehicle infrastructure.
Lauren Clason and Lindsey McPherson contributed to this report.
