July 29, 2005

TO: Board of Directors

FR: Kevin J. Burke
Director, Division of Government Relations

CC: Doug Henley
Todd Dicus
Rosi Sweeney

RE: Federal and State Legislative Update (for the week of July 25)

Correction of last week’s report: The Senate appropriations bill for the Departments of Labor, Health and Human Services, Education and Related Agencies has not yet been approved by the full Senate, which is necessary before it can go to a conference committee.

On Thursday, July 28, Rep. Nancy Johnson (R-CT), who chairs the House Ways and Means Subcommittee on Health, introduced a bill that would repeal the existing formula for calculating Medicare’s physician payments and replace it with a system linking payments to quality. The bill would eliminate the existing sustainable growth rate formula and replace it with a system under which annual payment increases would be based on the growth of the Medicare Economic Index (MEI), which tracks the cost of providing physician care. The Congressional Budget Office has estimated that repealing the current SGR formula would cost as much as $183 billion over the next 10 years.

On Thursday, July 28, by a vote of 230-194, the House of Representatives approved the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act (H.R. 5). The bill would limit non-economic damages to $250,000 in a medical malpractice lawsuit and would specify that attorneys’ contingent fees would be limited. The bill contains an especially controversial provision that would protect drug and device makers from punitive damages if the companies can show that they complied with applicable FDA regulations. The bill is identical to legislation that the House approved twice during the 108th Congress but that died in the Senate. The Senate is still not likely to approve the bill.

On Wednesday, July 27, by a vote of 428-3, the House of Representatives approved the Patient Safety and Quality Improvement Act (S. 544). On Friday, July 29, the President signed it into law. The bill creates a network for voluntary reporting and analyzing medical errors, with a goal of reducing future mistakes. Health care providers will be encouraged (but not required) to report their mistakes confidentially to newly designated Patient Safety Organizations (PSO). Under most conditions, these reports will be shielded from discovery during medical malpractice lawsuits. The PSO then contracts with the providers to analyze the errors and develop ways to prevent them. The federal government will coordinate the efforts of these PSOs and will develop the computer network that they will use to collect and analyze the data.

The Medicaid Commission held its first meeting on July 27 in Washington, DC. Commissioners were sworn in by HHS Secretary Michael O. Leavitt following his opening remarks. Commissioners then were given the opportunity to introduce themselves to each other and the public. During this period, the members described their particular interests in Medicaid reform. Concluding the day were a briefing for commissioners and a public comment period. Chairmen Sundquist and King stated that the commission would begin discussing how to find $10 billion in cuts to the program at its next meeting, tentatively scheduled for August 17 in Washington, DC.

On Wednesday, July 27, by voice vote, the House of Representatives approved State High Risk Pool Funding Extension Act (H.R. 3204), which would authorize $15 million for FY 2005 for grants to states that establish high-risk health insurance pools. States would be eligible for as much as $1 million to provide coverage for individuals who are uninsured because of a medical condition. States cap premiums for those in the high-risk insurance pools at a percentage of market premiums to maintain affordability for participants. The Senate Health, Education, Labor and Pensions Committee approved a similar measure (S. 288) in February.

On Wednesday, July 27, by voice vote, the House of Representatives approved the National All Schedules Prescription Electronic Reporting Act (H.R. 1132), which would establish a uniform system for reporting drug prescriptions and maintaining electronic records. It would authorize grants to states to initiate or improve reporting systems. The purpose of the electronic record storage systems is to help physicians determine if a patient is at risk for dangerous drug interactions. The data storage systems also help prevent “doctor shopping” across state lines by addicted patients. The Senate Health, Education, Labor and Pensions Committee approved similar legislation (S. 518) by voice vote on May 25.

On Tuesday, July 26, by a vote of 263-165, the House of Representatives approved the Small Business Health Fairness Act (H.R. 525), which would exempt association health plans from state laws that require coverage for specific treatments and procedures. These plans are insurance products used by small businesses that otherwise might not be able to afford to offer health insurance to their employees. The legislation attempts to remove the state coverage mandates that insurance companies insist increase premiums. While Senator Olympia Snowe (R-ME) has introduced a similar measure (S. 406), it has not yet been considered by the Senate Health, Education, Labor and Pensions Committee.

On Monday, July 25, the House Small Business Committee held a hearing on the effects that state “Duty-to-Fill” laws have on pharmacies, especially small independent operations in rural areas. The committee hearing focused on the situation in Illinois, where the administration of Governor Rod Blagojevich (D) issued an emergency rule that requires pharmacies that sell contraceptives to fill all prescriptions for FDA-approved contraceptives (namely, emergency contraceptive or “morning after” pills). Witnesses included an Illinois pharmacist who objected to being required to fill a prescription for a product that he morally objected to. In addition, the committee heard from a senior policy advisor to the governor who explained that the administration considered the health of the patient to be in jeopardy if pharmacists did not fill valid prescriptions or help the patient find one who would right away.

Almost all of state legislatures are in recess or adjourned for the year.

This week, the Mayor of the District of Columbia, Anthony Williams (D), proposed caps of $250,000 for physicians and $500,000 for hospitals in medical malpractice lawsuits. He is also committed to engaging in a public awareness campaign.