May 13, 2005

TO: Board of Directors

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

CC: Doug Henley
Todd Dicus
Rosi Sweeney

RE: State and Federal Legislative Update (Week of May 9)

Hearings in the House and Senate Appropriations Committees are winding down. The House Appropriations Subcommittee on Labor/HHS/Education is scheduled to debate a bill beginning on June 9, with action in the full panel slated for June 14.

In addition, House Appropriations subcommittees have received their 302(b) allocations, which are the amounts of discretionary funding provided to each subcommittee for programs under its jurisdiction. The allocation for the subcommittee on Labor, HHS, and Education is $142.5 billion. This would be a cut of $163 million (0.1 percent) from the FY 2005 appropriation. However, the proposed FY 2006 allocation is an increase of $924 million (0.7 percent) above the President’s recommendation.

On Tuesday, May 10, HHS Secretary Mike Leavitt signed a charter for the Medicaid study commission called for in the fiscal year 2006 budget resolution approved by Congress last month. The commission will recommend ways to cut $10 billion from Medicaid over five years and propose longer-term solutions to slow the program's rising costs. The Secretary will appoint the commission's voting members. The commission will have as many as 15 voting members and 18 nonvoting members. The voting members will include the Secretary or his designee; federal Medicaid officials; current or former governors; current or former state Medicaid directors; three health care policy experts from public policy organizations; and other "individuals with expertise in health, finance or administration," according to the charter. Congressional leaders will appoint four Republican and four Democratic legislators as nonvoting commission members.

The commission also will be advised by 10 people involved in Medicaid, including state and local officials, consumer advocates and care providers. The commission is expected to make its cost-cutting recommendations by September 1. The charter states that by December 1, 2006, the commission must make "longer-term recommendations on the future of the Medicaid program." According to the charter, the commission will address 10 questions, including, "What are alternatives to Medicaid for the delivery of long-term care?" The commission also will address whether "eligibility, benefits and financing structures for three broad categories of beneficiaries -- including mothers and children, individuals with disabilities and the elderly – [should] be modified."

Senators Chuck Grassley (R-IA), who chairs the Senate Finance Committee, and Max Baucus (D-MT), who is the most senior Democrat on that committee, have introduced a bill to place considerable restrictions on specialty hospitals. The bill would permanently extend the ban on the construction of new hospitals. Physicians who refer Medicare and Medicaid patients to the facilities would be forbidden from investing in them. Current hospitals could not increase the number of doctors who invest or the amount invested by current physician owners.

On Thursday, May 12, the Health Subcommittee of the Energy and Commerce Committee held a hearing on the issue. CMS Administrator McClellan testified that the agency has announced its intention to examine procedures for certifying new specialty hospitals, as recommended by the Medicare Payment Advisory Commission. In addition, he said that CMS will review procedures for approving reform payment systems to ensure the best possible alignment of Medicare's financial incentives with providing high-quality care to patients. This review of procedures and payment systems will help CMS determine which specific administrative steps are warranted. A report sent by CMS to Congress indicates some revisions in payment policies and methods for designating different health care facilities need to be undertaken.

Senators Susan Collins (R-ME) and Dick Durbin (D-IL) have co-authored a letter to CMS administrator McClellan urging an administrative resolution to the volunteer faculty in residency training in non-hospital settings. Such a remedy would be an extension of the moratorium and a collaborative effort to:

Senators are urging their colleagues to sign this letter by May 18. In the first few days of distribution, the letter has garnered over a dozen signatures.

Reps. Clay Shaw (R- FL) and Ben Cardin (D-MD) have introduced a bill to revise the Sustainable Growth Rate formula used to update physician payments under Medicare. Known as the Preserving Patient Access to Physicians Act, the bill would set the Medicare physician payment update for 2006 at no less than 2.7 percent, and implement the Medicare Payment Advisory Commission (MedPAC) recommendation, beginning in 2007, to replace the current SGR with updates based on inflation in physicians' practice costs. This essentially is the same bill that Rep. Nancy Johnson (R-CT) introduced in the 107th Congress.

On Wednesday, May 11, Reps. Tim Murphy (R-PA) and Patrick Kennedy (D-RI) introduced the Twenty-First Century Health Information Act (H.R. 2234). The bill would create regional health information networks that would assure interoperability of electronic information technology systems. The bill would provide grants to small and medium sized practices to invest in certified information technology.

On Wednesday, May 11, Rep. John Dingell (D-MI) re-introduced the Patients’ Bill of Rights Act (H.R. 2259). The bill, with 52 co-sponsors, is based on the bill that the Senate approved in 2001. The measure would guarantee that every patient would have:

Senator Edward Kennedy (D-MA), with 13 co-sponsors, has introduced the Senate version of this bill (S. 1012).

Legislatures in Florida, Georgia, Hawaii, Idaho, Indiana, Kentucky, Maryland, Mississippi, Montana, New Mexico, North Dakota, South Dakota, Utah, Virginia, Washington, West Virginia and Wyoming have adjourned for the year. Arkansas officially recessed April 13 but is technically still in session and can come back and work until May 13.