Washington Highlights: March 11,
2005
House, Senate Panels
Craft Budget Plans
Contents
Prior Issues
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The House Budget Committee March 9 approved an FY 2006 budget resolution
that calls for $69 billion in mandatory spending reductions over
5 years - about $18 billion more that the Administration requested
in its budget. The committee approved the resolution 22 - 15. Meanwhile,
the budget resolution the Senate Budget Committee March 10 approved
a call for $32 billion in mandatory savings over 5 years.
The House bill directs the House Energy and Commerce Committee
and the House Ways and Means Committee to find savings of $20 billion
and $18.7 billion, respectively, over five years. The bill does
not specify where the cuts must come from, but the Committees must
find savings in programs within their jurisdiction. Programmatic
jurisdictions of the House Energy and Commerce Committee include
Medicaid, Medicare outpatient services and the drug benefit, the
environment and others; The House Ways and Means Committee has jurisdiction
over Medicare, the Earned Income Tax Credit, welfare, child care
and unemployment insurance. Given the size of both the Medicare
and Medicaid program, it is likely that the savings could be achieved
through these programs.
The Senate budget bill directs the Senate Finance Committee to
find $15 billion in savings, primarily through Medicaid by June
6, 2005. According to Senate Budget Committee Chairman Judd Gregg's
(R-N.H.) budget mark summary, "The Committee notes that there
is great potential for savings in the Medicaid program due to waste
and abuse in the system…. As the Finance Committee considers
this legislation, the Budget Committee points out that at least
34 states are estimated to be receiving up to $6 billion a year
in federal Medicaid dollars inappropriately." The instructions
do not prevent the committee from finding savings in Medicare.
The Senate mark also includes a reserve fund to "improve health
care quality through the adoption of health information technology
and performance-based payments that are based on accepted clinical
performance measures." Another reserve fund would establish
a "deficit neutral reserve fund for committees of jurisdiction
(HELP and Finance) to pass legislation that addresses health care
costs, reduces the number of uninsured, or improves access to care."
Both the House and Senate budget resolution limit discretionary
spending to $843 billion, a 2.1 percent increase as requested in
the President's budget. Both resolutions also include a $50 billion
contingency fund for FY 2006 to fund ongoing military operations
in Iraq and Afghanistan.
The House resolution assumes the President's requested level of
$391 billion for "non-security" discretionary spending,
a 0.8 percent reduction. Within this total, the resolution assumes
$50.9 billion for discretionary health programs, which are categorized
in the budget as Function 550. After factoring out one-time costs
related to Bioshield in FY 2005, this represents a reduction of
1.8 percent. The actual FY 2006 funding levels for discretionary
health programs will be determined by the appropriations committees,
which are not bound by the functional totals in the resolution.
However, the appropriators will have to abide by the overall spending
limit set by the resolution.
In the area of education, both the House and Senate resolutions
call for reductions in the government subsidies provided to lenders
in the federal student loan programs. The House resolution calls
on the Education and the Workforce Committee to come up with $21
billion in savings over 5 years, about a third of which is estimated
to come from the loan programs. The House resolution directs a majority
of the savings toward reducing the deficit; the Senate resolution
calls for savings to be used to retire the Pell Grant shortfall
and create a $5.5 billion reserve fund that Congress could use to
increase borrower benefits during the reauthorization of the Higher
Education Act.
The House Budget Committee only accepted one amendment, a proposal
by Rep. Jeb Bradley (R-N.H.) to shift $1.15 billion in discretionary
spending from the international affairs account to veterans' programs
over 5 years.
Information:
Dave Moore, Senior Director
AAMC Government Relations
dbmoore@aamc.org
(202) 828-0525 (discretionary budget), or
Lynne Davis Boyle, Assistant Vice President
AAMC Government Relations
ldavisboyle@aamc.org
(202) 828-0526 (mandatory budget)
MedPAC, Hospital Leaders Recommend Extending Moratorium
on Niche Hospitals, Closing of Stark Loophole
During March 8 Congressional hearings, representatives from the
Medicare Payment Advisory Commission (MedPAC) and not-for-profit
and for-profit community hospitals urged members of the Senate Finance
Committee and House Ways and Means Health Subcommittee to extend
the current moratorium on physician-owned specialty hospitals. In
addition, community hospital leaders recommended that the current
loophole known as the Stark "whole hospital" exception
be closed to prevent physicians referring to entities in which they
have ownership.
In response to the Medicare Modernization Act's directions for
MedPAC and the Department of Health and Human Services (HHS) to
report to Congress on certain issues related to physician owned
specialty hospitals, MedPAC Chairman Glenn Hackbarth and Thomas
Gustafson, Ph.D., deputy director of the Center for Medicare Management
at the Centers for Medicare and Medicaid Services (CMS), discussed
in their testimony the study findings and related recommendations.
While the CMS findings are preliminary and the results have yet
to be released, both studies found that specialty hospitals treat
less severely ill patients and provide less uncompensated care than
community hospitals. In addition, both identified that the current
payment system includes large differences in profitability across
severity classes within diagnostic related groups (DRGs), which
might create financial incentives to select low severity patients.
In addition, MedPAC
found that specialty hospitals do not have lower costs for Medicare
patients, but do have shorter lengths of stay and that community
hospitals have so far been able to compete with specialty hospitals
without suffering financially. The CMS report also found that a
majority of Medicare patients in most specialty hospitals are referred
or admitted by a physician owner; the quality of care was at least
as good at a specialty hospital; and patient satisfaction is high.
Based on its findings, MedPAC recommends that the moratorium be
extended from June 8, 2005 until Jan. 1 2007 to allow Congress and
the Secretary work to improve payment accuracy in the hospital inpatient
prospective payment system by adjusting the diagnostic related groups.
In addition, the report recommends that Congress grant the Secretary
the authority to allow gainsharing agreements between physicians
and hospitals and to regulate those arrangements to protect the
quality of care and minimize financial incentives that could affect
physician referrals.
In response to questioning, Dr. Gustafson clarified that the administration
did not have a position on the moratorium extension. Dr. Gustafson
reminded the committees that CMS had included in President Bush's
FY 2006 budget a statement indicating it would propose refining
DRGs to address the specialty hospital issue.
The second panel, consisting of physicians and representatives
from community and specialty hospitals, disagreed over whether or
not the moratorium should be extended and whether the Stark whole
hospital exception loophole should be closed. Representatives from
community for-profit and not-for-profit hospitals detailed to the
Senate Finance Committee and House Ways and Means Health Subcommittee
why physician self-referrals to physician-owned, limited-service
hospitals threatens patient access to critical health care services,
and urged legislators to close the loophole in federal law used
to justify the activity. The panelists also disagreed over whether
DRGs should be refined.
Testifying at the Senate Finance Committee hearing
were past president of the American Surgical Hospital Association
and PSC Health Inc. Chief Executive Officer, Alan Pierott, M.D.;
Lookout Memorial Hospital CEO Larry Veitz; and Oklahoma University
Medical Center Chief Medical Officer J. Andy Sullivan, M.D. Testifying
at the House Ways and Means health subcommittee hearing
were representatives from St. David's Healthcare Partnership, the
American Medical Association, Cedars-Sinai Hospital, MedCath Corporation,
and Baylor Healthcare System.
Senate Finance Committee Chairman Charles Grassley (R-Iowa) stated
at the hearing that he and ranking member Sen. Max Baucus (D-Mont.)
are drafting legislation to address physician-owned specialty hospitals.
He later clarified that the legislation would close a loophole in
the federal self-referral law, known as Stark.
Information:
Lynne Davis Boyle, Assistant Vice President
AAMC Government Relations
ldavisboyle@aamc.org
(202) 828-0526
PPAC Addresses Medicare Contractor Reforms, Other
Issues
The Practicing Physicians Advisory Council (PPAC) met March 7 to
address a variety of Medicare activities underway by the Centers
for Medicare and Medicaid Services (CMS), including contractor reform
activities, the proposed rule for competitive bidding on drugs,
preliminary information about the Calendar Year (CY) 2006 physician
fee schedule rule, and pay-for-performance initiatives. PPAC serves
as the physician's advisory board to Medicare.
CMS representatives reported that CMS will be will be conducting
full and open competitions for new "Medicare Administrative
Contractors" (MACs), as mandated by the Medicare Modernization
Act (MMA) of 2003. Three types of MAC contractors will process fee
for service claims for 1) Parts A and B, 2) home health, and 3)
durable medical equipment. These changes are scheduled to be fully
implemented by 2011. The planned reform will make use of standard
contracting principles such as competition and performance incentives.
More details about contractor reform, including the most recent
report to Congress and an opportunity to submit comments, can be
found on the CMS
Web site.
CMS also reported on its proposed
rule for the "Competitive Acquisition Program" (CAP)
for Medicare Part B drugs and biologicals, as required under the
MMA. Beginning Jan. 1, 2006, this voluntary program will provide
an option for physicians to purchase covered medications from vendors
selected through a competitive bidding process or be paid under
the average sales price system for directly purchased drugs. Final
comments are due by April 25.
In a presentation on the 2006 physician fee schedule, CMS noted
that the work relative value unit (WRVU) component of the physician
fee schedule is scheduled for its mandated 5-year review. Currently,
over 800 codes have been submitted by CMS and specialty societies
for review by the relevant AMA committees and CPT Panel. Revised
work RVUs will be incorporated into the 2007 fee schedule.
CMS reviewed several pay-for-performance and quality
initiatives that are currently in process or being planned,
including the Physician Group Practice (PGP) demonstration.
Information:
Mary Patton, Senior Research Associate
AAMC Division of Health Care Affairs
mpatton@aamc.org
(202) 862-6297
Denise Dodero, Sr. Director, Health Care Affairs
AAMC Health Care Affairs
ddodero@aamc.org
(202) 828-0493
Senate Committee Passes Patient Safety Legislation
The Senate Health, Education, Labor, and Pensions (HELP) Committee
March 9 passed patient safety legislation that would establish a
voluntary and confidential reporting system in support of initiatives
to reduce preventable medical errors. The "Patient Safety and
Quality Improvement Act of 2005" (S. 544) is based on legislation
that was approved by the Senate in the 108th Congress (S.
720). The House passed similar legislation last year; however,
the House and Senate did not reconcile subtle differences between
the two bills before the 108th Congress adjourned.
By granting legal protections for reported data, S. 544 would encourage
providers to report medical errors or "near misses" to
"Patient Safety Organizations" (PSOs). The PSOs would
compile and analyze the data with the intent of developing and disseminating
"best practices" that could avoid subsequent errors and
improve healthcare quality.
Information:
Christiane Mitchell, Senior Legislative Analyst
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
On the Hill
Doris Matsui (D-Calif.) became the newest member of the House of
Representatives, winning a March 8 special election to succeed her
husband, Robert Matsui (D-Calif.), who passed away Jan. 1. Rep.
Matsui, a former deputy director of public liaison in the Clinton
Administration and lobbyist, was sworn in on March 10 and is expected
to be assigned a seat on the House Rules Committee. Rep. Matsui's
election brings the party breakdown in the House to 232 Republicans,
202 Democrats, and 1 Independent.
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