Washington Highlights: June 3, 2005
NGA To Address
Medicaid Reform Independently; Will Not Serve on Medicaid Commission
Contents
Prior Issues
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The National Governors Association (NGA) June 1 indicated that
it will work independent of the Department of Health and Human Services'
Medicaid Commission to develop short- and long-term options for
program reform. According to a press
release, the "NGA will provide its recommendations to Congress
and the commission as opposed to being part of the commission."
The release also outlines an interim Medicaid Reform Policy, which
includes a variety of proposals to "more efficiently manage
the program and subsequently serve all those in need." The
interim policy was developed by the bipartisan NGA Medicaid Working
Group, which is led by Chairman Governor Mark Warner (D-Va.) and
Vice Chairman Governor Mike Huckabee (R-Ark.). The full NGA membership
is expected to vote on the recommendations during their annual summer
meeting. According to the press release, the NGA will share the
details of their policy recommendations at a June 15 hearing before
the Senate Finance Committee.
The NGA reforms address prescription drug reimbursement, asset
transfers related to long-term care and cost-sharing. They also
call for increased flexibility in structuring benefits packages,
reforming the waiver process, and judicial reforms that assure states
have the "fundamental right to make basic operating decisions
about optional categories of the program." The NGA also proposes
the creation of a "National Health Care Innovations Program"
to control costs and improve quality through the use of health information
technology, as well as various incentives for employer-based and
private healthcare coverage.
Information:
Christiane Mitchell, Senior Legislative Analyst
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
Ways and Means Committee Holds Hearing on Tax-Exempt
Hospitals
In a May 26
hearing entitled "A Review of the Tax-Exempt Hospital Sector,"
the House Ways and Means Committee examined the legal history of
the tax-exemption for hospitals, the Internal Revenue Service's
(IRS) oversight of tax exempt hospitals, the need for congressional
oversight of the standards for hospital tax-exemption, and federal
policies that subsidize treatment of the indigent by hospitals.
After reviewing the legal history of tax-exemption for hospitals
and IRS oversight of the sector, IRS Commissioner Mark Everson stated
"we … are now faced with a healthcare industry in which
it is increasingly difficult to differentiate for-profit from non-profit
healthcare providers." The "sky-line" of hospitals
has changed dramatically since the standard was put in place, "with
more organizations entertaining complex business structures and
transactions" such as joint ventures. Such activities make
it difficult for the IRS to ensure compliance among tax-exempt entities,
without imposing "a disproportionate hardship on innocent charitable
beneficiaries" Mr. Everson said.
Mr. Everson urged continued discussions to determine "whether
there are additional bright-line tests that might be available to
aid the public in complying with the law, and the IRS in administering
it." As such, he argued that any discussions about tax reform
include assurances that the IRS has "the proper range of tools
to enforce compliance in a measured way."
Following Mr. Everson's testimony, Chairman Bill Thomas (R-Calif.)
strongly criticized the IRS for easing the requirements used to
determine whether a hospital merits tax-exempt status. Chairman
Thomas argued that the IRS had enabled many hospitals to skirt their
obligations as tax-exempt, non-profit entities as a result of the
agency's elimination of charity care requirements.
John Columbo, a professor of law at the University of Illinois
College of Law in Urbana-Champaign, an academic witness who previously
testified at the Ways and Means Committee's April 20 hearing, criticized
the IRS' community benefit standard for lacking accountability and
not requiring any measurable difference in behavior from a for-profit
entity. Mr. Columbo suggested three alternatives to the community
benefit standard: a strict charity care standard in return for hospital
tax exemption; a more accountable standard that has specific behavior
guidelines such as developing plans to enhance and demonstrate financial
commitment to improving access to services; and repeal of the community
benefit standard. In reference to the repeal, Mr. Columbo stated,
"academic medical centers would remain exempt as education
institutions under 501(c)(3) and a few organizations such as the
Mayo Clinic might be able to make the case that they are primarily
engaged in medical (scientific) research and hence exempt."
In discussing a newly released study by the Government Accountability
Office (GAO) that compare the amount of uncompensated care provided
by for-profit, non-profit, and government hospitals in five states
(California, Florida, Georgia, Indiana, Texas), Comptroller General
David Walker stated that the study's findings reinforce "a
larger point that I and others raised at the hearing last month
- namely that current tax policy lacks specific criteria with respect
to tax exemptions" and the need to re-examine whether non-profit
hospitals perform services that "justify their tax exemption."
Specifically, the study found that government hospitals "devoted
substantially larger shares" of operating expenses to uncompensated
care, when compared to non-profit and for-profit hospitals. While
the share of uncompensated care provided by non-profit hospitals
exceeded the share provided by for-profit hospitals, "the difference
was small relative to the difference found when making comparisons
with the government hospital group." The study also explored
whether teaching hospitals provided a disproportionate share of
uncompensated care. The study found that, among non-profit and for-profit
hospitals, teaching status "was not an important predictor"
of whether the hospital provided a large amount of uncompensated
care. Among government hospitals, however, teaching status "was
an important predictor."
In reviewing federal policies that subsidize treatment of the indigent
by hospitals, Mark McClellan, M.D., Ph.D., Administrator of the
Centers for Medicare and Medicaid Services (CMS), discussed the
Department of Health and Human Services' guidance pertaining to
discounted billing and collections for non Medicare and Medicaid
patients as well as Medicare and Medicaid payment mechanisms to
compensate hospitals for providing care to uninsured individuals,
including disproportionate share hospital payments, bad debt payments
and "a portion of Indirect Medical Education (IME) payments."
Stated Dr. McClellan, "some say that the difference between
the empirical estimate and the current level of IME payments is
a subsidy for uncompensated care." Referring to the Medicare
Payment Advisory Commission's findings of variations in uncompensated
care provided by public versus private teaching hospitals, Dr. McClellan
said, "Nevertheless, the IME payments do provide funds that
these institutions can and do use to cover the gap. Whether this
approach to funding hospitals that provide uncompensated care actually
results in the most healthcare per dollar invested, and is the most
appropriate method for targeting those dollars to the uninsured,
or indigent, is not clear." Dr. McClellan suggested the Ways
and Means Committee might want to review, in addition to hospitals'
tax status, current policies that exist to assist hospitals that
provide uncompensated care and to consider whether funds used in
those efforts are providing care in the most efficient and effective
manner possible."
Informaton:
Lynne Davis Boyle, Assistant Vice President
AAMC Government Relations
ldavisboyle@aamc.org
(202) 828-0526
Christiane Mitchell, Senior Legislative Analyst
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
Grassley Requests Non-Profit Hospitals To Justify
Tax Status
Senate Finance Committee Chairman Charles Grassley (R-Iowa) May
25 sent a letter to 10 not-for-profit hospitals and health systems
requesting information about their charitable activities, patient
billing and ventures with for-profit companies and hospitals.
In a prepared
release, Chairman Grassley stated, "By gathering information
from non-profit hospitals, I hope to learn whether the benefits
they provide to the needy justify the tax breaks they receive."
Chairman Grassley stated that he is collecting the information as
part of a continued effort to review the non-profit sector in advance
of legislation he will introduce to prevent abuse of the federal
tax laws that created non-profit organizations and encourage charitable
donations.
The letter requests 25 pieces of information on charity care and
community benefit, particularly relating to joint ventures, and
21 pieces of information related to hospital charges, billing procedures
and other issues.
The following institutions received the letter: The Cleveland Clinic;
New York Presbyterian Hospital System; Advocate Health Care Network
and Advocate Health and Hospitals Corporation; Resurrection Medical
Center and Resurrection Health Care; Phoebe Putney Health Systems,
Inc, Phoebe Putney Memorial Hospital, Inc.; William Beaumont Hospital
and Beaumont Properties; North Mississippi Health Services, Inc.,
North Mississippi Medical Center; Sutter Health; Fairview Health
Systems; and Banner Health.
Information:
Lynne Davis Boyle, Assistant Vice President
AAMC Government Relations
ldavisboyle@aamc.org
(202) 828-0526
GAO Appoints Two New MedPAC Commissioners
The Comptroller General of the United States May 27 appointed
two new members and reappointed three members to the Medicare Payment
Advisory Commission (MedPAC). The Commission comprises 17 members
who bring diverse expertise in the financing and delivery of health
care services. Commissioners are appointed to three-year terms (subject
to renewal) by the Comptroller General, who heads the Government
Accountability Office (GAO). Appointments are staggered; the terms
of five or six Commissioners expire each year.
The newly appointed members, whose terms will expire in 2008, are
Jennie Chin Hansen, R.N., M.S.N., and Nancy M. Kane, D.B.A. Ms.
Hansen is a member of the AARP Board of Directors, and a part-time
nursing faculty member at San Francisco State University. Dr. Kane
is a professor of management in the Department of Health Policy
and Management at the Harvard School of Public Health.
Her research interests include measuring hospital financial performance,
quantifying community benefits and the value of tax exemption, the
competitive structure and performance of hospital and insurance
industries, and nonprofit hospital governance.
The new commissioners will replace Carol Raphael, M.P.A., and Mary
K. Wakefield, Ph.D., R.N., F.A.A.N, who will leave the commission
after serving two terms each. Ms. Raphael is president and chief
executive officer of the Visiting Nurse Service (VNS) of New York,
the country's largest voluntary home health care organization. Dr.
Wakefield is director and professor, Center for Rural Health at
the University of North Dakota.
The reappointed members, whose terms will also expire in 2008,
are Nancy-Ann DeParle, J.D., David F. Durenberger, J.D., and Nicholas
J. Wolter, M.D. Ms. DeParle is a senior advisor at JP Morgan Partners,
LLC, and adjunct professor of health care systems at Wharton School.
From 1997 to 2000, Ms. DeParle was administrator of the Health Care
Financing Administration (HCFA), now the Centers for Medicare and
Medicaid Services (CMS). Mr. Durenberger is chairman and chief executive
officer of the National Institute of Health Policy and a former
U.S. Senator, and Dr. Wolter is the chief executive officer at Deaconess
Billings Clinic.
Information:
Karen Fisher, Sr. Director, Health Care Affairs
AAMC Health Care Affairs
kfisher@aamc.org
(202) 862-6140
Diana Mayes, Staff Associate
AAMC Division of Health Care Affairs
dmayes@aamc.org
(202) 828-0498
Student Loan Interest Rates Set to Increase
The interest rate on Stafford student loans in both the Direct
Loan and Federal Family Education Loan (FFEL) programs is set to
increase nearly 2 percentage points, effective July 1. For loans
that are in an in-school, grace or deferment status, the rate will
increase from 2.77 percent to 4.7 percent. Loans in repayment or
forbearance status will increase from 3.37 percent to 5.3 percent.
These rates apply to loans that were disbursed on or after July
1, 1998. Student loan interest rates are variable, and change each
year on July 1, with a cap of 8.25 percent. Rates are calculated
by taking the rate of the 91-day T-bill and adding 1.7 percent during
in-school, grace and deferment periods, and adding 2.3 percent during
repayment and forbearance periods.
Information:
Jonathan Fishburn, Director, Research, Education and Veterans' Legislative Affairs
AAMC Government Relations
jfishburn@aamc.org
(202) 828-0525
Economic Hardship Deferment Expansion Legislation
Introduced
Representative Rob Andrews (D-N.J.) May 23 introduced two bills
related to student loan deferment for medical residents. The first
bill, H.R.
2519, would provide that borrowers in post-graduate medical
and dental residencies that are eligible for the Economic Hardship
Deferment would have that deferment available for 5 years. Additionally,
the borrower would not be required to apply annually for the deferment.
Under current law, borrowers must apply for the Economic Hardship
Deferment annually and it is available for only 3 years. The second
piece of legislation, H.R.
2527, would provide for a new deferment of Stafford student
loans "during any period in which the borrower is serving an
internship, or a medical or dental residency, the successful completion
of which is required in order to receive professional recognition
required to begin professional practice or service." Rep. Andrews
is a member of the House Committee on Education and the Workforce,
the committee to which these bills have been referred.
Information:
Jonathan Fishburn, Director, Research, Education and Veterans' Legislative Affairs
AAMC Government Relations
jfishburn@aamc.org
(202) 828-0525
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