WASHINGTON WIRE
January 26, 2007
Issue 119
In this issue, you'll find:
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President Offers Health Care Reforms in State of the Union Address
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Study Suggests New Medicaid Reimbursement System Will Underpay Pharmacies
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No New Medicare Reporting Program Required for Bonus System
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Hearings
Top Story
President Offers Health Care Reforms in State of the Union Address
In his State of the Union Address Tuesday night, President Bush suggested wide-ranging reforms to the current health care system with a specific focus on expanding health care coverage to the nation's uninsured.
The President proposed a new "Affordable Choices" grants program with the aim of helping states bring private health insurance within reach of uninsured citizens. These state grant programs would be funded with up to $30 billion in existing health care funds redirected away from Medicare and Medicaid programs such as disproportionate share hospital (DSH) programs. It is unlikely, however, that Congress would allow funds to be taken from DSH programs which currently provide support to hospitals treating large numbers of uninsured and underinsured patients.
Under the proposed grants program, states would choose a basic, low-cost health plan to offer its citizens with specific health plans varying from state to state.
In a statement made prior to the President's address, Health and Human Services Secretary Michael Leavitt said the shift away from subsidizing institutions and toward helping individuals purchase insurance would ensure that "they get better care and the money ultimately goes further."
However, many groups object to the Presidents proposal to shift DSH funds to state grants including the American Hospital Association and the Federation of American Hospitals. Chip Kahn, President of FAH, said that cutting funding to "safety net" hospitals would not change their role as the "health care giver of the last resort," but only undermine their ability to treat the vulnerable, low-income population.
During his address, the President also proposed a change in the federal tax code that would offer deductions of $7,500 for individuals and $15,000 for families who have purchased health insurance or are covered through their employer. This alteration of the tax code would also introduce, for the first time, a tax on employer-sponsored health plans, since individuals participating in plans worth more than the proposed deductible amounts would be taxed on the difference. The President said the revision would "level the playing field" for individuals not insured through their employer, and for the uninsured, the deduction would free up money for the purchase of private health insurance. However, opponents argue that the President's plan would shift greater burden onto the middle and lower-middle classes as their employers have less incentive to provide their employees with health care.
Additionally, President Bush encouraged expanding health savings accounts, aiding small businesses through association health plans, and stemming the government's rising spending on entitlement programs such as Medicaid and Medicare.
Health Care News
Study Suggests New Medicaid Reimbursement System Will Underpay Pharmacies
According to study released this week by the Government Accountability Office (GAO), the federal government will underpay retail pharmacies for certain drugs under the Medicaid program.
Under changes made by the Deficit Reduction Act of 2005 (DRA), certain prescription drugs are to be reimbursed based on a system using the Average Manufacturers Price (AMP), rather than the nationally published prices for a drug. This system sets the "federal upper limits (FULs)," or the maximum federal reimbursement, for about 600 Medicaid-covered drugs.
Although the Congressional Budget Office (CBO) estimates the change will save Medicaid up to $3.6 billion over five years, the GAO survey found that many of the new drugs would actually be reimbursed at a rate lower than the retail pharmacy acquisition costs.
However, the Center for Medicare and Medicaid Services (CMS) questioned the GAO's calculations and particularly its estimates of the pharmacies' acquisition costs. The GAO did caution that full implementation of the new FULs in 2007 is needed to determine the true impact of these changes.
No New Medicare Reporting Program Required for Bonus System
During a CMS "Open Door Forum" this week, agency representatives stated that physicians will not be required to enroll in a new Medicaid "program" in order to receive bonus payments for reporting quality measures.
Just prior to adjournment, the 109th Congress approved legislation that would provide physicians with a 1.5% Medicare reimbursement bonus beginning in July 2007, for reporting quality data to CMS. The information will be submitted through the normal claims process for services covered under the current physician fee schedule.
According to CMS representatives, although caps will likely be put in place, the bonus payments will be based on all allowable charges rather than simply the 80% reimbursed by Medicare.
Upcoming Events
Hearings Protecting Workers from Genetic Discrimination
Tuesday, January 30, 2007
House Education and Labor
Subcommittee on Health, Employment, Labor, and Pensions
10:30 a.m., 2175 Rayburn Bldg.
Wednesday, January 31, 2007
Health, Labor, Education and Pensions Committee Organization
Senate Health, Education, Labor and Pensions Committee
Full Committee Business Meeting
10 a.m., 430 Dirksen Bldg.
Genetic Information Nondiscrimination Act
Senate Health, Education, Labor and Pensions Committee
Full Committee Markup
10 a.m., 430 Dirksen Bldg.
Medicare Drug Benefit
Senate Special Aging Committee
Full Committee Hearing
10:30 a.m., 562 Dirksen Bldg.
For More Information
For further information on any topics discussed or publications listed, or to get copies of anything mentioned in this alert, please call (202) 466-6550 and ask for the Legislative Practice Group.
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