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WASHINGTON WIRE

August 3, 2007
Issue 142

House and Senate Approve SCHIP Legislation

Negotiations on FDA Bill Postponed Until After August Recess

CMS Releases Final IRF, SNF Payment Rules

Top Story

House and Senate Approve SCHIP Legislation

On August 1st, by a vote of 225-204, the House approved legislation to reauthorize the State Children's Health Insurance Program (SCHIP) and make significant changes to the Medicare and Medicaid programs. On August 2nd, the Senate approved a much narrower SCHIP reauthorization bill by a 68-31 vote.

The House bill would reauthorize SCHIP and invest an additional $50 billion dollars over five years in the program, adding an additional five million children to the SCHIP rolls. The legislation would also prevent a scheduled 10 percent Medicare physician payment cut next year, providing doctors with a 0.5 percent payment increase each year over the next two years.

The House legislation also addresses a number of other priorities including Medicare's "75% Rule" on inpatient rehabilitation facilities, Part D coverage for certain classes of drugs, and Administrative efforts to restrict Medicaid rehabilitation and school-based services. The House bill is financed primary by a tobacco tax increase and a cut to Medicare managed care plans.

Funded entirely by a $0.61 increase in tobacco taxes, the Senate's SCHIP bill would invest an additional $35 billion over the next five years into the program, covering an additional 3.2 million children.

The Senate's bill contains no provisions impacting the Medicare program. While there has been speculation as to whether or not the Senate will draft its own Medicare bill or simply conference its SCHIP legislation with the House's SCHIP/Medicare bill, the Senate Finance Committee is now expected to begin work on Medicare legislation in early September.

Strong bipartisan support in the Senate has rendered its SCHIP bill veto-proof. However, many Republicans who supported the Senate version on the floor have stated that they will not support a conference report that goes much beyond the $35 billion price tag. The President has threatened to veto both the Senate and House bills as currently drafted. Many expect this means that either or both the SCHIP expansion and Medicare package will be finally passed when the last, must-pass legislative items are considered for the year.

Health Care News

Negotiations on FDA Bill Postponed Until After August Recess

Legislation to reauthorize the Prescription Drug User Fee Act will not be conferenced prior to the August recess.

Although both the Senate and House have approved legislation to reauthorize the Food and Drug Administration's (FDA's) drug user-fee program, House and Senate staff negotiations on the bills have been suspended as a result of differing safety requirements in the legislation and competing legislative priorities. The House bill, approved in mid-July, goes well beyond the Senate bill, passed in May, in terms of drug safety provisions.

Senate Majority Leader Harry Reid (D-NV) was prepared to appoint Conferees late this week, but Senator Michael Enzi (R-WY), top Republican on the Health Education Labor and Pension (HELP) Committee, asked that such appointments be postponed.

Drug-user fees are a primary means of financing drug safety reviews and other work at the FDA, and, without Congressional action on the drug user fee reauthorization prior to its September 30th expiration date, the agency states it will have to begin laying off employees. Congressional leaders have stated that the reauthorization legislation will be completed by the end of September.

CMS Releases Final IRF, SNF Payment Rules

The Centers for Medicare and Medicaid Services (CMS) released its final rules for the Prospective Payment System (PPS) for Inpatient Rehabilitation Facilities (IRFs) and Skilled Nursing Facilities (SNFs) this week.

The IRF PPS rule, as expected, will increase reimbursement for IRFs by 3.2 percent in fiscal year (FY) 2008 and increases the high-cost outlier threshold to $7,362 from the $5,534 in FY 2007.

The rule also further implements aspects of Medicare's controversial "75% Rule," which requires that all IRFs maintain a certain percentage of patients with one of thirteen diagnoses in order to keep their IRF classification under Medicare. Currently, IRFs must maintain a 65% threshold; however, the rule states that as of July 1, 2008, the threshold will increase to 75 percent. Additionally, the rule states that although IRFs may currently use a patient's comorbid condition to count toward compliance with the 75% Rule, as of July 1, 2008, that will no longer be the case.

Patient and hospital organizations have been vocal in their opposition to the 75% Rule, claiming that it restricts access for those with diagnoses that do not meet one of the thirteen qualifying conditions. However, the nursing home industry has strongly supported implementation of the rule, stating that SNFs and other less intensive settings can provide similar levels of rehabilitation as IRFs at lower costs.

The House passed Medicare legislation earlier this week that would freeze implementation of the 75% Rule at the 60% threshold and maintain current treatment of comorbidities in terms of compliance.

The SNF PPS rule would increase reimbursement rates by 3.3 percent in FY 2008, increasing payments by approximately $690 million.

The final rule IRF can be found at http://cms.hhs.gov/inpatientrehabfacpps/downloads/cms1551f-display.pdf.

The final SNF Rule can be found at http://www.cms.hhs.gov/snfpps/downloads/CMS-1545-F.pdf.

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