WASHINGTON WIRE

In this issue, you'll find:

• CMS Announces Plan to Implement 75% Rule As Is
• Congress Examines Potential Medicaid Savings From Prescription Drug Rebates
• CMS Announces Adult Day Care Demonstration Project Under Medicare
• Frist, Clinton Introduce Electronic Health Records Legislation
• Hearings

Top Story

CMS Announces Plan to Implement 75% Rule As Is

On Tuesday, June 21, 2005, the Centers for Medicare and Medicaid Services (CMS) announced that it would proceed with its plan to implement Medicare's "75 Percent Rule," despite recommendations from the Government Accountability Office (GAO) that called for more specific criteria to classify Inpatient Rehabilitation Facilities (IRF).

The 75 percent rule states that a facility must treat a certain percentage of patients with one of thirteen conditions in order to be considered an IRF under Medicare and thus reimbursed as such.

As outlined in the final inpatient rehabilitation rule on May 7, 2004, CMS plans to gradually implement the rule over four years beginning with the current 50 percent standard and reaching the 75 percent standard by 2007. An April, 2005 GAO report recommended that CMS expand the IRF criteria while conducting further research.

Provider and consumer groups have expressed concern that the implementation of this rule will severely restrict access to IRFs for those whose conditions do not meet one of the specified thirteen conditions as well as force many facilities to close their doors, further restricting access to all patients.

Additionally, several Senate Finance Committee members recently requested that CMS freeze implementation of the rule at the current 50 percent level.

However, CMS states that it has been carefully monitoring the patient impact and has found no decrease in access for beneficiaries.

Health Care News

Congress Examines Potential Medicaid Savings From Prescription Drug Rebates

On Wednesday, June 22, 2005, the House Energy and Commerce Committee, Subcommittee on Health, held a hearing to examine Medicaid prescription drug payments as the subcommittee begins it work to find approximately $10 billion in savings from the Medicaid program over the next five years.

Both the Bush Administration and the National Governors Association (NGA) have included changes to prescription drug pricing in their Medicaid reform proposals and the subcommittee, chaired by Nathan Deal (R-GA), generally concurred on Wednesday that the current Medicaid prescription drug system is in need of reform. However, subcommittee members differed on what specific actions should be taken.

The Chairman stated that pharmacists should be compensated fairly, and at the same time, the average wholesale price (AWP) system should be changed to accurately reflect market prices.

Douglas J. Holtz-Eakin, Director of the Congressional Budget Office (CBO) suggested increasing the rebates drug makers give Medicaid from 15 percent to 20 percent, stating that such changes could save Medicaid over $3 billion in 5 years.

Subcommittee Democrats went on to state that reforms for drug makers should also be considered and many expressed support for an increase in the minimum price concession brand-name drug manufacturers offer Medicaid.

The Senate Finance Committee plans to examine similar issues during a hearing on Wednesday, June 29, 2005.

CMS Announces Adult Day Care Demonstration Project Under Medicare

On Thursday, June 23, 2005, CMS announced plans to implement a demonstration project that would provide medical adult day care services to Medicare beneficiaries under the home health benefit.

Medicare beneficiaries who require medical adult day care services currently pay out-of-pocket or are reimbursed by a third party payer outside of Medicare. However, the demonstration project, authorized by Section 703 of the Medicare Modernization Act of 2003 (MMA), would allow home health agencies to work with medical adult day care facilities to offer services to beneficiaries as a substitute for a portion of home health services otherwise provided in the patient's home.

Approximately 15,000 beneficiaries will be eligible to participate in the three-year demonstration project to take place at no more than five sites. CMS states that home health agencies will be paid 95 percent of the home health prospective payment rate for services. The project will begin in February, 2006.

Frist, Clinton Introduce Electronic Health Records Legislation

On Thursday, June 16, 2005, Senate Majority Leader Bill Frist (R-TN) and Senator Hillary Rodham Clinton (D-NY) introduced S. 1262, the "Health Technology to Enhance Quality Act of 2005."

The legislation would create standards for electronic information sharing of health information as well as authorize $125 million in grants per year for five years to assist local and regional health care systems in the creation of health information plans. The bill would also statutorily establish the Office of the National Coordinator of Health Information Technology which was first announced by the Bush administration in April 2004. The bill has been referred to the Senate Health, Education, Labor and Pensions Committee.

Upcoming Events

Hearings

Tuesday, June 28, 2005

Committee on Energy and Commerce - Subcommittee on Health
10:00AM
2123 Rayburn House Office Building
Public Health Service Act

Special Committee on Aging
2:30PM
G- 50 Dirksen Senate Office Building
"Mandatory or Optional: The Truth about Medicaid"

Wednesday, June 29, 2005

Committee on Health, Education, Labor, and Pensions
9:50AM
430 Dirksen Senate Office Building
Business Meeting - S.681, to amend the "Public Health Service Act" to establish a National Cord Blood Stem Cell Bank Network

Committee on Finance
10:00AM
216 Hart Senate Office Building
Medicaid's pricing and payment policies for prescription drugs

Committee on Commerce, Science, and Transportation -Subcommittee on Technology, Innovation, and Competitiveness

Thursday, June 30, 3005

Committee on Commerce, Science, and Transportation -Subcommittee on Technology, Innovation, and Competitiveness
10:00AM
253 Russell Senate Office Building
"How information technology can reduce medical errors, lower healthcare costs, and improve the quality of patient care"

Special Committee on Aging
10:00AM
216 Hart Senate Office Building
Medicare Costs

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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