WASHINGTON WIRE

June 23, 2006
Issue 102

In this issue, you'll find:

CMS Issues Proposed Changes to Physician Fee Schedule
CMS Releases Cost-Sharing Guidance under the DRA
House Concludes Its "Health Week"
Senate Budget Committee Passes Budget Reform Bill
Hearings

Top Story

CMS Issues Proposed Changes to Physician Fee Schedule

On Wednesday, June 21, 2006, the Centers for Medicare and Medicaid Services (CMS) announced proposed changes to the Medicare Physician Fee Schedule.

The proposed rule would make changes to the payment system by altering physician work relative value units (RVUs) and the calculation of practice expenses.

Changes to the work RVUs include increasing the physician's reimbursement for "intermediate" office visits and "moderately complex decision-making" office and hospital visits. These types of visits are some of the most frequently billed physician services. In total, the proposed rule would modify work RVUs for over 400 types of physician services.

CMS states that it is required to implement these changes in RVUs in a budget neutral manner, and many stakeholders are expressing concern that reimbursement for other physician services will be cut to achieve budget neutrality. Medicare is estimating that the proposed changes to the work RVUs would cost Medicare approximately $4 billion.

The proposed rule would also modify how practice expenses are calculated. The change to the methodology would include both direct (personnel salaries and supplies) and indirect (office rent) costs and would make payment calculation procedures more consistent regardless of specialty. Certain specialties would be able to use collected data in the methodology of determining payment. CMS would phase in the proposed practice expense methodology over a four-year period.

The rule will be published in the June 29, 2006 Federal Register, and CMS is accepting comments on the rule until August 21, 2006. The final rule is expected in November 2006.

Health Care News

CMS Releases Cost-Sharing Guidance under the DRA

On Friday, June 16, 2006, the Centers for Medicare and Medicaid Services ("CMS") released guidance clarifying the Medicaid cost-sharing provisions enacted by the Deficit Reduction Act of 2005 ("DRA").

Under the DRA, states have the option to raise co-payments and premiums on Medicaid services, as well as enforce cost-sharing under the threat of service denial. (Previous law did not allow providers to deny services based on the ability of the recipient to provide co-payments.) The new guidance allows states to enforce cost sharing up to 20 percent of the service cost depending on the beneficiary's income level. Total cost sharing is capped at 5 percent of family income.

After enactment of the DRA, it remained unclear as to how the cost-sharing provisions would affect individuals below 100 percent of the Federal Poverty Level ("FPL"), as a recognized drafting error technically allowed unlimited cost-sharing for this population. According to the recent CMS guidance, it appears that previous nominal cost-sharing limits apply. Whether cost-sharing is enforceable for this population is unclear.

The guidance would also allow states to charge a higher co-payment for "preferred" medications in an effort to encourage beneficiaries to use generic drugs.

House Concludes Its "Health Week"

The House passed two bills during its "Health Week" this week including HR 5573, the "Community Health Center Reauthorization Act of 2006," and HR 5574, the "Children's Hospital Graduate Medical Education Payment Program Reauthorization Act of 2006."

HR 5573 would provide approximately $10 billion in funding through 2011 for community health centers. HR 5574 would authorize $300 million for children's graduate medical education ("GME") over the next five years. The GME program trains pediatricians and pediatric specialists across the country.

Although HR 4157, the "Health Information Technology and Promotion Act of 2006," was predicted by many to be the centerpiece of the House's "Health Week," Majority Leader John Boehner (R-OH) pulled the legislation from the floor schedule earlier this week. The House Ways & Means and Energy & Commerce Committees passed two different versions of the bill last week and have not reconciled the differences between the two bills. Majority Leader Boehner also stated that he was waiting on a score from the Congressional Budget Office before moving the bill to the floor. It is unclear when further action will be taken on this issue.

Senate Budget Committee Passes Budget Reform Bill

On Tuesday, June 20, 2006, the Senate Budget Committee passed the "Stop Overspending Act of 2006" along party lines. The bill, referred to as "S.O.S." by its sponsor and Budget Committee Chairman, Judd Gregg (R-NH), attempts to control federal spending on entitlement programs.

In an effort to control Medicare spending, under current law, the President is required to submit a legislative proposal to Congress to cut spending if the Medicare Trustees project general revenues to finance more than 45 percent of total Medicare spending for two consecutive years.

However, under this bill, the Budget Committee would "warn" Congress if the general fund contribution to total Medicare outlays were projected to exceed 45 percent within the next seven years. If the Budget Committee issued a warning for two consecutive years, any new entitlement spending not "paid for" in the budget would be subject to a budgetary point of order, requiring 60 votes for approval.

In addition, the bill would require broad cuts to keep the federal deficit within a certain percentage of the Gross Domestic Product. The bill would also establish a "National Commission on Entitlement Solvency" responsible for recommendations to Congress on controlling entitlement spending. Finally, the bill gives a line-item budget veto to the President.

Senate Democrats have expressed strong opposition to this legislation, stating that these entitlement proposals should not be considered without a focus on revenue and tax proposals. Many stakeholders suspect the Democrats would filibuster the legislation if it were to come to the Senate floor.

Upcoming Events

Hearings

Tuesday, June 27, 2006

Stem Cell Research
Senate Appropriations - Subcommittee on Labor, Health and Human Services, Education, and Related Agencies
Subcommittee Hearing
9 a.m., 192 Dirksen Bldg

Globalization of Health Care
Senate Special Aging Committee
Full Committee Hearing
10 a.m., 106 Dirksen Bldg.

Veterans' Rural Healthcare
House Veterans' Affairs - Subcommittee on Health
Subcommittee Oversight Hearing
10 a.m., 334 Cannon Bldg.

Wednesday, June 28, 2006

Older Americans Act; Health Bills
Senate Health, Education, Labor and Pensions Committee
Full Committee Markup
10 a.m., 430 Dirksen Bldg.

Mental Illness and Brain Disease
House Energy and Commerce - Subcommittee on Health
Subcommittee Hearing
10 a.m., 2123 Rayburn Bldg.

Health Savings Accounts
House Ways and Means Committee
Full Committee Hearing
10:30 a.m., 1100 Longworth Bldg.

Thursday, June 29, 2006

Pandemic Flu Preparedness in the Financial Services Sector
House Financial Services - Subcommittee on Oversight and Investigations
Subcommittee Oversight Hearing
10 a.m., 2128 Rayburn 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.

Powers Pyles Sutter & Verville P.C. is a full service law firm specializing in health care and education law and located at 1875 Eye St., NW 12^th Floor, Washington DC 20006