WASHINGTON WIRE

March 10, 2006
Issue 91

In this issue, you'll find:

Senate Committee Approves FY07 Budget Proposal
Finance Committee Chairs Seek Review of Specialty Hospitals
HELP Committee Debates Insurance Bill for Small Businesses
Chairman Thomas to Retire
Hearings and Events

Top Story

Senate Committee Approves FY07 Budget Proposal

On Thursday, March 8, 2006, the Senate Budget Committee approved, along party-lines, its fiscal year (FY) 2007 budget resolution. The full Senate is expected to debate and vote on the budget resolution next week.

The $2.8 billion budget sets aside approximately $1.5 billion for health-related programs. The budget resolution pledges to cut the deficit in half by 2008, reducing the projected deficit from $521 billion in 2004 to $250 billion in 2008. The proposal would impose a discretionary spending cap of $873 billion in 2007, similar to the one proposed in the President budget earlier this year.

Chairman Gregg's (R-NH) budget proposal does not include reconciliation instructions, as was the case in last year's budget resolution. Many in Congress cite the election year status, combined with the difficulty Congress had passing entitlement cuts just last session, as the reason for this omission.

Accordingly, Chairman Gregg's resolution would leave the Medicare program largely untouched despite the Administration's recommendation to find $37 billion in savings from the program. However, the Senate's proposal would put in place a new enforcement tool to curb spending if the general fund contributes more than 45 percent of total Medicare outlays.

The Chairman's Budget bill assumes $382 billion for Medicare spending in 2007, a 17 percent increase over 2006 levels. The proposal assumes the repeal of the Stabilization Fund included in the Medicare Modernization Act for a savings of $7 billion over five years. The Mark also assumes legislation will be enacted to extend the moratorium on therapy caps for a cost of $710 million over five years.

The budget proposal includes $199 billion in Medicaid spending in 2007, a 4.7 percent over 2006. Included in the budget are an Administrative initiative to provide Transitional Medical Assistance, the "Cover the Kids" initiative, and an increase in SCHIP spending in 2007 and 2008.

Although this budget does not include the cuts to entitlement programs that the President's FY 2007 budget proposed, Senate Finance Committee Chairman Grassley stated this week that such cuts will not necessarily be excluded in the House's budget. However, earlier this week, 60 House Republicans send a letter to House Budget Committee Chairman Nussle (R-IA) stating their opposition to the Administration's call for $37 billion in cuts to the Medicare program. Citing the fact that 7 out of 10 hospitals are currently losing money on Medicare, the letter stated that cuts to the program are not appropriate at this time.

The House Budget Committee is not expected to vote on its Budget bill until after the St. Patrick's Day break.

Health Care News

Finance Committee Chairs Seek Review of Specialty Hospitals

On Monday, March 6, 2006, Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Member Max Baucus (D-MT) requested that the Department of Health and Human Services (HHS) and the Government Accountability Office (GAO) each conduct an analysis of physician-owned specialty hospitals.

In a letter to HHS, the Senators asked the Office of Inspector General (OIG) to review the quality of care and safety of patients served in specialty facilities. The Finance Committee would like to ensure that specialty hospitals receiving Medicare and Medicaid reimbursements are providing the best care to patients. In addition, the Senators also sent a letter to GAO asking them to look into the financial practices of specialty hospitals. Concerned about the financial arrangement of a specific specialty hospital, the lawmakers placed asked GAO to conduct a special audit examining physician investment structure and patterns of fraud and abuse.

The letters followed two previous ones sent to HHS on February 14, 2006, regarding a moratorium on specialty hospitals under the Medicare Modernization Act of 2003, and to the Medicare Payment Advisory Committee on February 27, 2006, requesting the impact of specialty hospitals on community hospitals. Community hospitals have stated that it is a conflict of interest when physicians refer their patients to a specialty hospital in which they are a partial owner and could be compromising the quality of care and the safety of the patient.

HELP Committee Debates Insurance Bill for Small Businesses

On Wednesday, March 8, 2006, the Senate Health, Education, Labor, and Pensions (HELP) Committee began debate on the Health Insurance Marketplace Modernization and Affordability Act of 2005 (S. 1955).

The legislation would allow small businesses to group together when designing health insurance plans and permit the health insurance companies to bypass state coverage mandates. The legislation would also require insurers to offer a plan matching the benefits offered by the five largest states in the country. As cited by some Committee Democrats, many health insurance commissioners and advocacy groups are opposed to the legislation because of a provision which allows insurance companies to circumvent the state coverage mandates.

Senator Jeff Bingaman (D-NM) offered four amendments designed to protect patients by offering an alternative pooled insurance program similar to the one used by federal employees and requiring insurers to provide certain benefits under state mandates. Despite receiving Senator Mike DeWine’s (R-OH) support on two of the amendments, the measures ultimately failed.

The Committee agreed to reconvene Wednesday, March 15, 2006 to continue marking up the bill.

Chairman Thomas to Retire

On Monday, March 6, 2006, House Ways and Means Committee Chairman Bill Thomas (R-CA) announced he would not be seeking reelection this fall, after 14 terms in the House and 6 years as full Committee Chairman.

Term limits would have forced Chairman Thomas to step down from the Committee head at the end of this year regardless of whether he sought reelection or not. Speculation continues to surround his successor to the powerful Chairmanship as Republicans Jim McCrery of Louisiana and Nancy Johnson of Connecticut and Clay Shaw of Florida have all stated their interest in the job.

Upcoming Events

Hearings and Events

Wednesday, March, 15, 2006

Health Insurance Issues
Senate Health, Education, Labor and Pensions Committee
Full Committee Markup
9 a.m., 430 Dirksen Bldg.

Fiscal 2007 Appropriations: Labor, HHS and Education
House Appropriations - Subcommittee on Labor, Health and Human Services, Education, and Related Agencies
Subcommittee Hearing
9 a.m., 2358 Rayburn Bldg.

Better Health Care Information
House Energy and Commerce - Subcommittee on Health
Subcommittee Hearing
10 a.m., 2123 Rayburn Bldg.

Federal Employee Healthcare
House Government Reform - Subcommittee on Federal Workforce and Agency Organization
Subcommittee Hearing
2 p.m., 2154 Rayburn Bldg.

Hospital Group Purchasing
Senate Judiciary - Subcommittee on Antitrust, Competition Policy and Consumer Rights
Subcommittee Hearing
2:30 p.m., 226 Dirksen Bldg.

Medicare Hospital Payment Policies
House Ways and Means - Subcommittee on Health
Subcommittee Hearing
3 p.m., 1100 Longworth Bldg.

Thursday, March 16, 2006

Electronic Health Information System
House Energy and Commerce - Subcommittee on Health
Subcommittee Hearing
10 a.m., 2123 Rayburn Bldg.

Public Health and Medical Preparedness
Senate Health, Education, Labor and Pensions Committee
Full Committee Hearing
10:30 a.m., 430 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.

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