WASHINGTON WIRE

In this issue, you'll find:

• Senate Approves Reconciliation Bill; Cuts to Medicare and Medicaid
• CMS Releases 2006 Physician Fee Schedule
• HHS Unveils Avian Flu Plan
• Hearings

Top Story

Senate Approves Reconciliation Bill; Cuts to Medicare and Medicaid

On Thursday, November 3, 2005, the Senate approved 52 to 47 a five-year reconciliation package that finds approximately $35 billion in savings from mandatory programs, including Medicare and Medicaid.

During floor consideration, several health-related amendments were offered by Members on both sides of the aisle with most failing to be adopted. However, an amendment offered by Senate Finance Committee Member Jeff Bingaman (D-NM) addressing federal Medicaid reimbursements to states managed to garner 54 votes, enough to be incorporated. The amendment would restore a scheduled 2006 decrease to several states in their Federal Medical Assistance Percentage (FMAP), the payment formula used by Medicaid to determine the federal reimbursement rate for individual states. Senator Bingaman's amendment would also extend rebates for prescription drugs to Medicaid recipients enrolled in Medicaid managed care.

Meanwhile, the Bush Administration released a statement earlier this week indicating a possible veto of legislation that includes the elimination of the regional Medicare Advantage Stabilization Fund, originally set up through the Medicare Modernization Act of 2003 (MMA) to encourage managed care organizations to participate in the Medicare Managed Care program. The Senate's reconciliation legislation includes the elimination of this Medicare fund.

After the House Budget Committee approved a reconciliation package this week, the House is expected to bring the legislation to the House floor as early as next week. The House's current reconciliation bill includes no cuts to the Medicare program, finding almost $10 billion in savings from Medicaid over the next five years. The House version also provides greater overall cuts, $50 billion versus the $35 billion in the Senate, complicating future conference negotiations and potentially threatening a number of the Medicare provisions added to the Senate bill.

Health Care News

CMS Releases 2006 Physician Fee Schedule

On Wednesday, November 2, 2005, the Centers for Medicare and Medicaid Services (CMS) announced that physicians will receive a 4.4% decrease in their Medicare payments next year. The payment cut results from the current sustainable growth rate (SGR) formula used by CMS to calculate physician payments rates under the program.

Also under the new rule, Medicare payments to hospital outpatient departments will rise 3.7 percent in the coming year. Additionally, as a result of the SGR formula, these departments will receive payments of 106% of the manufacturers' sales prices (ASP) for outpatient prescription drugs. Outpatient drugs are currently being paid at 83 percent of the average wholesale price (AWP).

CMS Administrator Dr. Mark McClellan received harsh criticism from House Ways and Means Committee Chairman Bill Thomas (R-CA) who feels that the new Part B drug payments override Congressional intent in the MMA to link payments between two equivalent drugs.

Currently, the Senate's reconciliation legislation includes a provision to provide a temporary 1% increase in physician payments in 2006 while, the House Budget Committee's reconciliation legislation currently contains no such proposal. Following several years of such temporary fixes, many in Congress are pushing for permanent change to the SGR payment formula. Many physician groups had urged CMS to remove Part B outpatient drugs from the SGR formula, perhaps retrospectively, stating that such a move could help offset the costs of legislatively repealing the SGR payment formula. However Dr. McClellan has stated his agency does not have the authority to take such action.

As part of the final rule, CMS also put a hold on its intended revisions to its new practice expense methodology. Apparently, the agency discovered an error in its indirect practice expense (PE) program which resulted in all of the PE relative value units (RVUs) in the August proposal to be incorrect. CMS maintains its intention to move to the bottom-up approach in the future though, it is unclear when this change will take place.

On Wednesday, CMS also announced that it will establish a new cancer quality demonstration to be conducted in 2006. The demonstration will attempt to generate information on coordination of care, treatment design, and patient monitoring through the current billing system.

HHS Unveils Avian Flu Plan

On Wednesday, November 2, 2005, the Department of Health and Human Services (HHS) unveiled a much anticipated plan aimed at preventing and potentially combating the avian flu.

Among other things, the Administration's 396-page plan would develop new vaccines, stockpile antiviral medications and increase flu surveillance. According to the plan, the federal government would receive the majority of the funds although state and local health departments would be responsible for distributing flu vaccines and medical supplies, providing staff, and implementing the federal government’s outline. A provision in the Administration’s proposal would require states to provide $3 for every federal dollar to purchase antiviral medications.

The Bush Administration is estimating that 90 million people in the United States would be infected by an avian flu pandemic, 1.9 of whom could die. Of the 90 million, 45 million will need outpatient care, 9.9 million will require inpatient care, 1.48 million will need treatment in an intensive care unit and 743,000 people will need ventilators to breathe.

In response to the Administration's $7.1 billion funding request, the Senate tacked on $8 billion to its appropriations legislation this week to fund flu prevention and response. However, many critics fear that $8 billion is not enough to prevent a pandemic or provide sufficient treatment should an outbreak occur.

Upcoming Events

Hearings

Tuesday, November 8, 2005

Committee on Energy and Commerce
10:00AM
2123 Rayburn House Office Building
Assessing the National Pandemic Flu Preparedness Plan

Wednesday, November 9, 2005

Select Committee on Hurricane Katrina
10:00AM
2154 Rayburn House Office Building
Hurricane Katrina: Preparedness and Response by the State of Alabama

Thursday, November 10, 2005

Committee on Science - Subcommittee on Research
10:00AM
2318 Rayburn House Office Building
The Role of Social Science Research in Disaster Preparedness and Response

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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