WASHINGTON WIRE

In this issue, you'll find:

• Finance Chair Releases Reconciliation Proposals
• Senate Approved High-Risk Health Insurance Bill
• President Bush Signs Medicare Premium Assistance Bill
• Hearings

Top Story

Finance Chair Releases Reconciliation Proposals

On Thursday, October 20, 2005, the Senate Finance Committee Chairman Charles Grassley (R-IA) released a Chairman's Mark summary showing how the Committee expects to achieve the required budget reconciliation instructions of $10 billion over five years.

The legislative package includes $7.6 billion in Medicaid cuts and $3.3 billion in Medicaid spending. Additionally, the legislation includes $18.6 billion in Medicare cuts and $12.8 billion in new Medicare spending. The total net savings is approximately $10 billion over five years.

In terms of Medicaid, the Chairman would find a significant amount of savings by reducing Medicaid payments for prescription drugs. Specifically, the Chairman aims to reduce pharmacy reimbursements for prescription drugs and increase the required Medicaid rebates from drug manufacturers.

The Chairman also targets waste, fraud and abuse in the Medicaid system and attempts to make it more difficult for those applying for Medicaid to transfer their assets in order to become eligible. The Chairman also included a proposal to reduce spending in Medicaid's targeted case management (TCM) program.

As expected, the Chairman's proposal would eliminate the regional Medicare Advantage Stabilization Fund that was 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 legislative package includes provisions on pay-for-performance or "value-based purchasing" where acute-care hospitals, physicians, practitioners, managed care plans, end-stage renal disease providers, and home health agencies would receive 1% of pooled provider payments, growing to 2% over five years based on quality performance measures.

The Chairman's proposal would also reduce Medicare spending with regard to the rental of durable medical equipment (DME) by essentially ending the rental period at 13 months, rather than 15 months, and eliminating maintenance and service payments unless deemed necessary.

The Chairman's proposal also includes spending in both the Medicare and Medicaid programs. After weeks of promoting a Hurricane Katrina relief Medicaid package, the Chairman incorporated a scaled-down version of the bill in his reconciliation proposal. Also included is a scaled-down version of the Chairman's Family Opportunity Act, allowing certain families of children with disabilities to buy into the Medicaid program.

With regard to rehabilitation services, the reconciliation package would freeze implementation of the so-called "75% Rule" on inpatient rehabilitation hospitals at the 50% level while Congress and HHS study the impact of the restriction. The package would also extend the one-year moratorium on Medicare outpatient therapy caps.

The Senate Finance Committee is scheduled to mark-up this legislation on Tuesday morning although it appears that Chairman Grassley may still be facing opposition from fiscal conservatives on his committee who want to incorporate additional cuts or decrease spending. Meanwhile, the House Energy and Commerce Committee has yet to release an official Chairman's Mark, although last week the Committee released a set of draft Medicaid proposals outlining many of the Administration's Medicaid priorities including cost-sharing and benefit flexibility. The House Energy and Commerce Committee is expected to mark-up its legislation Thursday, October 27, 2005. The House Ways and Means Committee has yet to announce a mark-up hearing.

Health Care News

Senate Approved High-Risk Health Insurance Bill

On Wednesday, October 19, 2005, the Senate approved an amended version of HR 3204, the "State High Risk Pool Funding Extension Act of 2005."

The legislation would establish or maintain (depending on the state in questions) state health insurance pools for high risk individuals with chronic illnesses or pre-existing conditions who are typically unable to buy private insurance. The bill has faced significant opposition from some Members of Congress, including Senator Richard Durbin (D-IL), who stated that the legislation will prove harmful to larger states that tend to have more uninsured residents and therefore larger risk pools.

The Senate’s version of the bill would divide 40% of the pooled funds among all states, 30% of the funds would be dispersed based on the number of uninsured residing in each state, and the remaining 30% would be allocated according to the number of people in state risk pools. The bill is expected to go back to the House for a final vote.

President Bush Signs Medicare Premium Assistance Bill

On Thursday, October 20, 2005, President George W. Bush signed into law an extension of the Qualified Individuals (QI-1) program for a period of two years.

Under the QI program, state Medicaid programs pay the Medicare Part B premiums for low-income senior citizens between 120 percent and 135 percent of the federal poverty level and with assets of no more than $4000 for individuals and $6000 for couples. According to the new law, those receiving QI-1 will automatically be eligible for a subsidy to assist with the Medicare Part D Prescription Drug Plan. Congress offsets the cost of this legislation by prohibiting coverage of erectile dysfunction drugs under Medicare or Medicaid.

There had been considerable concern over the last week regarding Congress' delay in passing the QI extension and the potential impact of the program's expiration on low-income beneficiaries. Both the White House and CMS publicly encouraged Congressional passage of this premium assistance legislation.

Upcoming Events

Hearings

Tuesday, October 25, 2005

Senate Finance Committee
9:30 AM
215 Dirksen Senate Office Building
Mark Up of Senate Finance Reconciliation Legislation

Wednesday, October 26, 2006

Committee on the Judiciary -Subcommittee on Terrorism, Technology, and Homeland Security
10:30AM
226 Dirksen Senate Office Building
Terrorism: Emergency Preparedness

Thursday, October 27, 2005

Committee on Veterans
2:00PM
418 Russell Senate Office Building
Unemployable Disabled Veterans

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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