Health Care Policy Update (February 10, 2009)

10 February 2009 Publication

Legal News: Health Care

Senate Passes Trimmed-Down Economic Stimulus Package Containing Health IT Funds, Other Provisions
The Senate passed an $838-billion substitute economic stimulus package by a 61-37 vote on February 10, 2009. The bill was trimmed down from the original $900 billion package to garner more support among Republicans and some Democrats. Democratic leaders want to conclude a House-Senate conference quickly to reconcile several differences in each chamber’s version of the bill and pass the final measure before President’s Day.

The leaner Senate package cuts $2 billion in funds for expanding the use of electronic health records, leaving roughly $22 billion in tact for overall health information technology (IT) adoption. The Senate substitute bill also eliminates $5.8 billion from the original bill for preventive health measures. The House passed its version of the bill, the American Recovery and Reinvestment Act of 2009, on January 28, 2009 by a 244-188 margin. That bill contains roughly $20 billion for health care IT investments and $3 billion for prevention and wellness. Both the House-passed bill and the Senate bill would implement a system that rewards adopters of health IT with bonus Medicare payments and penalizes non-adopters with Medicare payment deductions. The measures also contain $87 billion in additional federal funds for state Medicaid programs.

Other health care provisions in the House-passed bill include $40 billion to subsidize health insurance premiums for recently unemployed workers under the Consolidated Omnibus Budget Reconciliation Act (COBRA) or Medicaid, $1.5 billion for community health centers, and $1.1 billion for comparative effectiveness research. The House bill also contains a moratorium on seven Medicaid regulations imposed by the Bush administration that would have cut funding to graduate medical education programs, teaching hospitals, and outpatient services, among other elements of the Medicaid program. The Senate substitute version does not include the Medicaid moratorium language and provides only $20 billion for COBRA subsidies. It also would block a FY 2009 Medicare payment reduction to teaching hospitals related to capital payments for indirect medical education. 

President Signs SCHIP Legislation Into Law
On February 4, 2009, President Barack H. Obama promptly signed into law a reauthorization of the State Children’s Health Insurance Program (SCHIP), which had passed in the House earlier that day by a vote of 290-135. The Senate passed the bill on January 29, 2009 by a vote of 66-32.

The law will reauthorize the program for four-and-a-half years and allow for $32.8 billion in new spending over five years. The bill would allow states to cover children and families with income up to 300 percent of the poverty level, expanding enrollment to cover an estimated additional four million children and adults. The bill is funded by a 62 cents-per-pack cigarette tax. The final bill did not contain restrictions on physician-owned hospitals that were included in the original House bill. SCHIP reauthorization passed Congress twice last year, but was vetoed both times by then-President George W. Bush. 

MedPAC Supports Increase in Medicare Physician Fee Schedule
The Medicare Payment Advisory Commission (MedPAC) voted on January 8, 2009 to recommend an increase in the Medicare Physician Fee Schedule by 1.1 percent for 2010. MedPAC votes annually in January on physician payment updates for the following year, and the 1.1 percent recommendation will appear in MedPAC's March 2009 report to Congress. The vote was supported by staff reports that Medicare beneficiaries generally have adequate access to physicians and their ability to receive doctor care is comparable to privately insured individuals aged 50 – 64 years.

To arrive at the 1.1 percent increase, staff subtracted a “productivity goal” of 1.3 percent from a forecast of input price inflation of 2.4 percent. However, the actual physician reimbursement level in 2010 will still be based on the Sustainable Growth Rate (SGR) formula under the Physician Fee Schedule, which requires a 20-percent cut. As in past years, another bill canceling the scheduled Fee Schedule pay cut for 2010 is expected to be considered by Congress this year.  

ICD-10 Implementation Delayed
In response to widespread industry concerns, The Department of Health and Human Service (HHS) issued a regulation on January 15, 2009 that will delay implementation of the International Statistical Classification of Diseases and Related Health Problems 10th Revision (ICD-10) coding system for two additional years, until October 2013. Under a proposed rule issued in August 2008, providers would have been required to adopt the ICD-10 system by October 2011. HHS received more than 3,000 comments on the proposed rule, most of which called for a further delay in the implementation date for issues primarily related to implementation costs and training.

In a related rule, HHS also postponed the deadline for upgrading the X12 Version 4010 data-transmission standards to Version 5010 — a pre-requisite to ICD-10 conversion — from October 1, 2010 to January 1, 2012. HHS estimates costs associated with the changes to total nearly $3 billion between 2011 and 2017, but estimates the benefits of the conversion at $4.5 billion between 2015 and 2025.

The final rules were published in the Federal Register on January 16, 2009 and are available online at: and

Daschle Withdraws Bid for HHS Secretary, Sebelius Now Top Choice for Post
Former Senate Majority Leader Tom Daschle, nominated by Mr. Obama to lead HHS, withdrew his name for consideration on February 3, 2009 amid controversy surrounding his failure to pay federal taxes on the use of a private driver. Mr. Daschle’s confirmation was expected to be one of the easiest, but stalled after reports emerged that he amended tax filings in January 2009 and paid $140,000 in back taxes and fees. Democrats in the Senate decried the loss as a major setback for health care reform, a chief campaign promise of the Obama administration.

The administration’s leading contender for the job is now Kansas Gov. Kathleen Sebelius (D). She is a former state insurance commissioner with experience regulating health insurers and an early Obama supporter. In December 2008, after Mr. Obama announced that Mr. Daschle would get the nomination, Ms. Sebelius removed herself from consideration for several cabinet posts, stating that her state’s budget problems required her full attention. Ms. Sebelius has not yet commented on the developments.

Tennessee Governor Phil Bredesen (D) and former Clinton White House chief of staff John D. Podesta also are under consideration. Some health advocacy groups are already opposing Mr. Bredesen for the position, citing his efforts to cut spending in Tennessee’s TennCare program, which provides health care for the poor. Former governor Howard Dean (D-Vt.) was mentioned early on and still has support among members of Congress. 

Health Care Reform May Slide to Next Year
While health advocates had hoped to move health care overhaul legislation in the first 100 days of the new Congress, it seems more likely now that a reform package may slide to 2010. Members of Congress are speaking to the press these days with some hesitation, noting that an overhaul is still taking shape. House Majority Leader Steny Hoyer (D-Md.) stated in late January 2009 that he would bring a health care overhaul bill to a vote in the 111th Congress, but would not commit to doing so this year. Mr. Hoyer’s remarks to a Families USA conference included talk of consensus building and stressed that it was “more important to do this right than to do it quickly.” House Ways and Means Health Subcommittee Chairman Pete Stark (D-Calif.) has said it could take a full year to develop legislation. House Majority Whip James Clyburn (D-S.C.) went so far as to say he did not expect a major reform bill this year. Mr. Daschle’s withdrawal from consideration for HHS Secretary also presents a major setback to health care reform. Many members of Congress considered him especially qualified for the job due to his knowledge of health policy and his close relationships in the Senate. Other factors slowing progress on health care legislation include the country’s economic troubles and the current emphasis on economic stimulus legislation, the growing costs associated with an overhaul, health care legislative leader Sen. Edward Kennedy’s (D-Mass.) personal health problems, and slow staff progress on health care legislation. 

Senator Baucus Outlines Health Care Plan
In November 2008, United States Senate Committee on Finance Chairman Max Baucus (D-Mont.) released a detailed health care agenda, which laid out plans to extend health care coverage to all Americans, lower costs, and improve quality. Mr. Baucus, whose committee holds jurisdiction over Medicare and Medicaid, intends for his proposal to be the basis of health care reform legislation in the 111th Congress. While the proposal generally falls in line with Mr. Obama’s previous health care proposals, Mr. Baucus released his agenda independently, indicating that he plans to be one of the chief architects of health reform legislation during the 111th Congress. United States Senate Committee on Health, Education, Labor, and Pensions Chairman Edward Kennedy also is expected to propose his own health reform legislation, but has not yet released a formal proposal.

Mr. Baucus' plan calls for an insurance coverage mandate for all individuals and provides for creation of a "health insurance exchange" marketplace for the uninsured to purchase coverage. Under the Baucus plan, those aged 55 – 64 would be eligible to buy into Medicare early, and SCHIP, reauthorized on February 4, 2009, would be expanded to all children who live in households with income below 250 percent of the poverty line. The Baucus plan also encourages widespread adoption of health IT and increased use of comparative effectiveness research, provisions currently under consideration by Congress in the economic stimulus package.

The Baucus plan calls for a redesign of Medicare's payment mechanisms to focus physician payments on quality of care and outcomes rather than volume of procedures. Mr. Baucus urges reform of the SGR formula, which is currently used to determine Medicare physician payment rates, and proposes methods for the Centers for Medicare & Medicaid Services to exert its authority in determining which services are included in SGR formula calculations. The plan also calls for increasing the number of primary care providers, eliminating fraud and abuse in public health programs, and reducing "overpayments" to private insurers in the Medicare Advantage program. 

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If you have any questions about this issue or would like to discuss these topics further, please contact your Foley attorney or any of the following individuals:

Joyce E. Gresko
Washington, D.C.

Ladonna Y. Lee
Washington, D.C.

Lena Robins
Washington, D.C.

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