Legislative Watch

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January/February 2003

By George G. Olsen, JD

Then the lights were turned out on the 107th Congress, the House and Senate were littered with major pieces of health care legislation that were never passed. Despite years of vigorous and often rancorous legislative activity, a Patients Bill of Rights proposal never emerged from Congress. The House narrowly passed a substantial Medicare reform bill that included a comprehensive drug benefit, but 3 weeks of acrimonious debate on the Senate floor failed to yield a Medicare reform bill or a drug benefit. Medicare provider “givebacks” legislation passed the House but never saw the light of day on the Senate floor. Other casualties in the 107th Congress included expanded mental health parity proposals, legislation to prevent genetic discrimination, proposals to modify and expand Medicaid and the State Children’s Health Insurance Program (SCHIP), and tort and medical malpractice reform proposals.

Health care legislation foundered in the last Congress for a myriad of reasons. First, there are fundamental philosophical and policy differences between the two parties over the role of the federal government in the health care market that are extremely difficult to bridge. Republicans believe that reform of health care delivery and payment systems should be predicated on private competitive market principles. Democrats are of the view that government regulation is essential to controlling health care costs and maintaining quality care. Second, the cost of many health care initiatives to both federal and state governments and to the private sector is daunting, especially in the face of a huge, new federal deficit. For example, estimates of the cost of a Medicare prescription drug benefit range from $300 billion to $725 billion over 10 years. Third, Congress and the Bush Administration were preoccupied with other more immediately compelling issues such as terrorism, homeland security, and potential military intervention in Iraq.

It cannot be gainsaid that the 108th Congress will have manifold opportunities to address a host of significant health care issues. And, with the House, Senate, and White House controlled by Republicans, there will be great expectations that Congress will pass, and the President will sign, important health care legislation over the next 2 years.

APPROPRIATIONS

When the new Congress convenes on January 7, 2003, its first order of business will be to pass 11 appropriations bills that, by law, should have been completed before the start of fiscal year 2003 on October 1, 2002. The appropriations bills provide the funding for all federal agencies and programs including the Department of Health and Human Services, the Centers for Medicare & Medicaid Services, the Food and Drug Administration, the Centers for Disease Control and Prevention, and the National Institutes of Health.

A long-term continuing resolution was passed just before Congress adjourned providing funding for the agencies at fiscal 2002 levels through January 11, 2003. This was the fifth stopgap measure since fiscal year (FY) 2003 began, with only two appropriations bills—defense and military construction—finished. It is likely that when Congress reconvenes it will have to pass another continuing resolution since appropriations negotiations could extend into early spring.

Congress will have to pass either individual, reworked FY 2003 appropriations bills or a single omnibus bill. Either way, the Administration has insisted that total discretionary spending be limited to $749 billion. Once Congress completes action on the FY 2003 appropriations bills, it will almost immediately begin work on the budget resolution and appropriations for FY 2004.

MEDICARE PROVIDER GIVEBACKS

Physicians, hospitals, skilled nursing facilities, home health agencies, outpatient rehabilitation providers, rural health clinics, and all other Medicare providers came up empty in their all-out efforts to secure needed changes in Medicare reimbursement and coverage law.

Numerous provider “givebacks” were contained in the Medicare Modernization and Prescription Drug Act that passed the House on June 28, 2002. In addition to establishing a Medicare drug benefit, this bill contained provisions to, inter alia, revitalize the Medicare+Choice program, improve the delivery of health care in rural areas, increase payments for skilled nursing facilities, revise the methodology for updating the physician fee schedule, establish competitive bidding for durable medical equipment, eliminate the 15% reduction in payment rates under the home health prospective payment system, and extend for 2 years the moratorium on the $1,500 outpatient therapy caps.

The Senate, unfortunately, was not able to pass a Medicare givebacks bill. Senator Baucus (D-Mont), then chairman of the Senate Finance Committee, and Senator Grassley (R-Iowa), then ranking member of that committee, prepared a $43.8 billion proposal that was never taken up in committee or on the Senate floor. As a result, no Medicare provider secured any relief in the last session of Congress.

There is little doubt that Medicare providers will continue to press for payment reforms and other improvements in the next Congress. However, even with a Republican-controlled Congress, it will not be easy to move a large Medicare givebacks bill. The House-passed bill was scored at $30 billion over 10 years and the Baucus-Grassley bill was even more expensive. Congress will be very cautious about spending money in this area when it knows that a Medicare drug benefit and a war in Iraq will increase an already burgeoning federal deficit. Furthermore, Congress is starting to grow weary of considering “givebacks” bills almost annually and may well seek Medicare reforms that obviate the need for such legislation or, failing that, decide to grant relief only upon the most compelling showing.

MEDICARE DRUG BENEFIT

Enactment of a Medicare outpatient prescription drug benefit is the highest priority of the Bush Administration. Control of Congress creates a “no excuses” situation for Republicans—the public wants a Medicare drug benefit and Republicans will take the blame if one does not become law. For this reason, the health care legislative agenda will be dominated by the effort to send a drug benefit proposal to President Bush for signature. It will not be easy to achieve this goal.

In late July 2002, the Senate failed to pass four different versions of a prescription drug benefit for seniors. These proposals differed significantly in delivery structure (private market versus government-run), benefit design (deductibles, co-payments, etc), premiums and premium assistance, catastrophic coverage, and low income assistance. These and other extremely complicated and politically charged structural issues will have to be resolved in order to pass a bill.

The cost of a drug benefit will also present a huge obstacle. The four proposals considered by the Senate had cost estimates ranging from a low of $295 billion over 10 years to a high of $594 billion. To help keep the cost of a drug benefit from careening out of control, Republicans may attempt to target the benefit to low income seniors while providing catastrophic coverage and drug card credits and discounts to beneficiaries generally. The contours of the White House proposal will become clearer when President Bush sends his budget to Congress in February of next year.

THE UNINSURED

The number of uninsured Americans is on the rise again and there is no sign that this trend will abate anytime soon. Recently published data demonstrate that approximately 41.2 million people are currently uninsured, an increase of 1.4 million in 2001 alone. The problem will worsen because the cost of employer-sponsored health insurance rose by an average of 12.7% last year. It is estimated that health plan premiums will rise 14% to 19% in 2003. Double-digit increases in health care costs are not sustainable by employers. As a result, businesses are limiting benefits and coverage under existing plans, shifting costs to plan beneficiaries through deductibles and copayments, dropping coverage for drugs and dental care, and eliminating coverage for retirees and/or employees altogether. The National Academy of Sciences summarized the current state of affairs as follows: “the American health-care system is confronting a crisis. The cost of private health insurance is now increasing at an annual rate of 12%, while at the same time individuals are paying more out of pocket and receiving fewer benefits. One in seven Americans is uninsured, and the number of uninsured is on the rise.”

Various diverse approaches to the uninsured problem are under development. Republicans are considering a system of tax incentives for employers to provide health insurance coverage to their employees as well as tax inducements for individuals to secure health insurance. Other Republican proposals may include strengthening high-risk health insurance pools in the states and providing for more comprehensive health insurance policies in the individual market through incentive-based strategies. Enhancements to medical savings accounts and the creation of association health plans are other avenues that Republicans may explore.

Senator Kennedy (D-Mass), a Democratic leader on health issues, has proposed a single national health insurance plan to cover all Americans. He is currently working on a legislative proposal to this end, which would, among other things, mandate that all employers provide insurance for their employees.

Although Congress will likely spend a great deal of time over the next year debating the best way to ensure that Americans have health insurance coverage, considerations of cost, politics, and policy will probably thwart a comprehensive solution in the near term.

George G. Olsen, JD, is a partner of the firm Williams & Jensen, PC, Washington, DC. He is also legal counsel for the National Association of Rehabilitation Agencies and Providers.

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January/February 2003