Legislative Watch

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January/February 2005

By George G. Olsen, JD

Congressional Top Ten List

As the nation's newest lawmakers take office, they will face a daunting health care agenda

The 109th Congress was sworn in on January 4, 2005, and the expanded Republican majorities in both the House and Senate took their seats. The Senate is controlled by 55 Republicans, with the balance made up of 44 Democrats, and one Independent. In the House, there are 232 Republicans, 202 Democrats, and one Independent. Republican leadership in both bodies, coupled with the second term of President Bush’s Administration, will set the stage for an ambitious health care agenda in the new Congress. Delineated below are major health care initiatives that may well be considered in the First Session of the 109th Congress.

1. IMPLEMENTATION OF THE MEDICARE MODERNIZATION ACT
The absolute highest priority of the Bush Administration next year is implementation of the provisions of the Medicare Modernization Act (MMA), which creates the new comprehensive Medicare drug benefit and establishes the expansive new managed care option for Medicare beneficiaries known as the Medicare Advantage Program. The MMA requires that these programs be up and running as of January 1, 2006. The timelines for effectuating these programs are extremely tight: within a single year, the Centers for Medicare and Medicaid Services (CMS) must promulgate final regulations governing both the drug benefit and Medicare Advantage plans; the agency must solicit, review, and approve bids from entities that seek to offer the drug benefit or participate as a Medicare Advantage plan; and plans whose bids are accepted must construct the infrastructure necessary to deliver benefits, educate and enroll beneficiaries, and commence delivering benefits on the first day of 2006.

The stakes in this effort are exceptionally high. The nation’s senior citizens and disabled individuals have been promised a Medicare drug benefit that reduces their costs of obtaining access to needed prescription medications. In addition, Republicans understand that if the MMA is not fully implemented as intended, they may pay a high political price in the 2006 mid-term Congressional elections.

Following enactment of the MMA, numerous bills were introduced in Congress to revise key provisions of the legislation. For example, proposals were proffered to permit the Secretary of Health and Human Services (HHS) to negotiate drug prices directly with pharmaceutical manufacturers. Similarly, efforts were made to reduce the payments that Medicare will make to Medicare Advantage plans. None of these bills were passed by the 108th Congress, and with Republican majorities in the House and Senate, it is unlikely that such legislation would make any progress next year. However, Congress will certainly undertake comprehensive oversight of CMS’ progress in implementing the MMA to ensure that the January 1, 2006, target date is met.

2. MALPRACTICE AND CIVIL TORT REFORM
At a high-profile White House Economic Summit on December 15, 2004, President Bush stated that reforming the civil tort system is a “priority issue” for his second term. His commitment was unequivocal: “I am here to…make it clear as I possibly can that I intend to take a legislative package to Congress which says we expect the House and Senate to pass meaningful liability reform on asbestos, on class action, and medical liability.” The President observed that the nation’s malpractice and civil tort systems cost the economy in excess of $250 billion annually. He specifically cited the cost of defensive medicine—tests and procedures done only to reduce malpractice exposure and not for any medically necessary reason—which drain $27 billion from federal coffers each year.

Over the last several years, Congress has considered numerous legislative proposals to address this issue including caps on malpractice damage awards, limitations on punitive damages, class action reform, and processes for handling and paying asbestos claims. While some of these bills have passed the House, none have passed the Senate. Republicans are hopeful that their enhanced majorities in Congress, together with the firm commitment of the President, will permit enactment of at least some of these reforms in the new Congress. It will not be easy, largely because such reforms are bitterly opposed by trial attorneys. Indeed, the Association of Trial Lawyers of America is already mobilizing a massive nationwide campaign to oppose President Bush’s reform proposals.

3. MEDICARE COST REDUCTION
The federal deficit soared to $412 billion in fiscal 2004, far exceeding the record deficit of $377 billion in the prior year. President Bush and Treasury Secretary John W. Snow have recently and repeatedly vowed to cut the deficit in half by 2009. Note too that the US Comptroller General, David Walker, announced on December 13, 2004, that $28 trillion of the nation’s $43 trillion in unfunded obligations is attributable to Medicare and its recent expansion. These facts make it clear that the Administration and Congress will look for ways to reduce federal spending on Medicare because, along with Medicaid, it constitutes the largest portion of non-defense, non-homeland security spending in the domestic budget. The first glimpse at the President’s plans in this regard will likely occur when he submits his annual budget proposal to Congress next February.

Reducing Medicare spending will not be easy for several reasons: (1) The roll of Medicare-eligible individuals will soon be swelled by the rapidly approaching Baby Boom cohort. (2) The MMA contained extensive provisions that revised the payment methodologies for numerous provider types—many of which have not yet been fully implemented. (3) A severe defect in the physician fee schedule persists, which will lead to a 5% reduction in payments to doctors unless Congress rectifies the problem at an estimated cost of $90 to $110 billion over 10 years. (4) Few sources of significant cost savings are apparent—eg, the Medicare Pay- ment Advisory Commission (MedPAC) recently reported that hospital margins are slim and that they should receive a full market basket increase.

Despite the difficulties in securing savings from Medicare, it is fairly certain that Congress will make an effort to extract some cost reductions from the program. What is not evident is what providers and/or benefits will be impacted.

4. MEDICAID REFORM
Medicaid has just surpassed Medicare as the largest federal entitlement program, making it a prime target for cost cutting. Indeed, in the past, the Bush Administration has proposed to convert Medicaid to a block grant-like program where the federal contribution is capped. This initiative was strenuously opposed by governors, Democrats, and some Republicans, and it did not progress. Medicaid reform will be high on the list of Congressional priorities this year especially in the House Energy and Commerce Committee, which has long wanted to tackle the problems endemic to Medicaid.

Possible modifications to Medicaid include controlling long-term care costs by encouraging Medicaid enrollees to obtain insurance coverage for such services, incentivizing more home-based care, simplifying the enrollment processes for Medicaid and State Children’s Health Insurance Programs (SCHIP), and revising the way the Medicaid pays pharmacists for prescription drugs.

5. Coverage for the Uninsured
To that end, the President has proposed the following steps:

Cover the Kids Campaign—a billion- dollar effort to enroll children who are eligible for governmental health insurance programs but who are not enrolled in them.
Tax Credits for HSA Enrollment—a refundable tax credit for small business owners for contributions that they make to their employees’ health savings accounts (HSAs).
Assistance to Low Income Individuals for HSA Enrollment—direct contributions to a low income individual’s HSA and a refundable tax credit for the purchase of a high deductible health insurance plan.
State-run Insurance Pools—grants to states to create purchasing pools to help reduce the cost of insurance and making it easy to obtain.
Association Health Plans—group purchasing plans for small businesses, civic groups, and community organizations.
National Marketplace for Health Insurance—permits individuals to shop for health insurance across state lines.
Community Health Center Expansion—ensuring that every poor county in the country has a community or rural health center.

Proposals such as the foregoing are controversial and costly and could face difficult sledding even in a Republican-controlled Congress. As a general proposition, Democrats tend to believe that a comprehensive solution to the problem of the uninsured is necessary, not a series of targeted approaches as the Republicans contend. This fundamental policy difference will complicate Congressional deliberations.

6. DRUG SAFETY
The United States, through the Food and Drug Administration (FDA), has long been considered to have the “gold standard” for review and approval of new prescription drugs. Several recent events, however, have raised questions about drug safety determinations made by the FDA. In September 2004, the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee held two hearings about whether it was safe to use antidepressants in the pediatric and adolescent populations. During the hearings, the FDA was roundly criticized for failing to take adequate action to address this safety concern. Shortly thereafter, Merck announced that it was voluntarily withdrawing Vioxx from the marketplace because a recent study had raised a safety issue. In the wake of these developments, at least four Congressional committees have, or intend to, initiate investigations of drug safety issues including the FDA’s procedures for evaluating a drug’s safety. There can be no doubt that the safety of prescription drugs and the role of the FDA in guaranteeing a drug’s safety and efficacy will be a major issue in the 109th Congress.

7. DRUG IMPORTATION
One of the most politically charged issues before Congress in recent years is the question whether individuals, pharmacists, and drug wholesalers should be permitted to import drugs from foreign countries into the United States. The purported rationale for legislation that would authorize such importation is that it would provide Americans with access to cheaper drugs. Congress has wrestled with this issue for several years and has twice passed legislation providing that the Secretary of HHS could promulgate regulations permitting importation if it were determined that the drugs could be imported without harming public health and would result in cost savings for US citizens. Current HHS Secretary Tommy Thompson, and former Secretary Donna E. Shalala could not make such findings, and as a result importation remains illegal.

Several bills have been introduced in both the House and Senate that would directly authorize drug importation but none have passed both bodies. It is beyond cavil that the proponents of drug importation will press for enactment of their legislation early in the 109th Congress.

8. ACCESS TO CLINICAL TRIAL DATA
During the Second Session of the 108th Congress, legislators started to examine whether patients and their physicians had adequate access to important information concerning drug clinical trials. A series of hearings was held on the issue, and as a result, several members of Congress introduced legislation to provide that doctors, patients, and the public have access to information on ongoing clinical trials and to the results of the studies once they are concluded. None of these bills became law. However, the sponsors of the legislation have committed to pursue their efforts in the new Congress.

9. NATIONAL INSTITUTES OF HEALTH
The National Institutes of Health (NIH) is, of course, a critical source of medical research. In recognition of this, the research budget of the NIH has been doubled over the last several years. Next year, during the process of reauthorizing the NIH institutes and programs, Congress intends to examine whether NIH is making the most cost-effective use of its funding. Put another way, is the public getting the “most bang for its research buck”?

10. SOCIAL SECURITY REFORM
From virtually the day after the election, President Bush has made reform of Social Security one of his leading domestic objectives. Thus far, he has only sketched out the broad outlines of his reform proposal and has offered little detail. The president appointed a commission that made Social Security reform recommendations in 2001, but he has not endorsed any of them publicly. It is anticipated that his proposal will permit Social Security recipients to shift some payroll tax revenue to private investment accounts. Whatever shape his plan takes, navigating it through Congress will be extremely difficult and require the expenditure of enormous political capital. The conventional wisdom is that Social Security is the “third rail” of American politics, and those who touch it do so at their peril. Republican members, especially those up for reelection in 2006, will be very wary about efforts to reform Social Security.

George G. Olsen, JD, is an attorney with the law firm of Williams & Jensen, PC, Washington, DC; and Rebecca Reisinger is a law clerk with the firm.

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January/February 2005