Summary Team Federal Role Current Environment Medicaid/care Process Case Histories Contact

Healthcare: Current Environment

During the 110th Congress the new Democratic majority has begun advancing healthcare proposals that include FDA reform, reauthorization of the Prescription Drug User Fee Act, reauthorization of the Medical Device User Fee Act, reauthorization of the State Children’s Health Insurance Program (SCHIP), instituting Medicare drug price negotiations, advancing health information technology, Medicaid reform, stem cell research, physician update reform and other Medicare reforms.  

The Congress has also begun to hold a series of oversight hearings on prescription drug costs, FDA generic drug approvals, FDA safety activities and managed healthcare programs.

Additionally, emergency preparedness and bioterrorism continue to be a high priority to the Congress. Emerging threats are causing fundamental rethinking in healthcare systems, structures, and processes. While Congress has funded broad programs across the country through the Bioterrorism Act of 2002, policy-makers are assessing funding effectiveness and considering targeted investments.

Congress and the Administration are increasingly interested in healthcare quality. The President announced a health information technology initiative, including increased funding for health information technology systems. The Department of Health and Human Services, through the Centers for Medicare and Medicaid Services, proposed differential Medicare reimbursement based on provider implementation – or failure to implement – quality initiatives. This could fundamentally change traditional formula based reimbursement, and has major ramifications for the health provider community.

However, the new Majority is facing a difficult budgetary environment that includes a 45% spending trigger that was included in the 2003 Medicare Modernization Act. The budget trigger law states that when Medicare trustees determine general revenues equal 45% or more of the total Medicare spending over the next six years for two years in a row, the President is required to submit Medicare legislation to be considered on an expedited basis to reduce spending below the 45% level. It is expected that this budget trigger will come into play next year.

Finally, the new Congressional Majority has reinstated pay-as-you-go (PAYGO) method of budget management.  The pay-as-you-go method was created by the Budget Enforcement Act (BEA), which expired in 2002.  The PAYGO rule requires that new mandatory spending proposals or tax reductions be offset by cuts in other mandatory spending or by tax increases. 

These and other issues are causing significant change in the healthcare industry and will require strategic and effective engagement with Congress and the Administration.

Legislation:

State Children’s Health Insurance Program (SCHIP)

On August 01, 2007 the House of Representatives passed the Children’s Health and Medicare Protection Act (H.R. 3162) which would re-authorize and expand the State Children’s Health Insurance Program (SCHIP) and make a number of changes to both the Medicare and Medicaid programs, including payments to physicians and rehabilitation facilities.  The Senate version of the bill included Medicaid provisions similar to those in the House legislation but did not include any Medicare related provisions.  The bill was passed by the Senate on August 2nd.  The final compromise legislation, which excluded the House passed Medicare provisions, was vetoed by the President on October 03, 2007.  An attempt to override the veto failed in the House on October 18th.  The House and Senate Leadership have since begun to craft revised legislation in an attempt to win enough votes to overcome the President’s objections.  The revised legislation, the Children’s Health Insurance Program (CHIP) Reauthorization Act of 2007 (H.R. 3963), was approved in the House by a vote of 266 to 141, 26 votes short of a veto proof margin.  The Senate passed the bill 64-30 on November 1st.  The President has indicated that he will again veto the legislation before the end of the year. A summary of the revised legislation follows.

The Children's Health Insurance Program Reauthorization Act of 2007

• Each State will receive a CHIP allotment for FY08 based on spending estimates submitted by the State to the U.S. Secretary of Health and Human Services in 2007 increased by two factors: national health care cost increases and State population growth. Annual State allotments will grow by these two factors each year.
• States will have two years to spend each year’s annual allotment. In addition, every two years, State allotments will be recalibrated to ensure funding meets children’s needs.
• States that experience a shortfall due to enrollment of children who are today eligible but not enrolled, will receive an enrollment adjustment equal to the federal share of State’s average per capita cost per child.

• Children are assured coverage of dental care under CHIP.
• Mental health care is treated equally with physical health care under benchmark benefits packages.
• States can provide such coverage through multiple delivery arrangements including an HMO, PPO, or other arrangement.
• Denies payments under CHIP for coverage of children with effective family income that exceeds 300% of the poverty line.
• Denies federal funding for illegal aliens.

The Prescription Drug User Fee Act

The Prescription Drug User Fee Act (PDUFA), first enacted in 1992 and revised in 1997 and 2002, is a program under which the pharmaceutical/biotechnology industry pays certain "user fees" to the Food and Drug Administration (FDA). In exchange for these fees, the FDA agreed, via correspondence with Congress, to a set of performance standards intended to reduce the approval time for New Drug Applications (NDA) and Biological License Applications (BLA).

On September 27th the signed legislation (H.R. 3580) reauthorizing PDUFA. The bill would:

• Reauthorize PDUFA for five years.
• Allow the FDA collect additional user fees from the drug industry, per the agency's recommendation.
• Allow FDA to review TV ads for new prescription drugs.
• Strengthen FDA's ability to monitor drug safety after the drugs reach the market.
• Reauthorize MDUFMA, a law similar to PDUFA but for medical devices instead of drugs.
• Create special provisions for the study of pediatric drugs and medical devices.
• Place medical marijuana under the regulatory purview of FDA.

The House has yet to act on similar legislation.

Health Information Technology

On June 26, 2007, Senators Kennedy (D-MA), Enzi (R-WY), Clinton (D-NY) and Hatch (R-UT) announced introduction of the Wired for Health Care Quality Act of 2007 (S. 1693).  The legislation, which was passed by the Senate Health, Education, Labor and Pensions Committee on June 27th, encourages the adoption of health information technology (HIT), develops standards for its adoption and offers various competitive grants.  The bill also creates a demonstration program to integrate qualified HIT into clinical education programs and encourage the use of software to reduce medical errors.  The bill also establishes a public-private partnership, known as the Partnership for Health Care Improvement to provide recommendations to the Secretary of Health and Human Services regarding the technical aspects of interoperability, standards, implementation, and certification criteria for the exchange of health information.

The House has yet to take up similar legislation.