2002 National Health Care Legislative Update
January 31, 2003
Robert Bradner - Washington
At the beginning of the 107th Congress, several health care
issues loomed large on the agenda. In the end, however, relatively little was
accomplished. Action on health care issues was inhibited by the slow start to
the new Administration, the change in Senate control six months after the
elections, the September 11,2001, terrorist attacks that overwhelmed the
domestic legislative agenda and altered the pre-existing political environment,
and sharp partisan disputes. In addition, the re-emergence of significant
budget deficits and the installation of an Administration favoring restrained
domestic spending and lower taxes has constrained the resources and political
support for some health care initiatives. Finally, certain agenda items that
were expected to be resolved during a post-election, "lame duck" session fell by
the wayside when that session proved unexpectedly short lived.
I. Significant Measures and Actions Adopted
Several health care-related measures did make it into law
during the 107th Congress; and the administration took several noteworthy
actions. Perhaps the most significant action was a comprehensive re-write of
the Frist-Kennedy Act to provide authorization for bioterrorism
preparedness and response activities, including preparedness grants to
states and hospitals, a variety of education and training activities, and a
massive expansion of existing medical stockpile, disaster response, research and
vaccination activities. In addition, Congress also enacted legislation to
reauthorize the consolidated health centers program for another
five years. While a comprehensive re-write of the statute authorizing the Food
& Drug Administration was put off, Congress did reauthorize the
Prescription Drug User Fee Act (PDUFA), a program providing for drug
manufacturers to pay user fees to FDA to support improved review processes. A
similar law was enacted for medical device review.
On the health insurance front, legislation providing for
parity in the provision of mental health benefits by private
health plans was again extended, and the Trade Act of 2002 created a tax-credit
subsidy to cover 65% of the health insurance premiums for workers who lose their
jobs due to trade policy.
At the administrative level, HHS Secretary Thompson
initiated an effort at Medicare administrative reform that
included renaming the Health Care Financing Administration (HCFA) as the Centers
for Medicare and Medicaid Services (CMS) and accelerating the review of onerous
regulations and practices. The Secretary's Advisory Committee on Regulatory
Reform (SACRR) recently issued 250 recommended changes. The President also
directed the Food & Drug Administration to issue a proposed regulation that
would restrict the ability of prescription drug manufacturers to use certain
techniques under the Hatch-Waxman Act to extend the length of the
exclusivity period granted their products under applicable patent laws.
Finally, the Administration significantly revised the final medical
information privacy regulations under the Health Insurance Portability
Amendments Act of 1996 to relieve much of the burden imposed on providers and
other covered entities by the original rules.
II. Significant Measures not Enacted
The list of health care-related initiatives that did not
make it into law is much more weighty and includes the following:
Patients Bill of Rights
Following Senator Jeffords' switch to the Democratic Party,
the new Senate leadership quickly scheduled and passed this legislation. The
House later followed suit. The two bills were similar in many respects, but
differed on the key issue of how much recourse to the courts patients could
obtain to enforce their rights and/or obtain damages. Progress stalled when the
President made clear that he would not accept the Senate version of the
legislation and attention to the issue faded after the September 11 terrorist
attacks.
Outlook: Once the "hot" issue, the Patients
Bill of Rights has lost some of its luster on a crowded health care agenda, and,
as a result of the change back to Republican control in the Senate. Also, some
evidence suggests that voters are now increasingly concerned about rising health
care premium costs. Nonetheless, the issue can be expected to re-emerge in the
108th Congress and, if supporters such as the American Medical Association are
willing to give ground on the liability issue, a compromise bill could be
enacted.
Medicare -- Prescription Drug Benefit, Provider
"Givebacks," CMS/Contractor Reform
By Mid-2002, the House had passed its version of this
legislation, which (as in the 106th Congress) relied on private health plans and
Pharmacy Benefit Managers to administer a drug benefit that was means tested to
cost about $300 billion over 10 years. However, unlike prior versions of this
legislation, the House bill did not propose significant privatizing reforms of
the existing fee-for-service Medicare program. Appended to the House bill was
a $30 billion package of provisions to alleviate reimbursement cuts scheduled
for various Medicare providers as a consequence of the 1997 Balanced Budget Act,
and a package of provisions designed to reform the administrative practices of
the Center for Medicare and Medicaid Services (CMS) and Medicare contractors.
Democrats on the Senate Finance Committee drafted a more
generous benefit (around $500 billion), but lacked the votes to report the bill
out of Committee. After much delay, the Senate debated a series of drug benefit
proposals as amendments to an unrelated generic drug bill, but because the
Senate never adopted a budget resolution, a super-majority of 60 votes was
required to pass any proposal. The surprising result of this situation was that
neither the Democratic proposal nor a proposal similar to the House bill was
ever passed by the Senate.
When it became clear that the Senate could not adopt a
prescription drug bill, a bipartisan proposal to provide about $40 billion in
provider relief coupled with regulatory reforms was drafted by the leaders of
the Senate Finance Committee. The Administration, however, deemed this package
too expensive and largely unnecessary, and consideration of the measure was
blocked in the Senate. Very late in the session, the House passed a bill that
would have provided potential relief to physicians from impending Medicare
payment cuts, but the Senate declined to consider the bill (not wishing to
consider relief for one provider group apart from the others) and it, too, died.
Outlook: Immediately after the election, the
President called for enactment of a prescription drug bill and the change in
Senate control makes it more likely that the House and Senate can pass similar
bills that are less generous than the Democratic version and that rely on
private entities to administer the benefit. The American Association of Retired
Positions (AARP) has preliminarily indicated a willingness to move toward the
GOP position if the Republicans will reciprocate. As for the Medicare provider
"givebacks" issue, the failure to enact any relief was a bitter defeat for many
providers and there is a concerted push underway to obtain some relief through
appropriations legislation that is presently being considered in the Senate.
As of this writing, a modest proposal to freeze physician payments and provide
relief for rural hospitals appears to have a good chance of being enacted by
March.
Medical Liability (Malpractice) Reform
In the House, a bill to legislate tort reforms that would
apply in state courts (limiting punitive and non-economic damages, reforming
joint liability, allowing testimony on collateral payment sources, imposing
statutes of limitations, providing for periodic payment of awards, limiting
contingent fees, and protecting certain patient safety reported information from
discovery) was passed during 2002. The bill was never taken up in the Senate,
but the issue was considered when Senator Mitch McConnell offered a smaller
package of medical malpractice reforms as an amendment to an unrelated bill.
The amendment was decisively defeated.
Outlook: With the Senate, House and White
House all under GOP control, there is renewed talk that tort reform legislation
will received priority consideration. It is likely that a medical liability
bill will be passed in the House and receive consideration in the Senate.
However, this is an issue that will be bitterly contested. It is possible such
legislation could be combined with legislation addressing the problem of medical
errors (discussed below).
Medical Errors Legislation
Congressional interest in this topic spiked following the
release of the Institute of Medicine (IOM) report on medical errors in March
2000. Both the House Energy & Commerce and Ways & Means Committees reported
similar medical errors bills – providing for a variety of grants to help
providers with the cost of implementing systems to avoid medical errors (e.g.
decision support IT, computerized prescribing), authorizing expanded research by
the Agency for Health Research and Quality (AHRQ), and creating systems for the
confidential reporting of errors information to centralized state patient safety
databases or to other Patient Safety Organizations (PSOs). In the Senate,
however, agreement on a bipartisan bill drafted by Senators Frist and Kennedy
fell apart over objections by the trial bar to the confidentiality provisions.
Near the end of the 107th Congress, it appeared that a compromise bill might
emerge, but the truncated, lame-duck session left no time for this legislation
to be resolved.
Outlook: This legislation came close to
enactment in the 107th Congress and seems a prime candidate for enactment during
the 108th.
Medicaid and S-CHIP
Legislation to relieve the strain on state Medicaid budgets
by increasing the Federal Medicaid Assistance Percentage (FMAP) was proposed and
considered in several contexts during the 107th Congress (e.g., as part of an
economic stimulus package following the September 11 terrorist attacks, and as
part of the Senate Medicare givebacks package (discussed above)) but the
proposal was opposed by the Administration, never acted upon by the House, and
not adopted. Also, legislation that would allow the states to retain excess
grant funds originally provided to set up Children's Health Insurance Plans (CHIPs)
for use to serve other uninsured populations was not enacted.
Outlook: Chances for a federal bailout of
struggling state Medicaid programs are diminishing over time, but it is still
possible that an FMAP increase could be considered as part of an "Economic
Stimulus" package that Congress will consider in the spring if the economy is
still lagging.
Appropriations
While the federal budget process is often messy, in 2002 it
suffered a "meltdown" that is unprecedented in modern history. The Senate could
not pass a budget resolution, House Republicans could not reach internal
agreement on how to handle the spending bills, and the Congress adjourned with
all 11 domestic spending bills left un-enacted and the government operating on
temporary funding authority. The first order of business in January was
therefore an attempt to resolve the fiscal year 2003 funding bills almost
one-quarter of the way through the new fiscal year. Prior to the election,
there was a significant divide between the relatively generous level of funding
proposed by the Senate for health care programs and activities and the more
constrained levels proposed by the President (the President's budget has a
four-percent overall increase in health care spending, but many programs are
proposed for cutbacks or elimination to finance larger increases for other
programs such as biomedical research). Now it is generally settled that the
appropriators will reduce funding to approximately the President's level and the
scramble is on to find dollars in other areas that can be channeled into health
care spending.
Outlook: An effort is now underway to
resolve the ugly fiscal year 2003 funding process before March, with the most
likely outcome that minimal increases will be provided for discretionary health
activities unrelated to bioterrorism, medical research and a handful of other
issues. Looking ahead, the President will likely propose restrained funding
increases for fiscal year 2004 and the needs of the War on Terrorism, deficit
pressures and desire for more economic stimulus tax cuts will further constrain
available resources.
For more information, contact Robert Bradner, toll free,
at 1-888-688-8500.