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Prospects for Health Legislation
in President Bush’s Final Year
Liz Fowler
Vice President, Public Policy
February 21, 2008
Agenda
Health Legislation in the 110th Congress
• Re-Cap of 2007
• Focus on SCHIP
• Health Legislation in 2008
President’s FY2009 Budget
Factors Affecting the Agenda
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110th Congress: Status of Health Legislation
ISSUE
“First 100 Hours” Agenda
• “Pay-go”
• “Non-interference”
• Stem cell research
OUTCOME

Did not pass Senate
Vetoed
Medicare physician payments
Extended through 6/08
SCHIP reauthorization
Vetoed twice then
extended through 3/09
Health information technology
Uncertain
Genetic information nondiscrimination
Pending
Mental health parity
Pending
PDUFA reauthorization
Follow-on biologics
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
Uncertain
110th Congress: December Health Bill
“Medicare, Medicaid, and SCHIP Extension Act” (S. 2499)
• Passed the Senate 12/8 and House 12/19; signed into law by
President Bush 12/29
• Guaranteed a 0.5% increase in Medicare physician payments, but
only through June 30, 2008; any requirement or incentive for
physician e-prescribing was not included in the final bill
• Extended SCHIP funding through March 31, 2009 with additional
funding for states expecting funding “shortfalls” in 2008
• Funded SCHIP and physician provisions in part through elimination of
the Medicare Advantage Regional Plan Stabilization Fund ($1.5 billion
over five years)
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SCHIP: Basics
Passed in 1997 as part of the Balanced Budget Act to expand health
coverage for low-income children
• State option to expand Medicaid, develop stand-alone SCHIP program, or
combination Medicaid/SCHIP
Ten-year authorization expired September 30, 2007
• Extended through March 2009 by December “Medicare, Medicaid, & SCHIP
Extension Act”
Financed by federal & state governments and administered by states
• States determine program design, eligibility, benefits, provider payments, and
administrative/operating procedures
• States receive enhanced federal match that exceeds Medicaid match (65-83%
match for SCHIP compared to 50-76% match for Medicaid)
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SCHIP: Vital Role in Reducing the Rate of
Uninsured Low-Income Kids
22.3%
Uninsured Rate for Children Under 19
1997-2005
21.5%
20.1%
20.0%
18.0%
15.8%
1997
1998
1999
2000
2001
2002
15.9%
2003
15.2%
14.9%
2004
2005
NOTE: Change in NHIS methodology for counting the uninsured beginning in 2004 means
results in 1997-2003 difficult to compare with those in later years.
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Source: Georgetown Center for Children and Families analysis based on data from the
National Health Interview Survey, December 2006.
Most Uninsured Children are
Already Eligible for Medicaid or SCHIP
Uninsured Children
Medicaid
Eligible
Low-Income Uninsured Children
SCHIP
Eligible
SCHIP
Eligible
19%
49%
Medicaid
Eligible
66%
21%
Not Eligible
13%
Not Eligible
32%
Total = 9 Million
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Source: L. Dubay, Johns Hopkins University, analysis of March 2005
Current Population Survey using July 2004 eligibility levels.
Total = 6.5 Million
SCHIP: CMS Guidance
States must demonstrate that 95% of children below 200% of poverty
who are eligible for SCHIP or Medicaid are enrolled before CMS will
approve coverage expansions above 250% FPL
• Applies to 16 states that already expanded eligibility above 250% FPL
• States with coverage below 250% FPL will also be ‘monitored’
States must adopt the following policies to minimize crowd-out:
• Waiting period of one year for SCHIP coverage
• Cost sharing in SCHIP compared to “competing private plans” must not be
more favorable by more than one percent of family income (unless SCHIP cost
sharing is set at the 5 percent family cap)
States must assure CMS that the number of children in the “target
population” insured through private employers has not decreased by
more than 2 percentage points over prior 5 years
Also applies to Medicaid expansions – announced January 2008
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SCHIP: House-Senate Compromise
Would have increased funding by $35 billion over five years
• 4.7 million additional uninsured children covered (1.6 million children impacted
by crowd out)
• Included House provisions to extend dental coverage and provide mental
health parity to children enrolled in SCHIP
• Parents currently covered by SCHIP would be transitioned into other coverage;
coverage for childless adults terminated after one year
• Expanded premium assistance options for states
• Senate offset of $0.61 increase in federal tobacco taxes
Would have overturned the August 17th CMS guidance
• Instead, would have phased in new requirements for coverage of low-income
children as a condition of expanding SCHIP to children above 300% FPL
• Gave states time and assistance in developing and implementing best
practices to address crowd out
Would have changed the name of the program back to CHIP
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SCHIP: President Bush’s Veto(s)
President’s view of House-Senate SCHIP bill(s):
• Moved program away from its original intent of covering poor children
• Would have moved millions of American children who now have private health
insurance into government-run health care
• Represented an incremental step toward a government-run health care
system
• Included excessive spending funded with significant tax increases
President’s alternative to SCHIP expansion:
• Repeal the current tax preferences for employment-based health insurance
and establish a standard deduction for health insurance
 $15,000 standard deduction for families with health insurance
 $7,500 standard deductions for individuals
• According to the Joint Committee on Taxation (JCT), the proposal would
increase federal revenues by a net $411 billion over the next 10 years
• According to CBO, after 10 years, only an additional 1.8 million people who
were previously uninsured would have health coverage
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SCHIP: Implications for Health Reform
Even health legislation that seems “easy” is contentious
Program expansions are difficult in a deficit-driven, pay-go environment
Lack of consensus in Congress to expand public program eligibility to
what some consider “middle-income”
Crowd-out will continue to be an issue
SCHIP funding level will affect states’ ability to pursue health reform,
which could impact debate at the federal level
Larger system reform almost certain to include tax credits and may also
include changes in tax treatment of employer-sponsored benefits
Incremental expansion difficult to achieve while potential for tackling
broader reform might be right around the corner
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110th Congress: 2008 Agenda
Economic Stimulus
• Round 1 (enacted): tax rebates, incentives for business investment, mortgage
relief
• Round 2 (contemplated): unemployment insurance, state fiscal relief and
additional tax relief
Unfinished health care business from 2007
• Medicare physician payment fix
• Medicare Advantage cuts (as an offset for doc fix) and marketing reforms
• SCHIP reauthorization
• Overturn or block Administration’s Medicaid rules
• Mental Health Parity
• Genetic Information Nondiscrimination Act (GINA)
• Health IT
• Small business health coverage
Possible use of “reconciliation” as the legislative vehicle
• Eliminates the 60-vote threshold in the Senate
• But... all provisions subject to the “Byrd rule”
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Medicare Physician Payment Dilemma
5.4%
Medicare Physician Payment Update Factor, 1999-2016
4.5%
2008
1.6% 1.5% 1.5%
0%
2000 2001
0%
0.5%
2009 2010 2011 2012 2013 2014 2015
2003 2004 2005 2006 2007
-5%
-5.4%
2002
-5%
-5%
-5%
-5%
-5%
-5%
-15%
Without Congressional action, physicians serving Medicare beneficiaries would
see a cumulative reduction in payment rates of over 40% by 2016. In contrast,
the MEI is expected to increase by about 20% over the same time period.
Fixing the problem is VERY expensive:
• Freeze payments for two years = $50-70 billion over 10 years (depending on whether
beneficiary premiums are ‘held harmless’
• Freeze payments at the 2007 level for 10 years = $175 billion over 10 years
• Replace the SGR with an automatic update based on MEI = $260 billion over 10 years
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Sources: CBO Report on SGR (June 2007); CBO testimony (March 2007); 2007 Medicare Trustees Report
President’s FY 2009 Budget: Medicare
Reduce Medicare provider payments and increase
beneficiary premiums by $178.0 billion over the next 5 years
and $556.1 billion over the next 10 years
• Freeze payment updates for 3 years and reduce future updates in 2012 and beyond by
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0.65% for inpatient and outpatient hospitals, nursing homes, rehab facilities, hospices,
LTC hospitals, and ambulance providers
Reduce the hospital payment add-on for IME from 5.5% to 2.2% over three years and
eliminate IME payments to teaching hospitals for Medicare Advantage beneficiaries
Eliminate Medicare bad debt payments
Reduce hospital capital payments by 5% in 2009 and reduce hospital disproportionate
share (DSH) payments by 30 percent over 2 years
Institute hospital value-based purchasing and eliminate payments for “never” events
Freeze payments to home health agencies for the next 5 years and reduce updates in
2014 and beyond by 0.65%
Freeze payments for ambulatory surgical centers (ASCs) in 2010 and 2011 and reduce
updates by 0.65% in 2012 and beyond
Expand competitive bidding to lab services
Establish income relating for Part D and eliminate indexing for Part B (and Part D)
income relating
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President’s FY 2009 Budget: Medicaid & SCHIP
Net cuts to Medicaid of $17.7 billion over 5 years and
$47 billion over 10 years – increase SCHIP by $19.3 billion over 5 years
• Reduce federal matching rate for certain administrative costs and benefits
• Repeal exemption for dual eligibles and children with disabilities from mandatory
managed care
• Give states new flexibility on coverage of acute care benefits for some seniors and
people with disabilities
• Baseline also reflects savings of $13 billion over 5 years for previously proposed
regulatory changes
Revise IGT payments for government providers (-$5.7 billion over five years)
Eliminate Medicaid graduate medical education (-$1.8 billion over five years)
Clarify rehabilitation services (-$2.7 billion over five years)
Reform school-based services administration (-$3.6 billion over five years)
• SCHIP funding falls short of the $21.5 billion needed over the next five years simply to
maintain coverage for children currently enrolled in the program
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Administration’s Proposal to Address
“45% Trigger”
MMA’s Medicare funding “trigger”
• If for two years in a row general revenue funding is projected to account for
45% of total financing within the next seven years, the President must propose
(and Congress must consider) legislation to address the issue
• The 45% threshold will be crossed in 2013, according to a warning issued by
Medicare trustees last year, which set events in motion for 2008
Administration’s Proposal
• Beneficiaries with income above $82,000, or $164,000 for couples, must pay
higher Part D premiums
 Projected savings = $900 million in 2009 and $3.2 billion over five years
• Cap non-economic damages in medical malpractice lawsuits at $250,000 and
limit the share of damage awards that plaintiffs’ attorneys could collect
• Encourage greater adoption of health IT
• Authorize the HHS Secretary to publicize price, cost and quality information on
providers, health plans and treatment options
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Factors Affecting Health Agenda in 2008
President’s FY 2009 Budget and
“45% Trigger” Proposal
Cut Medicare FFS providers
Congressional Health Agenda
Cut Medicare Advantage
Better oversight of MA marketing
Medicare Advantage marketing reform
Let 10% cut go into effect
Increase Medicare physician payments
More Medicaid regulatory changes
$19.3 billion for SCHIP
Income-relate Part D premiums
Medical malpractice reform
Value-based purchasing & health IT
Reverse / block Medicaid regulatory changes
$35 billion for SCHIP
Eliminate non-interference clause in Part D
Opposed to caps on non-economic damages
Value-based purchasing & health IT
Bottom line = not many areas for agreement except maybe
Medicare Advantage marketing, value-based purchasing and health IT
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Factors Affecting Health Agenda in 2008
President’s budget proposals
• Despite widespread agreement the proposal is DOA, it will impact the agenda –
and areas of stark disagreement (e.g., Medicare Advantage cuts) will be difficult to
achieve
Pay-go
• Will continue to be a barrier to legislative goals that cost money
Possible “reconciliation”
• Ideal scenario for Democrats – reconciliation instruction of $2-5 billion (i.e.,
protection in the Senate but not a high hurdle)
Medicare physician payments
• June deadline will be tight but a Medicare bill represents potential opportunity to
pass other priorities
2008 Presidential election
• Election presents a distraction and a reason not to pass legislation for both parties
 Republicans -- why give Democrats a victory?
 Democrats -- let’s wait for a Democratic president and achieve more than we can now
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