Mid-Year Update

July 11, 2008

With election day just four months away, the country is facing some daunting challenges: high gas prices are squeezing consumers, a weak dollar is raising import prices at the fastest pace in a generation, the U.S. no longer writes the rules that govern global commerce and the health care system is in serious need of reform. As complex as these challenges are to resolve, policy makers in Washington seem ill-equipped or ill-prepared to fulfill even their most basic responsibilities.

Hesitation waltz on appropriations

When Congress adopted a $3.03 trillion budget resolution in early June, one could logically expect lawmakers to begin churning out annual appropriations bills. One would be wrong. While Democrats congratulated themselves for adopting a budget blueprint in an election year for the first time since 2000, the process has not moved much beyond that point.

On June 13, the House Appropriations Committee announced it had divided up its allocation of $1.01 trillion in discretionary funds, giving each of its subcommittees their so-called 302(b) allocation, including $153.1 billion for programs contained in the Labor-HHS-Education appropriations bill. A few days later, the House Labor-HHS-Education subcommittee approved an annual spending bill totaling that amount, or $7.1 billion more than President Bush requested for FY2009 and about $7.8 billion more than the level appropriated in FY2008.

The House bill restored most of the cuts proposed by the President and targeted added funds to education and the National Institutes of Health.

 

• The bill provides $3.1 billion more for the Pell grant college student aid program, for a total of $17.3 billion—enough to increase the maximum grant amount by $169, to $4,410. The bill also provides an additional $298.8 million for education for the disadvantaged, $110 million more for school improvement programs and $594 million extra for special education.

 

• The bill also contains a $1.1 billion increase (+3.9 percent) over FY2008 for the NIH, bringing that agency’s program level to $30.1 billion (excluding $300 million transferred to the global HIV/AIDS fund).

 

But Chairman David Obey’s (D-WI) plans to bring this and 11 other spending bills to the House floor in July ran into a snag when a full committee meeting to ratify the Labor-HHS-Education bill turned into a partisan battleground over domestic energy production and gas prices. After a heated discussion, the meeting was adjourned abruptly, leaving in doubt whether this or any other appropriations bills will be taken up by the committee this year.

The full Senate appropriations committee, in the meantime, managed to ratify its version of the Labor-HHS-Education bill on June 26. The Senate committee bill includes $14.5 billion for No Child Left Behind programs, an increase of $631 million over prior year funding and $225 million more than the President requested. The bill also includes $585 million to prepare for an influenza pandemic. In addition, the Senate bill provides an extra $1.025 billion over FY2008 for NIH, enough to match the 3.5 percent biomedical research inflation index forecast for next year.

Next steps

Even before the House committee meeting on Labor-HHS-Education was suspended, Chairman Obey had already raised doubts that few, if any spending bills would be passed this year. Haggling over the recently enacted supplemental war spending bill took more than six months to resolve, with little time left before Congress breaks for the national party conventions in August and early September. More to the point, with President Bush threatening to veto any appropriations bill that exceeds his budget request, House and Senate Democratic leaders have not committed themselves to sending any appropriations bills to the White House before the November elections. Most recently, in fact, Chairman Obey stated he has no plans to schedule any committee meetings. House Rules Committee Chairwoman Louise Slaughter (D-NY) confirmed that it is unlikely any spending bills will come to the House floor for debate anytime soon. So unless lawmakers decide to convene a lame-duck session, passage of the spending bills will be delayed until early 2009.

If that is the case, programs that require annual appropriations will be wrapped into a continuing resolution in effect until February or March 2009.

Unfortunately, the strategy is disruptive to federal programs and those populations they serve. It is also risky because it leaves open the possibility that a new President and a new Congress ultimately decide to pass a full-year continuing resolution and get on with next year’s business.

Regardless of what course Congress takes, CRD Associates is advising its clients to continue advocating their position, be it on policy issues or funding. As the old adage goes, “When politicians feel the heat, they see the light.” The President and Congress need to be reminded that they have a responsibility to fulfill.

Physician pay fix adopted

In the decade since Congress first imposed a cost-containment formula on the Medicare program, physicians have repeatedly been threatened with cuts in their reimbursements. With a dramatic flair, Congress has usually stepped in at the last moment to block the cuts.

Such was the case July 9, when Senator Edward Kennedy (D-MA) broke an impasse over a Medicare bill that replaces a planned 10.6 percent cut to Medicare physician reimbursements with a 0.5 percent update for the remainder of 2008 and a 1.1 percent increase in 2009. The 18-month fix comes just after a previous temporary patch expired on June 30.

On June 24, the House voted 355 - 59 to pass HR 6331, the Medicare Improvements for Patients and Providers Act, a measure that blocked the physician pay cuts and modernized Medicare’s end-stage renal disease program. But just before the July 4th recess, the Senate fell one vote short of the 60 votes needed to block a Republican filibuster of the bill.

Although there seemed to be bipartisan consensus around fixing the problem quickly, how to pay for the package presented a major stumbling block. Democrats generally favored offsetting the physician pay fix by cutting payments to private Medicare Advantage plans. President Bush and most congressional Republicans view those plans as an example of how Medicare ought to be run.

To offset the cost of the pay fix, HR 6331 eliminates duplicate payments made to Medicare Advantage plans for teaching hospitals, so-called indirect medical education payments. The bill also calls for garnishing Medicare payments to physicians found delinquent in their income tax payments.

During the July 4th break, physician groups, along with AARP and other organizations turned up the heat on lawmakers, citing a March 2008 report from the Medical Group Management Association stating that nearly 24 percent of physicians in all specialties had begun limiting or not accepting new Medicare patients. That same report noted that 46 percent of physicians said they would limit or stop accepting new Medicare patients if the 10.6 percent pay cut scheduled for July 1 went into effect.

After Senator Kennedy cast his vote, giving Democrats the 60 votes they needed to break the filibuster, nine Republicans who had voted against the bill in June switched to vote in favor of passage. The final Senate vote, 69 - 30, together with the overwhelming House vote last month are enough to override a threatened veto by the President.