ALL ABOARD! - MOVING A LEGISLATIVE AGENDA

July 2, 2003

If legislative activity were the sole criteria, pundits would be hard-pressed to call this a 'do nothing' Congress. With a new tax policy in place, Congress used the July 4th holiday as a benchmark for moving government spending bills and crafting landmark changes to the Medicare program.

Appropriations bills on the move

Although Congress adopted an FY2004 spending plan April 11, it took nearly two months to decide how to allocate the $784.7 billion budget across 13 appropriations bills. But with the help of some gimmicks that would astound a three-card Monte dealer, the appropriations committees were given the go-ahead to begin work on next year's spending bills.

Within days, the House appropriations committee had marked up seven bills, including homeland security, defense, and the Labor-HHS-Education appropriations bill. The Senate committee marked up military construction and its own version of the Labor-HHS-Education bill, with the remaining bills set to move when lawmakers return from the July 4th recess.

The House version of the Labor-HHS-Education bill totals $138 billion, or about $445 million more than the Senate's bill. But both bills have already come under heavy criticism, not for what they include, but for the expectations they failed to meet for several high-visibility programs, including the No Child Left Behind education initiative, special education grants and the National Institutes of Health.

For example, both bills are about $334 million less than what was assumed in the budget plan for Title I education grants for the disadvantaged; both freeze the maximum Pell college grant at $4,050; the House bill provides $200 million less than the president requested for low-income energy assistance while the Senate cut health professions training funding by more than half. Funding growth for the National Institutes of Health, which received a 15 percent increase last year, was held to 2.5 percent in the House bill and 3.7 percent in the Senate bill.

Landmark Medicare reform on the docket

In the early morning hours of June 27, the House and Senate each adopted legislation that introduces sweeping reforms to Medicare. Both chambers passed bills that add a prescription drug benefit to Medicare and make other changes to the massive health care program for the elderly and disabled.

The Senate passed its version of the bill by a bipartisan vote of 76 to 21, largely as the result of a compromise forged between Senate Majority Leader Bill Frist (R-TN) and Senator Edward M. Kennedy (D-MA). House passage was more difficult to achieve as GOP leaders grappled with Democratic objections that the bill would not provide seniors with enough assistance and would threaten the stability of traditional fee-for-service Medicare, while conservative Republicans argued that the bill did not go far enough to achieve significant, market-based reforms. Despite these objections, the House bill squeaked through by a thin 216 to 215 margin.

Under the House-passed drug benefit, beneficiaries would pay a $35 monthly premium and a $250 annual deductible. From $251 to $2,000, the government would pay 80 percent of senior's costs and seniors would be expected to finance their own costs until they spend $4,900. Any costs above $4,900 would be 100 percent financed by Medicare.

While the House bill does more to foster public-private competition by introducing competitive bidding between private plans and traditional fee-for-service, the Senate-passed bill would provide beneficiaries with equal benefits regardless of whether they choose fee-for-service or managed care. Under the bill, beneficiaries would pay a $35 monthly premium and a $275 annual deductible. The government would pay half of senior's drug costs up to $4,500, and seniors would pay 100 percent of their own drug costs up to $5,800. If beneficiary's costs rise above $5,800, the government would step in and pay 90 percent of their costs.

The legislation now heads to a conference committee where House and Senate lawmakers hope to work out the differences between their respective versions before sending it to the president, who has given early signals that he will sign the legislation.

Bills address physician payments, geographic disparities and regulatory reform

Responding to pressure from physician groups, the House bill addresses some of the problems in Medicare's formula for calculating physician payments. The House would provide physicians with no less than a 1.5 percent positive update in their Medicare payments in 2004 and 2005, and would permanently change the Gross Domestic Product (GDP) factor in the physician payment formula to a 10-year rolling average, instead of updating GDP on an annual basis. Positive updates in 2004 and 2005, however, would be funded by negative updates in 2006 and beyond if Congress does nothing further to address underlying problems with the physician payment formula. The Senate took no specific action to address the physician payment problem, voting instead to adopt a resolution expressing the need to address the physician payment cuts threatening seniors' access to care. The Senate opted to focus on eliminating geographic disparities in physician payments, paying for the fix by reducing payments for Medicare-covered physician-administered drugs, freezing payments for durable medical equipment, prosthetics, and orthotics, and requiring beneficiaries to pay deductibles and co-payments for clinical laboratory services.

Both bills include the regulatory reform provisions consistently supported by the physician community and language that directs the General Accounting Office (GAO) to undertake a study on geographic differences in payments for physician services. The House bill also directs GAO to study access to physician services and instructs the Medicare Payment Advisory Commission to report on the effect of refinements to the practice expense components of payment for physician services after the transition to the Resource Based Relative Value System.