2007 LEGISLATIVE WRAP-UP: OUT WITH A WHIMPER

January 4, 2008

On December 19, the House of Representatives took its last vote of the legislative session, approving a $555 billion spending measure that combined 11 unfinished appropriations bills. The massive spending bill, which passed the Senate the day before by a vote of 76 to 17, was signed into law by President Bush on December 26.

Politics trumps policy

The bill's enactment came after months of contentious battles between and among congressional Democrats and Republicans. But clearly the controlling force in this fight was the President and his insistence that Congress not breach his overall budget request for discretionary spending and that there be no forced withdrawal from Iraq.

Democratic leaders praised the spending bill, which they said features several of their top priorities, including more money for veterans' benefits, college student aid and incentives for reducing carbon emissions. But in the end, Democrats yielded nearly every point to the President. They gave up on their efforts to add $23 billion for a wide range of health, education and social services programs, settling instead for rearranging a few budget priorities within the President's overall spending ceiling, and appropriating $70 billion for Iraq and Afghanistan, without any meaningful conditions.

As evidence of the widespread disappointment with the final deal, the House passed the omnibus spending bill by a vote of 272 to 142—with 141 Democrats voting against the measure. But there was enough blame to go around on all sides—as governing seemed to be the last thing on anyone's mind.

The budget process started optimistically enough when lawmakers adopted an overall spending plan, the budget resolution, relatively early in the year. In so doing, this session of Congress accomplished something its predecessor could not. But the celebration was short-lived. Try as they might, House Democrats were at a loss to come up with a legislative strategy for passing appropriations bills, opting instead for volatile pronouncements, few of which reflected a consensus or, for that matter, remained in effect more than a day or two. Senate Democrats, for their part, could not find a way to muster the 60 votes needed to overcome a Republican slowdown designed to keep the other side from claiming any significant accomplishments in the run-up to the 2008 elections.

Then, in November, the President dismissed out of hand the Democrats' desperate offer to meet him halfway on spending—a deal that would have allowed both sides to declare victory. Instead, he threatened to veto nine of the 12 appropriations bills unless they matched his spending target. Oddly enough, when Republicans controlled Congress budget excesses were deemed "manageable" by the White House, and therefore not subject to veto threats.

Summary of appropriations actions

The omnibus bill includes $146.3 billion to support discretionary programs ordinarily funded in the Labor-HHS-Education appropriations bill. In order to arrive at that total, lawmakers selectively shifted funds contained in a version of the bill that was vetoed by the President in November, then applied an across-the-board cut of 1.747 percent, or about $2.3 billion. Following is a summary of selected programs contained in the measure -

Job training and employment services. The bill provides $11.7 billion for Labor Department programs, a small increase over FY2007 funding, including $3.5 billion for adult and youth employment and training and $522 million for community service employment for older Americans.

Health Resources and Services Administration. - The omnibus contains $6.9 billion for HRSA, including $2 billion for community health centers to provide access to medical and dental services for an additional 280,000 uninsured individuals, $844.9 million for maternal and child health grants to states, $350 million to continue health professions and nursing education programs and $301.6 million for children's hospitals graduate medical education.

Centers for Disease Control and Prevention. - The bill contains $6.4 billion for CDC, an increase of 1.7 percent over current funding, including $1.8 billion to combat infectious diseases and $961 million for disease prevention and health promotion.

National Institutes of Health. - The omnibus bill contains $28.9 billion for NIH. After accounting for a $294.7 million transfer to the global AIDS fund, this represents an increase of $132.9 million over current spending, far less than the 3.8 percent increase needed to keep pace with biomedical research inflation. Of the increase provided, nearly 10 percent is diverted to the NIH Common Fund for interdisciplinary research, for a total of $495.6 million; as a result, most institutes are virtually flat-funded at the FY2007 level.

Substance Abuse and Mental Health Services Administration. - The bill includes $3.4 billion, an increase of $29.7 million over FY2007, including $910.8 million for mental health services, $2.1 billion for substance abuse treatment and $194.1 million for substance abuse prevention activities.

No Child Left Behind. - The legislation contains $24.6 billion, or $941 million above FY2007 spending and $74 million below the President's request, including: $14.4 billion for Title I math and reading instruction to an additional 276,000 disadvantaged children; $2.9 billion to improve teacher quality; $1.1 billion for after-school programs, enough to reach an additional 130,000 children; and $10.9 billion for special education grants to states.

College student aid. - The bill contains $14. 2 billion for Pell grants, increasing the average grant to $4,731, and restoration of $900 million for Perkins Loans and other student aid programs

Vocational education. - The omnibus contains $1.2 billion, a reduction of $10.7 million below current funding, to support technical training at high schools and community colleges.

Corporation for Public Broadcasting. - $420 million is provided in advanced appropriations for 2010 to support public broadcasting stations; $29.2 million for digital conversion and launch of the American Archives project; and $26.3 million to replace the public radio satellite.

Low-income home energy assistance. - The bill provides $2.6 billion, an increase of $409 million over current spending, to assist an additional 2 million low-income families and seniors cope with higher home energy costs.

Medicare physician payment fix and SCHIP extension adopted; tax extenders delayed

Lawmakers managed to pass legislation to keep the alternative minimum tax from affecting up to 21 million middle-income taxpayers. However, Congress failed to reach a consensus over a series of tax credits that expired December 31, 2007, when Democrats insisted on paying for the associated revenue losses and Republicans generally opposed offset provisions. Many of the so-called tax extenders, including the Work Opportunity Tax Credit, the Welfare-to-Work Tax Credit, the R&D Tax Credit and others, will likely be extended retroactively in 2008.

In the meantime, Congress could only manage to come up with temporary fixes for two high-profile issues affecting Medicare and SCHIP. In lieu of the scheduled 10.1 percent reduction in the 2008 Medicare physician fee schedule, Congress voted a six-month increase of 0.5 percent for physicians, and extended the one-point floor on the work geographic adjustment through June 30, 2008. However, unless Congress acts before then, physicians will face significant cuts on July 1, when payments revert back to the existing formula. Among other payment updates in effect until mid-2008 is a five percent incentive payment to physicians in primary care or specialty care scarcity areas. However, the legislation reduces the 2008 bonus funding for the Physician Assistance and Quality Initiative Fund to $150.5 million, down from $1.35 billion. The legislation also extends the physician quality reporting system through 2009, and requires the HHS Secretary to establish alternative criteria for reporting requirements.

On another front, after two vetoes of legislation to expand the State Children's Health Insurance Program (SCHIP), Congress yielded to the President and instead passed a simple extension of the program. The legislation extends SCIP through March 31, 2009, and provides $1.6 billion to cover allotments to states that encounter shortfalls.

Congress also modified the law governing Medicare as a secondary payer (MSP), requiring insurers or third-party administrators of group health plans, and plan administrators or fiduciaries of self-insured or self-administered group plans to secure information from plan sponsors and participants to identify situations where the plan is or has been primary to Medicare. The legislation also requires the HHS Secretary to share information on entitlement under Part A and enrollment under Part B with those entities, administrators and fiduciaries. Finally, the legislation requires liability insurance, no-fault insurance and workers' compensation plans (1) to determine whether a claimant is entitled to Medicare benefits, and (2) if the claimant is so entitled, to submit certain information to the government.

What to expect in 2008

The President's decision to reject the Democrats' offer to split-the-difference in 2007 portends an even more difficult budget battle in 2008. So does the fact that public approval ratings for the Democratically-controlled Congress has sunk below their level when Republicans controlled the institution.

Democrats at leadership levels continue to be in disarray and cannot seem to find a way to effectively communicate to the electorate why their priorities are important, while Republican leaders in Congress still manage to outmaneuver their opponents with parliamentary tactics. Add the emotional rhetoric so common during an election year, the narrow majorities in Congress and the fact that the presidency is up for grabs—and you have a recipe for stalemate.

It is easy to predict that in 2008 the legislative process will be even more difficult than last year's. In all likelihood, the budget President Bush sends to Congress on February 4 will be the most extreme of any this administration has submitted to Congress. (With an approval rating hovering in the low 30s for the past year, he has nothing to lose.) Unless Democrats can respond with a clear and compelling message about the potential disruptions voters could feel, the process once again will devolve into an inside-the-Beltway issue.