While weighing final action on key spending and tax credit bills, Democrats and Republicans are busy with essential housekeeping, including organizing their leadership teams to drive the party’s priorities in the next Congress (see table).

	Enactment of the Democrats’ healthcare priorities faces formidable odds, notes an election-year analysis by the law firm of Patton Boggs, LLP (Washington, DC). Progress will hinge on “a narrow majority, presidential veto power, industry resistance, and significant fiscal constraints.”

Flush from their victory in this month’s midterm elections, Democratic health leaders have been airing a host of healthcare policy changes they want to make when they take control of the 110^th Congress in January. But the GOP will still have a major say in what legislation gets enacted, given the Democrats’ narrow majority and the President’s veto power.

For the moment, however, Democrats and Republicans alike must decide how they want to proceed on major unfinished business during the "lame duck" session, where the GOP remains in the driver’s seat. A "must pass" item is legislation to keep funds flowing to federal agencies. Health & Human Service programs now operate under a continuing resolution at current-year spending levels, since Congress has yet to enact an HHS spending bill or opt to keep HHS going via a further continuing resolution. Beyond that, the outlook depends on how much the parties can and want to do before closing shop in December.

Physician Fee Fix

An appropriations measure or an omnibus bill could be the vehicle for preventing Medicare from instituting a 5% cut in physician payments as of January 1, 2007. The cut is required under the statutory fee update formula. When actual physician spending exceeds a target rate, the update is negative. Physician groups are unanimous in urging lawmakers to scrap the SGR (sustainable growth rate) factor in setting fee updates. Without an alternative, these groups say, even steeper cuts are projected in coming years—about 37% by 2015, while physician practice costs increase by 20%, the American Society for Clinical Pathology has told the Centers for Medicare & Medicaid Services. The ever deeper cuts will result, the American Medical Association has warned, in more physicians pulling out of the program and threatening beneficiary access to care.

There is bipartisan agreement that the SGR system must be overhauled, but Capitol Hill analysts expect Congress to hold off on this until next year. In the short term, lawmakers have a number of options—prevent the cut and grant a zero update (in effect, freezing physician fees at 2005 levels) or adopt a multi-year fix with modest increases, possibly tied to some quality reporting rewards.

The big hook in any fee fix is how to pay for it, Jason DuBois, vice president of government relations for the American Clinical Laboratory Association, tells NIR. Any fix, even a zero update like that in place this year or a modest multi-year increase tied to quality reporting, would prove costly. A one-year fix would cost $13 billion over five years, the Congressional Budget Office has estimated, while replacing the SGR system would cost $218 billion over 10 years.

Replacing the SGR System

"Grandfather" Protection for Pathology TC Billings

Pending legislation (H.R. 6030, S. 3609) would make permanent this protection––due to expire at the end of this year––and, if enacted, a likely vehicle is a spending bill or resolution. Securing the protection is vital to a wide number of affected groups, DuBois said, which have been lobbying for the protection, including the Rural Healthcare Coalition, the American Hospital Association, the College of American Pathologists, the American Society for Clinical Pathology, and ACLA. Unless Con-gress steps in, CMS plans to eli-minate the protection.

The "grandfather" protection allows independent clinical labs to be paid by Medicare for the technical component of pathology services to hospital inpatients and outpatients. It applies to hospital-lab arrangements in effect as of July 22, 1999. CMS contends that the TC is reimbursed under the hospital’s DRG payment, and labs should seek payment from the hospital, not Medicare Part B. Ending the protection would be particularly devastating to small and rural hospitals, CAP has warned, because they cannot afford to do the work in-house and must contract it out.

HIT & E-Health Legislation

Changing Leadership Lineup

The Democrats poised to assume leadership of key health committees are well briefed on lab industry issues, says veteran lobbyist Don Lavanty. For example, both Reps. Charles Rangel (NY), in line to head the House Ways & Means Committee, and Pete Stark (CA), in line to head the health subcommittee, have said they think competitive bidding for laboratory services is a bad idea. What this might mean for the current CMS demo is unclear. The leaders could use their oversight authority to revisit the issue or at least extend the rollout of the lab bidding demo while lab industry concerns are addressed. CMS has announced an April 2007 start date for the rollout and said it would identify winning labs by January 2007. Lab groups protest that the timeline is not practical since many technical issues must be resolved. At press time, the Clinical Laboratory Coalition was to meet with CMS project officials for further discussions.

The incoming head of the House Energy & Commerce Committee, John Dingell (MI), is known, Lavanty said, for advocating greater oversight of the Food & Drug Administration and the CMS-run CLIA lab regulatory program vs. the GOP reliance on corrective marketplace mechanisms. Also, he said, the incoming Democratic majorities on the appropriations side include members supportive of lab workforce issues, including addressing the growing shortage of qualified personnel and new support for lab personnel education and training.

Outlook for 2007

The day after the voters gave them control of Congress, Democratic leaders outlined some broad healthcare priorities they want to bring to the fore next year, including expanding coverage to uninsured Americans (an estimated 47 million), stem cell research, and changes to the Medicare drug and managed care programs.

Prescription Drug Benefit: Currently, Medicare is barred from directly negotiating prices for Part D prescription drugs with pharmaceutical makers or interfering in price negotiations between drug makers and Part D drug plans. Democrats favor lifting the prohibition. This would likely accompany creation of a standard federal benefit to compete with private plans.

Doughnut Hole: Democrats aim to shrink this gap in Part D coverage. The standard drug plan has a $250 deductible and 25% coinsurance for the first $2,250 in drug costs. For the next $2,850, no benefits are paid. Enrollees continue to pay premiums, but shoulder 100% of the costs. After this coverage gap, the drug plan covers catastrophic costs, with the beneficiary liable for 5%. Part D plans offer various coverage and cost options, including doughnut hole coverage.

Reducing Managed Care Payments: Democrats want to see if Medicare is overpaying Medicare Advantage plans, compared with what traditional Medicare fee-for-service spends for comparable beneficiary care. They also have called for elimination of the managed care stabilization fund.

The White House already has warned that the President would veto bills that allow Medicare to negotiate drug prices directly, cut funding for Medicare managed care plans, and promote stem cell research.

Much of next year’s congressional debate on healthcare will be to set the stage for the 2008 elections. In remarks at the recent Lab Institute 2006, Congressman Stark said he does not foresee anything beyond minor healthcare initiatives next year despite the Democratic gains, though the party can use its oversight power to frame the legislative calendar, hold committee hearings, and request studies.

November 20, 2006 - Table of Contents

NIR November 20, 2006 (full PDF issue)

Time Running Out for Medicare Physician Fee Fix

CMS Finalizes Rules for Pricing New Lab Tests

Date of Service Revised for Stored Specimens

Senate Bill Introduced to Replace CLIA Cytology PT

Outlook for Health Priorities in Congressional Power Shift

ICD-9 Changes to National Policies for Lab Tests

Wealthier Seniors to Pay More in ’07 Premiums

Medicare Opens Enrollment Period for 2007