Today, Politico published an article by Jonathan Allen that sets out exactly how the cuts will impact nondefense and defense spending. 

The Office of Management and Budget (OMB) will write a sequestration order that details the exact amount of the cuts to federal programs.  The report is expected in January.

Rep. Allyson Schwartz (D-PA) has proposed to repeal the SGR and freeze the current Medicare physician payment rates through 2012. She proposes to provide primary care physicians with a 2.5 percent annual rate increase and specialists with a 0.5 percent increase from 2013-2016. Her proposal calls on CMS to test and evaluate physician payment models and identify at least four models from which physicians could select to be paid beginning in 2016. If physicians elected to remain in the fee-for-service system, reimbursement rates would decrease annually to encourage providers to move away from the FFS system.

Later today, the President is expected to nominate Marilyn Tavenner to succeed CMS Administrator Donald Berwick when his recess appointment expires on December 31, 2011. Marilyn Tavenner currently serves as the Principal Deputy Administrator and Chief Operating Officer of CMS. She will serve as Acting Administrator of CMS during her confirmation process.

Marilyn Tavenner was Secretary of the Virginia Health and Human Resources Department during Governor Tim Kaine’s (D) administration from 2006-2010. Previously, she was a nurse and an executive at the Hospital Corporation of America. She was Chairwoman of the Virginia Hospital Association and a trustee at the American Hospital Association.

As Congress returned from the August recess, lawmakers and stakeholders geared up for the first public meeting of the Budget Control Act’s Super Committee meeting on September 8.  In preparation for the Committee’s work, the House Ways and Means Committee Democrats released a list of potential health care specific cuts that the Super Committee could consider.  The compiled list was an accumulation of pay-fors that have been offered in various deficit reduction plans.  The list totals more than $500 billion over 10 years and staff confirmed the offsets have not been officially endorsed by Members.  The list included mostly Medicare focused cuts, such as accelerated home health rebasing ($3 billion) and a new home health copay ($40 billion), post acute provider market basket freeze ($14-28 billion), increased SNF cost-sharing ($21.3 billion), elimination of the rural health hospital add-on payment ($62 billion), GME cuts ($15 billion), new cost-sharing for clinical lab services ($24 billion), new Part D rebate for dual eligible and LIS beneficiaries ($120 billion), increased cost-sharing on beneficiaries with Medigap coverage ($12-53 billion), raise Medicare eligibility age to 67 ($124 billion), freeze income thresholds for high income beneficiaries and raise premiums ($13 billion) and chained CPI ($7 billion).   In a jobs-focused speech to a Joint Session of Congress, President Obama called on the Super Committee to come up with additional cuts to pay for his newly proposed American Jobs Act, such as through “modest adjustments” to Medicare and Medicaid. 

As for committee action this past week, the Senate Appropriations Committee approved the Agriculture-FDA spending measure on Wednesday (HR 2112) and the Senate Health, Education, Labor and Pensions Committee advanced two health bills in a markup on Wednesday – reauthorization measures for graduate medical education at children’s hospitals (S 958) and autism research (S 1094).  Next week the Senate Committee on Health, Education, Labor and Pensions will hold a hearing on Wednesday, September 14 “Securing the Pharmaceutical Supply Chain” and the House Energy and Commerce Subcommittee on Health has scheduled a hearing on Thursday, September 15 titled, “Cutting the Red Tape: Saving Jobs from PPACA’s Harmful Regulations.”

The Obama Administration welcomed good news last week when a Virginia-based U.S. District Court of Appeals threw out two challenges to the health care reform law, the Affordable Care Act.  In a high profile case filed by the Commonwealth of Virginia by Attorney General Ken Cuccinelli, the court said that Virginia lacked standing to bring suit against the law.   The Attorney General filed the suit the day the Affordable Care Act was signed into law.  In the second case, filed by Liberty University of Lynchburg, Va., the appeals judges set aside a district court decision that the law is constitutional and ordered that the lawsuit be dismissed because the district court does not have jurisdiction to hear the challenge.  The Supreme Court is still likely to consider the constitutionality of the Affordable Care Act in the near future.

The Republican Governors Public Policy Committee issued a report in response to a request from House Energy and Commerce Committee Chairman Fred Upton that includes the following policy options for Medicaid reform:

• Repeal the Affordable Care Act and replace it with market-based reforms;
• Allow states to define an outcome-based program operating agreement with CMS (program would include a limited number of measures and eliminate federal review process for Medicaid programs);
• Enable states to measure accountability through measures of quality, cost, access and customer satisfaction;
• Repeal maintenance of effort requirements; Entrust the state with responsibility for program integrity;
• Require the federal government to assume the cost of uncompensated care for illegal aliens;
• Allow states to pilot programs to reduce the occurrence of cost-shifting between the state and federal programs;
• Permit a state (if it can demonstrate budget neutrality) to use state or local funds to pay for Medicaid services of system improvements that are not currently “matchable;”
• Encourage states to develop innovative programs to reduce chronic illnesses, emergency room visits, and hospitalizations;
• Provide states with the ability to implement bundling projects;
• Allow states to use only one managed care organization (rather than at least two as currently required by CMS);
• Amend ACA’s eligibility definition to reverse the use of MAGI;
• Allow states to contract with private firms to streamline eligibility determination;
• Provide states with flexibility to design benefit structures;
• Eliminate benefit mandates that exceed private insurance market benchmark or benchmark equivalent;
• Permit states to divide Medicaid into different parts; and
• Engage in shared savings arrangements for dual eligible beneficiaries.

The report will serve as the basis for the Committee’s Health Care Summit in Washington in October.

On August 12, the U.S. Court of Appeals for the 11^th Circuit Court ruled the individual mandate included in the Affordable Care Act unconstitutional.  In the decision, the judges explained that “the individual mandate contained in the act exceeds Congress’s enumerated commerce power.” 

The federal appellate court, however, overturned several key rulings made by Judge Roger Vinson in the Northern District of Florida in the case brought by 26 States, the National Federation of Independent Business, and two individuals.  Specifically, the 11^th Circuit Court judges found that the health care reform law could stand on its own without the individual mandate.  In addition, the court found that the Medicaid expansion is not unconstitutional.

The case heard before the 11^th Circuit Court is the first to be decided in appellate court and found unconstitutional.  Earlier this summer, an appellate court in Cincinnati found the law to be constitutional.  Challenges brought separately by the State of Virginia and Liberty University are still pending in appellate court.  The Supreme Court is expected to consider a challenge to the Affordable Care Act, but we do not expect the Court to issue a ruling prior to the 2012 election.   

In March, the Government Accountability Office (GAO) released a report examining alternatives to the individual mandate.  GAO found that mechanisms employed in Medicare Part B or Part D could be alternatives.  In Medicare Part B, the longer a senior waits to enroll, the higher the beneficiary’s monthly premium.  The report indicated that Congress could amend ACA so that uninsured individuals would pay a higher premium if they delayed purchasing insurance coverage.  GAO also noted that the government could limit the open enrollment period in the health insurance Exchanges to once every few years and require individuals who do not enroll in plans offered by the Exchanges to pay higher co-payments or deductibles. 

Sen. Ben Nelson (D-NE) and Sen. Claire McCaskill (D-MO) are considering introducing legislation that would provide an alternative to the individual mandate.  Rep. Peter DeFazio (D-OR) introduced the “Personal Responsibility in Health Care Insurance Act” (H.R. 767), which would require individuals who do not want to purchase health insurance to sign an “affidavit of personal responsibility” and would prohibit them from using the bankruptcy court to reduce their health-related debt.

Earlier this year, President Obama issued an Executive Order directing Department and Agency heads to submit a plan for retrospective review of regulations that may be obsolete or burdensome to businesses. Federal Departments submitted preliminary plans in the spring and just this week issued their final plans.

HHS’s plan notes that the goal of the retrospective review of the regulations is to improve patient care and outcomes and reduce system costs by removing obsolete or burdensome requirements.  The Centers for Medicare and Medicaid Services will publish a rule in September related to this regulatory review and estimates that the changes outlined in the plan will result in savings of $600 million annually and $3 billion over five years. 

HHS plans to revisit regulations a number of issues including the following:

• Use of telemedicine to increase access to improve the ability of rural and critical access hospitals to provide care more broadly and reduce provider burden by removing credentialing requirements;
• Increase use of electronic reports and submissions at the FDA and the Administration for Children and Families;
• Align reporting for electronic prescribing requirements and the EHR incentive program in Medicare;
• Improve pre-market review for medical devices;
• Reduce certain burdens imposed by the FDA’s medical device regulations;
• Continue to review the FDA’s Good Manufacturing Practices regulations for foods and drugs and establish preventive controls for food facilities, as well as accommodate advances in technology relating to pharmaceuticals;
• Revise and update labeling regulations for food and drugs at the FDA;
• Develop a CMS work plan to better align Medicare and Medicaid; and
• Review quality reporting requirements.

The Affordable Care Act established the Center for Medicare and Medicaid Innovation to test new care delivery models. The Center released a request for applications for organizations to participate in one or more of the initial models under the Bundled Payments for Care Improvements initiative. The notice outlined several models: 

• Model 1: Acute care hospital stay only
• Model 2: Acute care hospital stay and the post-acute care related to the stay
• Model 3: Post-acute care after the patient is discharged from an acute inpatient stay
• Model 4: Single, prospective bundled payment for all services given during the inpatient stay by practitioners

Organizations can participate in one or more of the models.  Applications are due later this year and the initiative takes effect in January 2013.

The Proposed Rule, “Medicaid Program; Eligibility Changes Under the Affordable Care Act of
2010,” implements sections of the ACA related to Medicaid and CHIP eligibility, enrollment simplification, and coordination. First, it offers new income-based eligibility rules and systems for processing applications for most Medicaid applicants, including a proposal to collapse eligibility categories into four primary groups: children, pregnant women, parents, and the new adult group. Second, the Proposed Rule seeks to improve coordination across Medicaid, CHIP, and the Exchanges by requiring the Exchanges to conduct eligibility determinations for Medicaid and CHIP as well as for advance payment of premium tax credits.

The Proposed Rule sets out the increased FMAP rates and proposes State options for accessing federal funding, which will be available, beginning January 1, 2014, for State medical assistance expenditures related to “newly eligible” individuals and expenditures in “expansion States.” Over the next several weeks, CMS will conduct outreach to stakeholders by holding forums in Atlanta, Chicago, Denver, New York, Portland, and Sacramento. HHS convened its stakeholder meeting in Portland on August 23.  The specific dates for the other cities have not been announced.

On August 12, the Department of Health and Human Services (HHS) and the Department of the Treasury proposed regulations relating to the establishment of the State-based Affordable Insurance Exchanges mandated by the Affordable Care Act (ACA). 

The Proposed Rule on Exchange Functions seeks to implement certain functions of the Exchanges established in the ACA.  The Affordable Care Act requires that health plans offered through the Exchange be certified as Qualified Health Plans (QHPs). HHS proposes that the Exchange perform eligibility determinations for enrollment in a Qualified Health Plan (QHP). HHS sets forth standards for eligibility, eligibility determination process, and applicant information verification process.  Additionally, the Department tasks the Exchange with determining eligibility for Medicaid and the Children’s Health Insurance Program (CHIP) and subsequently notifying the State Medicaid or CHIP agency with the applicant’s information.        

The Internal Revenue Service (IRS) of the United States Department of the Treasury released a Proposed Rule, entitled “Health Insurance Premium Tax Credit,” to implement Section 1402 of the ACA. Section 1402 the ACA amended the Internal Revenue Code to allow a refundable premium tax credit intended to help make health insurance coverage more affordable by reducing out-of-pocket premium costs. The IRS has scheduled a public hearing for November 17, 2011, which will be held at the Internal Revenue Building in Washington, D.C.