Hart Health Strategies provides a comprehensive policy briefing on a weekly basis. This in-depth health policy briefing is sent out at the beginning of each week. The health policy briefing recaps the previous week and previews the week ahead. It alerts clients to upcoming congressional hearings, newly introduced bills, regulatory announcements, and implementation activity related to the Patient Protection and Affordable Care Act (PPACA) and other health laws.


President Obama's State of the Union Address (SOTU) Pares Down Medicare Changes

During last Tuesday’s State of the Union Address, President Obama gave recognition that the rising cost of health care for seniors is a key driver of the nation’s debt crisis and, as a result, seniors should “embrace the need for modest reforms….so long as they don’t violate the guarantee of a secure retirement.” Promoting the adoption by both political parties of a long-term budget agreement containing a balance of new revenues and spending cuts, he indicated that he could accept Medicare savings over ten years in an amount (about $300 billion) recommended by the Simpson/Bowles Deficit Reduction Commission. Specifically he said “We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors. We’ll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn’t be based on the number of tests ordered or days spent in the hospital. They should be based on the quality of care that our seniors receive.”

The White House has already indicated that the President’s FY 2014 budget will not ask for savings from Medicaid or by means of increasing the Medicare eligibility age. The President’s budget is likely to be released in mid-March and only after his nomination of Jack Lew for Treasury Secretary has been cleared by the Senate.

In response to the President’s address, Republican Senator Marco Rubio (R-FL) said, “anyone who’s in favor of leaving Medicare exactly the way it is right now is in favor of bankrupting it.” House Republicans have already made clear their budget proposal, which must be approved by April 15 under the debt limit extension legislation, will attempt to balance the federal budget in 10 years largely through entitlement reforms.

A Congressional Budget Office (CBO) report presents the budget hurdles as both the House and Senate craft their budget resolutions: e.g. in 2012, federal spending on means-tested programs and tax credits totaled $588 billion with Medicaid accounting for 40% (a sharp increase is expected as the PPACA expands that program); and spending on PPACA health insurance subsidies will grow to $109 billion (in 2012 dollars) within ten years. 

Sequestration to Crimp Health Programs, Lead to Furloughs

With Congress on a “Presidents’ Day” recess for a week, February 25th is the earliest the Senate can take up a Democrat-leadership plan to replace the Budget Control Act (BCA) mandated sequestration, only four days before the March 1st start of a $400 million/day budget cut across all federal agencies and a 2% reduction in Medicare payments. The Reid/Murray sequestration substitute would consist of 50% in revenue increases and 50% in spending cuts. Included in the $110 billion plan extending through this calendar year is a 30% surtax on income between $1-2 million, a new tax on tar sands oil and provisions to repeal a tax deduction for the cost of moving corporate equipment overseas and to end several direct agriculture payments. The plan, supported by the President, would also lock in $3-5 billion a year in defense cuts beginning in FY 2015. A Senate Republican alternative is expected to be offered, but will likely exclude revenue enhancements. House Speaker John Boehner (R-OH) made it clear that the Senate will have to prove it can pass a bill first, before the House takes any action to ameliorate the sequester. A $120 billion sequester replacement was also unveiled by Rep. Chris Van Hollen (D-MD), the Ranking Member on the House Budget Committee. House Republicans, nonetheless, have recognized the severity of the cuts to the Pentagon with House Appropriations Chairman Harold Rogers (R-KY) stating that he will propose a new continuing resolution (CR) to continue spending for FY 2013 which would also give the Defense Department and the Veterans Administration added flexibility to make reductions across various accounts in recognition of the need to prioritize spending cuts. It appears that the sequester will begin on March 1 and that Republicans will attempt to negotiate some spending flexibility for federal agencies as the March 27th deadline approaches (the expiration date of the current CR). Federal agencies have called “foul” on the cuts with National Institutes of Health (NIH) Director Francis Collins stating that his agency would see a 5.1%, $1.6 billion, cut in funding leading to a reduction in medical research programs and the loss of about 20,000 jobs in university and other research laboratories. U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius also chimed in that the cuts would result in 7,400 fewer HIV patients having access to Medicaid, 424,000 fewer tests for AIDS and 373,000 fewer people receiving mental health services. In testimony before the House Energy and Commerce Oversight Committee, the CDC Director said that the cuts will inevitably lead to reductions in the funding of state and local government health departments. House Republicans made clear that they will also pursue deficit reduction by freezing federal wage levels after voting 261-154 to pass H.R. 273, legislation to accomplish that goal.

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