Washington Report - November, 2002

Bill Finerfrock

Capitol Associates

Congress Has Left The Building

With little fanfare and a lot of finger pointing, the 107th Congress came to a close on November 22nd. Other than passage of the Homeland Security bill and terrorism insurance legislation, very little was accomplished during the lame duck session.

As a result of the November elections (see next story), there was little incentive on the part of Republicans to achieve any type of consensus with Congressional Democrats.

Consequently, the Congress passed a short-term Continuing Resolution to keep the government running until the new Congress is sworn in in early January, 2003. At that time, the 108th Congress will have to consider and pass the Fiscal Year 2003 appropriations bills for most government agencies.

As reported in last month’s report, lame duck sessions have a history of generating a great deal of noise but little substance. The enduring fact is that the political environment that exists during a lame duck session is not conducive to achieving a policy consensus.

Perhaps indicative of the tense relations that prevailed as the 107th Congress wound down was the fact that Congressional leaders never convened for the traditional end-of-Congress photo.

108th Congress - What Will it Look Like

As the dust settled after the November elections, it was clear that Republicans would control the House, Senate and White House for the first time in several decades. As of the end of November, the exact size of the GOP majorities was still unknown as there were four races (one Senate and three House) still left undecided. At a minimum, the GOP will control 228 seats in the House and the Democratic party will control 203. One race, in which the Republican candidate has a narrow lead, is currently undergoing a recount. In the two other House races, one (Louisiana’s 5th District) will be decided by a runoff election on December 7th and the other (Hawaii’s 2nd) will be decided by a Special Election on January 4th.

For the most part, House incumbents of both parties were easily reelected. Only one House Member (Karen Thurman D-FL) who was not facing another incumbent, was defeated for reelection. There were a handful of House “incumbent” vs. “incumbent” races that occurred as a result of the decennial redistricting.

Several Senate incumbents were defeated at the polls. The following new Senators will serve in the 109th Congress. The seats in bold represent a party switch.

State / Senator-Party 108th Congress / Senator-Party 107th Congress
Georgia / Saxby Chambliss - Republican / Max Cleland - Democrat
Missouri / James Talent - Republican / Jean Carnahan - Democrat
Minnesota / Norm Coleman - Republican / Paul Wellstone - Democrat (1)
Arkansas / Mark Pryor - Democrat / Tim Hutchinson - Republican
New Hampshire / John Sununu - Republican / Bob Smith - Republican (2)
North Carolina / Elizabeth Dole - Republican / Jesse Helms - Republican
Texas / John Cornyn - Republican / Phil Gramm - Republican
South Carolina / Lindsey Graham - Republican / Strom Thurmond - Republican
Louisiana / ???????????????????????? / Mary Landrieu - Democrat
New Jersey / Frank Lautenberg - Democrat / Robert Torrecelli - Democrat (3)
Alaska (4) / ??????????? - Republican / Frank Murkowski - Republican
Tennessee / Lamar Alexander - Republican / Fred Thompson - Republican

1Senator Paul Wellstone died in a plane crash 10 days before the election. He was replaced on the ballot by former Vice President Walter Mondale.

2Senator Bob Smith was defeated in the Republican primary by Senator-elect Sununu.

3Senator Torrecelli withdrew after receiving the Democrat nomination for reelection. Senator-elect Lautenberg was selected to replace him on the ballot.

4 Alaska Senator Frank Murkowski was elected Governor. He has two years remaining on his current Senate term. Under Alaska law, he has the authority to appoint his replacement for the remaining two years. While it is certain he will appoint a Republican to his seat, the name of that individual is currently unknown.

Within days of the election, House Minority Leader Dick Gephardt (D-MO) announced that he would not seek reelection as Minority Leader. While several Democrat Representatives expressed interest in the position, it became clear that Representative Nancy Pelosi (D-CA) was the frontrunner. Despite a challenge from Representative Harold Ford, Jr. (D-KY), Representative Pelosi was overwhelmingly elected House Minority Leader.

In the House of Representatives, the outcome of a seat in Colorado was still unresolved as a recount was underway. On election day, the Republican candidate led the Democrat by a few hundred votes out of more than 100,000 votes cast.

In the Senate, there is a run off election between the top two vote getters on election day. That run off is scheduled for December 7th. Incumbent Senator Mary Landrieu (D-LA) led the ballot with approximately 46% of the vote. Louisiana Election Commissioner Susan Haik Terrell, a Republican, came in second with approximately 25% of the vote. Unique among the states, Louisiana law stipulates that the November election is actually an open primary. If no candidate gets more than 50% of the vote, then a runoff is held between the top two candidates - regardless of party.

While Senator Landrieu’s lead over Terrell was significant, it should be noted that the next two candidates were also Republicans. If you total the “Republican” vote on election day, GOP candidates received 51% of the Louisiana vote. Landrieu was the only Democrat on the ballot.

While the outcome of neither race will determine the control of the House or Senate, the outcomes could affect the Committee ratios.

For example, during the 107th Congress, which began with the Senate evenly divided and Republicans controlling the Senate by virtue of the Vice President’s tie breaking vote, Republicans enjoyed a 11 - 10 majority on the Senate Finance Committee. When Senator Jim Jeffords (I-VT) switched from Republican to Independent, the majority control switched to Democrats who maintained the 11-10 ratio.

With Republicans controlling at least 51 seats, the expectation is that the Finance ratio will move to 11 Republicans to 9 Democrats. However, should the GOP pick-up the Louisiana seat, some are arguing that the ratio should be 12 - 9. If the Democrats are only allocated 9 seats on the Finance Committee, one Democrat will have to be removed from the Committee. The most junior member of the Committee, Senator Blanche Lincoln (D-AR) would normally be the most likely victim. However sources have indicated that rather than have Senator Lincoln taken off the Committee, Senate Minority Leader Tom Daschle (D-SD) will voluntarily suspend his place on the Committee. This would allow Senator Lincoln to continue to serve on the Committee. Announcements as to Committee ratios and membership are not expected until early January.

Similarly in the House, some GOP members are calling for larger Republican majorities on the Committees to reflect the increase in the size of their overall majority in the House.

There is no set formula for Committee ratios and both parties have traditionally established Committee majorities larger than their overall majority - at least for certain key committees (i.e. Ways and Means, Appropriations and Energy & Commerce). It is expected that the House Republican and Democrat leaders and Senate Republican and Democrat leaders will meet over the next several weeks to negotiate their respective Committee ratios.

Physician Payment Reduction Delayed - Yes, No, Maybe?

During the waning hours of the 107th Congress, a last ditch effort was made to pass legislation that it’s authors maintained would give the Centers for Medicare and Medicaid Services the authority to “fix” the physician fee schedule update problem (see previous story). There was even a late effort to adopt what some referred to as a legislative “slight-of-hand” when the House passed a bill absolving CMS of any legal challenge if it made adjustments to fee schedule payments. Some of the more legally minded Members argued that this would give CMS the authority to fix the fee schedule problem. Initially, the Congressional Budget Office (CBO) said that enactment of this legalistic approach was “revenue neutral”. This ruling was significant because CBO had previously rule that the legislation to fix the problem would “cost” tens of billions of dollars.

When asked to explain the rationale that would allow CMS to fix the problem for free but cost the Medicare Trust Fund billions if Congress fixed the problem, the answer was - we cannot. Therefore, CBO’s analysts revisited the issue and subsequently ruled that the legal approach would “cost” the same as the policy fix.

Towards the end of November, after it was apparent Congress would not act, rumors began circulating in Washington that the Bush Administration would undertake various administrative means to delay the projected cuts in physician payments scheduled to take effect on January 1, 2003.

According to CMS sources, the anticipated fee schedule reductions (4.4% on average) cannot be made by the Medicare Carriers until they are directed to do so by CMS. This direction will come in the form of a Program Memo (PM) issued from CMS Central Office to the Medicare Carriers. It is possible that CMS will “delay” issuance of that Program Memo until sometime in late January or early February. Because of the time lag between the issuance of the PM and the actual changeover in the Carrier computer programs, the actual reductions could be delayed until February or March. This would give the new Congress a small window to make the necessary legislative changes to prevent the reductions from actually taking effect. It is important to reiterate that these are merely rumors. HBMA members would be advised to act as though the cuts will take effect. If anything official surfaces, we will pass the information along immediately.

Medicare Reform - Opportunity Delayed

One of the biggest policy issues left unresolved when the 107th adjourned was Medicare reform. While it had long been expected that Congress would adopt administrative reforms, even that legislation was left on the table as Congress called it quits for the year.

Republican leaders have already announced that one of the first issues they want to tackle in the 108th Congress is Medicare reform. Consequently we expect that Medicare legislation will receive considerable attention early next year. The key to achieving success will be in getting a budget adopted. If Congress is able to adopt a budget - something that was not achieved during the second session of the 107th Congress - then the prospects for enactment of Medicare reform are great. If, however, Congress is unable to adopt a budget, then the prospects for Medicare reform are slim.

There was broad bipartisan consensus on the need for Medicare Administrative reforms, as well as on the details of those reforms. There is no reason to believe that this consensus will deteriorate over the next few months.

In addition to administrative reforms, the addition of a prescription drug benefit will be a major area of contention. While both parties are in agreement that a prescription drug benefit should be added to the Medicare program, the details of that benefit are dramatically different. It is also expected that fraud and abuse issues will be a major focus of Medicare reform initiatives.

CMS Proposes Numerous Regulatory Changes

During the month of November the Centers for Medicare and Medicaid Services (CMS) issued several final and/or proposed rules that are highlighted below. If you would like to review these proposed changes, you can go to:

and click on the appropriate date. Once at the Federal Register cover page, go to the Centers for Medicare and Medicaid section and click on the document you wish to review.

November 15th

  1. Medicare Program; Changes to the Medicare Claims Appeal Procedures - Proposed Rule

SUMMARY: Under sections 1869 and 1879 of the Social Security Act (the Act), Medicare beneficiaries and, under certain circumstances, providers and suppliers of health care services, may appeal adverse determinations regarding claims for benefits under Medicare Part A and Part B. Section 521 of the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 amends section 1869 of the Act to substantially revise the Medicare claim appeals process. The statute mandates a series of structural and procedural changes to the existing appeals process, including: The establishment of a uniform process for handling all Medicare Part A and Part B appeals; revised time limits for filing appeals; reduced decisionmaking time frames throughout all levels of the Medicare administrative appeals system; the introduction of new entities known as qualified independent contractors (QICs) to conduct reconsiderations of contractors' initial determinations or redeterminations; and the establishment of the right to an expedited determination when an individual disagrees with a provider's decision to discharge the individual or terminate services. This proposed rule sets forth the regulations that would be needed to implement the new statutory provisions.

DATES: CMS will consider comments if CMS receives them no later than 5 p.m. on January 14, 2003.

November 22nd

  1. Medicare and Medicaid Programs; Physicians' Referrals to Health Care Entities With Which They Have Financial Relationships: Extension of Partial Delay of Effective Date - FINAL RULE

SUMMARY: This final rule further delays for 6 months, until July 7, 2003, the effective date of the last sentence of 42 CFR 411.354(d)(1). Section 411.354(d)(1) was promulgated in the final rule entitled Medicare and Medicaid Programs; Physicians'Referrals to Health Care Entities With Which They Have Financial Relationships, published in the Federal Register on January 4, 2001 (66 FR 856). A 1year delay of the effective date of the last sentence in Sec. 411.354(d)(1) was published in the Federal Register on December 3, 2001 (66 FR 60154). The last sentence of Sec. 411.354(d)(1) reads: ``Percentage compensation arrangements do not constitute compensation that is `set in advance' in which the percentage compensation is based on fluctuating or indeterminate measures or in which the arrangement results in the seller receiving different payment amounts for the same service from the same purchaser.''

  1. Medicare Program; Hospice Care Amendments - PROPOSED RULE

SUMMARY: This proposed rule would revise existing regulations that govern coverage and payment for hospice care under the Medicare program. These revisions are required by the Balanced Budget Act of 1997 (BBA), the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA).

The BBA made changes to the time frame for completion of a physician's certification for admission of a patient; the duration of benefit periods; the requirement that hospices make certain services available on a 24hour basis; the required core services; the coverage of services specified in a patient's plan of care; and the payment of claims according to area. The BBA also established hospice payment rates for Federal fiscal years 1998 through 2002. BBRA amended those rates. BIPA further amended those rates and clarified the physician certification rule.

This rule would also add to existing regulations certain established Medicare hospice policies that currently are available only in policy memoranda. These policies clarify the regulations regarding the content of the certification of terminal illness and the admission to, and discharge from, a hospice. This rule does not address the requirement for hospice data collection, the changes to the limitation of liability rules, or the changes to the hospice conditions of participation that were included in the BBA.

DATES: Comments will be considered if CMS receives them no later than 5 p.m. on January 21, 2003.

  1. Medicare Program; Photocopying Reimbursement Methodology - PROPOSED RULE

SUMMARY: This proposed rule would increase the rate of reimbursement for expenses incurred by prospective payment system (PPS) hospitals for photocopying medical records requested by Quality Improvement Organizations (QIOs), formerly known as Utilization and Quality Control Peer Review Organizations (PROs). CMS proposed to increase the rate from 7 cents per page to 12 cents per page, in accordance with the formula for calculating this rate to reflect inflationary changes in the labor and supply cost components of the formula.

This proposed rule would also provide for the periodic review and adjustment of the perpage reimbursement rate to account for inflation and changes in technology. The methodology for calculating the perpage reimbursement rate would remain unchanged.

DATES: CMS will consider comments if they receive them no later than 5 p.m. on January 21, 2003.

  1. This notice updates the Ambulance Inflation Factor (AIF) for ambulance services for calendar year (CY) 2003. The AIF is used in determining the payment limit for ambulance services required by section 1834(l) of the Social Security Act (the Act).

This section of the law provides for an update in payments for CY 2003 that is equal to the percentage increase in the CPI for all urban consumers (CPIU), for the 12month period ending with June of the previous year (that is, June 2002). For CY 2003 that percentage is 1.1 percent.