Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

Today the Obama Administration released an 11-page summary of its health reform proposal in preparation for a bipartisan health reform summit scheduled for February 25, 2010. Among other things, the proposal includes a relatively-detailed discussion how the Administration would promote access to affordable insurance, address health care fraud and abuse proposals, and bridge the differences between the House and Senate reform proposals in other key areas. Items of note include the following:

• Access to Health Insurance – The Administration proposes expanding access to affordable insurance through a series of insurance market reforms, including an insurance purchasing pool; federal premium subsidies; a requirement that individuals buy insurance or pay a penalty (with exceptions); a requirement that employers defray costs employees receiving federal subsidies (with exceptions); expansion of Medicaid; and a new Health Insurance Rate Authority to provide federal assistance and oversight to states in conducting reviews of unreasonable rate increases and other insurance industry practices. There is no mention of establishing a public health insurance plan to compete with private insurers.
• Waste, Fraud and Abuse – The Presidential proposal includes a variety of program integrity provisions, which include: a comprehensive sanctions database; registration and background checks of billing agencies and individuals; expanded access to the Healthcare Integrity and Protection Data Bank; liability of Medicare administrative contractors for claims submitted by excluded providers; strengthened standards for facilities that seek reimbursement as community mental health centers; limiting debt discharge in bankruptcies of fraudulent health care providers or suppliers; expanded use of technology for real-time data review; sanctions for illegal distribution of a Medicare or Medicaid beneficiary identification or billing privileges; a study of universal product numbers/claims forms for selected items and services under the Medicare program; a state Medicaid prescription drug profiling requirement; extrapolation of Medicare Advantage risk adjustment errors to contract payment for a given year; modification of certain Medicare medical review limitations; establishment of a CMS-IRS data match to identify fraudulent providers; and prevention of delays in access to generic drugs.
• Cost-Containment Provisions – While the summary document does not include a detailed discussion of Medicare provider rate changes, it does include a limited number of cost containment/fiscal sustainability provisions, including: an adjustment in Medicare Advantage payments to reflect “unjustified coding patterns”; an excise tax on the most expensive health plans ($27,500 for a family plan) beginning in 2018 for all plans; and new Medicare Hospital Insurance taxes on high-income taxpayers.
• Industry Fees -- The President proposes a $33 billion fee on brand name pharmaceutical manufacturers over 10 years (up $10 billion from Senate plan), beginning in 2011; a $67 billion assessment on health insurers over 10 years beginning in 2014 (with certain exceptions); and an excise tax (rather than fee) on medical device manufacturers, raising $20 billion over 10 years, starting in 2013.
• Quality of Care – Although not discussed in the summary document, a separate description on the White House web site states the President’s plan would provide “incentives for doctors, and hospitals that improve quality while providing for better coordination that helps to reduce harmful medical errors and healthcare-acquired infections.” The plan also includes “innovative payment reforms so providers are rewarded for the quality of care they provide, rather than just additional tests or treatments.” Likewise, it would reward greater coordination of care between primary care providers and specialists.
• Part D Coverage Gap – The President’s proposal fills the Medicare Part D prescription drug "doughnut hole" by providing a $250 rebate to Medicare beneficiaries who reach the coverage gap in 2010, and then phasing down the coinsurance requirement so it is the standard 25 percent by 2020 throughout the coverage gap.
• Medicaid Matching Funds – The President would eliminate the Senate’s proposed enhanced Medicaid matching provision for Nebraska and instead provide additional federal financing for all states to support the expansion of Medicaid.
• CLASS Act – The White House endorses the Community Living Assistance Services and Supports (CLASS) Program, a voluntary, privately-funded long-term services insurance program, but makes a series of changes designed to “improve the CLASS program’s financial stability and ensure its long-run solvency.”

The Administration also has released a variety of background and summary documents on the White House Health Care Meeting website.

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The Obama Administration has released its proposed federal budget for fiscal year (FY) 2011. In its budget documents, the Administration reaffirms its commitment to enacting health reform legislation, and it assumes $150 billion in federal savings attributable to health reform over the 2011-2020 period. The document states that the budget “supports health insurance reform” by expanding patient-centered health research on treatment effectiveness; increasing investment in health information technology, prevention, and wellness activities; and initiating Medicare payment reform demonstrations. Nevertheless, the budget does not outline comprehensive reform plans, nor does it repeat the sweeping Medicare and Medicaid budget savings proposals included in the Administration’s proposed FY 2010 budget. In other health policy areas, the budget would: expand funding for biomedical research, health centers for the medically underserved, and HIV/AIDS prevention and treatment; provide a six-month, $25.5 billion extension of the American Recovery and Reinvestment Act (ARRA) temporary increase in federal Medicaid matching funds; expand Medicare and Medicaid anti-fraud efforts; address high-risk billing activity associated with the Medicaid drug benefit; expand Food and Drug Administration (FDA) user fees; and fund an FDA to “provide regulatory pathways for new technologies such as biosimilars.”  A separate FDA press release on the budget proposal announces that the Administration is seeking $4.03 billion for the FDA in FY 2011, which is a 23% increase over the agency’s current $3.28 billion budget.  The following initiatives are the major components of the FDA's FY 2011 budget increase:  transforming food safety ($318.3 million); Protecting Patients Initiative ($100.8 million); advancing regulatory science ($25.0 million); and tobacco-related initiatives ($215.0 million).  Note that many provisions of the proposed budget would require Congressional approval to implement. To that end, Congress is holding a series of hearings on the proposal, including Senate Finance and House Energy and Commerce Committee hearings focusing on the health policy provisions of the budget. Several other budget hearings scheduled for the week of February 8 were postponed due to extreme weather conditions in the Washington, D.C. area.

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On February 4, 2010, the Centers for Medicare & Medicaid Services (CMS) released its health spending projections for 2009, estimating that growth in U.S. national health expenditures (NHE) increased 5.7%, compared to 4.4% in 2008. This 2009 growth rate exceeded the growth in the gross domestic product (-1.1%) and brought total national health spending to $2.5 trillion, or 17.3% of the GDP (compared to 16.2% in 2008). The increasing rate of spending is attributable in part to faster growth in Medicaid spending (9.9% compared to 4.7% in 2008), as the recession resulted in increased Medicaid enrollment.  According to CMS, the NHE growth is expected to decelerate in 2010 to 3.9%, but much of this projected slowdown is attributable to the 21.2% reduction in Medicare physician payment rates scheduled to go into effect in March 2010 -- but which Congress is expected to mitigate through legislation (as discussed above). If, on the other hand, physician payment rates are held at 2009 levels, total health spending is projected to grow 4.7%. By 2019, national health spending is expected to reach $4.5 trillion and comprise 19.3% of GDP. 

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On February 1, 2010, President Obama is scheduled to deliver his proposed federal budget for fiscal year 2011, which is likely to again include provisions that would, if adopted, significantly impact federal health care policies. Congressional panels already have scheduled hearings on the upcoming proposal, including Senate Finance Committee and House and Senate Budget Committee hearings set for February 2, 2010 and House Ways and Means Committee hearings on February 3.  In addition, the Senate Finance Committee is holding a hearing on February 3 to discuss the health policy provisions of the budget proposal with Department of Health and Human Services (HHS) Secretary Kathleen Sebelius.

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CMS has announced that overall US health spending grew 4.4% in 2008 – the slowest rate of growth since CMS began compiling this data in 1960. CMS attributes this spending slowdown to the effects of the economic recession. Nevertheless, health spending continued to increase faster than did the nation’s gross domestic product (GDP), which grew at 2.6%, according to figures released January 5, 2010. Health spending totaled $2.3 trillion in 2008, or $7,681 per person, and comprised 16.2 percent of the GDP. Health care spending by public programs, including Medicare and Medicaid, rose 6.5% in 2008, while health care spending by private sources grew only 2.6%.

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On December 16, 2009, President Obama signed into law the conference report to accompany the Consolidated Appropriations Act, H.R. 3288, an omnibus spending bill that combines six of seven unfinished appropriations bills for fiscal year (FY) 2010, including the appropriations for the Department of Health and Human Services (HHS). Among other things, the bill includes increased funding for anti-fraud efforts, combating hospital-acquired conditions, nursing home and medical facilities inspections, health care workforce training, and Public Health Service and National Institutes of Health initiatives.

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The CMS Office of the Actuary (OACT) has issued its analysis of the Senate Democratic leadership’s health reform plan, the Patient Protection and Affordable Care Act (H.R. 3590), as introduced on November 18.  OACT estimates that the Senate proposal would increase total national health expenditures by $234 billion (0.7 percent) during calendar year 2010-2019.  The increase is attributable primarily to (i) greater utilization of health care service by individuals becoming newly covered or having complete coverage; (ii) lower prices paid to health providers for the subset of those individuals who become covered by Medicaid; and (iii) lower payments and payment updates for Medicare services, together with net Medicaid savings from provisions other than the coverage expansion. The report also discusses the potential impact of the proposed $493 billion in Medicare cuts over 10 years.  In particular, the report charges that the savings associated with annual productivity adjustments for most providers are probably "unrealistic" since it is doubtful most providers could reduce costs to the extent envisioned in the legislation.  OACT simulations project that as many as 20 percent of Part A providers could become unprofitable within 10 years, potentially jeopardizing Medicare beneficiary access to care.

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On November 14, 2009, House Republicans released an analysis by CMS’s Office of the Actuary (OACT) that raises questions about the House-approved health reform plan’s potential to control health care spending. The report, which was requested by Ways and Means Ranking Member Dave Camp, found that under H.R. 3962, “America’s Affordable Health Choices Act of 2009”:

• Overall national health expenditures would increase by $289 billion (0.8 percent) for calendar years 2010 through 2019, reflecting the net effect of health service utilization increases and price reductions. OACT projects that the national health expenditure share of gross domestic product would be 21.1 percent in 2019 under the legislation, compared to 20.8 percent under current law.
• Net Medicare spending would be reduced by $571 billion for FYs 2010-2019 (this figure does not include the cost associated with reforming the physician fee schedule formula, which is being considered through separate House legislation). OACT warns, however, that the estimated savings for permanent annual productivity adjustments for Medicare institutional providers such as acute care hospitals, skilled nursing facilities, and home health agencies “may be unrealistic.” Although H.R. 3962’s reductions in Medicare payment updates “would provide a strong incentive for institutional providers to maximize efficiency, it is doubtful that many could improve their own productivity” to the degree envisioned in the legislation. This could result in Medicare payment rates that “grow more slowly than, and in a way that was unrelated to, the providers' costs of furnishing services to beneficiaries.” Medicare providers thus “could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).” While Congress could monitor this policy to prevent beneficiary access problems, “so doing would likely result in significantly smaller actual savings” than projected.
• Other than reduced inflation updates for Medicare providers, “[m]ost of the provisions of H.R. 3962 that were designed, in part, to reduce the rate of growth in health care costs would have a relatively small savings impact.” For instance, promoting comparative effectiveness research, expanding use of prevention and wellness measures, instituting administrative simplification provisions, and enhancing fraud and abuse enforcement efforts would result in a reduction in non-Medicare federal health care expenditures of $2.1 billion, all of which would result from the comparative effectiveness research proposal.
• There are significant questions about the viability of the proposed Community Living Assistance Services and Supports (CLASS) program -- a voluntary national insurance program that would provide cash benefits to assist individuals unable to perform two or more functional activities of daily living to purchase nonmedical services in order to remain in a community setting. According to the report, “voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants.”

OACT is an independent technical advisor to the Administration and Congress. The OACT report includes a disclaimer that the information does not represent an official position of HHS or the Administration.

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A number of Congressional committees have held hearings recently on health policy issues, including a Senate Health, Education, Labor, and Pensions hearing examining increasing health costs facing small businesses and a House Appropriations Committee “briefing” on the "2009 H1N1 Influenza Pandemic: Examining the Federal, State, and Local Public Health Response." In addition, on November 18, 2009, the House Energy and Commerce Committee has scheduled a hearing on “H1N1 Preparedness: An Overview of Vaccine Production and Distribution.”

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A number of Congressional committees have held hearings recently on health policy issues, including the following:

• An Energy and Commerce Health Subcommittee hearing on breast cancer prevention, research, treatment, and quality of care legislation (H.R. 995, H.R. 1691, H.R. 1740, and H.R. 2279).  
• House Oversight and Government Committee hearings on Medicaid pediatric dental services and the Administration's flu vaccine program. 
• A Senate Veterans’ Affairs Committee hearing on the Department of Veterans’ Affairs contracts for health services.
• Senate Aging Committee hearings on how successful health systems keep costs low and quality high, and the cost of federal long-term care insurance.
• A Senate Judiciary Committee hearing on "Prohibiting Price Fixing and Other Anticompetitive Conduct in the Health Insurance Industry," focusing on legislation to repeal a federal antitrust exemption for health insurance and medical malpractice insurance companies.  

In addition, several hearings are scheduled for October 15.  The Senate Small Business Committee is holding a hearing on "Sensible Health Care Solutions for America's Small Businesses." The Senate HELP Committee will examine health care equality for women.  The Energy and Commerce Oversight Subcommittee is holding a hearing on the problem of underinsurance.

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On July 24, 2009, the House of Representatives approved H.R. 3293, legislation to fund the Departments of Labor, Health and Human Services (HHS), and Education for fiscal year (FY) 2010. Among other things, the legislation would increase funding for: the HHS Health Care Fraud and Abuse Control Program; health professions training; NIH biomedical research programs; CDC public health programs, Substance Abuse and Mental Health Services Administration mental health and substance abuse programs; and healthcare-associated infection reduction efforts. The legislation now moves to the Senate.

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On July 3, 2009, the Congressional Budget Office (CBO) made public a new assessment of title I of the Affordable Health Choices Act, the Senate HELP Committee health reform bill, focusing on newly-released health insurance coverage provisions (insurance market reforms, insurance exchange, public plan option, and insurance mandates).  The CBO estimates that the bill would increase the deficit by $597 billion over the 2010-2019 period— but that does not reflect the costs of the Medicaid expansion and certain other low-income subsidies (or any of the numerous Medicare, quality improvement, workforce, or public health provisions under consideration). Note that this estimated cost is roughly $400 billion less over 10 years than the cost CBO estimated for an earlier version of the proposal, mainly because the insurance subsidies would be less expensive, a penalty was added for employers that do not offer insurance coverage to their workers, and subsidies to employees with access to employer-sponsored insurance were limited. CBO estimates that the bill would reduce the uninsured population by about 20 million when fully implemented, but 34 million people would still be uninsured.  

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On June 24, 2009, Senate Finance Committee Chairman Baucus announced that the CBO has scored the Finance Committee health reform plan under development as costing under $1 trillion.  The CBO also has determined that the plan makes offsetting cuts and/or raises revenues to fully pay for those new costs.  Note that the text of the Committee's legislation is not yet available; it is expected to be released after the 4th of July Congressional recess.

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Today the Chairmen of the three House committees that share jurisdiction over health policy released their 852-page draft health reform bill. As expected, the legislation would create a public health insurance plan to compete with private insurers, with provider payments based initially on Medicare payment amounts. Other mechanisms to expand access to insurance include low-income subsidies, creation of a health insurance exchange, Medicaid expansion, and private insurance market reforms, coupled with mandates for individuals to purchase insurance and employers to contribute to health care costs (with certain exceptions). The bill also includes extensive Medicare and Medicaid policy changes affecting virtually every type of health care entity. Among many other things, the bill would:

• Reform the physician fee schedule formula, including erasing cumulative shortfalls triggered by the current payment formula, establishing separate updates for evaluation and management and other types of services, and requiring review of potentially misvalued codes;
• Reduce payments to hospitals for a preventable readmissions;
• Bundle payments to hospitals and certain post-acute care providers (SNFs, IRFs, LTCHs, and HHAs) for services provided within 30 days of hospital discharge (the HHS Secretary would be required to study how the readmission policy also could be applied to physicians), and require the HHS Secretary to develop a detailed plan to reform Medicare payment for post-acute care services;
• Reduce Medicare reimbursement for imaging services by increasing equipment utilization factor for advanced imaging from 50% to 75% and increasing the multiple imaging procedure technical component discount from 25% to 50% for second and subsequent imaging studies on the same patient/same day;
• Reduce inflation updates for a variety of providers, revise the skilled nursing facility payment methodology, and incorporate productivity improvements into market basket updates for several types of providers;
• Limit the "whole hospital" exception to the Stark law's self-referral prohibition to those hospitals with physician ownership or investment on January 1, 2009, and add significant new conditions to that exception for existing hospitals with physician ownership;
• Reform graduate medical education payments;
• Reduce Medicare Advantage payments;
• Expand drug rebates in a number of ways (increase the Medicaid drug rebate amount for brand-name drugs from 15.1% to 22.1% of the average manufacturer price, apply the additional rebate to new drug formulations, allow rebates on drugs provided through Medicaid managed care organizations, and require drug manufacturers to provide rebates for certain full premium subsidy eligible individuals under the Part D drug program);
• Expand penalties for various types of health care fraud and abuse, including penalties for hospices that demonstrate substandard quality of care;
• Gradually phase out the Part D coverage gap ("donut hole");
• Establish an accountable care organization pilot program;
• Expand comparative effectiveness research;
• Require reporting of financial relationships between drug and device manufacturers and physicians (with a limitation on the deductions for advertising for failure to file required transparency reports); and
• Require the disclosure of nursing home ownership information and address other nursing home quality issues.

The three House committees -- Ways and Means, Energy and Commerce, and Education and Labor -- have scheduled hearings on the legislation next week, with committee voting expected in July.

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On June 16, 2009, the Congressional Budget Office (CBO) outlined the potential impact of health reform on the federal budget.  In a letter to the Senate Budget Committee, the CBO warns that "without meaningful reforms, the substantial costs of many current proposals to expand federal subsidies for health insurance would be much more likely to worsen the long-run budget outlook than to improve it."   Moreover, despite consensus about the need to make changes to make the health sector more efficient, such as paying providers for value, providing incentives for both providers and patients to control costs, and promoting comparative effectiveness information, "little reliable evidence exists about exactly how to implement those types of changes—especially at the level of specificity required for legislation."

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On June 15, 2009, the Congressional Budget Office posted its preliminary analysis of the major provisions related to health insurance coverage in the "Affordable Health Choices Act," which was released by the Senate Committee on Health, Education, Labor, and Pensions (HELP) on June 9, 2009.  Among other things, that draft legislation would establish insurance exchanges through which individuals and families could purchase coverage and would provide federal subsidies to substantially reduce the cost of that coverage for some enrollees.  The CBO estimates that the HELP health reform proposal would increase the federal budget deficit by about $1.0 trillion over the 2010–2019 period. Once fully implemented, about 39 million individuals would obtain coverage through the new insurance exchanges; however, because employer-provided insurance and coverage through other sources would decline, the net decrease in the number of people uninsured would be about 16 million. The $1 trillion figure also does not include the costs of a potential expansion of Medicaid eligibility or a public health insurance options, both of which might be added at a later date.  The HELP Committee is scheduled to begin markup of the legislation on June 17.

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The White House has proposed $313 billion in new Medicare and Medicaid cuts over 10 years, in addition to the provisions included in the Administration's proposed FY 2010 budget. Among other things, the Administration is endorsing: incorporating productivity adjustments into Medicare payment updates; reducing hospital subsidies for treating the uninsured as coverage increases; paying "better" prices for Medicare Part D drugs (including reducing reimbursement for beneficiaries dually eligible for Medicare and Medicaid); increasing the equipment utilization factor for advanced imaging from 50 percent to 95 percent; adopting MedPAC’s recommendations for 2010 payments to skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals; and cutting waste, fraud, and abuse (including prepayment review for physicians in high-risk areas or those that order a high volume of high-risk services such as durable medical equipment, home health, and home infusion services).

The following chart summarizes the Obama Administration's health reform financing proposals released to date:

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On May 7, 2009, the Obama Administration released its additional details on its proposed federal budget for fiscal year (FY) 2010, the outlines of which were unveiled in February 2009. Overall, the proposed budget would provide a total of $879 billion for the Department of Health and Human Services (HHS) in FY 2010, an estimated $63 billion increase over FY 2009. The Administration continues to advocate the establishment of a $635 billion reserve fund over 10 years to finance health reform, funded by Medicare and Medicaid savings in addition to new revenues. To strengthen Medicare's long-term sustainability, the budget seeks to align incentives toward quality, promote efficiency and accountability, and encourage shared responsibility. Key area for health program reforms include Medicare Advantage payments, hospital payments (including bundling payments to hospitals and certain post-acute providers for services provided within 30 days after discharge from the hospital, reduced payments for certain hospital readmissions, hospital pay-for-performance provisions, and restrictions on specialty hospitals), physician payments, imaging services, home health payments, Medicaid drug prices, among many others. In other areas, the budget stresses improvements in health quality and access to health care, increased funding for Medicare integrity and public health safety efforts.

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On April 2, 2009, the House and Senate approved separate budget resolutions (H.Con.Res. 85  and S.Con.Res. 13, respectively) that establish nonbinding spending and revenue frameworks for the Congressional committees for fiscal year (FY) 2010. Both bills include deficit-neutral “reserve funds” authorizing committees to adopt health reform measures if offsetting revenues are specified. Such reforms could include, among other things, provisions to make health coverage more affordable, expand access to insurance, improve quality, reduce health care costs, and preserve choice of providers and health plans. In a notable difference, the House bill would allow the Senate to use a procedure called reconciliation to approve health reform legislation by a simple majority, effectively blocking the minority’s ability to force Senate leaders to muster 60 votes in favor of a health reform bill. The House bill also would require the Committees on Ways and Means and Energy and Commerce each to identify $1 billion in health care savings over five years. The Senate adopted an amendment that would prohibit adoption of President Obama’s proposal to change the tax treatment of charitable contributions to pay for health reform. In addition, the House and Senate differ in their approach to fixing the Medicare physician fee schedule formula, which now would trigger an across-the-board payment cut of approximately 21% in 2010. Specifically, the Senate would require that any change to the physician fee schedule be done on a deficit-neutral basis, while the House allocates approximately $87 million over five years/$285 billion over 10 years to reform the formula. The Senate also calls for the importation of prescription drugs approved by the Food and Drug Administration (FDA) from a specified list of countries, and it would establish a deficit-neutral reserve fund to address Medicare and Medicaid reimbursement inequities that lead to access problems in rural areas. Both the House and Senate resolutions also provide up to $311 million for the Health Care Fraud and Abuse Control program for FY 2010. Lawmakers will work to iron out differences between the two measures when Congress returns from recess on April 20, 2009.

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A number of Congressional panels have held hearings recently on health policy issues, including the following:

• A House Ways and Means Committee hearing on reforming the health care delivery system to encourage better coordination and higher quality care, such as through bundled payments, health information technology, and value-based purchasing.
• House Energy and Commerce hearings on "Institutional Review Boards that Oversee Experimental Human Testing for Profit" (Oversight Subcommittee), "Making Health Care Work for American Families” (Health Subcommittee), and the "Protecting Consumer Access to Generic Drugs Act of 2009," which would prohibit brand name drug companies from compensating generic drug companies to delay the entry of a generic drug into the market (Commerce Subcommittee). 
• A House Appropriations Subcommittee on Labor-HHS hearing on “Pathways to Health Reform: Implementing the National Strategy to Reduce Healthcare-Associated Infections.”
• A Senate Health, Education, Labor and Pensions Committee hearing addressing insurance market reform in national health reform.
• A Finance Committee hearing on the "Role of Long-Term Care in Health Reform."
• A Senate Commerce Committee hearing on deceptive health insurance industry practices. 

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On March 30, 2009, HHS released a report entitled “The Costs of Inaction,” which cites the high cost of health care, diminished access to care, and persistent gaps in health care quality as reasons to pass health reform legislation this year. Highlights of the report include the following:

• The U.S. spent approximately $2.2 trillion on health care in 2007, or $7,421 per person, totaling 16.2% of gross domestic product (GDP).
• Health care costs doubled from 1996 to 2006, and are projected to rise to 25% of GDP in 2025 and 49 percent in 2082.
• An estimated 87 million people were uninsured at some point in 2007 and 2008. More than 80% of the uninsured are in working families.
• Up to 98,000 Americans die each year as a result of medical errors.

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On March 11, 2009, President Obama signed into law H.R. 1105, an omnibus spending bill that completes work on the remaining FY 2009 appropriations bills, including funding for the Department of Health and Human Services (HHS). Among other things, the law (PL 111-008) increases funding for the Food and Drug Administration (FDA) by $335 million above 2008 levels to help FDA improve the safety of domestic and imported food and medical products. The measure also includes increased funding compared to FY 2008 levels for the National Institutes of Health (NIH), the Centers for Disease Control and Prevention, community health centers, health professions training, childhood immunizations, and rural hospital programs. Moreover, the act funds a new initiative to reduce hospital and clinic infections and requires national and state plans to combat infections. 

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On February 25, 2009, the House of Representatives approved H.R. 1105, an omnibus spending bill to complete work on the remaining FY 2009 appropriations bills, including funding for HHS. Among other things, the bill includes increased funding compared to FY 2008 levels for the NIH, the Centers for Disease Control and Prevention, community health centers, health professions training, childhood immunizations, and rural hospital programs. The bill also funds a new initiative to reduce hospital and clinic infections and requires national and state plans to combat infections. The bill now is pending before the Senate. 

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A number of Congressional panels have held hearings recently on health policy issues, including the following:

• Senate Health, Education, Labor and Pensions Committee hearings on “Improving Care Through Innovation,” "Principles of Integrative Health: A Path to Health Care Reform," and "Addressing Underinsurance in National Health Reform.”
• A Senate Special Committee on Aging hearing on “Health Reform in an Aging America.”
• A Senate Finance Committee hearing on "Scoring Health Care Reform: CBO's (Congressional Budget Office) Budget Options." 

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On February 24, 2009, CMS announced that growth in U.S. national health expenditures is expected to significantly outpace economic growth in 2008 and 2009 due to the recession. Specifically, growth in national health expenditures in 2008 is expected to be 6.1%, totaling $2.4 trillion in 2008, while growth in the gross domestic product (GDP) is anticipated to be 3.5%. For 2009, health spending is projected to increase 5.5%. The health share of GDP is expected to increase from 16.2% in 2007 to 16.6% in 2008 and to 17.6% in 2009. The public share of total health care spending is expected to rise from 46.2% in 2007 to over 50% by 2016. Within Medicare, prescription drugs are projected to be the fastest growing component of the program’s spending from 2007 to 2018. Medicaid spending growth is expected to slow from 9.6% in 2009 to 7.8% in 2012 due to projected improving economic conditions. 

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The OIG has issued its quarterly report comparing Medicare Part B drug average sales prices (ASPs) and AMPs, this one comparing second-quarter 2008 ASPs and AMPs and reviewing the impact on Medicare reimbursement for fourth quarter 2008. The OIG identified a total of 31 HCPCS codes with ASP that exceeded AMP by at least 5% in the second quarter of 2008. If reimbursement amounts for these 31 codes had been based on 103% of the AMPs, Medicare expenditures would have been reduced by $3.5 million during the fourth quarter of 2008. The OIG notes that it could not compare ASPs and AMPs for 68 drug codes because AMP data were not submitted; the OIG will continue to work with CMS to evaluate and pursue appropriate actions against manufacturers that fail to submit required data.

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The Senate Health, Education, Labor and Pensions Committee has scheduled a hearing on February 23 on "Principles of Integrative Health: A Path to Health Care Reform," and a second hearing February 24 on "Addressing Underinsurance in National Health Reform." Also, on February 25, the Senate Finance Committee is holding a hearing entitled "Scoring Health Care Reform: CBO's (Congressional Budget Office) Budget Options."

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HHS is soliciting information on how it could better use its resources and authorities to encourage the development and use of new medical technologies, consistent with the goals of maintaining and improving the quality of care, controlling overall healthcare costs, and using timely and practical administrative procedures. Comments will be accepted until April 16, 2009. 

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On December 18, 2008, the Congressional Budget Office (CBO) released a major report entitled “Budget Options, Volume 1: Health Care,” which sets forth 115 policy options for Congress to consider as it addresses health care system reform. The CBO points out that Medicare is expected to grow from 2.8 percent of gross domestic product (GDP) in 2008 to nearly 9 percent of GDP in 2050. This spending growth will be fueled primarily by growth in per capita medical costs, according to the CBO, with the aging of the population playing a secondary role. In light of these trends, the CBO offers specific options addressing such areas as: health insurance (market reforms, tax treatment, access to federal programs); health care quality and efficiency; geographic variation in Medicare spending; paying for Medicare services (including hospital, physician, imaging, and post-acute care, and Medicare Advantage plan services, among others); financing and paying for services in Medicaid (including drug payment revisions) and SCHIP; premiums and cost sharing in federal health programs; long-term care; health behavior and health promotion; and closing the gap between Medicare’s spending and receipts.  The CBO also issued a separate report focusing on insurance reform, “Key Issues in Analyzing Major Health Insurance Proposals.” The CBO warns that without changes in policy, a substantial and growing number of nonelderly people are likely to be without health insurance. This issue cannot be addressed without making major changes in the financing or provision of health insurance and health care, which will involve "difficult trade-offs between the objectives of expanding insurance coverage and controlling both federal and total costs for health care." The report describes the assumptions that CBO would use in estimating the effects of key elements of proposals to modify the health insurance system on federal costs, insurance coverage, and other outcomes. In particular, it considers the types of issues that would arise in estimating the effects of proposals to: provide tax credits or other types of subsidies to make insurance less expensive to the purchaser; require individuals to purchase health insurance; require firms to offer health insurance to their workers or pay into a fund that subsidizes insurance purchases; replace employment-based coverage with new purchasing arrangements or provide strong incentives for people to shift toward individually purchased coverage; and provide individuals with coverage under, or access to, existing insurance plans such as the Medicare program, either as an additional option or under a “Medicare-for-all” single-payer arrangement.

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Medicaid spending is projected to total $339 billion in 2008, up 7.3% from 2007 levels, according to figures released by CMS October 17, 2008. Medicaid spending is expected to continue increasing by 7.9% on average over the next 10 years, reaching $674 billion by 2017, far exceeding the 4.8% projected growth rate for the general economy and pointing to continued strains on state budgets in the coming years. Additional spending details are contained in the CMS Office of the Actuary’s first annual fiscal report on Medicaid.

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On October 21, 2008, the Senate Finance Committee held a field hearing in Montana on "High Health Care Costs: A State Perspective." 

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