Federal Budget Deficits 2004-2014

							2007 Political and Policy
Environment: Washington
           Presentation Outline
•   Election results
•   Political environment
•   Health care policy backdrop
•   Health care policy priorities
    – President
    – Congress
• CCLC / GNYHA Advocacy
Election Results
        Elections: U.S. Senate
• Outcome: a Democratic majority (barely)
  – Democrats picked up the six seats necessary to
    take control of the Senate (MO, MT, OH, PA,
    RI, VA)
     • The new Senate is effectively 51:49, with
       Democratic majority (technically 49:49 with two
       independents that vote with Democrats)
  – Extremely difficult to govern the Senate
  “New” Democrats of influence

• Chairman of Senate Finance: Max Baucus
  – Jurisdiction includes Medicare, Medicaid
• Chairman of Senate Health, Education,
  Labor, Pensions Committee: Ted Kennedy
  – Jurisdiction includes other health programs
• Chairman of Appropriations: Robert Byrd
  – Labor HHS Subcommittee: Tom Harkin
 Good news for CCLC/ GNYHA
          members
• All represented by two Democratic Senators
  – Senator Schumer gains stature, credited with
    Democratic takeover, Finance Committee
    member
            Elections: House
• Democrats needed to win 15 seats to win
  control of the House
• They picked up twice that:
  – New configuration:
     • 233 Democrats, 202 Republicans
    Gains for Democrats in NY
              Region
• New York: Democrats pick up 3 seats
  – Democrats:Republicans: 23:6
     • Good for NY – as long as the Democrats keep the
       majority!
  – NJ: 7 Democrats, 6 Republicans (no change)
  – CT: 4 Democrats, 1 Republican (Dems picked
    up 2 seats)
              New House Leadership

• Speaker Nancy Pelosi (D-CA)
• Rules: Louise Slaughter (D-NY)
• Ways and Means: Charlie Rangel (D-NY)
• Energy and Commerce: John Dingell (D-MI)
• Energy and Commerce, Health: Frank Pallone
  (D-NJ)
• HHS Appropriations: Nita Lowey (D-NY)
    – Highest ranking Democrat next to Subcommittee Chair
      (David Obey, D-WI)
Political Backdrop
2008 election has already begun
Members of Congress running for
          President
      (7% of the U.S. Senate)
Republicans want Congress back
Health Care Policy Backdrop
        Federal Budget Deficit/Surplus
                ($ in billions)
$300

$200

$100

   $0
                                                         Deficit/Surplus
     05
     06
     07
     08
     09
     10
     11
     12
     13
     14
     15
     16
     17
($100)
   20
   20
   20
   20
   20
   20
   20
   20
   20
   20
   20
   20
   20
($200)
                           Tax cuts begin to expire
($300)

($400)


          Source: Congressional Budget Office, 1/24/07
  Federal Budget Deficit If Tax Cuts
            are Extended
            ($ in billions)
$300

$200

$100                                                    Tax Cuts Expire
                                                        Tax Cuts Extended
   $0
     05
     06
     07
     08
     09
     10
     11
     12
     13
     14
     15
     16
     17
($100)
   20
   20
   20
   20
   20
   20
   20
   20
   20
   20
   20
   20
   20
($200)

($300)

($400)


         Source: Congressional Budget Office, 1/24/07
  Projected Federal Medicare and
        Medicaid Spending
900
800
700
600
500                                                  Medicare
400                                                  Medicaid
300
200
100
  0
  06

  07

  08

  09

  10

  11

  12

  13

  14

  15

  16

  17
20

20

20

20

20

20

20

20

20

20

20

20
      Source: Congressional Budget Office, 1/24/07
Social Security and Medicare Trust Fund
                 Ratios
                (assets as a % of annual expenditures)




   Source: Trustees Report, May 1, 2006
Change in Medicare Part A Trust
            Fund
                    ($ in billions)
  10
   5
   0
  -5
 -10
 -15
 -20
 -25
 -30
 -35
 -40
 -45
       2007 2008 2009 2010 2011 2012 2013 2014 2015

  Source: Trustees Report, May 1, 2006
MedPAC Recommendations

                    FY 2008
Provider Type   Recommendations
SNF                 Freeze
Home Health         Freeze
LTC Hospitals       Freeze
Policy Priorities
                  Budget
• Both President Bush and Congressional
  Democrats have vowed to balance the
  budget by FY 2012
  – Places pressure on Medicare, Medicaid
The last time they tried to balance the budget:
          1997, major Medicare cuts

           Medicare Inpatient PPS Margins
       18.0%
       16.0%
       14.0%
       12.0%
       10.0%
       8.0%
       6.0%
       4.0%
       2.0%
       0.0%
       -2.0%
               1994   1995   1996   1997   1998   1999   2000   2001   2002   2003   2004

          % 3.6%      9.0% 14.7% 17.8% 15.7% 13.4% 11.8% 10.1% 6.1%           2.0% -0.3%


   Source: Medicare Payment Advisory Commission.
             Summary of Bush Budget
               Health Care Proposals
                                 ($ in Billions)
                                                                           FY 2008   5-Year
               Program                                 Type                Impact    Impact
Proposals to Reduce Spending
                                         Legislative                        ($4.3)   ($65.6)
• Medicare
                                         Administrative                     ($1.0)   ($10.2)
                                         Legislative                        ($1.9)   ($13.0)
• Medicaid
                                         Administrative                     ($1.5)   ($12.7)
• Total                                                                     ($8.7)   ($101.5)
Proposals to Increase Spending or Provide Tax Incentives
• SCHIP                                  Legislative                        $1.2      $5.9
• Flat tax credit for health insurance   Legislative (tax loss at first)    $0.0     $106.9

• Expansion of HSAs                      Legislative (tax incentives)       $0.3      $3.7
• Total                                                                     $1.5     $116.5
Update Proposals ($ in Millions)

   PPS or Fee                                                         FY 2008         5-Year
                                       Proposal
    Schedule                                                           Savings        Savings
                     0% in 2008; MB –0.65% annually
SNF                                                                     $1,010         $9,210
                     thereafter
                     0% from 2008–2012; MB –0.65%
Home health                                                              $410          $9,680
                     annually thereafter
Hospice              MB –0.65% annually, starting in 2008                $60           $1,140




Note: OMB’s out-year savings estimates reflect an 8% compound growth rate and, thus, were
based on a dynamic model that considers changes in inflation, volume, and case mix.
 Medicare Administrative Proposals
• Inpatient PPS rule for 2008 released 4/13
• Major changes:
  – DRG refinement
     • Severity-adjusted DRGs (replace current 538 DRGs
       with 745)
     • Continued phase-in of cost-based weights
     • Capital cuts for large urban hospitals
        – Seeking comment on eliminating teaching, DSH
          adjustments
     • New quality measures
       Congress reacts to Bush
             budget…
• Budget resolutions: no Medicare or Medicaid cuts
  contemplated
   – However, desire for new spending:
      • Medicare physician cut
          – Unless Congress acts, MD’s suffer 10% rate cut in 2008
          – $20-$30 billion annual cost to fix it
      • Uninsured children
          – “SCHIP” law expires in 2007 (Child Health Plus)
          – $12 billion over 5 years over and above current spending of $5
            billion per year to just to re-authorize
          – Democrats want to expand the program, spend as much as $40
            billion over 5 years
    Other new spending priorities
• Medicare prescription drugs
    – Fill in the donut hole?
        • CBO: Federal negotiation saves no money
•   Medicare wage index issues (Section 508)
•   Stop the Medicare rehab “75% rule”
•   Funding for stem cell research, NIH
•   Funding for health care information technology
•   Uninsured adults
    – Tax credits, deductions (Bush)
    – Program expansions (Democrats)
          “Pay as you go…”
• Democrats re-instate “pay-as-you-go” rules
  – New spending or tax cuts must be accompanied
    by spending cuts or tax increases
  – May put pressure on Medicare, Medicaid
    programs
Good News: Senate votes to stop
       Medicaid rules
• The Senate version of the Iraq/Afghanistan
  supplemental funding bill prohibits CMS from
  implementing Medicaid regulations to
   – 1) eliminate GME funding and
   – 2) harm public providers (e.g., HHC)
• House bill did not contain this provision
   – Bill is currently in conference
• Bad news: President Bush has vowed to veto the
  bill over Iraq war timelines…
CCLC / GNYHA Advocacy
         Best position in years
• Democratic Congress with New York, New
  Jersey members in key positions of
  influence over health care policy
• Advocacy focus:
  – Protect members from Medicare, Medicaid cuts
     • Legislative, regulatory
  – Get traction on the issue of the uninsured for
    2008 campaign
Alliances: CCLC / GNYHA Will
      Work With Everyone
• SEIU: Much more powerful in Washington
  given Democratic ascendancy
• Delegation meeting on March 8
• Next month: launch of the Partnership for
  Quality Care, nationwide version of NY’s
  Healthcare Education Project
  – Labor/management collaboration