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Legislative Counsel Announcement

Political Landscape

The most significant political event of the first session of the 107th Congress was the decision by Vermont Senator James Jeffords to leave the Republican Party to become an independent and caucus with the Democrats on organizational matters. This decision, which Senator Jeffords made because he felt the Republican Party had become too conservative, thrust the Democrats into control of the evenly divided Senate.

Senate Majority Leader Tom Daschle (D-SD) brought the patients' bill of rights to the Senate floor as his first action as majority leader. The Senate would probably have not considered this bill as quickly if the Democrats were not in power. In addition, the shift in power in the Senate should slow the annual appropriations process, as Senate Democrats will use every tactic at their disposal to try and demonstrate that President Bush's tax cut was excessive and greatly reduced the federal surplus.

The House of Representatives is also closely divided and there are currently several vacancies. Rep. Joe Moakley (D-MA) passed away in late May, while Rep. Floyd Spence (R-SC) died in mid-August. These seats are expected to remain in the Democrat and Republican columns, respectively. In addition, Rep. Asa Hutchinson (R-AR) was tapped by President Bush to head the Drug Enforcement Administration. That leaves the current ratio in the House at 220 Republicans, 210 Democrats, and 2 independents. Also, Rep. Steve Largent (R-OK) will retire on November 29 to run for governor, while Rep. Joe Scarborough (R-FL) will resign for personal reasons in September. This will leave the House GOP with a tenuous majority over the next several months, and means that a solid Democratic caucus need only peel off a few moderate Republicans in order to prevail on any given vote.

Patients' Bill of Rights

Both the House of Representatives and Senate passed legislation this summer to enact a patients' bill of rights. Lawmakers are now preparing for a House-Senate conference committee, where they will once again attempt to reconcile the two bills and send a consensus bill to the president.

The Senate

The Senate began consideration of patients' rights legislation in mid-June, shortly after the Democrats took over as the majority party. S. 1052, the Bipartisan Patient Protection Act of 2001,
introduced by Senators John McCain (R-AZ), John Edwards (D-NC), and Edward Kennedy (D-MA), was the subject of contentious debate for almost two weeks. S. 1052 contains strong patient protections, including access to specialists, a point-of-service option, and strong internal and external appeals processes. ATRA worked with congressional staff on the drafting of the bill, and endorsed the final product.

The debate in the Senate largely centered on the liability provisions contained in S. 1052. Republicans argued that these provisions would lead to a rash of frivolous lawsuits, drive up healthcare costs, and force employers to drop health insurance coverage. Republicans offered several amendments largely centered on efforts to reduce employer liability and increase state flexibility in enforcing the federal patient protections. While Democrats and a few moderate Republicans were able to fend off these weakening amendments, several compromise amendments were adopted which ultimately improved the bill.

These amendments: 1) would repeal the liability provisions in the McCain-Edwards-Kennedy bill if more than one million individuals lose their health insurance during the first year the law is in effect; 2) clarify that health plans cannot be required by an external reviewer to provide coverage for specifically excluded items or services from an insurance contract while ensuring that external reviewers have wide discretion in determining whether or not an item or service is medically necessary; 3) modify the standard a state must meet in seeking to opt out of the federal patients' rights law; and 4) amend the liability provisions to effectively shield 94% of employers from liability - only large, self-insured plans would still be open to liability if they directly participate in a medical decision to deny care.

The final bill passed the Senate by a margin of 59-36, with nine Republicans joining all 50 Democrats in voting for final passage. Although several substantive changes were made to the bill in an attempt to allay Republican concerns, President Bush reiterated his threat to veto the legislation.

The House

The House began consideration of S. 1052 one month after the Senate finished its work. Rep. Ernie Fletcher (R-KY) drafted a narrower measure that had the support of House GOP congressional leaders and President Bush. However, supporters of the Fletcher bill were unable to convince enough House Republicans to support their bill and abandon the bipartisan bill they had supported in the past.

It appeared that House Republican leadership would be forced to allow the patients' rights debate to go forward on the House floor with the very real chance that the companion bill to S. 1052, introduced by Reps. Greg Ganske (R-IA), John Dingell (D-MI), Charlie Norwood (R-GA), and Marion Berry (D-AR) would prevail. Under that scenario, President Bush would have been forced to either sign a bill he opposed or veto popular legislation.

That situation was averted, however, when the president and Rep. Norwood reached an agreement on the contentious issue of health plan liability on the eve of the House vote. The White House had felt is was especially important to target Rep. Norwood, who has been a leader on this issue for several years and the person that several Republicans looked to for guidance on this issue.

Rep. Norwood reached the deal with President Bush without the support of his primary congressional allies in the fight over managed care reform after repeatedly stating that he would not make any deal without running it past his bipartisan coalition of supporters. Rep. Norwood's previous supporters in this effort, including Reps. Ganske, Dingell, and Berry, bitterly opposed this compromise, arguing that it rendered the patient protections contained in the bill almost meaningless.

The Norwood-Bush compromise amendment narrowly passed the House by a party-line vote of 218-213, and the final bill passed 226-203. The House and Senate bills now move to what promises to be an extremely contentious conference committee. It is important to note that despite the passage of compromise liability provisions the House bill did adopt a strong set of patient protections that are largely identical to the Senate legislation. This represents a major step forward. However, deep partisan disagreements over the liability and several tax provisions still exist. ATRA will remain a player during these negotiations, and we will keep you updated as the conference committee proceeds.

Family Opportunity Act

Congress has yet to take any action on the Family Opportunity Act ("FOA"). Although the bill has 71 Senate cosponsors, including a majority of the Finance Committee membership, which has jurisdiction over the bill, 198 House cosponsors, and funds reserved in the FY 2002 budget resolution, it still awaits congressional action.

In the Senate, it appears this delay may be due to certain Finance Committee members holding the FOA "hostage" until they can secure action on a larger bill designed to decrease the number of uninsured Americans. Finance Committee ranking member Charles Grassley (R-IA), the bill's primary sponsor in the Senate, planned to offer the FOA as an amendment during a scheduled Finance Committee markup in an effort force a vote on the bill. However, the markup was cancelled, meaning any action on FOA will not take place until after the August congressional recess. ATRA will monitor the status of the Family Opportunity Act and will stand ready to mobilize its grassroots in support of the bill as appropriate.

Rehabilitation PPS

On August 7, the Centers for Medicare and Medicaid Services ("CMS" - formerly HCFA) published the final regulation describing the prospective payment system ("PPS") for inpatient rehabilitation facilities ("IRF"). The final PPS is notably different from the proposed inpatient rehabilitation PPS CMS unveiled in November 2000. ATRA submitted written comments in December 2000 to CMS that described its primary concerns. These concerns were related to the use of the MDS PAC as the patient assessment instrument and the potential expansion of the transfer policy to home care or outpatient rehabilitation care.

In the final rule, CMS announced that it will use a modified version of the Functional Independence Measure ("FIM") as the patient assessment instrument, replacing the MDS PAC, which was to be the patient assessment instrument under the November 3, 2000 proposed rule. In addition, CMS decided "to allow any clinician who is employed by the IRF or is a contract clinician of the IRF, and who has been trained in how to perform a patient assessment using our assessment instrument, to perform a patient assessment and record data for any item on the patient assessment instrument" (66 FR 41328). This is a major improvement over the proposed rule, which precluded recreational therapists from filling out the patient assessment instrument.

CMS also decided that "it would be inappropriate to expand the transfer policy at this time to include discharges of patients who will receive home health and outpatient therapy services" (66 FR 41354).

These developments represent major victories for ATRA, as it opposed both the use of the MDS-PAC as the patient assessment instrument and the extension of the transfer policy to home health care or outpatient rehabilitation services. These final regulations are effective January 1, 2002.

FY 2002 Appropriations

The annual appropriations process remains on hold as Congress prepares for what promises to be a bruising budget battle this fall. Neither the House nor Senate Appropriations Committees have begun work on the bill funding the Departments of Labor, Health and Human Services, and Education. They should begin work on these bills in September.

Recently released budget figures greatly complicate matters. The Congressional Budget Office released a report on August 27 projecting a $153 billion surplus for FY 2001. When the Social Security surplus is removed, however, CBO estimates that the government will have to use about $9 billion in funds collected for Social Security in order to balanced the budget. CBO predicts a tiny $2 billion surplus in FY 2002 and an $18 billion deficit in FY 2003 (not including the surpluses generated by Social Security).

This means that lawmakers will either have to exceed the budget caps in order to increase discretionary spending or dip into the Social Security surplus, which is a politically perilous decision that each side is either to blame the other for causing. Democrats argue that President Bush's large tax cut used up the entire surplus, while the White House and congressional Republicans will blame reckless spending by Democrats.

Either way, the appropriations battle should be highly contentious. This process should continue into at least November.

Medicare Reform/Prescription Drugs

Although it is perhaps the most important healthcare issue facing Congress today, lawmakers have yet to address legislation to either add an outpatient prescription drug benefit to the Medicare program or fundamentally reform the program. Although it is unlikely that Congress will act on such legislation before the end of the 1st session, the second half of the 107th Congress may see some action in this area throughout the first half of 2002. Most likely is the prospect that the 107th Congress will not be able to produce a significant Medicare reform bill that President Bush will sign.

Senate Finance Committee Chairman Max Baucus (D-MT) has indicated that his committee, which had planned to mark up Medicare reform/prescription drug legislation before the August recess, will now likely consider such legislation in September. He recently stated that he wants to use all $300 billion that was set aside in the FY 2002 budget resolution solely to add an outpatient prescription drug benefit to Medicare and not for structural Medicare reform. These funds will only become available if the Finance Committee in the Senate or the Ways and Means or Energy and Commerce Committees in the House report out a bill.

Chairman Baucus stated his desire to use the entire reserve fund for a drug benefit in response to the introduction of a set of Medicare reform proposals introduced by an influential group of Finance Committee members, including Senators John Breaux (D-LA), Charles Grassley (R-IA), Olympia Snowe (R-ME), Orrin Hatch (R-UT), and James Jeffords (I-VT). He said the plan "does not represent a broad majority in the Senate, and I cannot support it, and I will actively oppose it. It's robbery, not reform."

While Chairman Baucus opposes this proposal, it was introduced by an influential group of Finance Committee members and may have some traction in committee. Regardless, lawmakers will need to address these issues in the near future. ATRA will continue to monitor the developments and update members as appropriate. (Note: for a detailed analysis of competing Medicare reform/prescription drug proposals, please see Attachment A).

Prepared by:
Peter Thomas, Legislative Counsel, American Therapeutic Recreation Association
Jeremy Allen, Legislative Director, Powers, Pyles, Sutter & Verville, PC
August 31, 2001