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Government Relations Update – February 21, 2012

Pennsylvania Issues


State Budget:  On February 7, 2012, Governor Corbett (R) delivered the Commonwealth’s 2012-2013 budget address to the Pennsylvania General Assembly.  The $27.1 billion plan, which includes no new taxes, represents a spending decrease of 0.1% compared to the current budget.

The proposed budget responds to a projected $719 million revenue shortfall by reducing spending for higher education by more than $300 million, introducing more than $800 million in cost saving measures through the Department of Public Welfare (DPW) and cutting transportation spending by 9%.  The budget proposal would be the first budget in a decade not to increase spending for prisons. 

Following the budget address, the Hospital Association of Pennsylvania (HAP) issued a statement reiterating the role of Pennsylvania hospitals in stabilizing the economy and creating jobs.  HAP criticized the proposed cuts to DPW and asserted that the reductions would negatively impact hospitals and their communities and limit services to the poor, elderly and disabled. 

The legislature will conduct budget hearings over the next two months, and the proposal will be debated and modified.  The Governor and Republican leadership are committed to meeting the Commonwealth’s constitutional deadline of June 30th for budget passage. 


Legislative Redistricting:  As reported previously, Pennsylvania lawmakers are required to redraw federal and state legislative districts every ten years based on the most recent national census data.  On December 12, 2011, the Pennsylvania Legislative Reapportionment Commission approved new maps for Pennsylvania House and Senate districts.  However, on January 24, 2012, the Pennsylvania Supreme Court rejected the Legislative Reapportionment Commission’s redistricting plan for the state legislative districts.  As a result, the 2012 election will proceed using the 2001 legislative maps for the state legislative districts.  The Pennsylvania primary election is scheduled for April 24, 2012. 

New Jersey


Medicaid Spending Cuts.  In September 2011, the State of New Jersey filed an application seeking more than $107 million from the Centers for Medicare and Medicaid Services (CMS) for historical underpayments.  The state asserted that CMS mistakenly rejected Medicaid claims from New Jersey citizens for decades, and Governor Chris Christie (R) projected receipt of the money from CMS in his current state budget plan.  On October 27, 2011, CMS notified the State of New Jersey that it was not statutorily permitted to reimburse the state.  In addition, a federal audit revealed on January 11, 2012 that the state owes $145 million to the federal government after improperly billing for certain Medicaid services. 

Governor Christie had previously projected that the state would spend $300 million less this year on Medicaid services, but the Governor has not yet announced a plan to address the $252 million adverse change in the state budget.  Assembly Budget Committee Chairman Vincent Prieto (D-Hudson) warned that the Governor would propose deeper Medicaid cuts to offset these results.

Federal Issues


Physician Fee Schedule; Section 508 Funding:  On December 23, 2011, President Obama signed into law legislation averting until February 29, 2012 the planned 27.4% decrease to the Medicare physician fee schedule. The measure also extended the hospital reclassification payments under Section 508 of the Medicare Modernization Act of 2003 until November 30, 2011. Section 508 permits qualifying hospitals to reclassify into adjoining geographic areas with higher payment rates.  Under Section 508, St. Luke’s Warren Hospital receives a Medicare payment upward adjustment of $2.5 million per year.

On February 17, 2012, Congress approved a bill extending the current Medicare physician fee schedule rates through December 31, 2012.  The legislation also extends funding pursuant to Section 508 through March 31, 2012, resulting in nearly $850,000 in additional payments to St. Luke’s Warren Hospital.  If Congress fails to extend these provisions again, the Medicare physician fee schedule will decrease by 32% on January 1, 2013, and St. Luke’s Warren Hospital will forfeit any additional payments pursuant to Section 508. 

Senators Casey (D-PA), Lautenberg (D-NJ) and Menendez (D-NJ) and Congressmen Dent (PA-5-R), Fitzpatrick (PA-8-R), Holden (PA-17-D), and Lance (NJ-7-R) voted in favor of the legislation.  Senator Toomey (R-PA) and Congressman Garrett (NJ-5-R) voted against the bill.  The President is expected to sign the bill into law within the next few days.

Proposal to Eliminate Earmarks:  Earmarks are defined as the practice by legislators of allocating funding to a specific project, program or organization.  A temporary Congressional earmark moratorium expires later this year.  On February 2, 2012, Senators Toomey (R-PA) and McCaskill (D-MO) offered an amendment to permanently ban earmarking by members of Congress.  The Senators assert that earmarking circumvents scrutiny and provides an opportunity for corruption.  The amendment failed to receive the 60 votes necessary to proceed.  Senators Casey (D-PA), Lautenberg (D-NJ), and Menendez (D-NJ) voted against the amendment.

Federal Budget:  On February 13, 2012, President Obama released his proposed 2013 federal fiscal year budget.  The $3.8 trillion budget proposal includes $302.8 billion in reductions to Medicare spending and $55.7 billion in reductions to Medicaid spending over 10 years, including reductions in Medicare bad debt payments, decreased reimbursement for certain advanced imaging services and capped Medicaid durable medical equipment rates.

Initial budget proposals from the President are rarely enacted.  Rather, the proposal is intended to form the basis for commencement of negotiations with Congress.  Moreover, the proposal provides the Senate and House Appropriation Committees a guideline for the amount of federal funds available to appropriate to federal agencies, departments, and organizations.

Senate Majority Leader Harry Reid (D-NV) has already announced that he will not introduce a budget resolution to the Senate floor, since the Budget Control Act approved last August already determines the 2013 federal fiscal year spending plan.  In the House, Budget Committee Chairman Paul Ryan (R-WI) has announced that he will move a budget resolution through his committee and forward it to the Senate for consideration regardless of Senator Reid’s announcement.