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Government Relations Update - February 19, 2013

Pennsylvania Issues


Medicaid Expansion: As previously reported, Medicaid is scheduled to expand significantly on January 1, 2014 pursuant to the Patient Protection and Affordable Care Act (PPACA), unless states elect to opt out. The federal government will match additional state funding for the first three years following the expansion and then gradually reduce the matching rate to 90% by 2020. On February 5, 2013, Governor Corbett (R-PA) announced that the Commonwealth of Pennsylvania would elect to opt out. In a letter to Kathleen Sebelius, Secretary of the Department of Health and Human Services, Governor Corbett explained that the expansion would be financially unsustainable. Twenty two states and the District of Columbia have chosen to expand their Medicaid programs in accordance with PPACA. Thirteen states, including New Jersey and Pennsylvania, have rejected the expansion plan.

State Budget: On February 5, 2013, Governor Corbett delivered his 2013-2014 budget address to the Pennsylvania General Assembly. The $28.4 billion plan represents a 2.4% spending increase compared to the current budget. Together with the release of his proposed budget, Governor Corbett announced his pension reform plan, which would transition state employees hired after January 1, 2015 into a defined contribution plan and reduce benefits owed to state employees under current defined benefit plans.

Following the budget address, the Hospital & Healthsystem Association of Pennsylvania (HAP) issued a statement supporting the Governor's proposed preservation of inpatient hospital payment rates for Medical Assistance patients. However, HAP urged the Governor to reconsider his decision to opt out of the Medicaid expansion. HAP asserts that hospitals will be forced to provide greater free care to poor and disabled citizens, and the Medicaid expansion would provide coverage for these patients. HAP will continue to work with the Governor on these issues. The Governor and legislative leaders have pledged to meet the June 30th constitutional deadline for budget passage.

Medical Assistance Modernization Act of 2010: The Medical Assistance Modernization Act of 2010, also known as Act 49, authorizes the Pennsylvania Department of Public Welfare to impose a statewide assessment based on net operating revenues derived from inpatient services provided by licensed acute care hospitals in Pennsylvania. The assessment dollars are used to secure additional federal matching funds, which are then distributed to statewide hospitals and to support the General Fund. Act 49 expires this fiscal year. The Governor's budget proposal anticipates that Act 49 would be reauthorized, but the Governor plans to retain an additional $49 million from the assessments to be used to support the General Fund, thereby decreasing hospital distributions. HAP opposes this plan.


State Funding: On February 11, 2013, Governor Corbett awarded 54 additional Redevelopment Assistance Capital Program (RACP) grants in 28 counties throughout the state. According to the Governor, the grants will create or retain more than 56,000 jobs.

Northampton County Executive: On February 6, 2013, Bethlehem Mayor John Callahan (D) announced his candidacy as the Democratic nominee for Northampton County Executive. Former Northampton County Executive Glenn Reibman (D) has also announced his candidacy for the Democratic nomination. Mr. Reibman served as the Northampton County Executive from 1998 to 2006. John Brown (R), who currently serves as the Mayor for the Borough of Bangor, is seeking the Republican nomination for the office. The primary election will be held on May 21, 2013.

New Jersey Issues


Imputed Rural Floor Wage Index: Medicare payments for the delivery of inpatient hospital services are made in part pursuant to a prospective payment system (PPS), which pays hospitals a fixed amount for each Medicare inpatient discharge based upon patient diagnosis and certain other factors used to classify each patient into a Diagnosis Related Group (DRG). Congress adopted an "imputed" floor in the 2005 inpatient PPS rule as a temporary three year regulatory measure to address a concern that certain hospitals in New Jersey were disadvantaged by the absence of rural hospitals to set a wage index floor for purposes of determining the PPS payments to those hospitals. The imputed floor policy only benefits New Jersey hospitals, which raises the risk that the Centers for Medicare and Medicaid Services (CMS) will change or eliminate the funding mechanism. The imputed floor was originally set to expire in 2007, but it has since been extended through September 30, 2013. The New Jersey Hospital Association (NJHA) and several New Jersey hospitals met with members of Congress recently to seek an extension of the imputed rural floor.

Federal Issues


National Physician Payment Transparency Program: On February 1, 2013, CMS released final regulations implementing the Physician Payment Sunshine Act. The Act requires manufacturers of drugs, devices, biological supplies and medical supplies to publicly disclose information about payments or other transfers of value made to physicians or to hospitals that receive Medicare payments for indirect medical education or graduate medical education. The Act also requires manufacturers and group purchasing organizations (GPOs) to disclose for publication by CMS any ownership or investment interests that physicians may have in those entities. The Act is designed to shed light on potential conflicts of interest that could affect treatment decisions and health care costs. Applicable manufacturers and GPOs must begin collecting data on August 1, 2013 and electronically submit reports to CMS by March 31st each year thereafter. CMS will publish the data on a public website by September 30, 2014. The Act includes sizeable penalties for failure to comply.

State of the Union Address: On February 12, 2013, President Obama delivered his latest State of the Union Address. During his speech, the President noted his support for several Medicare program reforms, including: (1) requiring pharmaceutical manufacturers to offer Medicaid-level rebates on drugs for the 10 million people who are eligible for both Medicare and Medicaid, yet get their medications only through Medicare's Part D prescription program; and (2) greater use of means-testing, which would increase costs for wealthier Medicare participants.


S.232: Medical Device Access and Innovation Protection Act. On February 7, 2013, Senators Orrin Hatch (R-UT) and Amy Klobuchar (D-MN) introduced legislation to repeal the 2.3% medical device tax included in PPACA, which is expected to raise $30 billion over the next 10 years. The tax commenced in January and is estimated to cost medical device manufacturers about $194 million each month. Senators Bob Casey (D-PA) and Pat Toomey (R-PA) serve as co-sponsors of the legislation. Senator Toomey asserts that the tax will cost Pennsylvania's economy about $100 million per year and cause significant job losses. Senator Casey adds that the tax limits new innovations and unfairly burdens Pennsylvania, which has a large medical device industry. HAP has not commented on the bill. However, HAP previously raised concerns that the cost of excise tax could be passed through to hospitals. A similar bill has been introduced in the House. Congressmen Dent (R-15-PA), Fitzpatrick (R-8-PA) and Lance (R-7-NJ) serve as its co-sponsors.