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Government Relations Update – January 21, 2014

Pennsylvania Issues


Medicaid Expansion: Pursuant to the Patient Protection and Affordable Care Act (PPACA), the federal Medicaid program expanded state medical assistance programs significantly on January 1, 2014, unless states elected to opt out. The federal government began matching additional state funding for three years as of January 1st and will reduce the matching rate gradually to 90% by 2020. The Hospital & Health System Association of Pennsylvania (HAP), labor unions and advocates for the poor strongly support Medicaid expansion. HAP asserts that expansion will strengthen the economy, decrease hospital uncompensated care costs and improve the quality of life for the uninsured.

25 states, including New Jersey, Ohio, West Virginia, Maryland, Delaware and New York, have agreed to expand their Medicaid programs as of January 1, 2014. Governor Corbett (R-PA) previously announced that Pennsylvania would reject the expansion plan, unless Pennsylvania was permitted to include job search requirements for, and cost sharing (i.e., monthly premiums and co-pays) by, Medicaid enrollees. On December 6, 2013, Governor Corbett released his proposal for Medicaid expansion through the “Healthy PA” program. In addition to the job search and cost sharing provisions, the Healthy PA program would increase Medicaid coverage beginning in January 2015 for about 500,000 Pennsylvanians by using federal funds to cover costs through the private insurance exchange system created by PPACA, rather than simply expanding Medicaid to additional enrollees. It is unclear when the federal government will respond to the Governor's proposal.


State Tax Revenues: Through December 31, 2013, state expenditures are expected to outpace revenues by 0.6%, creating an estimated $1.3 to $1.4 billion budget gap. In a survey of all states released by George Mason University, Pennsylvania ranked 42nd in the Fiscal Condition Index, since the Commonwealth had higher levels of long-term debt, less cash on hand to pay short-term bills and higher expenses compared to other states. On February 4, 2014, the Governor plans to introduce his 2014-2015 proposed budget to the General Assembly. A key challenge will be replacing nearly $500 million in lost Federal Medical Assistance Percentages (FMAP) payments and tobacco settlement funds. HAP has been meeting regularly with the Governor and his staff to emphasize the important role of hospitals and to urge him to avoid any funding reductions to the Department of Public Welfare.

New Jersey Issues


S.3027: Establishment of a State Trauma System. On November 7, 2013, Senator Joseph Vitale (D-Vitale) introduced legislation to establish a state trauma system. The Senator introduced the legislation following a study conducted by the American College of Surgeons at the request of the New Jersey Department of Health (DOH). The report concluded that a statewide system would enable the DOH to establish best practices and standards for trauma care providers, provide protocols for the stabilization and transfer of patients and establish training requirements for personnel. The Senator asserts that the bill is not intended to limit the number or type of trauma centers in the state. On January 23, 2014, both the Senate and the Assembly approved the bill. State Senator Michael Doherty (R-Warren, Hunterdon, Somerset) and Assemblymen Erik Peterson (R-Warren, Hunterdon) and John DiMaio (R-Warren, Hunterdon) voted in favor of the bill, which has been forwarded to Governor Chris Christie (R-NJ) for his approval.

Federal Issues


H. J. Res. 59: The Bipartisan Budget Act of 2013. The Medicare physician fee schedule was scheduled to expire on December 31, 2013, which would have reduced Medicare payments to physicians by 24.4% effective January 1, 2014. However, on December 12, 2013, the House passed a spending bill incorporating a 0.5% increase in Medicare payments to physicians through March 31, 2014. The bill also restored several expired or expiring Medicare payment provisions for hospitals, including the Medicare Dependent Hospital (MDH) program, which was restored for six months retroactive to October 1, 2013. St. Luke's Hospital – Miners Campus is one of 13 Pennsylvania Hospitals and 200 hospitals across the country designated as a MDH. The Senate approved the legislation on December 18, 2013, and the President signed the bill into law on December 26, 2013. Congressmen Cartwright (D-17-PA), Dent (R-15-PA), Fitzpatrick (R-8-PA) and Lance (R-7-NJ) and Senators Booker (D-NJ), Casey (D-PA) and Menendez (D-NJ) voted in favor of the bill. Senator Toomey (R-PA) voted against the measure given the increase in federal spending.


Sustainable Growth Rate (SGR) Repeal & Medicare Beneficiary Access Improvement Act of 2013: As reported previously, the Sustainable Growth Rate (SGR) formula was devised in 1998 as a method to control healthcare spending by tying Medicare costs to growth in the economy. As medical costs increased more quickly than inflation, the SGR formula would have caused physician payment reductions every year since 2002. In response, Congress has passed bills to delay or avert the implementation of the payment reductions, thereby avoiding the impact of the SGR formula. The cost to repeal the SGR formula had been estimated at $300 billion over ten years. The Congressional Budget Office (CBO) recently lowered the estimate to between $116 billion and $153 billion over ten years. On December 12, 2013, the Senate Finance Committee and House Ways and Means Committee both approved a bill which would permanently repeal the SGR and replace it with a new formula for physician payments through Medicare. In addition, the Senate Finance Committee's bill includes amendments to several Medicare provisions, including a permanent extension to the MDH program. The House and the Senate are expected to reconcile the two bills in early 2014 and obtain passage prior to the expiration on March 31, 2014 of the three month physician fee schedule extension.

Health Insurance Marketplace Enrollment Numbers: Individuals seeking health care coverage through the health insurance market place were required to enroll by December 23, 2013 in order to receive benefits beginning on January 1, 2014. As of December 27, 2013, the Department of Health and Human Services reported that 1,102,000 individuals selected health plans through the federally-facilitated marketplace, compared to the projected 3,300,000 expected to enroll. Over 850,000 individuals selected plans through the state-based marketplaces. In order for the exchange concept to avoid significant losses, 40% of the enrollees must be between the ages of 28 and 34. As of January 15, 2014, only 24% of the individuals enrolled were within this age group. The next critical deadline for enrollment is March 31, 2014, after which individuals face a tax penalty if they remain uninsured.

Medicare Dialysis Payments: As reported previously, the Centers for Medicare & Medicaid Services (CMS) in July proposed significant payment reductions under the end-stage renal disease (ESRD) prospective payments system. However, on November 22, 2013, CMS issued a final payment rule that reduces payments to dialysis facilities by less than 1% over the next two years. The final rule also authorizes a 50% increase for peritoneal dialysis and home hemodialysis training treatments.