For the week ending Friday, January 18, 2002

Federal Update:
The second session of the 107^th Congress will begin later this month with President Bush’s State of the Union address on January 29th. The Bush Administration will also kick off the FY 2003 budget cycle a few weeks later with the release of the President’s budget. Once again, health care issues will remain on the forefront of the congressional agenda.

The bipartisanship briefly experienced by Congress after the September terrorist attacks has been replaced by election-year antics in an effort to change the current power structure in Congress. With Democrats controlling the Senate by one vote and Republicans controlling the House by a slim margin, creating bipartisan consensus on issues will remain extremely difficult.

Like last year, our health care issues will primarily revolve around this year’s budget process. The AHA and other hospital organizations have already urged President Bush to reject new Medicare and Medicaid cuts in his FY 2003 budget. This joint letter also asked the Administration to eliminate scheduled reductions in indirect medical education and a 15% home health reduction and to provide a full inflation update for hospital inpatient services.

AHA’s call for a full inflation update was recently supported by The Medicare Payment Advisory Commission (MedPAC). MedPAC recommended that rural and "other urban" hospitals receive full inflation updates. The commission also recommended an increase in the standardized inpatient base payment rate for rural and other urban hospitals so that it matches the rate currently paid to large urban hospitals, and to do so with new Medicare funds. While MedPAC’s recommendation is not binding, if Congress chose to enact MedPAC’s recommendation, it would be very good news for Vermont hospitals. MedPAC’s announcement at the very least will provide the hospital community with solid evidence supporting our advocacy efforts to prevent any new Medicare payment reductions.

How the Medicare payment and other healthcare issues play out this session will become clearer once Congress decides whether or not to pass a budget resolution this year. Every year, Congress must pass the 13 appropriations bills that determine discretionary spending for the upcoming fiscal year. Congress passes a budget resolution when they anticipate changes in tax, Medicare and/or Social Security laws that would change the entitlement programs. If Congress decides to "reconcile" these entitlement laws to meet their budget objectives, it would potentially create a legislative vehicle for an array of Medicare and Medicaid changes.


State Legislative Update:

Week in Review
The second week of the legislative session continued at a relatively brisk pace, with committees in both the House and Senate setting priorities for this legislative session.  The Committees on Appropriations heard from heads of various state agencies and departments on recommended rescissions to the FY 2002 budget, and received updated economic and revenue forecasts to assist in their planning for FY 2003. 

On the political front, Gov. Howard Dean appointed Hinesburg Republican Diane Snelling to fill the unexpired term of her mother, Barbara, who recently resigned.  Though not an unexpected appointment, some Republicans voiced irritation that Dean did not appoint the candidate recommended by the Chittenden County Republican Committee. 

The House of Representatives spent considerable time on the floor Thursday morning debating a resolution addressing the former Champion Land property purchased by the state several years ago.  Many legislators and sportsmen are concerned over a proposal to restrict access to some 12,000 acres of the property in the Northeast Kingdom as part of a management plan proposed by the Agency of Natural Resources.

Although last week was relatively quiet in the health care field, the Governor’s Budget Address scheduled for January 23^rd, will certainly change the pace for health care as committees also work to define their legislative priorities.

Scrutinizing Medicaid
This week the House Health and Welfare Committee reviewed the report of the Health Access Oversight Committee on the financial condition of the Vermont Health Plan and a Joint Fiscal Office review of the Medicaid program.

Medicaid is in fiscal crisis putting at risk the 21% of Vermont’s population that relies on this program. Due to increasing costs, expanded benefit and more generous eligibility levels, expenditures have more than tripled in the past 10 years. Medicaid now accounts for 24% of total state spending. The Health Access Trust Fund, which supports the Vermont Health Plan, will show a deficit next year. Causes for this crisis are growth in per person spending including medical inflation (a great part of which is pharmaceutical costs) and changes in treatment patterns.

Since reimbursement rates to providers are still well below costs, the Medicaid cost shift to private sector payers still continues. Vermont’s Medicaid program ranks among the nation’s most generous, providing 33 of the 37 optional benefits. The Committee will examine the cost containment measures that establish per capita costs, mainly price, utilization and intensity. Education, market forces, management or regulation can also affect these three factors. The Committee will ultimately recommend cost containment measures to attempt to bring the Medicaid budget under control.

Medical Record Confidentiality
After passing the House Committee on Health and Welfare at the end of the first legislative week, the bill on medical record confidentiality, H.416, was referred to the House Committee on Judiciary. There were no hearings held on this issue last week and there are none scheduled for this week as of yet.

Pharmaceutical Costs
This week the Senate Health and Welfare Committee heard from Eileen Elliott, Commissioner of PATH, about the work of the Tri-State Pharmacy Initiative, which is instituting processes to better manage the pharmaceutical health care spending of state programs. The objectives of the coalition include maintaining and enhancing quality of health care, controlling pharmacy expenditures, and reducing program administrative costs through collective procurement. The Pharmacy Benefit Management Systems will include a network of pharmacies, claims processing, formulary management and clinical management and data reporting. The OVHA is instituting a preferred drug list, prior authorization procedures, and rules regarding drug interactions, early refills, quantity limits. The Prior Authorization Review Process can be accessed through www.dsw.vt.us/districts/ovha/ovha11.htm.

Acting Chair Sen. Ginny Lyons (D-Chittenden) asked which pharmaceutical companies were represented on the preferred list and who made these decisions. Commissioner Elliott stated that all parties have received letters informing them of the changes. For example, physicians will be mailed notices listing their Medicaid patients. The physician will need to evaluate the patient’s condition and prescribe prescriptions in according with the Preferred Drug List.

Drug Testing
The House General, Housing and Military Affairs Committee heard testimony this week from many employers supporting H.412, the proposal to allow employers to test for drugs in the workplace. H.412 proposes to establish a drug-free workplace program allowing employers to test employees for drug and alcohol use. The bill has four key provisions outlined below:

• Eliminate the 10-day waiting period to test prospective employees and eliminate the requirement that it be part of a complete physical examination.
• Change the currently high legal standard from "probable cause" to the defined term "reasonable suspicion" to allow employers to test for drugs.
• Allow for random, company-wide drug testing. The bill currently only addresses scheduled, company-wide testing but many supporters of H.412 have asked for the bill to be amended to include random testing for greater effectiveness as a deterrent for drug and alcohol use in the workplace.
• Allow for mandatory post-accident drug testing for employees injured or involved in a workplace accident, to provide a safe workplace for employees. It also addresses employer-sponsored substance abuse programs to help workers before returning to work.

Additional hearings on H.412 will be scheduled this week.

On the Agenda This Week
House Appropriations Committee – The focus this week will be on the FY02 budget adjustment and they will begin mark up of the FY03 budget.

House Health and Welfare Committee – The committee will continue their discussions on Medicaid with a focus on the FY03 budget.

Senate Appropriations Committee – The focus this week will be on the FY02 budget adjustment act.

Senate Health and Welfare Committee – The committee will focus on health promotion and the VHAP buy-in proposal.

House Government Operations Committee – The committee will focus on the definition of gross negligence this week.

Senate General Affairs and Housing Committee – The committee will begin work on S.228 on open meetings for hospital boards.

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