While systemic health reform promises to be a top U.S. policy priority in any new administration, Congress? first health policy focus in 2009 will be on already identified and targeted health initiatives. Some are time-sensitive measures that demand attention early in the new year. Others are front-and-center concerns that will also command immediate attention. All of these health proposals invariably will become vehicles for a variety of ?bite-sized? provisions, either as a means to offset the cost of the underlying proposal (e.g., restrictions on physician-owned hospitals have recently been offered up in this context) or as unrelated provisions seeking a legislative ride to enactment.

This article highlights key measures that Congress is likely to consider early in 2009: State Children?s Health Insurance Program (SCHIP), Medicaid, Medicare, health information technology, ?follow-on? biologics and the Medicare prescription drug benefit.

Health industry stakeholders immediately have opportunities to weigh in on these initiatives and either affect their shape or capitalize on them as vehicles for accomplishing other health-related goals apart from the specific focus of the legislation. In addition, understanding the health legislative and regulatory landscape remains a critical element of sound legal and business strategy and decision-making.

Time-Sensitive Measures

Congress faces three separate time-sensitive health matters in 2009 that are certain to be addressed early in the next congressional session regardless of who is president, and regardless of the timing of broader health care reform endeavors. Critically, any of these items could become a vehicle for enacting other unrelated health provisions, extending the impact beyond the matters directly implicated.

SCHIP

The Issue

Unless Congress acts by March 31, 2009, the federal SCHIP program will expire. SCHIP provides federal matching funds to states to cover uninsured children and some adults with family incomes too high to qualify for Medicaid. The debate around SCHIP will shed light on attitudes to systemic health reform as it revolves around how and whether the federal government should extend coverage to the uninsured. Senator McCain voted against SCHIP expansions when they came before the Senate in 2007; Senator Obama voted in favor of SCHIP reauthorization and expansion, foreshadowing the bent each would take if elected president. Indeed, Senator Obama has called for expansion of the SCHIP program as a key element of his health overhaul proposal.

Direct Impact

SCHIP reauthorization, and possibly expansion, would help providers that serve the uninsured, especially children. Some benefits may be expanded, such as dental, which also would help providers in that sector.

MEDICAID REDUCTIONS

The Issue

On April 1, 2009, steep Medicaid payment reductions will go into effect unless Congress or the new president extends the moratoria on six Medicaid regulations established by the Bush administration and recently suspended by the Democratic Congress. Affected payment areas include graduate medical education, coverage and payment for rehabilitation services, treatment of targeted case management services and allowable provider taxes. An additional regulation not suspended by Congress relates to outpatient hospital services.

Direct Impact

Providers that receive Medicaid reimbursement for the services subject to reduction will be affected if the moratoria are not extended. Public and other safety-net hospitals that serve a significant Medicaid population will also be affected.

MEDICARE REDUCTIONS

The Issue

Physicians face dramatic Medicare payment reductions of at least 20 percent unless those reductions are averted by Congress before January 1, 2010. If Congress does rescue physicians from these cuts, the cost will be between $40 and $100 billion, depending on whether Congress replaces the reductions with a payment increase, and the size of the increase, forcing cuts from other sources. Democrats have recently looked to the Medicare Advantage program as a source of funding, but efforts to slash funding to the program have been blocked by the Bush administration. A McCain administration could be the new firewall, as Senator McCain has traditionally opposed cuts to the Medicare Advantage program. Senator Obama, on the other hand, has supported efforts to strategically cut spending for Medicare Advantage to support other Medicare priorities.

Even if cut, the Medicare Advantage program will not provide ample funds to avoid physician payment reductions. Congress will have to look to other funding sources, which could include payment reductions for hospitals, skilled nursing facilities, durable medical equipment suppliers and new restrictions on physician ownership of hospitals.

Direct Impact

Physicians will be significantly affected by the scheduled 20 percent payment reduction should it be realized, or by a positive update instead. To the extent that Congress decides to reverse the negative update, other providers will feel the bite from reductions that will be needed to offset increases to doctors.

Other Pressing Priorities

HEALTH INFORMATION TECHNOLOGY

The Issue

Lawmakers widely view the U.S.-wide implementation of interoperable health information technology as critical to efforts to improve efficiency in the health sector. Senator Obama was an original co-sponsor of the principal Senate health information technology bill in the 110th Congress; Senator McCain also supports accelerated adoption of health information technology.

Areas of controversy include how to incentivize providers to adopt health information technology and whether to penalize them for failure to do so, whether patient privacy and security protections would need to be expanded and/or refined, and how to manage the investment costs in new health information systems and in new privacy and security protections.

Direct Impact

The ability of pharmaceutical companies, academic medical centers and health systems to use data to improve care for specific patients and to use and work with aggregated data for quality improvement at the population level could be undermined by new privacy and security provisions that may accompany health information technology legislation.

All providers could face new cost and standards of practice flowing from new requirements, incentives or penalties related to adopting health information technology, and accompanying privacy and security measures. Amongst the questions that will be on the table is whether certain entities (e.g., hospitals or pharmaceutical companies) could financially support physician acquisition of the hardware and software that will be needed.

“FOLLOW-ON” BIOLOGICS

The Issue

Both Senators McCain and Obama have called for an approval pathway through the U.S. Food and Drug Administration for generic or ?follow-on? versions of biologicals. Congress began to entertain proposals in this regard in 2008, setting the stage for stand-alone consideration in early 2009.

A key area of concern is how long manufacturers of brand name biologicals would have market exclusivity.

Direct Impact

Brand name manufacturers seek to protect their market exclusivity for as long as possible. Some of these manufacturers may be able to make a case for singling out specific types of products that should not be subject to market exclusivity established timeframes.

MEDICARE PRESCRIPTION DRUG BENEFIT

The Issue

Both presidential candidates have identified the Medicare prescription drug benefit as an arena ripe for early legislating. Key areas of debate include the importation of prescription drugs from other countries, how to craft federal authority to negotiate drug prices and whether to expand the benefit. Both candidates agree that reimportation should be allowed provided that safety is assured, but they differ on how to approach federal negotiation of drug prices, with McCain focusing on market competition and Obama favoring federal negotiation authority. In addition, Obama favors and McCain opposes expanding the benefit to eliminate the so-called ?doughnut hole? into which beneficiaries fall when their total drug spending exceeds a certain amount each year.

Direct Impact

Pharmaceutical manufacturers are vulnerable both to price negotiation authority and also to re-importation from other countries. As with ?follow-on? biologics, certain manufacturers may have the opportunity to seek carve-outs from these provisions for products with certain distinct characteristics.

Conclusion

Health issues will be center stage on the congressional and administration agenda in 2009. Indeed, at this writing, Congress may return in mid-November 2008 after the elections for a lame-duck session, which may well include consideration of some healthrelated matters. We also expect to see later in 2008 the release and promotion of legislators' health reform proposals, as jockeying for advantage in the systemic reform debate is clearly underway.