A busy work period ended Friday, as Congress was able to reach agreement prior to the August recess on federal spending – thereby eliminating the possibility of a government shut down before the election, and also took action on several other key initiatives. This week commences a five-week Congressional recess. A description of recent congressional activity is outlined below.

Agreement Reached on Spending Package

With little progress made in either chamber to advance legislation funding federal agencies for FY 2013, the possibility of a government shut down when current funding expires September 30 had again been raised in recent weeks. It was clear neither Congressional Democrats nor Republicans were interested in such a scenario. On Tuesday (July 31), Senate and House leadership announced that agreement had been reached to keep the federal government funded through to March 2013, or for the first half of FY 2013.

Senate Majority Leader Harry Reid (D-NV) and House Republican Speaker John Boehner (R-OH) said that their respective chambers will vote in September on the continuing resolution for the first half of fiscal 2013, using the $1.047 trillion discretionary spending limit agreed to in last year’s deficit reduction law as the baseline. In other words, for another year the government will continue to fund programs at current levels without approval of any comprehensive federal budget.

It should be noted that this agreement has no impact on other fiscal issues mandated by the same deficit reduction law, including the impending across-the-board eight percent spending cuts – known as sequestration. Sequestration will begin in January and likely will be left to address by either the lame-duck session of the current Congress, following the November 2012 elections, or to the next Congress.

House and Senate Take Conflicting Action on Bush-Era Tax Rates

On Wednesday, the House of Representatives passed a one-year extension of George W. Bush-era tax cuts after rejecting a Democratic proposal to let tax breaks expire for Americans with incomes above $250,000.

In a 256-171, mostly party-line vote, the chamber advanced a bill that would extend the full 2001 and 2003 tax cuts that are set to expire at the end of 2012. The vote came less than a week after the Senate took the opposite approach, voting 51-48 to pass a measure that extended tax rates only for individuals earning up to $200,000 a year and households making up to $250,000, while voting down legislation extending all tax rates.

While the House has remained insistent upon extending the current rates for all Americans, Senate Democratic leadership has vowed to oppose any legislation that extends the rate for high-income earners, while the President has said he would veto any such proposal. Given the divide between the chambers, Congress may not take up the tax issue again until after the election.

Cybersecurity Legislation Blocked in the Senate

After months of negotiations, the chances for passage of a comprehensive cybersecurity bill this year was dealt a significant blow Thursday (August 2), when legislation failed to get the votes necessary in the Senate to override a filibuster. Senators voted 52-46 to invoke cloture on the measure, which would create voluntary security standards for critical digital infrastructure. With sixty votes needed to invoke cloture, the vote brought to an end, what began as a promising week for the legislation.

Prior to the cloture vote Senators Lieberman (I-CT) and Collins (R-ME) had made significant changes to their original proposal, reducing the authority of the Department of Homeland Security to impose mandatory safety standards on industry. These changes were intended to bring to the table, a key block of Republican Senators who had strongly disagreed with the original bill, including Senators McCain (R-AZ) and Hutchinson (R-TX). Ultimately the negotiations and the changes brought thereby proved fruitless, as an agreement on the substance of the bill as well on the process through which the bill would be debated could not be reached. With the bill’s defeat, it is unclear whether another attempt at the bill will be mounted this year in either chamber.

Senate Committee Advances ‘Tax Extenders’ Legislation

On Thursday (August 2), the Senate Finance Committee approved a more than $205 billion package of expired and expiring tax provisions. In a rare showing of bipartisanship, all of the committee’s Democrats voted for the measure, with more than half the panel’s Republicans joining them in support.

Some of the provisions extended were a provision that ensures that the Alternative Minimum Tax does not apply to middle-income earners as well as credits for investing in alternative energy sources like wind and solar power.

While Democrats and Republicans-alike hailed the vote as a positive step, both acknowledged that tougher battles are ahead as Congress considers legislation reforming the tax code. That legislation is expected to be considered when Congress begins its next session in January 2013.

Massachusetts Passes Landmark Healthcare Payment Reform Legislation

On August 6, 2012, Massachusetts Governor Deval Patrick signed into law what is widely regarded as the most sweeping healthcare payment reform legislation in U.S. history. The legislation was written to support and expand upon the universal healthcare legislation signed into law by then Massachusetts Governor Mitt Romney in 2007. The original Massachusetts legislation passed five years has since been used as a model for health reform nationally.

Under the new law, Massachusetts will move away from traditional "fee for service" medicine where providers are paid for each individual unit of healthcare delivered, and towards a "global payment" model where providers are paid a fixed fee, per patient, per year, for all care rendered, and with incentives to keep patients healthy. Massachusetts' leaders determined this next step in health reform was necessary because it learned that increasing access to healthcare without doing anything to reduce costs was leading to unsustainable healthcare cost increases in the Commonwealth's budget.

The centerpiece of the legislation is a requirement that healthcare costs in Massachusetts cannot grow faster than the Commonwealth's gross state product ("GSP") through 2017, and for the following five years, the maximum increase in healthcare costs must not exceed a half percent below state GSP. If a provider's costs are growing too quickly, the legislation requires that the provider submit a performance improvement plan to the Commonwealth that puts the provider on a path to lowering costs.

The law also assesses high cost providers who have not transitioned to global payments and distributes the revenue from these assessments to distressed hospitals in danger of failing. Another key provision of the bill requires regulators to collect and analyze data regarding so-called market power of certain providers. If thresholds are met pointing to potential anti-competitive behavior, these cases may be referred to the Massachusetts Attorney General for further investigation.

The legislation also sets up a framework for certification and oversight of accountable care organizations, promotes electronic medical records, requires increased patient access to information about healthcare delivery, and re-organizes state government to create a regulatory framework to implement this groundbreaking new approach to healthcare delivery. The legislation also makes dozens of other important changes across the Massachusetts healthcare system.

Well recognized as a national leader in healthcare reform, Massachusetts' latest healthcare payment reform law is being watched closely by not only states across the country, but also by leaders in Washington, DC, and both presidential campaigns.

Next Steps

When Congress returns on September 10, it will only have three working weeks in Washington before adjourning for November’s election. The Public Policy and Government Relations Group at Edwards Wildman Palmer LLP will continue to monitor these developments closely.