Healthcare Issues Feature Prominently in 112th Congress Agenda

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Big Issues in Play with Significant Impact on O&P

As the new 112th Congress convenes and leadership in the House of Representatives shifts to Republican control, a host of healthcare and budget issues clog the Congressional docket. Congress is off to an accelerated start this year, with votes already taking place on the repeal of healthcare reform in the House and Senate. At the time of this writing, President Obama's federal budget proposal is expected in mid-February, and by all accounts, this promises to be an austere year for government spending. Whether Congress will reform entitlement programs to reign in the annual deficit, expected to top out at $1.5 trillion this year, is not yet settled, but there are strong signals that Medicare, Medicaid, and even Social Security are up for discussion.

This article surveys the major issues confronting Congress this year with a focus on policies that impact the O&P profession. Many of these proposals may have an indirect, yet still important, impact on O&P, while others are more O&P specific.

Healthcare Reform Targeted for Repeal

After months of waiting to respond to the healthcare reform law (PL 111-148 and PL 111-152), re-energized House Republicans voted on a two-page bill (HR 2) to repeal the law, along with a small number of Democrats. The debate raised various concerns about the cost of repealing the bill, the loss of insurance for those to be covered by the law, and the lack of a viable alternative. The House passed HR 2 on January 20 on a largely partisan vote of 245 to 189. Lawmakers also passed a resolution (H. Res. 9) instructing relevant House committees to prepare a series of replacement bills to serve as alternatives to the current healthcare law.

The Obama Administration countered the health-reform repeal effort with a letter to the new Speaker of the House, John Boehner (R-OH), extolling the virtues of the new law. In addition, President Obama made public statements about his willingness to improve the law rather than repeal it. Congressional Democrats also promoted a report from the nonpartisan Congressional Budget Office (CBO), which estimates that a repeal of the health-reform law would increase the deficit by an estimated $230 billion over ten years.

The vote was the first step in what promises to be a long legislative battle over various elements of the law, as part of the run-up to the 2012 presidential election. House Republicans bolstered the repeal measure with a House Budget Committee report on the economic consequences of the law, which indicates that the law would cost $2.6 trillion when fully implemented and would add $701 billion to the deficit in its first ten years. The argument against the bill also focused on jobs that Republicans asserted would be lost if the new law were to be implemented as currently written.

The success of the House repeal vote, coupled with a major federal court decision invalidating the health-reform law (discussed below), accelerated a vote on the repeal issue in the U.S. Senate in early February. That vote failed to repeal the bill by a 51 to 47 margin along strict party lines. This means that for all intents and purposes, a complete repeal of health reform will not reach the President's desk in this Congress. Even if such a bill were to pass, it is thought the President would veto the legislation anyway. However, Republican leaders have vowed to press their case by introducing targeted bills that would repeal certain provisions in the new law as well as restrict funding for implementation of the law. In fact, the first targeted legislation passed the Senate in early February by a landslide vote. This amendment repeals the provision in the health-reform bill that mandates that small businesses file a 1099 form for every vendor they pay $600 or more to in a given tax year.

Other Repeal Legislation and Hearings

In addition to the 1099 tax-reporting requirement, other aspects of the bill that are expected to be the subject of repeal efforts include the individual mandate for all Americans to purchase insurance, the employer "free rider fees," the medical-device tax on manufacturers, the Independent Payment Advisory Board, the Community Living Assistance Services and Supports (CLASS) Act program, and the expansion of Medicaid eligibility, which is expected to add 19 million Americans to the Medicaid program by 2019.

Indeed, legislation (HR 452) introduced by Rep. Phil Roe (R-TN) in the House on January 26 would seek to repeal a part of the health-reform law that created an Independent Payment Advisory Board (IPAB) with authority to cut Medicare payments to providers. IPAB is set to begin operations in 2014 and has been controversial from the start. Ironically, inclusion of IPAB in the health-reform bill was a requirement for the Blue Dog Democrats in the House who feared that health reform would cost more than the CBO forecasted. They held firm during last year's health-reform debate to create a new entity with "teeth" to regulate reimbursement rates for providers under Medicare. As a result of this provision's inclusion in the health-reform law, a significant number of Blue Dog Democrats ultimately voted for the bill.

In addition, House Republicans held two hearings in the final week of January to highlight what they see as unsustainable costs that will come from the Affordable Care Act (ACA), the formal name of the health-reform law. In a House Budget Committee hearing, Richard Foster, chief actuary at the Centers for Medicare & Medicaid Services (CMS), testified on the long-term costs facing Medicare and Medicaid. On the same day, the House Ways and Means Committee heard from Austan Goolsbee, chairman of the White House Council of Economic Advisers. Their testimony included financial outlooks that have been used by both supporters and opponents of the bills. To counter these, Senate Democrats followed these hearings with one in the Senate Health, Education, Labor, and Pensions Committee in which Health and Human Services (HHS) Secretary Kathleen Sebelius testified on the disruptive effects that repeal would have now that HHS has spent nearly a year implementing various health-reform provisions.

Medical-Device Excise Tax

One of the topics addressed in the January 26 hearing in the House Ways and Means Committee was the economic and regulatory burdens imposed by the new $20 billion tax on medical-device manufacturers and importers. The day before this hearing, House and Senate lawmakers introduced legislation to repeal this tax. These bills were introduced by Rep. Erik Paulsen (R-MN) and Sen. Orrin Hatch (R-UT), the new Ranking Member of the Senate Finance Committee. While it is likely the House will seek to move this legislation, the situation in the Senate is much less certain.

The final health-reform bill imposed an annual fee on medical-device manufacturers and importers beginning in 2013 that is projected to generate $20 billion over a seven-year period to offset the cost of expanding insurance coverage under the healthcare reform law. The extent of the tax was lowered from 2.9 percent to 2.3 percent annually in the final negotiations on the bill, but to offset this revenue reduction, the tax was extended to a larger set of manufacturers to include Class I medical devices. This means that this tax potentially applies to a significant number of manufacturers and importers of orthotics and prosthetics as well as durable medical equipment (DME). Certain devices were specifically exempted from the tax, including eyeglasses, contact lenses, hearing aids, and "any other medical device determined by the Secretary to be of a type which is generally purchased by the general public at retail for individual use." This is an important exemption that could apply to a wide variety of orthoses, primarily "soft goods" and medical supplies that are routinely sold in pharmacies. But this language and other aspects of the legislative language could be interpreted to exempt the majority of O&P care.

Impact of the Florida Court Decision Repealing Health Reform

The most lethal threat to emerge against the new healthcare-reform law may be the January 31 federal judicial ruling in Florida striking down the entire bill and ruling that the individual insurance mandate, an underpinning of the entire law, is unconstitutional. As a result, the court held that the entire bill is void due to the lack of a "severability" clause that would have allowed the remainder of the law to be implemented even if one provision of the law were to be struck down. Governors and attorneys general from 26 states, almost all Republican-led, joined the suit in Florida on the heels of the passage of the health-reform law.

The Florida Judge, Roger Vinson, stopped short of imposing an injunction on the Obama Administration to stop it from implementing the law on the grounds that an injunction was unnecessary. Vinson referenced a long-standing practice that federal agencies are obligated to comply with federal court decisions, and as such he asserted that health reform is void in 26 states and that the HHS Secretary must stop implementing the law in those states. This aspect of the judge's ruling has created tremendous confusion and is being interpreted in various ways. For instance, the Obama Administration intends to appeal the decision and continue implementing the law across the country unless and until the U.S. Supreme Court tells it otherwise.

Impact of the Court's Decision on the O&P Profession

If Vinson's decision is upheld at the Appellate Court and, ultimately, at the Supreme Court, the entire law (or only the individual mandate) could be struck down as unconstitutional. If the entire law is invalidated—a fairly unlikely outcome—there are a number of provisions in the law that impact O&P that would be thrown into disarray. For instance, many O&P providers are concerned about the impact of the changes in the health-reform law to the Medicare fee schedule. The health-reform law imposes a new modifier to the CPI-U annual inflation update known as the "productivity adjustment." This new factor resulted in a reduction of the already modest CPI for 2011, resulting in a 0.1 percent decrease in the fee schedule this year. If the entire law is held unconstitutional and therefore null and void, this modest decrease in the O&P fee schedule would no longer be valid. As a result, theoretically, the full CPI-U adjustment would apply retroactively without the decrease from the productivity adjustment. This assumes, of course, that Congress would not return to Medicare to re-impose similar cuts—which they likely would.

On the private insurance front, if the law is held invalid, insurance companies would be able to continue to use medical underwriting and current insurance tactics to limit and restrict coverage of O&P services and devices. Unless Congress intervenes, a dramatic expansion of coverage would not materialize, pre-existing condition exclusions would continue to be used, and people would lose access to the federally subsidized high-risk pools in the states. Lifetime and annual caps would once again be permissible, and a whole host of provisions that indirectly impact O&P would not take effect. The medical-device tax mentioned previously would also be null and void before going into effect. This would remove any chance that this new tax would apply to O&P manufacturers or any other device manufacturer.

Despite these recent developments, Administration officials have publically stated that they continue to pursue implementation of the health-reform law at a rapid pace. Proponents and opponents of the health-reform law can look forward to a protracted engagement on these issues well into the next election and probably well beyond.

Injured and Amputee Veterans Bill of Rights

There are increasing concerns that as the national spotlight moves away from those injured by the past decade of war, amputee veterans and others with war injuries will increasingly have problems accessing vital O&P care. HR 5428, the Injured and Amputee Veterans Bill of Rights, requires that every Department of Veterans Affairs (VA) O&P clinic post a list of rights stating that all veterans have access to the most appropriate technologies to meet their needs, have access to a private practitioner of their choice whether or not that practitioner has a VA contract, have the right to a second opinion by a VA physician or prosthetist/orthotist, have the right to receive comparable benefits throughout the country, and many other protections.

When the U.S. Senate adjourned in December at the end of the 111th Congress, consideration of HR 5428, which the House of Representatives had just passed, was left unfinished. The National Association for the Advancement of Orthotics and Prosthetics (NAAOP) expended enormous energy to get the Senate to pass the bill and was assisted by many other O&P organizations and individuals, but in the end there was not enough time to address the VA's concerns.

However, those efforts have cemented bipartisan support in both the House and Senate for addressing the problems raised by this bill. A number of key legislators have expressed interest in continuing to work on this issue in the 112th Congress. The chief sponsor of the bill, Congressman Bob Filner (D-CA), will no longer be Chairman of the House VA Committee, but he will remain as the Ranking Member of the committee. The Republican staff on the VA Committee has expressed interest in continuing to find a way to address the needs of injured and amputee veterans in the new Congress.

DME Competitive Bidding Program

Finally, on the regulatory front, DME competitive bidding began implementation on January 1, 2011. There are 356 suppliers that have Medicare contracts to provide certain medical equipment and supplies to beneficiaries in nine Metropolitan Statistical Areas (MSAs) across the United States at competitively bid rates. CMS' DME competitive bidding program aims to save Medicare and its beneficiaries nearly $28 billion over ten years, a huge fiscal number. CMS will achieve these savings through steep cuts in reimbursement rates, averaging 32 percent on the DME items selected under the program.

The nine MSAs are Charlotte, North Carolina; Cincinnati and Cleveland, Ohio; Dallas, Texas; Kansas City, Missouri and Kansas; Miami and Orlando, Florida; Pittsburgh, Pennsylvania; and Riverside, California. CMS accepted supplier bids from the nine regions on certain DME items in order to decide the competitively bid rate. The lower rates translate into lower copayments for beneficiaries (approximately $10 billion less over ten years).

Although orthotics and prosthetics are essentially exempted from the current competitive bidding program, CMS may accept bids for "off-the-shelf" orthotics in a future round of bidding. CMS is already beginning to work on Round II of the competitive bidding program, which, under the health-reform law, will be expanded to nearly 100 MSAs and implementation will be accelerated. If health reform is voided, these provisions may be voided as well.


Whatever the fate of healthcare reform, the next two years leading up to the presidential election will be one of the most active, yet unpredictable, times in our nation's history for the healthcare system as a whole and, as a result, for the O&P field as well.

Peter W. Thomas, JD, serves as general counsel for the National Association for the Advancement of Orthotics and Prosthetics (NAAOP). Adam R. Chrisney is a senior legislative director with Powers Pyles Sutter & Verville, Washington DC.

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