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February 9, 2006


February 9, 2006


President Bush Releases FY07 Budget
This week, President Bush released the Administration’s budget proposal for fiscal year 2007.  As expected, the Administration’s budget provides increases in defense, homeland security and physical science programs, while cutting or holding flat spending for programs of interest to the respiratory community.

The proposed budget also pays particular attention to restraining federal spending on entitlement programs.  The budget proposes trimming Medicare spending by $36 billion over five years and additional $13.5 billion cuts over five years to the Medicaid program.  It should be noted that several of the Administration’s proposed cuts to the Medicare and Medicaid programs were proposed last year and were ultimately rejected by Congress. 

Regarding the research and public health programs of interest to the respiratory community, the proposed budget flat funds NIH, while cutting CDC, EPA and VA research funding.  This budget represents the first time that the National Institutes of Health (NIH) did not receive a budget increase. 

Below is the funding chart for federal programs of interest to the pulmonary and critical care medicine community:

National Institutes of Health (NIH)
(in millions)

FY05 Actual
FY06 Estimated
FY07 Proposed
% change
- 0.71
NIH Total

Centers for Disease Control and Prevention (CDC)
(in millions)

FY05 Actual
FY06 Estimated
FY07 Proposed
% change
+ 9.08
Environmental Health
Chronic Disease Prevention
CDC Total

Veterans Affairs
(in millions)

FY05 Actual
FY06 Estimate
FY07 Proposed
% Change
VA Research

While the President’s proposal does represent an important starting point in the budget process, it is ultimately the job of Congress to determine funding levels for discretionary programs and the nature and scope of cuts to entitlement programs.   While most congressional observers expect FY07 will be a relatively austere year for federal spending, Congress will be hard pressed to enact the kind of cuts proposed by the Administration during an election year.


Congress Stops Cuts in Medicare Physician Payments
On February 1st, the U.S. House of Representatives passed the budget reconciliation bill (S.1323) by a vote of 216 to 214.  Included in the legislation is a provision establishing the Medicare physician update for 2006 at 0.0 percent.
On January 1, 2006, Medicare reimbursements for physician services were cut by 4.4 percent because of the flawed formula used to calculate the annual update.
With congressional action now complete, attention now moves to the President, who is expected to sign the bill into law this week. The Centers for Medicare and Medicaid Services (CMS) has indicated that it will begin processing claims at the 0.0 percent update two to three business days after the legislation is signed by the President.

The CMS also indicated that it will not require physicians to resubmit claims that have already been processed to receive the revised payment rate. Medicare carriers and fiscal intermediaries will automatically reprocess these claims, making the 4.4 percent adjustment. Pending enactment of the legislation, the CMS hopes to have all the claims reprocessed by July 2006 and expects to provide physicians with lump sum payment checks reflecting the revised payment rate.

While the passage of this legislation is welcome news for the physician community, doctors still face the prospect of further cuts in Medicare reimbursement starting in January 2007. To prevent this, the medical community will need to continue to encourage Congress to fix the underlying Medicare physician payment formula.

Congress Changes Payment Policy for Home Oxygen

The budget reconciliation legislation also includes a provision to change how Medicare pays for home oxygen services. Under current law, Medicare treats all home oxygen equipment as rental items and therefore reimburses beneficiaries for these systems on a monthly basis. 

The legislation passed by the House of Representatives would reclassify home oxygen systems as capped rental items, which means that after 36 months of payment, Medicare would stop making monthly reimbursements for the home oxygen system and transfer the title of the equipment to the beneficiary. While it is presumed that Medicare would continue to make payments for oxygen delivery and periodic maintenance, the legislative language on this issue is unclear. Moreover, if made, these payments will likely be far less than the current monthly Medicare payments.


ATS Comment During CASAC Meeting

Last week, ATS representative William Rom MD, Chair of the ATS Environmental Health Policy Committee, presented comments on behalf of the ATS during a meeting of the EPA Clean Air Scientific Advisory Committee (CASAC).  CASAC is a committee convened by the Environmental Protection Agency (EPA) to provide the agency with scientific analysis and recommendations on National Ambient Air Quality Standards (NAAQS) under the Clean Air Act. 

Earlier in 2005, CASAC concluded that existing standards for fine particle pollution (PM2.5) of 15µg/m3 for the annual average standard and 65 µg/m3 for the 24-hour standard not provide adequate protection.  CASAC recommended that EPA issue a revised strict standard in the range of 13 or 14 µg/m3 for the average annual standard and 30-35 µg/m3 for the 24-hour standard.  CASAC also recommended setting a national PM2.5-10 standard of 70µg/m3 average annual standard.

In December, the EPA essentially set aside the advice of the committee and proposed new NAAQS standards for fine particles (PM 2.5) and course particles (PM2.5-10) that were not within the range recommend by CASAC.  EPA proposed retaining the existing PM2.5 standard of 15µg/m3 and lowering the daily standard to 35µg/m3.  Additionally, the EPA proposed an urban-only standard for course particles of 70 µg/m3 average annual standard.  This represents the first time that EPA has not followed the recommendations of CASAC.

The purpose of the conference meeting was for CASAC to consider how it would respond to EPA’s action.  In his comments, Dr. Rom strongly urged that CASAC contact EPA and reiterates its support for a stricter standard for PM2.5 and a national standard for PM2.5-10. 

Senators Send Letter to EPA on Clean Air Standards

In a related story, nine Democratic Senators sent a letter to EPA Administrator Stephen Johnson expressing concern that the EPA-proposed standard ignored the recommendations of the Clean Air Scientific Advisory Committee (CASAC).  In the letter, the Senators express concern that EPA- proposed National Ambient Air Quality Standards (NAAQS) for fine and coarse particulate matter ignored the recommendations of CASAC.  The letter states, “Fine particle pollution kills people at levels below the existing standards.  We need to change these standards and heed the advice of our best and brightest scientific minds.  We need to let them tell us when the air is safe to breathe.�

Senators Joseph Lieberman (D-CT), Barbara Boxer (D-CA), Thomas Carper (D-DE), Hillary Clinton (D-NY), Frank Lautenberg (D-NJ), Barack Obama (D-Il), Russ Feingold (D-WI), Dianne Feinstein (D-CA) joined Senator Jeffords (I-VT) in the letter to EPA.

Points of Contact

Gary Ewart Senior Director, Government Relations
Nuala Moore Senior Legislative Representative
Joe Kirby DC Office Administrator