June 15, 2007

Headline

CBO Report Analyzes Increase in Medicare Physician Spending

Last week, the Congressional Budget Office – the non-partisan budget policy and analysis arm of Congress – released a report that analyzed the increases in Medicare spending on physician services. The key finding of the report is that growth in Medicare physician spending is not driven by “behavioral response.” Behavioral response describes the phenomena where physicians intentionally increase the volume and intensity of services provided to offset revenue losses from cuts to reimbursement.

The report finding should help bolster the physician community effort to replace the Medicare Sustainable Growth Rate (SGR) formula which is driving cuts in Medicare physician reimbursement. Without Congressional action, Medicare payments to physicians is projected to be cut by 10% starting January 1, 2008

The CBO report found that from 1998 to 2005 – when SGR was implemented – Medicare spending on physician services has grown 79.2. When adjusted for medical inflation, that growth was reduced to 34.5 percent. CBO further analyzed the 34.5 percent growth and determined that only 1.4 percent was explained by behavioral response. CBO found that the growth in spending was driven largely by increases in the volume and intensity of services provided to Medicare beneficiaries. The volume and intensity growth was explained by changes in the Medicare population, disease prevalence, introduction of new benefits, and new technology over the period.

Prior to this report, many Congressional policy analyst felt that growth Medicare reimbursement was driven by the behavioral response and the physicians should not be rewarded for behavioral response driven growth in Medicare spending with higher payment rates. The report clearly demonstrates that increases in Medicare spending are being driven by secular trends in the patient population, not by physician driven demand.

Research

The Senate Military Construction/VA Appropriations Subcommittee this week marked up their version of the FY08 VA appropriations bill – providing $500.0 million for VA research. This represents an increase of $86 million over FY07 (not including the $32.5 million VA research got in the Iraq Supplemental Appropriations bill). The bill will now go to the full Senate Appropriations Committee for action.

The Senate Military Construction/VA Appropriations Subcommittee this week marked up their version of the FY08 VA appropriations bill – providing $500.0 million for VA research. This represents an increase of $86 million over FY07 (not including the $32.5 million VA research got in the Iraq Supplemental Appropriations bill). The bill will now go to the full Senate Appropriations Committee for action.

Last week, the House took parallel action providing $480.0 million (+$66 million). It appears that the VA research program is poised to receive its first significant increase in funding in several years.

While the committee action in the House and Senate is encouraging, President Bush has indicated that he will veto appropriations bills that exceed his spending limits. It this point in the process it remains unclear how Congress and the President will resolve the potential impasse over federal spending.

The ATS Washington Office will continue to advocate in Congress and the Administration for significant increases in the VA research program.

The Senate Appropriations Committee has begun work on the Fiscal Year 2008 Labor-Health and Human Services and Education (HHS) Appropriations bill. The Labor-HHS Appropriations Subcommittee is currently drafting the bill and is expected to vote on it in the near future. The bill provides annual appropriations for biomedical research at the National Institutes of Health (NIH) and for other programs in the Public Health Service. ATS is requesting that the bill provide a 6.7% funding increase for the NIH. ATS members are asked to contact their two Senators to request their support.

A 6.7% funding increase for NIH would halt the erosion of the nation’s medical research enterprise, and enable investigators to accelerate the momentum of discovery for conditions like asthma, tuberculosis, and chronic obstructive pulmonary disease.

Pediatric Lung Health

Legislation reauthorizing two key laws that have together successfully increased the number of pediatric clinical drug trials is advancing in the House. The Best Pharmaceuticals for Children Act and the Pediatric Research Equity Act, H.R. 2589, sponsored by Rep. Eshoo (D-CA), reauthorizes the Food and Drug Administration’s (FDA) pediatric drug incentive program, which grants manufacturers of drugs being tested for children an additional period of patent exclusivity. Since enactment of the BPCA and in the late 1990’s, pediatric clinical trials have been completed in over 130 drugs and 115 drug labels have been changed to incorporate new pediatric information. Prior to enactment of this legislation, most drugs were not being tested for use in children.

The House Health subcommittee is scheduled to consider the pediatric drug testing bill this week. The ATS joined with the American Academy of Pediatrics in sending a letter to the Chair of the Health Subcommittee, Rep. Pallone (D-NJ), supporting the measure, particularly maintenance of the patent exclusivity provision, as included in the version of the bill passed by the Senate last month. The Senate pediatric drug testing bill passed the Senate, along with the pediatric medical device bill, as part of a broad FDA reform bill on May 9th.

Tuberculosis

The Foreign Operations Subcommittee of the House Appropriations Committee approved the Fiscal Year 2008 spending bill for the State Department and all foreign operations. The bill includes a funding level of $100 million for global tuberculosis control activities through the U.S. Agency for International Development (USAID), a $10 million increase over last years funding. The bill is expected to be considered by the full House of Representatives in July. The Senate Foreign Operations Subcommittee will begin consideration of its version of the state department and foreign operations bill within the next week.

Clean Air

This week, the House Appropriations Subcommittee reported its version of the FY08 Interior and Environment Appropriations bill which provides funding for the Environmental Protection Agency (EPA). The Subcommittee provided $8.085 billion for the EPA, an increase of $360 million over last year. While providing increases for the overall budget, air-quality related programs generally received modest cuts or increases.

This week, the House Appropriations Subcommittee reported its version of the FY08 Interior and Environment Appropriations bill which provides funding for the Environmental Protection Agency (EPA). The Subcommittee provided $8.085 billion for the EPA, an increase of $360 million over last year. While providing increases for the overall budget, air-quality related programs generally received modest cuts or increases.

The House bill does provide $50 million for a new Commission on Climate Change Adaptation and Mitigation. In creating the commission, the subcommittee accepts as fact that climate change is occurring and that government must respond to the trend. In describing the mission of the commission, the committee notes;

“It is important to understand that the new Commission established in this bill is not charged with studying the question of whether climate change is occurring or at what rate. Nor is it a Commission to determine the causes of global warming or regulatory approaches to ameliorate these causes. Its charter is limited to making recommendations on the science questions that need to be addressed and the initial steps which should be taken to begin serious research related to those questions.”

The Senate has yet to consider its version of the FY08 Interior and Environment Appropriations bill.

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