Medical Device Daily Washington Editor

Healthcare financing continues to be a source of controversy on Capitol Hill, and this week's recent passage of a bill to increase funding for the Children's Health Insurance Program (CHIP) has drawn fire from several quarters, including operators of skilled nursing facilities (SNFs).

The House of Representatives passed the Children's Health and Medicare Protection Act of 2007 (CHAMP Act) on Wednesday by a vote of 225-204, largely along party lines, and the White House is promising to veto any CHIP reauthorization that it sees as likely to pull children from private healthcare coverage to public plans.

The House bill would boost CHIP funding by almost $48 billion over the next five years, nearly tripling the current annual outlay. However, projections of the House bill suggest that it would not even double the number of children covered, increasing that number from the current six million to just 11 million.

The current annual federal outlay for CHIP is $5 billion, and the White House has proposed doubling that amount for the next five-year authorization, and opposing use of the program to insure adults.

Fiscal conservatives charge that many states aren't restrictive enough in their use of CHIP funds, too often using them often to insure adults. By some accounts, the state of Minnesota puts 87% of its CHIP monies toward insuring those over the age of 18.

According to a Congressional Budget Office (CBO) analysis, The House bill does not allocate monies for auditing requirements to establish citizenship status of recipients, but it does put monies into reversing the cuts to doctors' fees under Medicare Part B that are mandated by the sustainable growth rate (SGR) mechanism, which came into play as an act of Congress. While the SGR mechanism would have trimmed 5% from the amount paid to docs under Part B in FY06 and FY07, Congress has reversed field each time, allocating monies to offset the SGR cuts.

One of the elements that both the House and Senate bills have in common is an increase in the tax on tobacco products to fund CHIP. The House bill would boost cigarette tax by $.45 a pack while the Senate version would nearly triple the tax, from $.39 per pack to $1.

But any large increase has been seen as resulting in smaller revenues than anticipated because serving to reduce cigarette consumption. A statement on the web site of the American Medical Association (AMA; Washington) that addresses the CHAMP Act underscores this possibility. The statement includes a passage saying that the bill "increases the federal taxes on tobacco, which, studies show, will reduce smoking."

AMA lauded the bill's reduction of "subsidies" to Medicare Advantage (MA) plans, which have also been controversial on Capitol Hill.

Pete Stark, (D-California), has taken aim squarely at MA plans in hearings in the House Ways and Means Committee's health subcommittee. In a March 21 hearing, AHIP's president/CEO, Karen Ignagni, said that a bill sponsored by Stark would disproportionately affect minorities, but Stark accused Ignagni of "lying [and] using false information" to make her case.

For its part, America's Health Insurance Plans (AHIP; Washington) decried the cuts to MA plans as having a "devastating impact on seniors' health security," and projecting that three million Medicare beneficiaries would have to enroll in plans that would cut benefits and increase out-of-pocket costs.

AHIP's web site also states that Ken Thorpe, formerly a senior healthcare advisor in the Clinton administration, estimated that 3.2 million seniors would lose MA coverage and that MA plans would no longer be available in 22 states.

Thorpe is said to have also made the point that disenrolled seniors would end up in plans with fewer benefits and higher co-pays.

The Senate Finance Committee approved its version of the CHIP reauthorization by a vote of 17-4 recently, but while that bill, the Children's Health Insurance Program Reauthorization Act of 2007 is on the legislative calendar, it has not yet hit the Senate floor for a vote. CHIPRA boosts the ceiling on eligibility to children from families making twice the federal poverty level to those in families making three times the poverty line.

The passage of the House bill drew immediate fire from several organizations, including the American Health Care Association (AHCA; Washington), which issued a statement earlier this week in which the organization's President/CEO Bruce Yarwood said, "In its current form, the CHAMP Act is highly detrimental to the long-term care needs of 'America's Greatest Generation' as well as future generations — contrary to the claims being made by its proponents."

Yarwood said that cutting SNF funding by "$2.7 billion over five years is the wrong way to finance the broader objectives of the legislation — and seniors in the states most negatively impacted deserve answers as to why their care has been singled out for the highest level of budget cuts."

Ken Pree, director of government relations at AHCA, told Medical Device Daily that the recently reported CMS update for skilled nursing facilities is "the largest annual update in dollar figures we've ever got," but that the House bill "will take away nearly all that for fiscal 2008." He said that the bill suggests a "disconnect between CMS and Congress."

Pree said that the Senate's approach to boosting CHIP funding is financed entirely by a tax increase on tobacco products. As to reduced funding for SNFs in the House bill, he said, "we have a very good chance of getting out of the bill that comes out of conference."

In the past, "we have always been able to link quality care to funding," he said, calling that an argument "that has always played better in the Senate."

CMS announced on Tuesday an update for the payment schedule for SNFS for 2008, projecting that the proposed 3.3% increase will come to about $690 million, an amount that will drop by more than $500 million should the House financing mechanism for CHIP prevail over that of the Senate.

According to the CMS statement, the final rule is intended to "to reflect data from fiscal year 2004" whereas the previous update was based on data from seven years earlier. The new rate is also said to "include a special adjustment made to cover the additional services required by nursing home residents with HIV/AIDs."

Herb Kuhn, acting deputy director at CMS, said in a statement that the new payment schedule "will enable nursing homes and Medicare to continue to move forward in providing quality services for patients who need post-acute care" and "demonstrates our commitment to ensure that Medicare is affordable for current beneficiaries and is sustained for future generations by paying accurately and efficiently."

Under the prospective payment system for skilled nursing facilities, CMS pays a daily rate for patients that, based on a variety of factors, including land, building and equipment in addition to medical supplies, therapies, drugs and lab services. While this mix of costs — the so-called market basket — is measured annually, the agency does not adjust the prospective payment amount each year.

Earlier this week, CMS also published payment schedules for inpatient rehabilitation facilities and for hospital inpatient services, both for FY08.