Committee Advances Reconciliation Recommendations

April 25, 2012

WASHINGTON, DC - The U.S. House Energy and Commerce Committee, chaired by Rep. Fred Upton (R-MI), today advanced reconciliation legislative recommendations required by the Fiscal Year 2013 Budget resolution.

”This reconciliation effort is designed to replace the blunt instrument known as the sequester included in the Budget Control Act,” said Chairman Upton. “Unless we propose more thoughtful savings, this sequester will cut discretionary spending indiscriminately while shielding the lion share of the government’s budget, mandatory spending, from reductions. These proposals will help avoid a draconic sequester that will harm our military capacity and achieve savings where they are needed the most - in our nation’s growing entitlement apparatus. I’m glad to report that the committee reconciliation recommendations will achieve over $114 billion in savings over the next decade and exceed the budget resolution’s instructions by $17 billion.”

The committee’s legislative recommendations are detailed below:

Title I

Repeal Prevention and Public Health Fund
The health care law created the “Prevention and Public Health Fund,” controlled by the Secretary of the Department of Health and Human Services, to provide billions of dollars in spending on public health programs over and above existing program authorizations. The law provides an advanced appropriation of $16 billion for the first ten years and a permanent $2 billion annual appropriation. The committee approved a proposal to repeal the fund and rescind unobligated funds.

Repeal Unlimited State Exchange Authority
The health care law provided the Secretary of HHS with an unlimited tap into the Federal Treasury without any further congressional approval for grants to states to facilitate exchanges. The committee approved a proposal to strike the unlimited direct appropriation and rescind unobligated funds.

Defund the CO-OP Program
The health care law created the “Consumer Operated and Oriented Plan” (CO-OP) program to provide government-subsidized loans to qualified non-profit health insurance plans and appropriated $6 billion for such loans, reduced to $3.8 billion in the FY11 CR. The President’s Office of Management and Budget (OMB) estimates of potential taxpayer losses and awards given to potentially unqualified entities have raised serious concerns about CO-OPs. The committee approved a proposal to rescind all unobligated funds made available to the CO-OP program in the health care law.

Title I was approved by a vote of 30 to 22.

Title II

Repeal the Medicaid Maintenance of Effort on States
The health care law imposes onerous eligibility restrictions on states called Maintenance of Effort (MOE) requirements. These restrictions prevent states from managing their enrollment in a way that meets the needs of their citizens, balances the budget, and makes commonsense modernizations to root out waste, fraud and abuse.  In 2011, for example, inadequate eligibility review cost taxpayers approximately $15 billion in improper payments under the Medicaid program. The committee approved a proposal to repeal the MOE and return flexibility to states.

Rebase the Disproportionate Share Hospital Allotment in Fiscal Year 2022
The health care law includes annual aggregate Disproportionate Share Hospital (DSH) allotment reductions for FY 2014 through FY 2020, but allotments revert to levels prior to passage of the health care law in FY 2021. The Middle Class Tax Relief and Job Creation Act of 2012 included a rebasing of DSH payments for FY 2021. The committee approved a proposal to rebase the FY 2022 allotments to maintain the FY 2021 level of reductions.

Repeal the Increased Federal Medicaid Funding Cap and Match Rate for Territories
The health care law increased the federal Medicaid match rate for the territories from 50 percent to 55 percent beginning in FY 2011. Additionally, the law increased the cap on federal Medicaid spending directed to the territories by $6.3 billion over ten years. The committee approved a proposal to restore both the increased Medicaid federal match and cap for the territories to the levels in place prior to the health care law.

Adjust the Provider Tax Threshold to 5.5 Percent
States are able to use revenues from health care provider taxes to help finance the state share of Medicaid expenditures. Under current law, states are limited to a provider tax threshold of no higher than six percent of the net patient service revenues. Until October 1, 2011, the threshold was 5.5 percent. The president’s FY 2013 budget proposal would have phased down the threshold to 3.5 percent. The committee approved a proposal to adjust the provider tax threshold back to its previous 5.5 percent level beginning in FY 2013.

Repeal of Bonus Payments for States for Increasing Their Medicaid Enrollment
The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) authorized “bonus” payments to states that increase their Medicaid enrollment above a defined baseline from the prior year only if the state implements eligibility verification criteria that run counter to the standards for program integrity in the Medicaid program. By providing bonus payments to states that implement oversimplified eligibility review procedures such as express lane eligibility and continuous eligibility periods, the bonus program weakens the integrity of Medicaid. The committee approved an amendment to repeal these “bonus” payments.

Title II was approved by a vote of 30 to 20.

Title III

Medical Liability Reform
The current broken medical liability system is one of the most significant cost drivers to our nation’s health care industry. Each year, it places a $200 billion burden on our nation’s health care system as a whole. The committee approved a proposal to implement medical liability legislation identical to previous legislation approved by the committee in 2011.

Title III was approved by a vote of 29 to 22.

###