Government Relations Update – November 16, 2010

State Issues

Legislation

• S.B. 1280: Extension of the Mcare Act. The Medical Care Availability and Reduction of Error Fund (Mcare) was created by Act 13 of 2002 and signed into law on March 20, 2002. As previously reported, Act 13 requires the Pennsylvania Insurance Commissioner to make a determination by July 2011 whether to implement the first of two steps leading to the retirement of the Mcare Fund based upon a review of the private market’s ability to bear increased primary limits. On September 29, 2010, the Pennsylvania Senate approved a bill to delay the Commissioner’s determination regarding a phase out of the Mcare Fund until 2018. October 5, 2010, the bill passed in the Pennsylvania House. Legislators supporting the delay assert that the extension is necessary to develop a plan to pay for claims arising during the period of Mcare coverage but filed after cessation of Mcare coverage. Despite pressure from Pennsylvania trial lawyers, Governor Rendell vetoed the bill on October 22, 2010. HAP and the Pennsylvania Medical Society praised the Governor’s veto, since they support the earlier phase out of Mcare. This issue will likely be renewed next year under the new administration.

Miscellaneous

• Election Update: All 203 Pennsylvania Representatives and half of the Pennsylvania Senators were elected or reelected on November 2, 2010. Representatives Brennan (D-Lehigh, Northampton ), Day (R-Berks, Lehigh), Freeman (D-Northampton) and Reichley (R-Berks, Lehigh) were reelected to their seats despite opposition. Representatives Hahn (R-Northampton), Harhart (R-Lehigh, Northampton ), Mann (D-Lehigh) and Samuelson (D-Lehigh, Northampton ) did not face opposition in their reelection efforts. Representative Grucela (D-Northampton) did not seek reelection, and his seat was secured by Republican Joe Emrick. Mr. Emrick is a school teacher and a former Upper Nazareth and Salisbury Township Supervisor. Representative Beyer (R-Lehigh, Northampton ) lost in the May primary election, and her seat was won by Republican Justin Simmons. Mr. Simmons is a former staff member for both Senator Wonderling and Senator Mensch. He recently graduated from St. Joseph ’s University. Pennsylvania’s Attorney General Tom Corbett will be Pennsylvania ’s 46^th Governor after successfully defeating Allegheny County Executive Don Onorato for the position by a margin of 54.5% to 45.5%. Mr. Onorato only won a majority of the vote in four of Pennsylvania ’s 67 counties. Bucks County Commissioner Jim Cawley will serve as the Lt. Governor, a role that includes serving as President of the Senate. Both the Governor and the Lt. Governor will be sworn into office on January 18, 2011. For the first time since 2002, the Pennsylvania House, the Pennsylvania Senate and the Governor’s office will be controlled by the Republicans. HAP has urged Republican House leaders to address tort reform immediately.
• Republican House Reorganization: On November 9, 2010, House Republicans reorganized and elected new members to leadership. Representative Sam Smith (R-Armstrong , Indiana , Jefferson) was nominated as Speaker, and Representative Mike Turzai (R-Allegheny) was elected as the incoming House Majority leader. Other leadership positions elected on the same day include Majority Whip, Appropriations Chair, Caucus Chair, Policy Chair, Caucus Administrator, and Caucus Secretary. All positions will take effect on December 1, 2010, except Speaker. Representative Smith must be formally elected as Speaker by the entire House on January 4, 2011. House Democrats are expected to hold their leadership elections during the week of November 15, 2010. Representative Jennifer Mann (D-Lehigh) is one of four candidates seeking the Minority Whip position. Representative Mann currently serves in leadership as the Caucus Secretary and is the first woman since 1963 to be a member of the House Democratic leadership team.

Federal Issues

Advocacy

• President Obama’s Fiscal Commission: On February 18, 2010, President Obama created the National Commission on Fiscal Responsibility by executive order. The eighteen member commission is led by former Senator Alan Simpson (R-WY) and Erskine Bowles, former White House Chief of Staff for President Clinton. The commission is charged with addressing the nation’s fiscal challenges and identifying policies for improvement. On November 10, 2010, the co-chairs released draft recommendations, which included cuts to domestic and military spending, an increase to the Federal gasoline tax, elimination of certain tax breaks and an increase in the retirement age for social security. The proposal also calls for reductions in federal spending on graduate and indirect medical education, and elimination of the Medicare bad debt program, which provides additional funding to hospitals treating seniors unable to pay their bills. The plan recommends reductions to the Medicare Advantage program and decreased disproportionate share payments to hospitals. The commission asserts that these recommendations will reduce the federal deficit by nearly $4 trillion over the next decade. In response, the American Hospital Association (AHA) expressed concerns about additional Medicare payment cuts, since hospitals already face $155 billion in reduced funding through the recent Federal health care reform legislation. Speaker Pelosi called the proposal unacceptable and criticized the proposed reductions to Medicare and Medicaid providers. Republicans reacted cautiously to the proposal and negatively to the proposed elimination of the mortgage interest tax deduction and the child tax credit. The report must be approved by 14 of the 18 commission members in order to be presented to Congress.
• 2011 Medicare Physician Fee Schedule: On November 2, 2010, the Centers for Medicare & Medicaid Services (CMS) issued a final rule updating payment policies and rates under the Medicare Physician Fee Schedule (MPFS) for services furnished in 2011. The final rule addresses a number of provisions of the Patient Protection and Affordable Care Act of 2010, such as coverage for mammographies, colonoscopies and certain other preventive services without patient co-pays. The final rule also reduces physician payments by 23% on December 1, 2010 and by an additional 2% on January 1, 2011. These payment reductions are scheduled pursuant to the sustainable growth rate (SGR) formula and have been avoided through Congressional intervention since 2002. Without legislative action, St. Luke’s will experience an estimated annual payment reduction of $6.2 million. It is unclear whether Congress will intervene.

Miscellaneous

• Election Update: Republican Pat Toomey defeated Democrat Joe Sestak to become the junior United States Senator from Pennsylvania by a margin of 51% to 49%. Senator-elect Toomey served as a member of the U.S. House from 1999 to 2005 and ran unsuccessfully for U.S. Senate in 2004. From 2005 until 2009, Senator-elect Toomey served as the President of the Club for Growth, a Washington , D.C. based advocacy group promoting limited government principles. Senator-elect Toomey succeeds Senator Arlen Specter (D-PA), who lost the May primary to Mr. Sestak after serving as a U.S. Senator since 1980. Senator-elect Toomey’s victory represents one of six wins nationwide for Republicans in the Senate. The Senate of the 112^th Congress will include 51 Democrats, 47 Republicans and two independents caucusing with the Democrats. Democrats previously held 57 seats, and the Republicans had 41 members. The swearing in ceremony for the Senate is scheduled for January 3, 2011. Congressmen Dent (R-15) and Holden (D-17) were reelected to Congress, while Congressman Murphy (D-8), was unsuccessful in his pursuit of a third term. Republican Mike Fitzpatrick defeated Congressman Murphy by a margin of 126,404 to 109,157 votes and recovered the seat he held from 2005 to 2007. Five Congressional seats switched from Democrat to Republican in Pennsylvania , tying New York and Ohio for the most gains in one state. Although a few races are still being tallied, the most recent estimates show Republicans now controlling about 239 seats and Democrats holding about 196 seats, representing a swing of 61 seats in favor of the Republicans. Members of Congress will be sworn into office on January 3, 2011.