Washington Update

Senate Challenges Use of Military Benefits by For-Profit Colleges

Legislation | Permanent link

For the second time in two years, Congress is trying to close a loophole critics say is used by for-profit colleges to target veterans and the generous Department of Defense (DOD) tuition grants they receive. Federal law prohibits for-profit colleges from receiving more than 90% of their funding from federal financial aid programs that are part of Title IV of the Higher Education Act. But that figure does not include money from the Post-9/11 GI Bill or DOD tuition assistance programs. A Senate bill, the Protecting our Students and Taxpayers (POST) Act, and a similar House bill propose to drop the maximum to 85% — its original ratio until 1998 — and change the definition of federal revenue to include not just federal student aid from the Department of Education but all federal funding. According to Sen. Dick Durbin (D-IL), the second-ranking Democrat in the Senate and a bill sponsor, for-profit colleges received $32 billion in FY12 through Pell Grants and federally backed student loans. “The loophole makes service members and veterans prime targets of for-profit schools,” Durbin said on the Senate floor on November 8, the day he introduced the bill. “They are all over these service members and veterans to sign them up because they bring in more federal dollars,” he added, according to a report in CQ Roll Call. A two-year investigation by the Senate’s Health, Education, Labor and Pensions Committee found that for-profit colleges and universities sometimes engage in “aggressive” and “deceptive” recruiting practices, and that their students experience inflated tuition prices and high drop-out and default rates on their student loans, according to the CQ article. For-profit colleges enroll only about 12% of all college students yet account for almost half of student loan defaults, Durbin said in a press release issued on the day the bill was introduced. Supporters of the bill say lowering the maximum amount of federally funded tuition from 90% to 85% will help insure that for-profit colleges retain high enough standards to attract a student body where at least 15% of students cover the costs of tuition out of their own pockets and not through taxpayer-funded federal education grants. The Association of Private Sector Colleges and Universities, the trade group that represents the for-profit educational sector, says the government is already taking steps to curb predatory marketing to veterans and make sure that they choose schools that fit their needs. The group’s president, former Rep. Steve Gunderson, told a Senate hearing in June 2013 that there were poorly performing universities in every part of higher education, and that Congress was simply demonizing the private sector. The group has also said the change will make it harder for veterans to get the education they deserve.

Senate Approves the Children’s Hospital Graduate Medical Education Payment Program Reauthorization

Legislation | Permanent link

The Senate passed by unanimous consent legislation (S.1557) that would reauthorize funds for the Children’s Hospital Graduate Medical Education (CHGME) Payment Program through fiscal year 2018. The bipartisan Children’s Hospital GME Support Reauthorization Act of 2013 reauthorizes the program at $300 million annually. The House must approve the bill before it becomes law. The CHGME program supports graduate medical education (GME) programs at freestanding children’s hospitals. It is administered by the Health Resources and Services Administration (HRSA) and funded under the Public Health Service Act.

Calls for Continued Funding of the Prevention and Public Health Fund

Legislation | Permanent link

A national group of leaders from the cancer treatment, research and business communities has called on congressional budget leaders to continue to fund the Prevention and Public Health Fund at current levels, and not divert monies to other uses. The fund was established as part of the Affordable Care Act (ACA) to provide sustained national investments in prevention and public health. In a November 6 letter, 14 directors of National Cancer Institute-designated comprehensive cancer centers wrote budget and other congressional leaders asking that the federal government make “substantial, annual investments in prevention efforts to reduce the risk of cancer that are no less than their current level.” The 14 directors noted that 500,000 Americans will die of cancer in 2013, but that about half of those deaths could be prevented through better nutrition, more exercise and less smoking. The fund was cut by $6.25 billion over ten years beginning in 2012 in order to avoid cuts to Medicare payments and temporarily extend unemployment benefits. The letter asserted it was a “false choice” to claim that avoiding Medicare cuts and an extension of unemployment benefits could only come at the expense of cancer prevention, treatment and research funding. Recently, the fund has been the target of numerous attempts to defund it, primarily by House Republicans who are against the ACA; it has often been referred to as “low hanging fruit” because whenever there is a need to find a funding source in Congress it seems that this fund goes to the top of the list.

Accountable Care Organizations May be Required to Assume Some Financial Risk

Legislation | Permanent link

Accountable Care Organizations (ACOs) work by making a group of providers jointly accountable for their patients’ health across care settings. The model encourages care coordination to improve patient health and save money by avoiding unnecessary tests and procedures. The ACO model has gained the attention of some oral health care providers as a possible vehicle for delivery of care. ACOs represent a significant departure from the traditional fee-for-service payment model in which providers make money each time they charge for a service. Under the Affordable Care Act, ACOs can contract with Medicare to participate in Medicare Shared Savings Programs, which allow the ACOs to recoup money when they meet certain targeted savings goals. In a meeting in November, members of the Medicare Payment Advisory Commission, an independent congressional advisory agency on Medicare issues known as MedPAC, raised the question of whether ACOs should also accept some financial risk — and not just financial benefits — if they fail to meet those targets. Medicare’s current three-year ACO contracts, which begin to expire in 2015, are essentially risk free, and many MedPAC members say they now favor more use of a two-sided approach that would allow the ACOs to share in both potential monetary rewards and penalties, according to a November 7 report in CQ HealthBeat News. There are currently 252 ACOs, which provide health care to 4.1 million Medicare recipients. “Ultimately, these ACOs need to be accountable for delivering on outcomes including costs lower than fee-for-service,” CQ quoted MedPAC member Scott Armstrong of Group Health Cooperative in Seattle as saying. The MedPAC commissioners are going to consider whether they want to provide guidance for increasing the financial accountability of ACOs in their next report to Congress and the Centers for Medicare and Medicaid Services (CMS). Several MedPAC members nonetheless stressed that any move towards risk-sharing needed to be gradual, and wondered whether even greater financial incentives were needed to bring more ACOs into the Medicare fold. “We kind of need to make … fee-for-service less attractive, so that we keep moving forward,” said MedPAC Commissioner Craig Sammit of HealthCare Partners in Torrance, Calif.

Looking Forward—What’s on the Congressional Agenda

Legislation | Permanent link

In the coming weeks, Congress needs to replace the current Continuing Resolution (CR) (P.L. 113-46) that will expire on January 15. There is still movement around negotiating a deal to re-do the automatic spending cuts under sequestration. According to CQ HealthBeat News, Majority Leader Sen. Harry Reid (D-NV) declined to comment when asked whether he could support the fall-back option suggested by Speaker John Boehner (R-OH) if there is no conference committee deal. If no deal, another CR would lock in the scheduled sequester cuts, 5% across the board, for the rest of FY14. Sen. Chris Coons (D-DE) indicated that Democrats would likely accept a CR based on the sequester cuts if there is no other deal. “If the alternative is shutting the government down, we’ll fund the continuing operation of the government,” he said. Sen. Jeff Sessions (R-AL) said he would support a last-ditch CR at the sequester level, adding “We’ll have to. Absolutely.” Senate Appropriations Chair Barbara Mikulski (D-MD) was not receptive to the idea of a sequester-linked CR, saying “That’s a ship that you can float it, but it’s a ship that won’t sail.” Also, there is some momentum to raise the hourly minimum wage from $7.25 to $10.10. Sen. Tom Harkin has filed (S.1737) to initiate the debate. Sen. Susan Collins (R-ME) would like to raise the workweek threshold from 30 to 40 hours per week for workers covered by the employer mandate under the Affordable Care Act. Sen. Collins’ bill (S. 1188) is being seen as an alternative to the minimum wage bill. Now that the “nuclear option” has been exercised in the Senate, which removes the requirement to have a super-majority (60 votes) to confirm a judicial or executive nominee, the stage is set for the consideration of key nominees.  The Senate will consider three nominees to the D.C. Circuit Court of Appeals.  The D.C. Circuit Court has broad powers of review which include such matters as air and water rules, nuclear plant safety, insider trading and, of course, the Affordable Care Act. Also, up for consideration is Rep. Watt (D-NC) for the Federal Housing Finance Agency, Jeh Johnson for the Department of Homeland Security and Janet Yellen to lead the Federal Reserve. Lastly, on February 7, 2014, the U.S. government will hit the congressionally imposed debt ceiling limit again.  Therefore, if the suspension of the debt ceiling is not extended on or before the February date, the Treasury will have no room to borrow under standard operating procedures. If that should happen, the Treasury would have to begin employing extraordinary measures to allow continued borrowing for a limited time. The Congressional Budget Office (CBO) projects that those measures would probably be exhausted sometime in March 2014.

Shutdown Ends, but Potential Battles Loom Over the Debt Ceiling and Budget Negotiations

Legislation | Permanent link

On October 16, 2013, President Obama signed into law (H.R. 2775, Public Law 113-46) the Continuing Appropriations Act, 2014, to end the government shutdown and raise the debt ceiling. House Republicans were unable to achieve their goal of defunding or delaying the Affordable Care Act, but they won a victory in the agreement with a provision for stricter income monitoring of those seeking subsidies and tax credits under the ACA.

House Committee Investigates Health Exchange Implementation Glitches

Legislation | Permanent link

The House Energy and Commerce Committee held a hearing titled, “PPACA Implementation Failures: Didn’t Know or Didn’t Disclose?” on October 24 to investigate problems with the rollout of the federally run Health Insurance Marketplace website, www.healthcare.gov. In a press release, House Energy and Commerce Committee Chair Rep. Fred Upton (R-MI) stated, “Despite the widespread belief that the administration was not ready for the health law’s October 1 launch, top officials and lead IT contractors looked us in the eye and assured us all systems were a go,” adding, “The American people deserve to know what caused this mess.” The committee requested that U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius and the heads of two corporations contracted to help develop the government-run site appear to answer questions about how the site was tested prior to its launch and what those tests revealed. Secretary Sebelius declined to attend, provoking condemnation from committee members who pressed her to reconsider in a letter sent October 17. According to Reuters, House Republicans plan to use a series of oversight hearings to investigate other aspects of “Obamacare” as the Affordable Care Act is frequently called.

Gainful Employment Regulations Still on Administration’s Agenda

Legislation | Permanent link

The Obama Administration has indicated that it is toughening its regulation of for-profit colleges by taking another aim at drafting rules requiring vocational programs to prove that they are preparing students for “gainful employment.” The gainful employment issue encompasses for-profit colleges and non-degree career programs at public and private, nonprofit colleges. From 2009 to 2011, the administration debated with the for-profit education sector and its allies over proposals to crack down on programs that leave graduates with heavy debts that they are unable to repay. The Education Department issued a rule in 2011 that defined standards for loan repayment rates and the ratio of a graduate’s debt to income. Programs that failed the standards were in jeopardy of being disqualified from participation in federal student aid programs, which would essentially shut them down. But a federal judge in 2012 blocked major provisions of that rule, forcing the department to rethink its strategy. The latest draft includes standards for debt-to-earnings rates and other language that could generate significant debate (linked is a comparison of final rules compared to the previous rule in a PowerPoint). A chart prepared by the department indicated that 974 programs, or 9% of 11,359 nationwide, could be failing to meet the standards in the draft (click here for the data analysis PowerPoint). The gainful employment rule has been redrafted and the department has set a schedule for negotiations with representatives from for-profit colleges and others stakeholders. The first session was held September 9-11, 2013, and the second session was scheduled for October 21-22 but was cancelled due to the government shutdown. The next session will take place on November 18-20, 2013.

Debate Continues Over the Medical Device Tax

Legislation | Permanent link

The Affordable Care Act imposes a tax on medical devices; the idea is to levy new fees on various medical industries and, through the law’s expansion of Medicaid and federal tax credits, it would help low- to moderate-income people buy private insurance. The medical device tax has become very unpopular; it seems to have garnered bipartisan disdain and there is substantial support for its repeal. In fact, it was the focus of intense negotiations during the recent government shutdown.   The medical industry faces an uphill battle because opponents need to find a way to replace the approximately $30 billion in revenue that the 2.3% tax on device purchases is supposed to raise over the next 10 years. The 2.3% excise tax is on the sale of any taxable medical device by the manufacturer or importer of the device starting in 2013. The tax does not apply to eyeglasses, contact lenses, hearing aids, wheelchairs, or any other medical device that the public generally buys at retail for individual use. Sales for further manufacture or for export are also tax-exempt. The Internal Revenue Service (IRS) published proposed regulations in February 2012 and final regulations in December providing detailed guidance on how the tax will be applied. The IRS has also issued interim guidance for determining the price of a taxable device and providing transition relief from penalties for failure to pay the tax. If the tax is repealed, Congress will have to find another source of revenue to replace $30 billion, an almost insurmountable task. The medical device industry has fought this provision and has continued to oppose it, even after its cost was scaled back to about half of the original proposal. The Joint Committee on Taxation indicated that repealing the tax would undercut health reform in at least two ways. Pay-as-you-go procedures would require Congress to offset the cost of repeal by increasing other taxes or reducing spending; one likely target would be the provisions of the Affordable Care Act (ACA) that expand health coverage to 27 million more Americans. Also, repealing the tax would encourage efforts to repeal other revenue-raising provisions of the ACA, which in turn would either require still more painful offsets or increase the budget deficit (if Congress failed to offset the cost). Sen. Amy Klobuchar (D-MN), whose state is home to many medical device makers, indicated that repealing the tax will be part of negotiations to forge a budget agreement and part of the debate over how to restructure the tax code. With the next round of debt ceiling negotiations approaching, the medical device tax may again be the subject of much debate.

Senate Finance Committee Dives Into the Debate on Entitlements

Legislation | Permanent link

On October 10, 2013, the Senate Finance Committee held a hearing on “The Debt Limit.” You can access the video and testimony from the hearing here. Treasury Secretary Jacob J. Lew testified that changes to entitlement programs could result in savings of up to half a trillion dollars over the next decade. Some of the changes Lew mentioned included slower increases in Social Security payments and Medigap policies that cover less. Other changes might include higher Medicare Part B and Part D premiums and reduced reimbursements to hospitals for patients who do not pay their medical bills. The focus on entitlement programs will no doubt be the center of attention in any budget negotiations.

Duggan ad 2013