July 2005 • Vol. 1, No. 2
	Advancing Orthotic and Prosthetic Care Through Knowledge

NAAOP Government Relations Update

The budget resolution moving through Congress right now could have a serious impact on professional orthotic and prosthetic care. The budget debate could set the stage for a legislative showdown this summer and fall on Medicaid and Medicare payments. This could have a chilling impact on state Medicaid programs that provide health care, as well as some O&P services, to low-income beneficiaries. Medicare reforms might be on the table as well with lawmakers poised to hold down Medicare spending, possibly by continuing the “freeze” on Medicare O&P payments.

Medicaid, Possibly Medicare, Slated for Significant Cuts in FY 2006 Budget

President Bush released his fiscal year (FY) 2006 Budget Proposal on February 7, 2005, which proposed a net decrease in federal spending on Medicaid of $45 billion (gross $60 billion). His budget did not propose spending cuts for Medicare. Congress, which passes its own version of a budget to set spending priorities for the next fiscal year, is preparing to pass a budget resolution that does not go as far as the President’s proposal on Medicaid, but will still likely contain some cuts to entitlement programs. Politically, Medicare was “off-the-table” for cuts at the beginning of the budget debate. However, this may not be the case anymore as lawmakers appear to be considering Medicare changes in a “reconciliation” bill. Reconciliation bills are required if a Congressional budget resolution mandates cuts to entitlement programs, such as Medicare and Medicaid, and are not subject to the filibuster’s 60-vote threshold. Thus they can pass with a simple majority vote.

Although House and Senate leaders have not agreed on a final budget resolution at the time of this writing, it is anticipated to contain reconciliation instructions for congressional committees with jurisdiction over Medicaid and Medicare at approximately $10 billion and $7 billion, respectively. Medicaid cuts will very likely be a top priority of the House Energy and Commerce Committee and the Senate Finance Committee.

Although the cuts are not directly related to O&P services, these reductions in payments to states and other revenue saving measures will impact “optional” Medicaid services that are not mandated by the federal statute. O&P is an “optional benefit” and, therefore, could be subject to reductions in payment, scope of coverage, or, conceivably, elimination as Medicaid programs lose funding. Already states are slashing optional services; Missouri, in fact, just eliminated O&P services from its Medicaid program, only to add prosthetics back in subsequent proposals.

Although the Bush Administration has requested that Congress not make changes to the Medicare prescription drug benefit this year, Medicare provider payments may be subject to additional legislative action through the reconciliation process as the House Ways and Means and Senate Finance Committees search for ways to reduce spending and increase payments to some providers who are slated to be cut in 2006. With $7 billion in reconciliation instructions, it is looking even more likely that some part of Medicare will have to be cut to increase payments for others. Among the most expensive items they would like to include in a Medicare package would be the elimination of a scheduled 4.3-percent reduction in physician payments and an extension of the moratorium on caps on physical, occupational, and speech therapy. As a result, House and Senate leaders will be searching for sources of revenue to finance these costly items. This could mean that later this year the O&P field may be fighting extensions of the freezes in the Medicare O&P fee schedule and, potentially, an acceleration and/or expansion of competitive bidding.

Written by Peter W. Thomas, Esq., NAAOP General Counsel and Dustin W.C. May, Legislative Director, Powers, Pyles, Sutter & Verville, P.C.