February 15 , 2005

Medical Liability
US House panel holds hearing on medical liability.

Medical liability legislation introduced in the US Senate.
State News
Blue cross and blue shield reach six-year agreement.
Judiciary committee releases employer immunity bill.

Federal News
Class action measure passes in Senate.

Budgets proposed

Last week both the Federal and State Budgets were proposed by President Bush and Governor Rendell, respectively. Drastic cuts to Medicaid and other programs were outlined in each budget. Working with national and state advocacy groups, UPHS will participate in an advocacy campaign over the next several months working to avoid these devastating funding reductions.


The Governor's proposed budget calls for $580 million in cuts in the Department of Public Welfare (DPW) - with more than $380 million through hospital payment reductions; recipient benefit changes (including limits on inpatient admissions and outpatient visits), co-payments, prescription drug efficiencies, and capitated plan rate cuts. Payments that are targeted for cuts include outpatient disproportionate share, medical education, community access fund, uncompensated care, and the tobacco settlement for charity care patients. The Department of Public Welfare proposes for the first time to means test these supplemental or disproportionate payments to otherwise qualifying hospitals. This means testing will preclude payment to any hospital whose previous fiscal year's operating margin is one percent or greater.

Almost half of all Pennsylvania hospitals - including HUP and Pennsylvania Hospital, which previously qualified for such payments, would not receive any disproportionate payments for FY 2006. These payments are intended for those hospitals that treated a disproportionate level of Medicaid and charity care patients. We are in the process of determining the precise impact of the proposed payment cuts and benefit reductions on the Health System and our patients. It is clear that these cuts will have a devastating impact on patients, hospitals and the communities they serve across the Commonwealth.

In addition, the Governor also recommended restructuring the tobacco settlement and using funds from Blue Cross and Blue Shield plans to meet the increased demands for health care services for low-income and uninsured Pennsylvanians. Of obvious concern is that the restructuring of the tobacco funds could compromise research funding provided by the state.


On February 7th, President Bush introduced his fiscal year 2006 budget plan. His plan is being driven by a goal of cutting the federal deficit in half by fiscal year 2009. President Bush called for $60 Billion in Medicaid cuts over ten years through a series of Medicaid "reform" measure. These include further restrictions on a state's ability to increase federal financial participation, including continued scrutiny of intergovernmental transfers and upper payment limits as a means of drawing federal dollars into state programs.

Other key health-related areas in the President's budget include Nurse Education, Bioterrorism Preparedness, Health Information Technology, and Health Centers. The budget proposes $483 million in fiscal year 2006 in preparedness funding to continue progress toward having all states possess the necessary surge capacity plans in preparation for a possible emergency event. This figure is actually a reduction of $8 million from last year's budget. The President also requested a total of $150 million for nursing education programs, which increases support for basic nursing education and retention by $10 million. The administration will also seek to refine the inpatient hospital payment system and related provisions to ensure a more level playing field between specialty and acute-care hospitals.

In addition, the President requested $28.8 billion for the National Institutes of Health (NIH). This is only a 0.7% increase of $196 million over the current year's funding and far below the projected biomedical inflation rate of 3.5%. If enacted, it would be the first time since 1964 that NIH received an annual increase of less than 1%.
* If you have a specific area that you would like budget information about please contact the office.

Medical Liability
US House panel holds hearing on medical liability. The US House and Energy Committee Subcommittee on Health recently held a medical liability hearing that focused on testimony from patients, physicians, academics, the American Tort Reform Association and the Texas insurance commissioner. The discussions focused on caps on damages and pharmaceutical companies. We expect medical liability to again be an issue this session, however, we do not expect sweeping reforms to be enacted.

Medical liability legislation introduced in the US Senate. Earlier this month, Senators Judd Gregg and John Ensign introduced the Help, Efficient, Accessible, Low-Cost, Timely Healthcare Act. If enacted, the bill would cap non-economic damages in health care lawsuits at $250,000 and place restrictions on punitive damages; impose a three-year statue of limitations on the filing of health care lawsuits, with an exception of children under six, and limit attorney contingency fees based on a sliding scale. It is unlikely that there will be sufficient votes in the Senate to pass this bill.

State News
Blue cross and blue shield reach six-year agreement.
Last week Governor Rendell announced an agreement with the state's four Blue Cross and Blue Shield plans on community health reinvestment. The reinvestment is estimated to total $150 million and will be made solely within the plan's service areas. The agreement establishes a formula to calculate each plan's annual community reinvestment. Sixty percent of which will be used to subsidize adultBasic or other insurance or for low-income families and forty percent for other community health care related expenditures. The level of surpluses of the Blue Cross and Blue Shield plans have been under scrutiny for several years with consumer groups and other health advocacy groups claiming the plans had accumulated inappropriately high surpluses and the funds should be used for other health-related purposes. The agreement with the Governor does not significantly reduce those surpluses.

Judiciary committee releases employer immunity bill. The state Senate Judiciary Committee recently released SB 60, the employer immunity bill that was introduced by Senator Pat Vance (R-Cumberland). The bill would amend current law by providing for employer immunity from liability for disclosure of information about former or current employees as long as the employer is not intentionally giving out false information.

Federal News
Class action measure passes in Senate. Last week the US Senate easily passed legislation that shifts class action lawsuits from state to federal courts. The legislation applies to those class action suits where the defendant and any of the plaintiffs live in different states, and the total amount of the dispute exceeds $5 million. The House is expected to take up the measure this week without any changes to the bill. The expected enactment of this legislation is a key element of the President's overall liability reform initiative that also includes medical liability reform.

If you would like a copy the most recent listing of RFAs, notices, and program announcements relating to federal research funding opportunities prepared by the University Office of Government, Community and Public Affairs, please email Shelly at Kryciam@uphs.upenn.edu.

The Government Relations Weekly Update is provided by the
Office of Government Relations of the University of Pennsylvania Health System

Shelly Krycia or Alan N. Rosenberg
Government Relations Office
University of Pennsylvania Health System
2021 Penn Tower/4385
Phone: 215-349-5136
Fax: 215-662-3910

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