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109th Congress Adjourns: Maintains 4.3% O&P Medicare Payment Update

Before adjourning, the 109th Congress cleared a surprising number of health-related bills including several which impact the Medicare and Medicaid programs.


Most notable perhaps, was the massive tax and trade legislation which included in it a freeze in Medicare physician payments for 2007. Under the controversial SGR payment system, physicians were scheduled to receive a 5.0% payment cut in the coming year. The one-year fix also includes a 1.5% bonus payment beginning in July 2007 for those physicians who voluntarily submit data on quality measurements.

Of particular importance to NAAOP and the O&P profession, this legislation would not cut the O&P Medicare fee schedule and, therefore, O&P will maintain its 4.3% payment update in 2007.

The tax and trade legislation also included a one-year extension for the Deficient Reduction Act’s (DRA) therapy cap exception process. Under Medicare, therapy services are technically capped at a certain (and arbitrary) level; however the exception process allows beneficiaries requiring additional services to apply for exceptions to the cap. Additional provisions in the legislation include increases in Medicare dialysis payments, technical corrections to the 2005 DRA, and an extension of Transitional Medical Assistance (TMA) for low-income families transitioning off of Medicaid.

Some of the costs of these provisions are offset by using the 2003 Medicare Modernization Act’s (MMA) “stabilization fund,” originally set up to entice insurance companies to participate in the Medicare prescription drug program. Other cost-saving provisions include a recovery and audit program to identify and collect on inaccurate Medicare overpayments and a reduction in the Medicaid provider taxes ceiling from 6.0% to 5.5%. States often find some Medicaid revenues from taxing hospitals, nursing homes, managed care organizations, and other health care providers. This provider tax provision preempts the Administration’s expected regulations that would have reduced the provider tax limit to 3.0%, severely impacting states’ Medicaid budgets.


Although the final hours of the 109th Congress were extremely busy, many pieces of legislation were left unfinished including the fiscal year (FY) 2007 Labor-HHS-Education appropriations bill. The 109th Congress postponed action on this, and eight other spending bills, by passing a continuing resolution (CR) into February, 2007. However, on Monday, December 11th, incoming House and Senate Appropriations Chairmen David Obey (D-WI) and Robert Byrd (D-WV) stated that they will attempt to pass a CR for the remainder of the FY 2007 appropriations cycle, which ends September 30, 2007. The year-long continuing resolution, if enacted, would essentially freeze program spending at FY 2006 levels until FY 2008.

NIH/SCHIP Legislation:

Another last-minute legislative package set to be enacted, would impact HIV/AID funding, the National Institutes of Health (NIH), and State Children’s Health Insurance Programs (SCHIP). Among the top priorities of outgoing House Energy and Commerce Committee Chairman, Joe Barton (R-TX), was reauthorization legislation for the NIH. Chairman Barton’s NIH reauthorization bill will significantly restructure the agency and create a common fund to be used for cross-cutting research between centers. Meanwhile, last week Senate HELP Committee Chairman Michael Enzi (R-WY) and Ranking Member Edward Kennedy (D-MA) were pushing the House to clear the Senate-passed Ryan White Care Act Reauthorization legislation which provides funding for low-income individuals with HIV/AIDS. And, HELP Bioterrorism and Public Health Preparedness Subcommittee Chairman, Richard Burr (R-NC), was also pushing the House to pass his Senate-approved reauthorization of the 2001 bioterrorism law.

The four lawmakers crafted a deal during the 109th Congress’ final hours that combined the three bills. However, as part of the deal in the Senate, lawmakers attached a provision which allowed for redistribution of surplus 2004 and some 2005 State Children’s Health Insurance Plans (SCHIP) funding (which were set to expire) to states with SCHIP shortfalls in 2007. The legislation was approved by both Chambers just prior to adjournment and now heads to the President for his signature.


The Medicare physician payment freeze, included in the recent tax and trade legislation, proved extremely important to NAAOP members, as O&P will now receive a 4.3% update in calendar year 2007. However, Medicare provider payment rates, as well as many other important Medicare and Medicaid issues, are likely to be debated again in the 110th Congress, set to convene on January 4, 2007.

We will keep you updated as developments occur.

Compiled by Peter W. Thomas, NAAOP General Counsel Emily A. Niederman, Legislative Director, Powers, Pyles, Sutter & Verville


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