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Reform Update: Government funding deal negotiations continue, with device tax in the mix


By Jessica Zigmond
Posted: October 11, 2013 - 3:45 pm ET
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As the government shutdown nears its second full week, members of Congress and the White House intensified their efforts around a deal to fund the government, with at least one part of the healthcare reform law still in play in those negotiations.

On Friday, President Barack Obama met with Senate Republicans at the White House. That meeting came a day after Obama met with House Republicans, which did not produce a deal to re-open the government, fund government operations or raise the nation's debt ceiling.

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At deadline, the White House press office had not responded to a Modern Healthcare request for comment about the discussions. Rumors surfaced late last week that Senate Republicans were considering a deal that called for a one-year spending bill at sequestration levels, a temporary extension for the debt ceiling, and a two-year delay of the medical device tax.

There have been repeated calls for an outright repeal of the 2.3% excise tax on sales of medical devices in the stalled budget negotiations, including a proposal from Sen. Susan Collins (R-Maine) this week that would fund the government for six months. The tax is projected to raise nearly $30 billion over 10 years to pay for the law's coverage expansion and other provisions.

"I do think it has traction," Jodie Curtis, senior government relations director at Drinker Biddle & Reath, said of Collins's proposal. "I think it is being talked about among Senate Republicans.” She said Sens. Lisa Murkowski (R-Alaska) and Kelly Ayotte (R-N.H.) have endorsed it. But it hinges, she said, on whether the White House is willing to have any part of the Patient Protection and Affordable Care Act included in the negotiations to re-open the government and raise the nation's debt ceiling.

The White House has said repeatedly that Obama won't consider any changes to the Affordable Care Act in negotiations to re-open the government or raise the nation's debt ceiling. But the administration has signaled it is open to discussing changes in the ACA in conversations not tied to those fiscal hurdles.

Curtis highlighted that repealing the device tax wouldn't fundamentally change the structure of the law. Others note, however, that a repeal would blow a significant hole in the law's funding and likely encourage other powerful healthcare interest groups, including hospitals, insurers and drugmakers, to seek reductions or repeal of their funding contributions.

"It was a way to raise money to fund the ACA, so in that way it influences the ACA," Curtis said. "But it's not like shutting down the exchanges or overturning the individual mandate. Now if everybody gets a repeal, then you've got a real problem because that's the money coming in to pay for the ACA."

Exchanges will be 'modestly negative' to not-for-profit hospitals, Moody's says

A new report from Moody's Investors Service found that the ACA's health insurance exchanges will be "modestly negative" to the credit quality of not-for-profit hospitals in 2014. "There are several exchange-related risks that will pressure hospitals' revenues in 2014, modestly tipping the credit scales away from the upside benefit of more insured individuals," the report said. "These risks include the migration of commercially insured patients to exchange-insured patients with anticipated lower reimbursement rates, uncertain terms and contracts between exchange plans and hospitals as well as expected growth in bad debt," it added.

MACPAC cancels Oct. meeting due to government shutdown

Because of the government shutdown, the Medicaid and CHIP Payment and Access Commission, or MACPAC, announced this week that it has canceled its meeting scheduled for Oct. 17. The group's next public meeting will be held Nov. 14-15.

Follow Jessica Zigmond on Twitter: @MHjzigmond


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