January 2007 brought a sea change to Washington. New Democratic majorities in both the Senate and the House will result in significantly different healthcare policies and priorities over the next two years. California Congressman Pete Stark, the author of the Stark Act restrictions on physician referrals, now chairs the the House Ways and Means Health Subcommittee. Massachusetts Senator Ted Kennedy, chief advocate of a single payor delivery system, now chairs the Senate Committee on Health, Education, Labor & Pensions. Already, House Democrats have passed significant new legislation on federal funding of stem cell research and negotiation of drug prices for the Medicare Prescription Drug Plan. Healthcare providers are likely to see changes in the following areas as a result of the new Democratic majorities: 1) End of a Shift to Privatizing Components of Medicare Many Democrats have been critical of the role of insurance companies in the Medicare Prescription Drug Program. While Republicans have argued that competition among insurers and consumer choice are good for the program, Democrats prefer a governmental system with more limited alternatives. Democrats also have been critical of the profits made by private insurers in the Medicare Advantage Program where Medicare beneficiaries can choose comprehensive alternatives to traditional Medicare from companies such as United or HealthSpring. As a result, House and Senate Democrats may curtail options for private insurers to participate in these programs and will instead work to enhance traditional fee-for-service Medicare. 2) A De-Emphasis on Health Savings Accounts New Democratic majorities will mean that widespread utilization of high deductible health plans coupled with employer-financed health savings accounts is less likely. Democrats have opposed such arrangements on the grounds that they reduce the employer's responsibility for healthcare costs and are too difficult for consumers to understand. Republican efforts to create individual incentives to hold down healthcare expenditures and to reconnect patient choices with patient financial responsibility will go nowhere in the next few years. Instead, Democratic majorities will try to penalize employers for not providing healthcare coverage plans with low cost options to their employees. 3) Less Tolerance for Physician Ownership of Healthcare Facilities Congressman Stark, in particular, has made opposing physician ownership of healthcare facilities a signature issue for Democrats. He believes physician ownership increases utilization, adds to unnecessary procedures and creates conflicts of interest. In the past, he has attempted to expand the Stark Act prohibitions (on physician referrals to facilities with which physicians have a financial relationship) to nongovernmental payors. He has also been especially critical of specialty and physician-owned hospitals. Stark has expressed concern that physician-owned hospitals have pulled profits and resources from community hospitals and he has committed to stopping their "proliferation." 4) Shift in Medicare and Medicaid Reimbursement Priorities Traditionally, Congressional Democrats have not been supportive of enhanced physician Medicare reimbursement. The Congressional elimination of the automatic reduction in the Medicare fee schedule was passed in the December "lame duck" Congress with significant Republican support that is no longer present in the new Congress. However, Democratic House and Senate leadership may be more supportive of increased hospital reimbursement, especially for urban tertiary care facilities. In addition, Congressional Democrats have not been as supportive of ambulatory surgical center reimbursement and may accelerate the move to enact more significant rate disparities for facility fee reimbursement between the hospital and ambulatory surgical center settings. 5) Exploration of a Single Payor System and New Coverage Many members of the House and Senate leadership have committed to investigate universal healthcare coverage as well as significant expansions of coverage for the uninsured. Although Democrats may adopt an incremental approach on these issues, these issues are a high priority for many Democratic constituencies, and Democrats will attempt to implement expansions of current programs and "pilot" projects to alter healthcare coverage nationally. Democrats are more likely to increase governmental coverage through the creation of new programs rather than utilizing tax policy to expand private coverage. 6) Limited Efforts on National Tort Reform Past Republican Congressional leadership scheduled a series of votes on national limits on punitive damage awards in medical malpractice cases, but they were never able to pass these measures. Democrats have generally opposed national tort reform. Democrats continue to receive significant support from trial lawyers and their affiliated organizations. Tort reform will not be a priority in either the House or the Senate. Because Democrats do not currently control the Executive Branch and do not enjoy veto proof majorities in either the House or the Senate, they may find it difficult to enact meaningful new programs in the next two years. They will, however, be able to change the debate in Washington in the healthcare policy arena. Without a doubt, healthcare issues will be a focus of great attention in the upcoming Presidential election. Colin H. Luke is the Chairman of Balch & Bingham, LLP's Health Law Practice Group. February 2007