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107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-547

======================================================================



 
MEDICARE MODERNIZATION AND PRESCRIPTION DRUG ACT OF 2002 (SECTION 903: 
        MEDICAID DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS)

                                _______
                                

 June 26, 2002.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Tauzin, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 4991]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 4991) to amend title XIX of the Social Security 
Act to revise disproportionate share hospital payments under 
the medicaid program, having considered the same, report 
favorably thereon without amendment and recommend that the bill 
do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     2
Committee Consideration..........................................     2
Committee Votes..................................................     2
Committee Oversight Findings.....................................     4
Statement of General Performance Goals and Objectives............     4
New Budget Authority, Entitlement Authority, and Tax Expenditures     4
Committee Cost Estimate..........................................     4
Congressional Budget Office Estimate.............................     4
Federal Mandates Statement.......................................     4
Advisory Committee Statement.....................................     4
Constitutional Authority Statement...............................     4
Applicability to Legislative Branch..............................     5
Section-by-Section Analysis of the Legislation...................     5
Changes in Existing Law Made by the Bill, as Reported............     5
Additional Views.................................................     7

                          Purpose and Summary

    H.R. 4991 increases Medicaid disproportionate share (DSH) 
allotments for States for fiscal year 2003 and beyond.

                  Background and Need for Legislation

    Congress established the Medicaid DSH program in 1981 to 
ensure that Medicaid programs provide adequate payments to 
hospitals whose patient populations are disproportionately 
composed of low income Medicaid and uninsured patients. Recent 
analysis demonstrates that despite DSH funding, Medicaid 
payments may still fall short of costs incurred by health 
facilities in caring for the uninsured and low-income patients.
    Due to explosive growth in the Medicaid DSH program, 
Congress reduced the federal share of Medicaid DSH spending in 
the Balanced Budget Act of 1997 (BBA 97). States were provided 
some relief from those cuts in 2000. The Benefits Improvement 
and Protection Act (BIPA) provided temporary relief from the 
BBA's scheduled reductions for the Medicaid DSH program for the 
years 2001 and 2002. However, beginning in fiscal year 2003, 
many states would revert back to payment levels consistent with 
the 1997 cuts, which would impose a significant reduction in 
federal Medicaid DSH allotments. These reductions in DSH 
funding could place many safety-net hospitals in severe fiscal 
jeopardy and negatively impact the ability to provide care to 
indigent and under-served populations.

                                Hearings

    The Committee on Energy and Commerce has not held hearings 
on the legislation.

                        Committee Consideration

    On Friday, June 21, 2002, the Full Committee met in open 
markup session and favorably ordered reported a Committee Print 
on Disproportionate Share Hospital (DSH) Payments by voice 
vote, without amendment, a quorum being present. Chairman 
Tauzin then introduced H.R. 4991 to reflect the Committee's 
action.

                            Committee Votes

    Clause 3(b) of Rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
following is the record vote taken on an amendment offered on 
the measure, including the names of those members voting for 
and against. A motion by Mr. Tauzin to order H.R. 4991 reported 
to the House, without amendment, was agreed to by a voice vote.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has not held oversight 
or legislative hearings on this legislation.

         Statement of General Performance Goals and Objectives

    H.R. 4991 would ensure that states and hospitals receive 
increased Medicaid DSH allotments in fiscal year 2003 and 
beyond. The legislation would help to lessen the burden that 
many state Medicaid budgets are facing with respect to growing 
Medicaid costs and impending BBA 97 reductions in DSH 
allotments.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
4991, to amend title XIX of the Social Security Act to revise 
disproportionate share hospital payments under the Medicaid 
Program, would result in no new or increased budget authority, 
entitlement authority, or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974, which is 
included in the report to accompany H.R. 4984.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the cost estimate provided by the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974 is included in the report to 
accompany H.R. 4984.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act. The estimate is included in the report to accompany H.R. 
4984.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 903. Disproportionate Share Hospital (DSH) Payments

    Section 903 would increase DSH allotments for FY 2003 by 
setting those amounts at the specified levels in 1923(f)(2) for 
FY 2001, increased by the percentage change in the CPI-U for FY 
2001. Allotments for FY 2004 and thereafter would be equal to 
the allotment for the previous year as calculated by the 
committee's provision, increased by 1.7 percent unless the 
Secretary determines that the allotment under this provision 
will equal (or no longer exceed) the allotment for that state 
that would have been in effect under prior law. For those 
states, beginning in the first fiscal year that their allotment 
would equal or no longer exceed the prior law levels, their 
allotment would be equal to the allotment for the previous year 
increased by the percentage change in the CPI-U for the 
previous year.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                         SOCIAL SECURITY ACT

           *       *       *       *       *       *       *



      TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

           *       *       *       *       *       *       *



  ADJUSTMENT IN PAYMENT FOR INPATIENT HOSPITAL SERVICES FURNISHED BY 
                    DISPROPORTIONATE SHARE HOSPITALS

  Sec. 1923. (a) * * *

           *       *       *       *       *       *       *

  (f) Limitation on Federal Financial Participation.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) State dsh allotments for fiscal year 2003 and 
        thereafter.--
                  [(A) In general.--The DSH allotment for any 
                State for fiscal year 2003 and each succeeding 
                fiscal year is equal to the DSH allotment for 
                the State for the preceding fiscal year under 
                paragraph (2) or this paragraph, increased, 
                subject to subparagraph (B) and paragraph (5), 
                by the percentage change in the consumer price 
                index for all urban consumers (all items; U.S. 
                city average), for the previous fiscal year.]
                  (A) In general.--The DSH allotment for any 
                State--
                          (i) for fiscal year 2003 is equal to 
                        the DSH allotment for the State for 
                        fiscal year 2001 under the table in 
                        paragraph (2), without regard to 
                        paragraph (4), increased, subject to 
                        subparagraph (B) and paragraph (5), by 
                        the percentage change in the consumer 
                        price index for all urban consumers 
                        (all items; U.S. city average), for 
                        fiscal year 2001; and
                          (ii) for each succeeding fiscal year 
                        is equal to the DSH allotment for the 
                        State for the previous fiscal year 
                        under this subparagraph increased, 
                        subject to subparagraph (B) and 
                        paragraph (5), by 1.7 percent or, in 
                        the case of fiscal years beginning with 
                        the fiscal year specified in 
                        subparagraph (C) for that State, the 
                        percentage change in the consumer price 
                        index for all urban consumers (all 
                        items; U.S. city average), for the 
                        previous fiscal year.

           *       *       *       *       *       *       *

                  (C) Fiscal year specified.--For purposes of 
                subparagraph (A)(ii), the fiscal year specified 
                in this subparagraph for a State is the first 
                fiscal year for which the Secretary estimates 
                that the DSH allotment for that State will 
                equal (or no longer exceed) the DSH allotment 
                for that State under the law as in effect 
                before the date of the enactment of this 
                subparagraph.

           *       *       *       *       *       *       *


                            ADDITIONAL VIEWS

    In the Balanced Budget Act of 1997, Congress established 
limits on payments to the states for Disproportionate Share 
Hospitals (DSH). In the case of many states, there was a 
precipitous decline in dollars available over the five-year 
period. Institutions that are critical to providing services to 
low-income Medicaid beneficiaries and uninsured persons have 
already absorbed reductions in funding. Public hospitals, 
children's hospitals, and private hospitals serving large 
numbers of Medicaid and uninsured people cannot weather 
additional reductions that are slated to take effect.
    This Committee recognized in legislation that passed two 
years ago that this decline in available dollars had to be 
stopped. We passed legislation that stopped the decline at the 
level established for FY 2000, and applied inflationary factors 
for the next two fiscal years and beyond. Unfortunately, when 
the final legislation was enacted, we ended up with only a two-
year fix, and an intention to resolve the problem before the 
original precipitous decline otherwise scheduled for FY 2003 
could occur.
    We are at the point now where we must act. The situation is 
even more dire than we might have anticipated. States are 
struggling with budget shortfalls. The effect of unemployment, 
loss of revenue because of Federal tax changes, and increasing 
health care costs have all put tremendous pressure on state 
budgets.
    This legislation is a first step, but the relief it 
provides is not enough.
    We believe that the Committee should continue to build on 
the level of funds we established in the legislation of 2000. 
To do anything less would have a devastating effect on these 
critical DSH institutions and on all the people who depend on 
them.
    We also believe we should address the issue of ``low-DSH'' 
states to enable them to provide adequate funding to their 
facilities that serve as a critical safety net for poor and 
uninsured individuals.
    Finally, while we are pleased that the Committee has 
decided to take a first step toward addressing the reductions 
in DSH payments, we are concerned that the Committee has 
neglected other important matters with respect to Medicaid. In 
particular, there is bipartisan support in the House for giving 
states the option to cover legal immigrant children and 
pregnant women under Medicaid and the Children's Health 
Insurance Program as well as permanently extending the 
transitional medical assistance program (TMA) which provides 
health insurance coverage as families transition to the 
workforce from welfare. Assistance for low-income Medicare 
beneficiaries with incomes between 120% and 135% of poverty is 
set to expire this year and should be reinstated as well. 
Nearly a million children risk losing health insurance coverage 
unless issues within the Children's Health Insurance Program 
are addressed this year. This program was passed out of this 
Committee with bipartisan support in 1997 and has a funding 
shortfall of $3 billion over three years, as well as a formula 
for redistributing state allotments which expires at the end of 
2002. The Committee should act to preserve the gains in 
coverage made under this program.
    Due to the offering of Committee Prints on separate 
subjects amendments offered by Members were ruled out of order 
as being nongermane. This is something, however, that we 
believe the Committee and Congress as a whole should take up 
this year.

                                   John D. Dingell.
                                   Sherrod Brown.
                                   Henry A. Waxman.
                                   Rick Boucher.
                                   Edolphus Towns.
                                   Gene Green.
                                   Frank Pallone, Jr.
                                   Michael F. Doyle.
                                   Karen McCarthy.
                                   Thomas M. Barrett.
                                   Christopher John.
                                   Bobby L. Rush.
                                   Ted Strickland.
                                   Anna G. Eshoo.
                                   Lois Capps.
                                   Peter Deutsch.
                                   Eliot L. Engel.
                                   Bart Stupak.
                                   Ralph M. Hall.
                                   Jane Harman.
                                   Tom Sawyer.
                                   Diana DeGette.
                                   Bart Gordon.