Capital Thinking Update - March 19, 2012

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General Legislative

On Monday, March 19, the House will convene at 4:00 p.m. for legislative business. The following legislation will be considered pursuant to a rule: H.R. 5, the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011; and H.R. 2087, a bill to remove restrictions from land situated in Accomack County, Virginia. The House may consider the following legislation under suspension of the rules: H.R. 4086, the Foreign Cultural Exchange Jurisdictional Immunity Clarification Act; H.R. 3992, a bill to allow Reciprocal E-2 Visas for Israelis; and H.R. 665, the Excess Federal Building and Property Disposal Act. The Senate will convene at 2:00 p.m. on Monday, March 19, for a period of morning business. Thereafter, the Senate will resume consideration of H.R. 3606, the Jumpstart Our Business Startups Act.



Agriculture

LEGISLATIVE ACTIVITY


  • Genetically Engineered Food Labeling. On Monday, March 12, fifty-five Members of Congress, including 10 Senators and 45 House Members, sent a letter to Food and Drug Administration Commissioner Margaret Hamburg requesting that the agency require the labeling of genetically engineered foods. Senator Barbara Boxer (D-CA) and Representative Peter DeFazio (D-OR) led the bipartisan effort to support the legal petition filed by the Center for Food Safety.  
  • Release of Baseline Figures for Farm Bill. On Tuesday, March 13, the Congressional Budget Office released the following cost estimates on key Farm Bill categories over the next 10 years: (1) Crop Insurance - $91 billion; (2) Conservation - $64 billion; (3) Commodities - $63 billion; and (4) Nutrition - $772 billion. Compared with the March 2011 baseline, nutrition is up $70 billion and crop insurance is up $11 billion. The Agriculture Committee leadership in the House and Senate is unlikely to reevaluate its proposed $23 billion in reductions to Farm Bill programs following the release of the baseline. 
  • Senate Agriculture Committee Hearing. On Thursday, March 15, the Senate Agriculture Committee held a hearing to examine commodity programs and risk management tools available to farmers through the U.S. Department of Agriculture (USDA). This was the final 2012 Farm Bill hearing for the Committee. The hearing was originally scheduled for Wednesday, March 14, but was postponed due to votes on the Senate floor.

    Discussions focused primarily on the importance of the crop insurance program as a risk management tool and the proposed cuts to the program under the President’s FY2013 Budget Request. During her opening statement, Chairwoman Debbie Stabenow (D-MI) stated that “the era of direct payments is dead” and that she viewed the Farm Bill as a jobs bill. Following the four-panel hearing, Senator Stabenow told reporters the committee will hold a markup on the bill as soon as possible, but did not specify a date.       

    Earlier in the week, Ranking Member Pat Roberts (R-KS) suggested that the Farm Bill might need to be attached to another bill that could use the budget authority from the proposed $23 billion cuts over 10 years in farm spending.  If the $23 billion in proposed cuts were used for another program, then USDA may not be protected against cuts under sequestration. 
  • Upcoming Hearings. On Wednesday, March 21, the House Agriculture Subcommittee on Rural Development, Research, Biotechnology, and Foreign Agriculture will hold a hearing to identify duplicative federal rural development programs. On Friday, March 23, the House Agriculture Committee will hold a field hearing in Galesburg, Illinois.

REGULATORY ACTIVITY

  • National School Lunch Program. On Thursday, March 15, USDA announced that it will offer more choices to schools in the National School Lunch Program for the 2012-2013 school year, including the option to order products with or without Lean Finely Textured Beef (also known as “pink slime”). This announcement follows questions about the safe consumption of meat products containing “pink slime,” which is a meat product derived from a process that separates fatty pieces from beef trimmings to reduce the overall fat content.  



Budget, Appropriations

LEGISLATIVE ACTIVITY


  • Senate and House Budget Resolutions. House Budget Committee Chairman Paul Ryan (R-WI) is expected to announce his FY2013 budget proposal on Tuesday, March 20. His proposal will closely resemble what he put forth last year, including discretionary and mandatory spending cuts, as well as tax reform provisions. The proposal will include spending cap that is less than the $1.047 trillion level established in the Budget Control Act of 2011 (BCA) (P.L. 112-25).

    On Tuesday, March 13, Senate Budget Committee Republicans sent Chairman Kent Conrad (D-ND) a letter urging a public mark-up of a budget resolution prior to the statutory deadline of April 1 (April 1 is the statutory deadline for each chamber to report a budget resolution out of committee; April 15 is the statutory deadline to pass a resolution in the full chamber). The Chairman continues his stance that while he intends to move a budget resolution in the Senate this year – primarily to serve as a vehicle for a deficit reduction proposal – it is unnecessary to meet the statutory deadline because of the discretionary spending cap established in the BCA.
  • Congressional Budget and Appropriations Committee Hearings. House Appropriations Subcommittees will continue hearings on the FY2013 Budget Request this week: Federal Communications Commission (Financial Services – Monday, March 19); Smithsonian Institution (Interior – Tuesday, March 20); Farm and Foreign Agricultural Services (AG – Tuesday, March 20); Secretary of Commerce (CJS – Tuesday, March 20); National Archives and Records Administration (Financial Services – Tuesday, March 20); United Nations (State-Foreign Operations – Tuesday, March 20); NIH (LHHS – Tuesday, March 20); National Park Service (Interior – Tuesday, March 20); DOE Office of Science (Energy & Water – Tuesday, March 20); Office of Management and Budget (OMB) ( Financial Services – Tuesday, March 20); NOAA (CJS – Tuesday, March 20); State Department (Classified) (State-Foreign Operations – Wednesday, March 21); NASA (CJS – Wednesday, March 21); Veterans’ Employment and Training (LHHS – Wednesday, March 21); Research, Education, and Economics (AG – Wednesday, March 21); Commander of U.S. Central Command (Defense – Wednesday, March 21); DOE Environmental Management and Health, Safety and Security (Energy and Water – Wednesday, March 21); IRS (Financial Services – Wednesday, March 21); DHS Management and Science and Technology Directorates (Homeland Security – Wednesday, March 21); Secretary of Housing (THUD – Wednesday, March 21); Public Witnesses (Interior – Wednesday, March 21); SBA Administrator (Financial Services – Wednesday, March 21); Secretary of Veterans Affairs (MilCon – March 21); Congressional and Public Witnesses (CJS – Thursday, March 22); Public Witnesses (Interior – Thursday, March 22); Secretary of Education (LHHS – Thursday, March 22); FAA, FHWA, FRA, and FTA Administrators (THUD – Thursday, March 22); and Commodity Futures Trading Commission (AG – Thursday, March 22).

    On Thursday, March 29, the LHHS Subcommittee will hold a Budget Hearing with public witness testimony. The deadline for submitting written testimony for the record is Thursday, March 29.

    As of the writing of this report, Senate Budget and Appropriations hearing schedules for this week have not been released.
  • Member Deadline for Appropriations Submissions. Tuesday, March 20 is the deadline for Members to submit programmatic and language requests to the Appropriations Subcommittees for consideration in the FY2013 spending bills.

OTHER BUDGET, APPROPRIATIONS NEWS

  • Congressional Budget Office Releases Updated Budget Baseline. On Tuesday, March 13, the Congressional Budget Office (CBO) released an updated budget baseline, which estimates that the budget deficit for FY 2012 will reach $1.2 trillion. This estimate is $93 billion more than the baseline released in January because it accounts for the payroll tax extension enacted last month. While somewhat subjective as it is based on current law that will likely change (i.e., it assumes the expiration of the Bush tax cuts), the baseline will certainly influence budget negotiations going forward. 



Education

LEGISLATIVE ACTIVITY


  • Online Tracking Program for College Readiness. On Thursday, March 15, Senators Chris Coons (D-DE) and Marco Rubio (R-FL) introduced a bipartisan bill to provide three-year competitive grants to schools, nonprofits and other organizations to create personal online tracking programs for low-income students to monitor their college readiness, with online profiles linked to a college savings account. The bill is not expected to move on its own in the Senate, but likely will be attached to a broader education measure or even implemented directly by the Department of Education. Congressman Chaka Fattah (D-PA) plans to introduce a companion measure in the House next week.
  • University Transportation Centers. As part of the Senate’s transportation reauthorization package passed on Wednesday, March 14 (additional details are provided in the Transportation section), $70 million would be authorized for each of the Fiscal Years 2012 and 2013 for transportation education and research as part of the University Transportation Centers (UTC) program. The measure, amended by Senator Barbara Boxer’s (D-CA) Manager’s Amendment, calls for a grant competition to begin one year after enactment, with three separate award competitions as follows:
    • Five National Centers will be awarded a maximum of $3.25 million each with a 100 percent match requirement;
    • Ten Regional Centers will be awarded a maximum of $2.75 million with a 100 percent match requirement;
    • No more than 20 Tier 1 Centers will be awarded a maximum of $1.5 million each with a 50 percent match requirement and two recipients required to focus on public transportation issues.
  • Hearings. The House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies is scheduled to hold a hearing Thursday, March 22, at 10:00 a.m. on the Administration’s FY2013 Budget Request for the Department of Education. Education Secretary Arne Duncan will testify. The subcommittee will hold another hearing March 27 at 10:30 a.m. on the department’s FY2013 Budget Request as it relates to K-12 education.

REGULATORY ACTIVITY

  • FAFSA Completion Data. On Tuesday, March 13, the Department of Education released a new data tool used to track the number of students completing the Free Application for Federal Student Aid (FAFSA). The data is available to the public and is intended to help high school counselors and families determine FAFSA submission and completion rates.
  • White House Meeting on College Affordability. On Friday, March 23, the White House will host a second meeting with college presidents and chancellors to discuss college affordability and productivity issues. The White House has not released details on the names of the invited guests and has not confirmed President Obama’s attendance at the meeting.    

    In December 2011, President Obama and Education Secretary Arne Duncan hosted a meeting with university presidents and chancellors from 10 institutions of higher education, including public universities, two private nonprofit colleges, and one community college. 



Energy

LEGISLATIVE ACTIVITY


  • Congressional Hearings. On Tuesday, March 20, one House Natural Resources subcommittee will hold a hearing on future energy technologies, with a particular emphasis on Canadian oil sands; another subcommittee will consider how the President’s FY2013 budget request for the Bureau of Land Management and U.S. Forest Service would affect job creation, domestic energy production, and deficit reduction. On Wednesday, March 21, the full House Natural Resources Committee will hold an oversight hearing on how rising gas prices are impacting families and how harnessing American resources can create jobs. The Senate Energy and Natural Resources will consider the nominations of Adam Sieminski to be Administrator of the Energy Information Administration; Marcilynn Burke to be an Assistant Secretary of the Interior; and Anthony Clark and John Norris to be members of the Federal Energy Regulatory Commission (this hearing was originally scheduled for March 14). DOE’s Undersecretary for Energy, Assistant Secretary for Energy Efficiency and Renewable Energy, Assistant Secretary for the Office of Electricity Delivery and Energy Reliability, and Acting Assistant Secretary for Fossil Energy are all scheduled to testify before a House Appropriations Subcommittee on March 27 regarding the Administration’s FY2013 budget request for their respective program areas.

REGULATORY ACTIVITY

  • Wind. The Bureau of Land Management is currently reviewing approximately 45 wind energy applications and is working with other federal agencies and project applicants on wind development mitigation strategies. The Bureau of Ocean Energy Management is developing the first Geological and Geophysical Programmatic Environmental Impact Statement for the mid- and south-Atlantic, a draft of which is anticipated this spring.
  • Hydraulic Fracturing. Bureau of Land Management Director Robert Abbey recently said that a proposed draft rule that would govern hydraulic fracturing operations on federal land could be released as soon as April. It would regulate well bore integrity, public disclosure, and water management issues associated with HF operations. The Environmental Protection Agency (Region 6) is soon expected to release a draft report on the potential for injection-induced seismicity to be caused by deep underground waste water injections. EPA is undertaking this work to provide state regulators with input as they develop recommendations that could manage or minimize significant seismic events; this work is not be conducted pursuant to or as part of a formal rulemaking procedure. 
  • ARPA-E. The Open Funding Opportunity Announcement originally issued March 2 has been revised. Deadlines for letters of intent (March 30) and concept paper submissions (April 12) remain the same.
  • OCS Scientific Committee. The Interior Secretary is revising and renewing the Outer Continental Shelf Scientific Committee, which provides advice on the feasibility, appropriateness, and scientific value of the OCS Environmental Studies Program.  



Environment

LEGISLATIVE ACTIVITY 


  • Assistant Secretary of Interior. On Tuesday, March 20, the Senate Committee on Energy and Natural Resources will hold a hearing to consider the nomination of Marcilynn Burke to be Assistant Secretary of the U.S Department of Interior for Land and Minerals Management.
  • Mercury and Air Toxics Standards. On Tuesday, March 20, the Senate Committee on Environment and Public Works, Subcommittee Clean Air and Nuclear Safety will hold a hearing entitled, "Oversight: Review of the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) for Power Plants." 
  • National Ocean Policy. On Thursday, March 22, the House Committee on Natural Resources, Subcommittee on Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs will hold a hearing on national ocean policy with regard to recreational and commercial fishermen.
  • Mineral Resources and Production. The House Committee on Natural Resources, Subcommittee on Energy and Mineral Resources will hold two hearings on mineral resources and production. On Tuesday, March 20, the subcommittee will hold a hearing on the President’s FY2013 Budget and Legislative Proposals for the Bureau of Land Management (BLM) and the U.S. Forest Service’s Energy and Minerals Programs with regard to job creation, domestic energy, minerals production and deficit reduction. On Thursday, March 22, the subcommittee will hold a hearing on the President’s FY2013 Budget for the U.S. Geological Survey with regard to job creation, hazard protection, mineral resources and deficit reduction.
  • Water Resources. On Tuesday, March 20, House Committee on Natural Resources, Subcommittee on Water and Power will hold a hearing on the proposed FY2013 priorities and the missions of the Bureau of Reclamation and the U.S. Geological Survey’s Water Resources program.

REGULATORY ACTIVITY

  • Animal Feeding Operations. The U.S. Environmental Protection Agency (EPA) Science Advisory Board (SAB) Staff Office held a public meeting of the SAB Panel to conduct a peer review on the EPA documents: "Draft—Development of Emissions Estimating Methodologies for Broiler Animal Feeding Operations" and "Draft—Development of Emissions Estimating Methodologies for Lagoons and Basins at Swine and Dairy Animal Feeding Operations" (February 2012 draft). The SAB Panel meeting was held on Wednesday, March 14 from 8:30 a.m. to 5:30 p.m., Thursday, March 15 from 8:30 a.m. to 5:30 p.m., and Friday, March 16 from 8:30 a.m. to 1 p.m.
  • Anacostia River. On March 9, EPA Administrator Lisa Jackson and David O’Neill of the National Fish and Wildlife Foundation (NFWF) joined Mayor Vincent C. Gray and Congresswoman Eleanor Holmes-Norton of the District of Columbia to announce creation of The Anacostia River Revitalization Fund. The fund, which will invest $1 million in restoration activities this year with a total goal of investing $5 million over the next three years, will be used protect and restore the Anacostia River and to create a national model for watershed conservation. NFWF, in partnership with EPA and the DC Department of the Environment and with funding from corporate sponsors, created the fund which will award grants to local partnering organizations. Priority will be given to projects focused on key tenants of the fund – improving water quality in the Anacostia River and its tributaries; achieving habitat restoration priorities for the Anacostia; engaging, employing and educating local residents and businesses; connecting the public to the Anacostia and its tributaries through enhanced outdoor recreation and volunteer opportunities; leveraging public and private funding to make the greatest conservation impact; and emphasizing the neighborhood benefits of watershed restoration to local economic development, public health, livability and as a neighborhood asset. The Anacostia River is one of seven pilot locations as part of the Urban Waters Federal Partnership – a union of 11 federal agencies – led by EPA.
  • Fuel Economy. The EPA has released its annual report which concludes that the average fuel efficiency for new cars and light duty trucks has increased while the average carbon dioxide (CO2) emissions continue to decrease for the seventh consecutive year. The report also details the growth of more efficient technologies, such as six-speed transmissions, advanced fuel injection and turbochargers that are making inroads into the mainstream market. The report, "Light-Duty Automotive Technology, Carbon Dioxide Emissions, and Fuel Economy Trends: 1975 Through 2011,” can be accessed at: http://www.epa.gov/otaq/fetrends.htm



Financial Services

LEGISLATIVE ACTIVITY


  • Senate Unveils Modified Capital Formation Package. On Thursday, March 15, the Senate presented its own version of the capital formation package that the House approved last week. The Senate version, called INVEST In America Act of 2012, is similar to H.R. 3606, allowing capital formation through “crowdfunding” and exempting emerging companies from full Securities and Exchange Commission (SEC) registration for up to five years. However, the Senate version narrows the exemption for emerging companies, includes a modernization of the Export-Import Bank, and raises to 750 the number of shareholders that would trigger the SEC registration. The Senate is expected to begin votes on the package on Tuesday, March 20.
  • Senate Banking Committee to Consider Obama Nominations. On Tuesday, March 20, the Senate Banking Committee will hold a hearing to consider several prominent nominations, including Richard Berner, to be Director, Office of Financial Research; Christy Romero to be Special Inspector General for the Troubled Asset Relief Program; Jerome Powell and Jeremy Stein to be Members of the Board of Governors of the Federal Reserve System; and Jeremiah Norton to be a Member of the Board of Directors of the Federal Deposit Insurance Corporation.
  • Geithner to Testify Before HFSC. On Tuesday, March 20, Treasury Secretary Tim Geithner will appear before the House Financial Services Committee to discuss the state of the international financial system.
  • House Subcommittee to Discuss Swap Data Repository Indemnification Legislation. On Wednesday, March 21, the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises will hold a hearing on the Swap Data Repository and Clearinghouse Indemnification Correction Act of 2012.
  • Senate Banking to Consider Orderly Liquidation, Derivatives, and the Volcker Rule. On Thursday, March 22, the Senate Banking Committee will hold a hearing titled "International Harmonization of Wall Street Reform: Orderly Liquidation, Derivatives, and the Volcker Rule."

REGULATORY ACTIVITY

  • CFTC to Hold Rulemaking Meeting. On Tuesday, March 20, the Commodity Futures Trading Commission will hold a public meeting to vote on the Final Rule on Customer Clearing Documentation, Timing of Acceptance for Clearing, and Clearing Member Risk Management.
  • FDIC to Hold Open Meeting. On Tuesday, March 20, the Federal Deposit Insurance Corporation (FDIC) will hold an open meeting to discuss (i) a proposed rule related to assessments on large banks and (ii) a proposed rule regarding the enforcement of subsidiary and affiliate contracts by the FDIC as receiver for a covered financial company.



Health Care

LEGISLATIVE ACTIVITY


  • House E&C Hearing. On Monday March 19, the House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “A Review of Efforts to Prevent and Treat Traumatic Brain Injury.” Witnesses include Dr. Bonnie Strickland, Division of Services for Children with Special Health Care Needs, Health Resources and Services Administration (HRSA), William Ditto, New Jersey Department of Health, Dr. Flaura Winston, Center for Injury Research and Prevention, Children’s Hospital of Philadelphia, and Mark Ashley, Centre for Neuro Skills.
  • House Approps Hearing. The House Appropriations Committee Subcommittee on Labor, Health and Human Services, Education, and Related Agencies will hold a hearing on Tuesday March 20, 2012 on the National Institutes of Health (NIH) FY2013 budget. Witnesses include Dr. Francis Collins, NIH, Dr. Thomas Insel, National Institute of Mental Health, Dr. Roy Vagelos, former Chairman and CEO of Merck & Co., Dr. Scott Koenig, President and CEO of MacroGenics, and Dr. Todd Sherer, CEO of the Michael J. Fox Foundation for Parkinson’s Research.
  • House E&C Hearing. The House Committee on Energy and Commerce Subcommittee on Oversight and Investigations has scheduled a hearing on Wednesday, March 21, at 10:00 a.m. on  “The Center for Consumer Information and Insurance Oversight and the Anniversary of the Patient Protection and Affordable Care Act.” Witnesses to be announced.
  • Senate Finance Hearing. On Thursday, March 22, the Senate Finance Committee will hold a hearing entitled “Prescription Drug Abuse: How are Medicare and Medicaid Adapting to the Challenge?” Witnesses include Dr. Jeffery Coben, Injury Control Research Center, West Virginia University, Dr. Timothy Schwab, SCAN Health Plan, and Dr. Alex Cahana, Chief of Anesthesiology and Pain Medicine, University of Washington.
  • House Approps Hearing. The House Appropriations Committee Subcommittee on Financial Services and General Government will hold a hearing on March 27on the National Drug Control Policy budget. Gil Kerlikowske is scheduled to testify.

REGULATORY ACTIVITY

  • Exchange Regs. Earlier this week, the Department of Health and Human Services (HHS) released the final rule related to the establishment of the Affordable Insurance Exchanges (the "Exchanges") created by the Affordable Care Act (ACA). The rule details how the Department will implement the Exchanges, which are required to become operational by January 1, 2014. The Final Rule establishes the following: standards that states must meet if they elect to establish and operate an Exchange; eligibility and enrollment standards to enroll in qualified health plans (QHPs) through the Exchange and participate in insurance affordability programs; procedures for consumer application and enrollment in the Exchange; basic requirements that employers must meet to participate in the Small Business Health Options Program (SHOP); minimum certification requirements for a QHP to be offered through the Exchange; and standards that health insurance issuers must meet to participate in an Exchange and offer QHPs.
  • HHS issued four separate proposed rules relating to Exchanges in July and August 2011.  This Final Rule combines the provisions of two previously-issued proposed rules – the Exchange Establishment Proposed Rule  and the Proposed Rule on Exchange Eligibility Determinations and Standards for Employers.  HHS noted that the Department of Treasury will soon publish the Final Rule on “Health Insurance Premium Tax Credits.” The Final Rule on Medicaid eligibility determination and coordination is expected to be finalized shortly.
  • Additionally, the Final Rule does not address all of the provisions in the ACA related to Exchanges. Information regarding the Federally-facilitated Exchange will be provided in future guidance. Also, HHS indicated that separate rulemaking will be issued to address: 1) the process by which the Exchange may issue certificates of exemption from the individual responsibility requirements payment; 2) the definition of “essential health benefits” and other benefit design standards; and 3) standards for Exchanges and QHP issuers related to quality.
  • Medicaid and CHIP Final Rule. The Department of Health and Human Services (HHS) released a final rule related to Medicaid and the Children’s Health Insurance (CHIP) Program. The final rule codifies the Affordable Care Act (ACA) by expanding access to Medicaid and CHIP to 133 percent of the federal poverty level with 100 percent federal funding for newly eligible individuals for CY2014-2016 reduced to 90 percent by 2020, and simplifies Medicaid and CHIP by streamlining income-based rules and systems for processing applications and renewals and modernizing enrollment and renewal processes. The rule also provides two ways for Exchanges to perform Medicaid-eligibility evaluations: the Exchange can determine Medicaid eligibility based on the State’s Medicaid eligibility rules and also determine eligibility for advance payment of premium tax credits, or the Exchange can make a preliminary Medicaid eligibility assessment and rely on the State Medicaid and CHIP agencies for a final eligibility determination. The final rule does not address changes in the Federal Medical Assistance Percentage (FMAP) rates. A final FMAP rule will follow as technical work with States on FMAP methodologies and income conversion continues.
  • Reinsurance, Risk Corridors and Risk Adjustments Final Rule. Today, the HHS released a final rule on the Standard Related to Reinsurance, Risk Corridors and Risk Adjustment. States certified to operate an Affordable Insurance Exchange (Exchange) have the option to establish a risk adjustment program, but are not required to do so. If a state does not establish a risk adjustment program, HHS will establish the program and will perform the risk adjustment functions for that state. A Federally-developed risk adjustment methodology will be proposed in the annual HHS Notice of Benefit and Payment Parameters in the fall of 2012. States operating risk adjustment programs may propose an alternative methodology for approval by HHS. The final rule affords states flexibility in how they collect data for risk adjustment; when HHS operates risk adjustment on behalf of the state, a distributed data collection approach will be used. Under the distributed approach, issuers retain their own data and do not submit personal health information to a state or HHS on a state’s behalf.
  • Under the final rule, states have the option to establish a reinsurance program, regardless of whether they establish an Exchange. If a state elects not to establish a reinsurance program, HHS will establish the program and will perform the reinsurance functions for that state. Reinsurance contributions will be based on a national per capita contribution rate, which HHS will announce in the annual HHS Notice of Benefit and Payment Parameters. Under this program, reinsurance payments are similar to traditional, commercial reinsurance. Payments will be based on a portion of costs per enrollee paid once claims costs reach a certain level (attachment point) and until a payment limit (cap) is reached. 
  • Regarding risk corridors, health plans with costs that are at least three percent less than the plans’ costs projections will remit charges for a percentage of those savings to HHS, while qualified health plans with costs at least three percent higher than cost projections will receive payments from HHS to offset a percentage of those losses. The Affordable Care Act directs HHS to administer the risk corridors program from 2014 through 2016.

OTHER HEALTH NEWS

  • MedPAC Report to Congress. The Medicare Payment Advisory Commission (MedPAC) releases its March 2012 Report to the Congress: Medicare Payment Policy. The report includes the Commission’s analyses of payment adequacy in fee-for-service (FFS) Medicare, Medicare Advantage and Part D, as well as the Commission’s assessment of the sustainable growth rate (SGR) system for physician payment. Fee-for-service payment recommendations include a one percent update for hospital inpatient and outpatient prospective payment systems, a reduction in hospital outpatient department evaluation and management services to make level with those offered in a physician office, a repeal of the sustainable growth rate (SGR) system replaced by a 10 year path of statutory fee schedule payments, a 0.5 update for ambulatory surgical centers, a one percent update for outpatient dialysis payments, an elimination of the 2013 market basket update for skilled nursing facilities and rebasing of payments beginning in 2014, elimination of the market basket update for home health agencies in 2013, rebasing of rates, revision of the home health case mix system and creation of a per episode copay for home health episodes that are not preceded by hospitalization or post-acute care use, elimination of the 2013 market basket updates for inpatient rehab facilities and long term care facilities, and a 0.5 payment update for hospice in 2013. 
  • MACPAC Report to Congress. The Medicaid and CHIP Payment and Access Commission (MACPAC) released its March 2012 Report to Congress on Medicaid and CHIP. The report focuses on a number of priority issues including Medicaid and persons with disabilities, access to care for children, state financing, and program integrity. The Commission recommends that the Secretary and states should accelerate the development of program innovations that support high-quality, cost-effective care for persons with disabilities, particularly those with Medicaid only coverage, and that the Secretary working with the states should update and improve quality assessment for Medicaid enrollees with disabilities. The Commission also that the Secretary should ensure that current program integrity efforts make efficient use of federal resources and do not place an undue burden on states or providers, as well as support states’ abilities to detect and deter fraud and abuse.
  • IOM Meeting. The Institute of Medicine’s Roundtable on Translating Genomic-Based Research for Health will host a public workshop on Wednesday, March 21 to investigate how genetic and genomic information is currently being and will be used in the future to improve the business of drug development. Stakeholders will be asked to present their perspectives during the workshop and may include leaders from the pharmaceutical industry, academia, and regulatory agencies.



International, Defense, Homeland Security


  • Russia Trade and Human Rights Developments. Supporters of Permanent Normal Trading Relations (PNTR) status for Russia, including the Obama Administration and Senate Finance Committee Chairman Max Baucus (D-MT), received a potentially important boost on Tuesday, March 13. A coalition of Russian opposition leaders wrote to Congress to voice their support for removing the Jackson-Vanik restrictions that currently preclude U.S. “most-favored nation” trading status from applying to Russia upon the country’s entry into the World Trade Organization. They noted that the Jackson-Vanik restrictions only add fuel to President-elect Vladimir Putin’s anti-U.S. rhetoric. At the same time, they specifically supported Senator Ben Cardin’s (D-MD) S. 1039, which would apply more targeted sanctions against specific Russian officials involved in human rights violations.
  • Greater Middle East Developments. Recent polling suggests that a majority of the U.S. electorate supports the Obama Administration’s caution on greater involvement in the burgeoning civil war in Syria. Notably, Thursday’s Pew research poll showed equal opposition to arming Syrian rebels and conducting U.S.-led air strikes. On the other hand, a majority of the U.S. public thinks the Administration should move more quickly to withdraw from Afghanistan. However, so far, the Administration has not committed to an accelerated redeployment schedule, even though the massacre last Sunday certainly caused the White House, Pentagon, and State Department, not to mention Afghan President Hamid Karzai, to engage in yet another reassessment of the U.S. presence in the country.



Tax

LEGISLATIVE ACTIVITY


  • Senate Passes Transportation Bill, House Proposal Still Unclear. On Wednesday, March 14, the Senate passed S. 1813, a two-year, $109 billion transportation bill, by a bipartisan 74-22 vote. This vote came after weeks of negotiations between leaders of both parties, and after a series of votes on both tax and non-tax provisions. The Senate must now wait for the House to act on a highway bill before any differences that exist can be resolved in conference.

    The Senate bill includes a tax title that reauthorizes federal excise taxes that fund the highway trust fund. The tax title also includes various other tax provisions, some of which are used to help offset a projected shortfall in the highway trust fund. The largest revenue raiser is a pension stabilization provision that is designed to smooth interest rates employers use for purposes of determining defined benefit pension plan contributions. Under this provision, plan liabilities would still be determined based on corporate bond segment rates, which are based on the average interest rates over the preceding two years. But, beginning in 2012, minimum funding rules would be changed such that segment rates must be within 15 percent of the average of such segment rates for the 10 year period preceding the current year. The purpose of this provision is to minimize the effects of any potential large-scale fluctuations of interest rates from year to year, thus making employer contributions to their pension plans more predictable. The provision is estimated to raise over $9 billion in revenue over 10 years; thus, its inclusion helps pay for the cost of the highway bill. 

    The Senate voted against including several noteworthy tax amendments to the bill this week, including competing tax “extenders” amendments offered by Senators Debbie Stabenow (D-MI) and Pat Robers (R-KS), and competing energy tax incentive amendments offered by Robert Menendez (D-NJ) and Jim DeMint (R-SC). The Stabenow amendment would have extended through 2012 a variety of alternative energy tax incentives, including the production tax credit. It also would have revived the Section 1603 grant program which provides a 30 percent cash grant in lieu of tax credits to eligible solar projects. The Roberts amendment would have extended a wider variety of expired tax “extender” provisions, but excluded certain of the provisions included in the Stabenow amendment (such as the 1603 grant program). Neither amendment received the 60 votes required for adoption.

    The Menendez amendment included provisions from legislation he previously introduced last year, the New Alternative Transportation to Give Americans Solutions act (NAT GAS act). This amendment would have provided tax incentives for commercial companies to purchase natural gas run vehicles and for the construction of natural gas fueling stations, funded through a new user fee on natural-gas purchases. The DeMint amendment would repeal various tax credits used by all forms of energy, including coal, gas, oil, wind, and solar, while using the savings to reduce the corporate tax rate. Neither of these amendments passed.

    The Senate-passed bill also included a one-year delay of the implementation date for rules on worldwide interest allocation. The rules were previously postponed by three years in the HIRE Act and the Senate bill would extend this postponement until January 1, 2022. The Senate bill also includes language that would prohibit certain transactions known as “Reverse Morris Trusts,” subject to a transition rule.

    The House has yet to act on its own highway bill, and decisions remain to be made as to what path House leaders will pursue. It is worth nothing that earlier iterations of the House highway bill have not included tax provisions aside from those necessary for purposes of extending the authorization for highway-related taxes. It is likely that there will have to be a short-term extension of some duration as the current authorization expires on March 31.
  • Bipartisan Bill to Expand 100 Percent Bonus Depreciation Unveiled. On Tuesday, March 13, H.R. 4196 sponsored by Representatives Pat Tiberi (R-OH), John Larson (D-CT), Erik Paulsen (R-MN), Richard Neal (D-MA), Kenny Marchant (R-TX), and Bill Pascrell (D-NJ) was unveiled. H.R. 4196 would extend 100 percent bonus depreciation on qualified capital investment through 2012. The bill would also expand the bonus depreciation provision to provide companies with the opportunity to claim corporate alternative minimum tax in place of bonus depreciation. The 100 percent bonus depreciation provision expired at the end of 2011, and though a 50 percent bonus is already on the books for 2012, many lawmakers are intent on extending a 100 percent bonus depreciation incentive so as in order to further encourage investment and hiring. The President’s FY2013 budget also calls for extending bonus depreciation through 2012.

    While the proposal has clear bipartisan support, it was not included in bipartisan legislation that extended the payroll tax cut, and it is unclear at what point Congress may again consider it.
  • Tax Hearings Next Week. The following hearings are scheduled next week in the House Ways and Means and Senate Finance Committees:
    • Tuesday, March 20: Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth hearing on Tax Fraud by Identity Theft, Part 2: Status, Progress and Potential Solutions.
    • Thursday, March 22: House Ways and Means Subcommittee on Oversight hearing on the Internal Revenue Service Operations and the 2012 Tax Return Filing Season.



TechComm

LEGISLATIVE ACTIVITY 


  • FCC Budget. On Monday, March 19, the House Appropriations Subcommittee on Financial Services and General Government will hold a hearing on the Federal Communications Commission (FCC) budget. Chairman Julius Genachowski and Commissioner Robert McDowell will be testifying on behalf of the agency.
  • Verizon-SpectrumCo Deal. On Wednesday, March 21, the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights will hold a hearing on “The Verizon/Cable Deals: Harmless Collaboration or a Threat to Competition and Consumers?” Executives from Verizon Communications, Inc., Comcast Corporation, Rural Cellular Association and Free Press are among the witnesses. The hearing takes place as the FCC awaits responses from Verizon Wireless and its cable partners, Comcast, Bright House and Cox, to further inquiries the agency made about Verizon Wireless’ purchase of spectrum and commercial agreements it entered with the cable companies. Reply comments in the FCC proceeding are also due on March 26.
  • Spectrum. Now that the Middle Class Tax Relief and Job Creation Act has been signed, the FCC and the Commerce Department’s National Telecommunications and Information Administration have spent recent weeks focusing on implementation of their various statutory obligations. For example, Friday, March 23, is the deadline by which the FCC must appoint at 14-member Technical Advisory Board for First Responder Interoperability. The board must submit technical requirements to ensure a national level of network interoperability to the FCC for review by May 22. Meanwhile, NTIA must establish a First Responder Network Authority (FirstNet) within six months of the law’s enactment that will oversee that creation of the national public safety broadband network. Also within six months, NTIA in consultation with FirstNET must create a grant program to assist states, regional, tribal and local jurisdictions for network build out.

REGULATORY ACTIVITY

  • Broadband in Classrooms. In an effort to connect more K-12 classrooms to the Internet, FCC Chairman Julius Genachowski and Education Secretary Arne Duncan launched the Leading Education by Advancing Digital (LEAD) Commission on Thursday, March 15. The commission is charged with developing a plan to further expand classrooms’ access to broadband services by the end of the year. The commission’s co-chairmen are Columbia University President Lee Bollinger, former Education Secretary Margaret Spellings; Common Sense Media CEO James Steyer; and TPG Capital co-founder James Coulter. The LEAD Commission stems from recommendations set forth in the FCC’s National Broadband Plan and the Education Department’s National Education Technology Plan, both issued in 2010.
  • FCC Open Meeting. The FCC has a busy agenda scheduled for its Wednesday, March 21 open meeting. Among this issues the commission will tack are a Notice of Proposed rulemaking exploring whether to retain, sunset or relax the exclusive contract prohibition of the program access rules and whether to revise the program access rules to better address alleged violations. The FCC also will consider a Fourth Report and Order and Third Order on Reconsideration to implement a market-specific FM translator processing scheme, adopt application caps to prevent trafficking and modify policies to expand opportunities to rebroadcast AM stations on FM translators. The commission will consider three other items: (1) a Fifth Reporter and Order, Fourth Further Notice of Proposed Rulemaking and Fourth Order on Reconsideration regarding proposals to implement the Local Community Radio Act and to strengthen the LPFM service; (2) a Notice of Proposed Rulemaking concern the potential for harmful interference to Lower 700 MHz B and C Block operations if the Lower 700 MHz Band were interoperable and whether, if interference exists, it can be reasonably mitigated; and (3) Notice of Proposed Rulemaking proposing service, technical, assignment, and licensing rules for flexible terrestrial use of spectrum currently assigned to the Mobile Satellite Service (MSS) in the 2 GHz band.


Transportation

LEGISLATIVE ACTIVITY


  • SAFETEA-LU Reauthorization: On Wednesday, March 14, the Senate voted 74-22 to pass the surface transportation bill (S. 1813), Moving Ahead for Progress in the 21st Century (MAP-21). The $109 billion two-year bill reauthorizes federal highway and transit programs at current levels, indexed for inflation. The final passage of the bill came after several days of considering amendments, including a Manager’s Amendment that was adopted on Tuesday, March 13. The Senate bill would authorize programs through FY2013. 

    Of note, the Manager’s Amendment:
    • Provides for a new bus discretionary program, authorizing $75 million to be funded out of the $1.955 billion authorized for New Starts as another source of assistance for bus capital needs. Again, these funds are a take down from the New Starts program.
    • Changes the Bus Rapid Transit (BRT) definition under the New Starts program. This change restores eligibility for BRT projects that have a “substantial” portion of operations within a dedicated right-of-way during peak hours, so long as the right-of-way is “semi-dedicated” for transit usage and physical elements are in place that reduce vehicle travel time and increase reliability. The definition in the original bill would have required a “majority” of the project to be in a “dedicated” right of way to be eligible for New Starts funding.
    • Provides additional flexibility for small bus systems in large urbanized areas to use capital funds for operating, with systems operating under 75 buses able to use up to 75 percent of their capital assistance towards operating costs, and operators of 76-100 buses able to use up to 50 percent.


In terms of germane floor amendments, the Senate narrowly adopted an amendment by Senator Jeff Bingaman (D-NM) to remove “privatized highways” (public toll roads that had been converted to privately leased toll roads) from the calculation used to apportion highway funding to the states.

Action now turns to the House. The House majority is expected to turn to the FY2013 Budget and then potentially legislation repealing provisions of the health reform law to coincide with two-year anniversary of the Affordable Care Act. This will occupy floor time potentially until the end of the month, making all but certain that Congress will need to move forward with a short-term extension to keep the program running after March 31st when the current extension expires. The duration of an extension remains an unknown, although with Congress out for spring recess for the first two weeks of April, the House may not even turn to the transportation bill until mid-April.

The path forward in the House remains to be determined. The House Leadership and Transportation and Infrastructure Committee leadership are continuing to educate members and work to build consensus around H.R. 7, the five year reauthorization, at least within the Republican conference. The Speaker has indicated that if the House did not have consensus on HR 7, then he may bring up some version of the Senate bill – likely by creating a modified House version (with various funding and policy changes) and moving that through the floor process. Many observers, however, view bringing up some version of the Senate bill as more of a threat than a promise – one designed to get the Republican conference to coalesce around their own bill. Other options are also possible as the House works to identify what vehicle and approach can win 218 votes and move out of the House.

 

Published In: Agriculture Updates, Education Updates, Elections & Politics Updates, Energy & Utilities Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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