BUDGET ALERT: April 12, 2007
DOD Responds on Funding Delay On March 30, the Senate Budget Committee released a CRS report saying the Army could finance its operations 'through the end of May' with funding already appropriated and through June or July by using its authority to transfer funds among accounts. Yesterday, the Pentagon responded in a letter from Secretary Gates to Senate Appropriations Chairman Robert C. Byrd. Secretary Gates' letter states, in part: "While some have suggested that the Army can operate this year until July with existing resources and authorities, in reality there are significant limits, costs and disruptions associated with the budgetary maneuvers necessary to continue Army operations, as we saw last year. The technical and limited ability of the Department to transfer funds should not create a sense of complacency regarding the pressing need for the supplemental.... "It is a simple fact of life that if the Fiscal Year 2007 supplemental legislation is not enacted soon, the Army faces a real and serious funding problem that will require increasingly disruptive and costly measures to be initiated -- measures that will, inevitably, negatively impact readiness and Army personnel and their families." Context : The reasons for the urgent supplemental funding are twofold: (1) the Administration under-funded war costs in their FY '07 Budget Request (only $50 billion was requested; Congress appropriated $70 billion; and now an added $100 billion has been requested); and (2) the costs of the "surge." Finance Marks Up Medicare Rx Bill Today (Thursday) at 6:40pm in 219 Dirksen, the Senate Finance Committee will mark-up Medicare prescription drug benefit legislation (S.3). The mark- up will not be webcast. Senator Baucus will offer a Chairman's amendment to S. 3 that would strike the language in the 2003 Medicare Rx law that prohibits the HHS Secretary from involvement in Rx price negotiations (known as the "noninterference clause"). However, the current ban on establishing government formularies (lists of Rx drugs available to participants) and price controls would remain in place. The issue of allowing Medicare to negotiate drug prices with pharmaceutical companies has important budgetary implications. The Senate Finance Committee and the House Committees on Ways & Means and Energy & Commerce (which share jurisdiction over the Medicare Rx drug program) need to find budgetary savings to offset various initiatives such as expansion of the State Children's Health Insurance Program (SCHIP) and rolling back scheduled reductions in Medicare physician reimbursements. However, this week the Congressional Budget Office released two letters casting doubt on how much savings can actually be achieved from the Baucus proposal. The CBO letter to Senator Baucus, which you can link to below, states in part "that modifying the noninterference provision would have a negligible effect on federal spending because we anticipate that under the bill the Secretary would lack the leverage to negotiate prices... that are more favorable than those obtained by prescription drug plans under current law." At the same time, CBO released a letter to Sen. Ron Wyden (D-OR), a leading Senate health care reformer, indicating that "modest" Medicare savings could be achieved by allowing negotiations on "drugs with no close substitutes or those with relatively high prices under Medicare." The Baucus bill aims to facilitate this by giving congressional researchers access to data, including rebates, discounts, and other price concessions that drug plans are negotiating with manufacturers. Nevertheless, CBO states clearly in the Wyden letter that significant savings can be achieved only by allowing Medicare to establish a formulary or set prices administratively- which the Baucus Chairman's mark--and the bill that already passed the House--do not do.
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| Charles S. Konigsberg, President | (202) 587-2984 (ph) | (202) 587-2983 (fax) | ckonigsberg@federalbudgetgroup.com | |
