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Senate Confirms Lee Francis Cissna to lead USCIS

On Oct. 5, the U.S. Senate approved the nomination of Lee Francis Cissna to lead the U.S. Citizenship and Immigration Services agency (USCIS) on a bipartisan vote of 54-43. All Republican senators supported the nomination and were joined by Democrat Senators Donnelly (IN), Heitkamp (ND), Manchin (WV) and McCaskill (MO). Senators Cochran (R-MS), Cortez Masto (D-NV) and Heller (R-NV) did not vote.

For more legal analysis go to The National Law Review

Better Care Reconciliation Act – Key Takeaways for Employers and Plan Sponsors

On June 22, 2017, the Senate released its much anticipated health care reform legislation – the Better Care Reconciliation Act (“BCRA”) (linked to amended version released June 26, 2017). In many respects the BCRA is similar to the House of Representatives’ American Health Care Act (which was described in our March 9, 2017 and May 4, 2017 blog entries). However, the BCRA differs from the AHCA in several important respects.

As of the date of this blog entry, the BCRA does not have sufficient support to pass a vote in the Senate and House GOP members have indicated that they would reject the bill. Therefore, Senate leadership has delayed a vote on the BCRA until after the July 4^th holiday recess. Nevertheless, as we provided for the AHCA, below are key takeaways for employers and plan sponsors and a few comparisons between the AHCA and BCRA. A more detailed comparison between key provisions of the Affordable Care Act (“ACA”), the AHCA, and the BCRA is provided at the end of this blog.

1. Individual and Employer Mandates. Like the AHCA, the BCRA would essentially repeal the ACA’s individual and employer mandates effective after December 31, 2015. Both bills do this by “zeroing-out” the penalties for not having minimum essential coverage (individual mandate) or for not offering adequate minimum essential coverage to full-time employees (employer mandate). Outside of the effective repeal of the employer mandate, the AHCA’s and BCRA’s impact on group health plans appears to be minimal. However, if either the AHCA’s 30% surcharge or the BCRA’s 6-month waiting period becomes law, it is likely that plan sponsors will be required to provide notices similar to the certificates of creditable coverage required in the pre-ACA era

In the absence of an individual mandate, the AHCA and BCRA have different methods of incentivizing individuals to maintain continuous health coverage. Under the AHCA method, insurance carriers would be required to charge a 30% premium surcharge to those who fail to have continuous coverage (i.e., a break in coverage of 63 days or more would trigger the surcharge). The BCRA would require insurance carriers to apply a 6-month blanket coverage waiting period to any individual with a 63-day or more break in continuous coverage during the prior 12 months.

Outside of the effective repeal of the employer mandate, the AHCA’s and BCRA’s impact on group health plans appears to be minimal. However, if either the AHCA’s 30% surcharge or the BCRA’s 6-month waiting period becomes law, it is likely that plan sponsors will be required to provide notices similar to the certificates of creditable coverage required in the pre-ACA era.

2. BCRA Retains ACA’s Subsidy and Tax Credit Program. The Senate appears to have rejected AHCA’s elimination of cost-sharing subsidies and premium tax credits available only for coverage purchased on the Marketplace. The AHCA would have replaced the ACA’s program with an advance tax credit program available to individuals purchasing individual market insurance (not just Marketplace coverage) or enrolled in unsubsidized COBRA coverage. Under the AHCA, the amount of the tax credit would be based on age and would be available only to individuals with income less than $75,000 (individual) or $150,000 (jointly with a spouse).

The BCRA, however, maintains the ACA’s cost-sharing subsidies and premium tax credit program, albeit with some modifications. Under the BCRA, cost-sharing subsidies and premium assistance would be determined based on age, with younger individuals getting more assistance than older individuals, and income. Household income in excess of 350% of the federal poverty line would disqualify an individual from cost-sharing subsidies and premium assistance, in contrast to the ACA’s 400% threshold. Additionally, under the BCRA, the premium tax credit would be based on a benchmark plan that pays 58% of the cost of covered services (in contrast to the ACA’s use of the second-lowest cost silver (70%) plan). This lower value of coverage effectively reduces the amount of premium assistance an individual can get.

3. Employer Reporting Obligations to Continue. Although the individual and employer mandates would be repealed, it is likely that the ACA reporting obligations (Forms 1094-B/C and 1095-B/C) would remain in place, at least in some forms. As noted above, the BCRA retains the ACA’s cost-sharing subsidies and premium assistance, the availability of which is conditioned on an individual not being enrolled in employer-sponsored coverage. Therefore, the IRS would likely still need to obtain coverage information from employers.

4. Cadillac Tax Repealed Subject to Reinstatement. Like the AHCA, the BCRA effectively delays the so-called Cadillac Tax until 2025. The Cadillac Tax was originally slated to be effective in 2018, but it was delayed until 2020 in prior budget legislation.

5. Most ACA-Related Taxes Repealed. The BCRA would also repeal most of the tax reforms established under the ACA. Most relevant to employers and plan sponsors would be the elimination of the contribution limit on health flexible spending accounts (HFSAs), the ability reimburse over-the-counter costs under HFSAs and health savings accounts (HSAs), the increase in HSA contribution limits, and elimination of the Medicare surcharge applied to high-earners.

6. Popular ACA Reforms Remain. As was the case under the AHCA, the BCRA would keep many popular ACA market reforms and patient protections in place. These include:

• The requirement to cover dependent children until age 26;

• The prohibition on waiting periods in excess of 90 days;

• The requirement for individual and small group plans to cover essential health benefits;

• The prohibition against lifetime or annual dollar limits on essential health benefits;

• The annual cap on out-of-pocket expenditures on essential health benefits;

• Uniform coverage of emergency room services for in-network and out-of-network visits;

• Required first-dollar coverage of preventive health services;

• The prohibition of preexisting condition exclusions;

• Enhanced claims and appeals provisions; and

• Provider nondiscrimination.

7. ERISA Preemption for “Small Business Health Plans.” The BCRA would add a new Part 8 to ERISA for “small business health plans.” Currently, some states have enacted insurance laws that prohibit small employers from risk-pooling their employees in a single, large group insurance plan. New Part 8 of ERISA would preempt these state laws and allow the formation of “small business health plans,” which, generally, are plans sponsored by an association on behalf of its employer members. Small business health plans must meet certain organizational and financial control requirements and apply to the Department of Labor for certification.

8. Employee Tax Exclusion Remains Intact. Like the AHCA, the BCRA does not currently include a limitation on the employee tax exclusion that would result in imputed taxes to employees if the value of health coverage exceeds a certain amount. This absence, however, does not necessarily mean that such a limit will not eventually be imposed. It is possible that Congress will consider limiting tax incentives for both retirement and health and welfare plans when broader tax reform is considered.

9. HFSA/HSA Expansion. As mentioned above, the BCRA includes the same modifications to the HFSA and HSA rules as the AHCA. The BCRA would remove the annual contribution cap on HFSAs. Additionally, HFSAs and HSAs would now be able to reimburse on a non-taxable basis over-the-counter medication without a prescription. The annual contribution limit to HSAs would be equal to the out-of-pocket statutory maximum for high-deductible health plans. Spouses would both be able to make catch-up contributions to the same HSA.

It is still too early to tell whether the BCRA will fare better than the AHCA. In any event, we will continue to monitor legislative efforts and will provide updates as substantive developments occur.

Health Care Reform Legislation Comparison
Shared Responsibility	ACA	AHCA	BCRA
Employer Mandate	Applicable large employers (those with 50 or more full-time employees and equivalents) face penalties if minimum essential coverage not offered to 95% of full-time employees (and dependents) or if coverage is not minimum value or affordable.	No penalties for failing to provide adequate coverage.	No penalties for failing to provide adequate coverage.
Individual Mandate	Individuals subject to tax if not enrolled in minimum essential coverage unless exception applies.	No tax for failing to enroll in minimum essential coverage. However, effective for plan years beginning in 2019, a 30% premium surcharge would be charged by insurance carriers to an individual who purchases insurance coverage following a lapse in coverage of 63 days or more.	No tax for failing to enroll in minimum essential coverage. However, individuals who have a lapse in coverage of 63 or more days in the prior 12-month period will be subject to a 6-month coverage waiting period.
Reporting	IRC §§ 6055 and 6056 require reporting from issuers of minimum essential coverage and applicable large employers.	No change to ACA reporting requirements under IRC §§ 6055 and 6056. Additional Form W-2 reporting required.	No change to ACA reporting requirements under IRC §§ 6055 and 6056.
Market Reforms	ACA	AHCA	BCRA
Dependent Coverage	If dependent children covered, coverage must continue until age 26.	No change.	No change.
Essential Health Benefits	Small group and individual market plans must cover 10 essential health benefit categories, as defined by benchmark plan established by state.	No change, but states can apply for waiver to establish separate definition of essential health benefit.	No change, subject to relaxed waiver rights under ACA § 1332 (State Innovation Waivers).
Annual/Lifetime Dollar Limits	No annual or lifetime dollar limits can be applied to essential health benefits.	No change, but states can apply for waiver to establish separate definition of essential health benefit.	No change, subject to relaxed waiver rights under ACA § 1332 (State Innovation Waivers).
Out-of-Pocket Maximums	Out-of-pocket maximum applied to essential health benefits.	No change, but states can apply for waiver to establish separate definition of essential health benefit.	No change, subject to relaxed waiver rights under ACA § 1332 (State Innovation Waivers).
Preexisting Condition Exclusions	Preexisting condition exclusions prohibited.	No change, but insurance providers must apply a 30% premium surcharge if individual has a gap in coverage of 63 days or more.	No change, but 6-month waiting period applied if individual has a gap in coverage of 63 days or more.
Preventive Care	Preventive care covered without cost-sharing.	No change.	No change.
Emergency Coverage	Emergency room visit at an out-of-network hospital must be covered at in-network rate.	No change.	No change.
Rescissions	Coverage cannot be retroactively terminated except in cases of fraud or misrepresentation or for premium nonpayment.	No change.	No change.
Summaries of Benefits and Coverage	Short (8-page) disclosure of plan terms and glossary distributed on an annual basis.	No change.	No change.
Enhanced Claims Procedures	Claims procedures now require additional claims procedures and voluntary external review.	No change.	No change.
Provider Nondiscrimination	Cannot discriminate against a health care provider acting pursuant to state license.	No change.	No change.
Section 105(h) Nondiscrimination	Fully-insured employer-sponsored health plans cannot discriminate in favor of highly compensated individuals (not yet effective).	No change.	No change.
Medical Loss Ratio	Individual and small group plans must spend 80% of premium income on claims and quality improvement. Large group insurance plans must spend 85% of premium income on claims and quality improvement.	No change.	Applicable ratio determined by the state (effective for plan years beginning on or after January 1, 2019).
Tax Reforms	ACA	AHCA	BCRA
Cadillac Tax	40% excise tax applied to cost of group health coverage exceeding threshold (effective January 1, 2020).	Delayed until January 1, 2025.	Repealed effective December 31, 2019, but to be reinstated effective January 1, 2025,
Small Business Tax Credit	Tax credit for premiums paid toward group health coverage available to small businesses.	Not available for plans that cover abortion for plan years beginning on or after January 1, 2017; repealed for plan years beginning on or after January 1, 2020.	Same as AHCA.
Health FSA Limit	Maximum contribution to health FSA set at $2,500 (subject to annual increases for inflation).	Repealed effective January 1, 2017.	Repealed effective January 1, 2018.
HSA Distribution Penalty	Penalty for HSA distributions used for non-qualifying medical expenses increased to 20%.	Repealed effective January 1, 2017. Penalty would go back to 10% for HSAs and 15% for Archer MSAs.	Same as AHCA.
HSA Contribution Limits	No change.	Increased to match statutory out-of-pocket maximum for high-deductible health plans (effective January 1, 2018).	Same as AHCA.
FSA/HSA Over-the-Counter	Health FSAs and HSAs cannot reimburse over-the-counter products without a prescription (excluding purchase of insulin).	Repealed effective January 1, 2017.	Same as AHCA.
Medical Expense Deduction	Itemized deduction under IRC § 223 available for medical expenses in excess of 10% of adjusted gross income.	Repealed effective January 1, 2017. Threshold would return to 7.5% adjusted gross income.	Same as AHCA.
Medicare Surcharge	Additional 0.9% hospital insurance (Medicare) tax applied to high-earners.	Repealed effective January 1, 2023.	Same as AHCA.
Medicare Investment Income Tax	Medicare tax of 3.8% applied to unearned income.	Repealed effective January 1, 2017.	Same as AHCA.
Health Insurance Tax	Tax applied to insurance carriers based on premiums collected.	Repealed effective January 1, 2017.	Repealed effective January 1, 2018.
Health Insurer Compensation Deduction	No compensation deduction available to certain health insurance providers for compensation in excess of $500,000 paid to applicable individuals.	Repealed effective January 1, 2017.	Same as AHCA.
Medical Device Tax	Excise tax of 2.3% imposed on manufacturer, producers and importers of medical devices.	Repealed effective January 1, 2017.	Repealed effective January 1, 2018.
Branded Prescription Drug Fee	Manufacturers and importers of branded prescription drugs are subject to an annual fee.	Repealed effective January 1, 2017.	Repealed effective January 1, 2018.
Retiree Drug Subsidy	Amount received under Retiree Drug Subsidy must be taken into consideration when determining prescription drug cost business deduction.	Repealed effective January 1, 2017.	Same as AHCA.
Marketplace	ACA	AHCA	BCRA
Marketplace Structure	Individuals can purchase insurance coverage on risk-pooled Marketplace established by Federal or state government. Individuals purchasing coverage on the Marketplace may be eligible for cost-sharing subsidies and premium assistance. Plans available on Marketplace (“qualified health plans”) must meet certain cost-sharing and actuarial value levels (i.e., gold, silver, bronze plans). Qualified health plans must cover essential health benefits.	Effective January 1, 2020, cost-sharing subsidies and premium assistance are repealed. Additionally, Marketplace plans are no longer required to meet cost-sharing and actuarial value requirements. Limited-scope, or catastrophic plans would be available.	No structural changes from ACA. Marketplaces, including cost-sharing subsidies and premium assistance, remain intact with modifications.
Cost-Sharing Subsidies and Premium Assistance	Available to individuals with household income between 100% and 400% of federal poverty line. Age is not a factor in amount of subsidies or assistance available.	For plan years beginning in 2018 and 2019, basic structure remains the same except that age and income are factors in the amount of cost-sharing subsidies and premium assistance that is available. No subsidies or assistance is available for qualified health plans that cover abortion. Cost-sharing subsidies and premium assistance repealed for plan years beginning in 2020. Instead, advance tax credit available based solely on age.	Available to individuals with household income between 100% and 350% of federal poverty line. Age is a factor in amount of subsidies or assistance available.
Premium Rate Setting	Small group and individual insurance markets may vary rates based only on certain factors, including individual or family coverage, community rating, age (3:1 ratio) and tobacco use.	Age ratio increases to 5:1 beginning January 1, 2018. States may apply to waive ACA requirements and base premiums on health factors.	Age ratio increases to 5:1 beginning January 1, 2018. State Innovation Waiver Program (ACA § 1332) requirements relaxed, giving states ability to waive many of the ACA’s market reforms.

This post was written by Damian A. Meyers and Steven D. Weinstein of Proskauer Rose LLP.

Can Congress Get to “Yes” on Replacing the Affordable Care Act?

Senate Majority Leader Mitch McConnell recently gave a candid assessment of the chances of getting an Affordable Care Act (ACA) replacement bill through the Senate, saying “I don’t know how we get to 50 (votes) at the moment.” That succinctly captures the political dilemma. There has long been broad bipartisan agreement that the nation’s health care system was in need of repair. Something had to be done to contain rapidly rising health care costs, increase the quality of medical outcomes, and to expand coverage. But there was little or no bipartisan agreement on how to do it. Indeed, no major health care initiative since Medicare was enacted in 1965 has enjoyed true bipartisan support.

The most recent effort to overhaul the health care system was no exception. The ACA passed in March 2010 with no Republican votes. That wholly partisan effort, in turn, set off a determined, seven-year-long effort by Republicans to repeal the law. The most recent step on this tortuous journey occurred on May 4, 2017 when the House passed the American Health Care Act (AHCA) by a vote of 217-213. In this case, no Democrats voted for the bill. Twenty Republicans also voted no and the bill passed with just one GOP vote more than the 216 needed to pass.

As we explain below, the ACA and AHCA are “apples and oranges” in their approaches to reforming the healthcare system. Because each proceeds from different philosophical premises, this post briefly examines their key components and primary goals without opining on the merits. Our primary focus is on the political and policy challenges faced by Senate Republicans in getting a bill passed (which remains highly uncertain) and whether such a bill will differ greatly from the House product. In our view, to achieve the GOP’s publicly stated policy objectives, and faced with the constraints imposed by the budget reconciliation rules (explained below), Senate Republicans will be forced to address essentially the same questions as their colleagues in the House—and their solutions likely will differ from those of the House mostly in degree.

What the AHCA Does

In the AHCA, House Republicans singled out a few ACA provisions they had publicly campaigned against—most of which are contained in Title I of the law. These include the mandate that individuals purchase coverage; the narrow, 3:1 modified community-rating corridor that Republicans asserted made coverage prohibitively expensive for younger individuals; and the requirement that plans sold in the individual and small-group market include a comprehensive set of covered medical and related services known as “essential health benefits” (EHBs) The AHCA also would make major changes to Medicaid that go well beyond rolling back the program expansion authorized by the ACA.

The AHCA’s primary purpose is to reduce premium costs and reduce the federal government’s role in health care by giving more authority and flexibility to the states. The ACA’s primary goal, in contrast, was to expand insurance coverage in the individual markets—and it did that, although not as much as had been predicted. Another ACA goal was to make coverage more affordable, at least for low- and moderate-income individuals—and it did that too. But the ACA did little to lower medical costs, and from the available evidence had only a marginal effect on healthcare outcomes. Neither does the AHCA address those issues. It instead focuses mainly on reducing federal expenditures, shifting costs to the states, and constraining the growth of Medicaid. The recently issued report by the Congressional Budget Office and the staff of the Joint Committee on Taxation indicates that the AHCA would achieve significant success in this regard, estimating that the bill would reduce the cumulative federal deficit over the 2017-2026 period by $119 billion.

The GOP Challenge

With their slim 52-48 majority, Republican lawmakers don’t have the votes to repeal the ACA outright. That would require 60 votes to overcome a filibuster. Instead, they must rely on a special budget strategy called “reconciliation.” Created by the Congressional Budget Act of 1974, reconciliation allows certain bills that directly impact federal spending to be passed by a simple majority. For example, reconciliation rules would allow repeal of the ACA’s individual and employer mandates by a simple 51-vote majority because those mandates directly affect revenue; but reconciliation could not be used to repeal the employer reporting rules because those provisions do not directly affect spending. These restrictions severely limit which provisions of the ACA Republicans in the Senate (and by extension the House) can replace without Democratic support. We discuss those provisions below.

The individual mandate

The ACA included an “individual mandate” that requires most U.S. citizens to buy health insurance. The purpose was to ensure broad participation in the individual markets so that there would be enough healthy individuals in the risk pool to subsidize the cost of covering those who are less healthy. Most agree that the ACA penalty for not maintaining coverage was insufficient to induce enough healthy people into the pool. The result has been steep underwriting losses which have prompted major carriers to exit the public exchanges. The AHCA would eliminate the penalty retroactively, to the beginning of 2016. In its place, the bill would impose a “continuous coverage” requirement to induce people to buy coverage and stay covered rather than buying it only when they need it, which drives up costs in the exchanges. Health carriers could assess a 30 percent penalty on individuals who have a gap in coverage of more than 63 days in the prior 12 months. The Health Insurance Portability and Accountability Act (HIPAA) has provided a similar rule for employer-provided group coverage since 1996.

Community rating

Under community rating, premiums can vary by age, among other things. In the case of age rating, actuarial principles dictate that the premiums paid by the oldest subscribers should be about five times what younger subscribers pay. To mitigate the impact on older citizens, the ACA limited the rating range to 3:1. The AHCA allows a ratio of up to 5:1 which actuaries say more closely aligns premiums with the costs associated with age. AHCA proponents assert that the maximum 3:1 ratio dictated by the ACA unfairly penalizes younger, healthier individuals, discouraging them from participating in the individual markets and contributing to the underwriting losses in the ACA exchanges. They also assert that individuals 65 and older are eligible for Medicare and that the workers affected by the 5:1 ratio would be primarily those 54 to 65 years old—generally the highest earning years.

Premium tax credits

The AHCA scraps the ACA’s cost-sharing subsidies, and replaces its premium tax credits. Beginning in 2020, the AHCA would offer credits for U.S. citizens and qualified aliens enrolled in qualified health plans who are not eligible for other sources of coverage. The credit amounts are based on age and adjusted by a formula that takes income into account. Credits would be capped according to a maximum dollar amount and family size. In general, the AHCA subsidies are less generous than those provided by the ACA. According to the CBO report, repeal of the ACA’s tax credits saves some $665 billion while the cost of the AHCA’s tax credits is $375 billion—a net savings of $290 billion.

Medicaid

Medicaid is a health insurance program with shared federal/state authority and financing. Historically, coverage generally was limited to low-income families with children, the elderly, and people with disabilities. The ACA offers states generous federal funding designed to encourage expansion of their programs to cover all Americans under age 65 whose family income is effectively at or below 138 percent percent of federal poverty guidelines ($16,394 for an individual in 2016). Currently, 31 states plus the District of Columbia have expanded their programs.

The AHCA would change the current system of federal funding of Medicaid by placing per capita caps on federal payments to states. Under that approach, each state’s Medicaid spending, beginning in 2020, would be limited based on enrollee categories (i.e., children, disabled, etc.). States that exceed the limits would get less money the following year. Alternatively, states could opt to receive federal block grants (i.e., predetermined fixed amounts) to cover their Medicaid-eligible populations.

The Medicaid changes account for the single largest item of budgetary savings under the AHCA—some $843 billion over 10 years according to the CBO. The savings are important to achieving other GOP objectives such as tax reform, but many of the 16 GOP governors who expanded Medicaid have expressed concerns about the scope and timing of the changes and the impact on their citizens.

States’ ability to opt out

In an effort to persuade House conservatives to support the AHCA, Rep. Tom MacArthur (R-NJ) offered an amendment that would allow states to seek waivers of certain AHCA provisions. The idea was to devolve to those states flexibility to modify their coverage rules to best meet the needs of their constituencies. Under the amendment, states that are granted waivers may:

Adopt age-rated premium ratios higher than 5:1 for older individuals buying coverage in the individual and small group markets;
Define their own, less generous, “essential health benefits” (EHBs) for plans purchased in the individual and small-group markets instead of the 10 EHBs mandated by the ACA (and which the AHCA otherwise would leave in place); and/or
Bypass the 30 percent penalty for individuals who do not maintain continuous health coverage, and instead apply medical underwriting to the pricing of plans in such cases; but states seeking such waivers must have a high-risk pool or participate in the Federal “Invisible Risk Sharing Program” (explained below).

High-risk pools

High-risk pools are state programs that provide funding to cover the health care costs of individuals with catastrophic or pre-existing medical conditions and who are unable to purchase affordable coverage in the individual market. The AHCA embraces state high-risk pools as a way to contain the cost of medical premiums for healthy individuals. It does this by creating two risk pools: one for healthy individuals or those with continuous coverage, and the other for those with high-cost or pre-existing conditions. The idea is to lower premiums for healthy people while at the same time providing coverage for those with serious health conditions using a separate funding mechanism.

To fund coverage for high-risk individuals, the AHCA provides a total of $138 billion over 10 years through various mechanisms as follows:

A State Stability Fund in the amounts of $15 billion in 2018 and 2019, and $10 billion each year thereafter through 2026;
An additional $15 billion in 2020 that states could use for maternity coverage and newborn and prevention, treatment, or recovery support services for mental or substance use disorders;
An additional $8 billion for the period 2018-2023 to states with a “MacArthur waiver” (previously discussed); and
A Federal Invisible Risk Sharing Program to help with high-cost medical claims of certain individuals who buy coverage in the individual market.

The MacArthur waivers are not without controversy. The two biggest issues are the potentially large cost increases to older citizens and whether individuals with pre-existing health conditions will be adequately protected. Another question is how many states actually will seek waivers and assume the financial (and political) responsibility for protecting older and sicker workers if the federal dollars under the AHCA prove insufficient. The CBO makes an educated guess as to how many people might be affected by states getting waivers, but they are guesses nonetheless.

Ways to get to Yes

The CBO report estimates that from 2017 to 2026, the AHCA would reduce direct spending by $1.111 trillion and revenues by $0.992 trillion (resulting in a net deficit reduction of $119 billion—and that 23 million fewer people would have health coverage (CBO does not count as health coverage limited benefit plans, including so-called “mini-med” plans and fixed-dollar indemnity plans). These numbers are a direct consequence of the AHCA’s stated goals—to reduce the role of the federal government in regulating and financing health care, specifically in the individual market, Medicaid, and the uninsured.

Senate Republicans broadly share those goals, but they differ on how to achieve them, as did many of their House colleagues. To further mitigate the impact on individuals, the Senate could adjust the AHCA’s spending and revenue levels, as well as the timing of certain provisions—for example, they could push back the phase-out of the ACA’s Medicaid expansion provisions from 2020 to a later date. Similarly, the AHCA’s per-capita caps and block grant provisions could be adjusted to provide more money to the states. The trade-off would be higher spending levels than the House bill, but this could be offset by modifying the AHCA’s tax repeal provisions. For example, the ACA’s so-called “Cadillac” tax on high-cost employer plans, which the House bill delayed until 2026, could be allowed to go into effect earlier, thus generating more revenue. To the same effect, the Senate could push back repeal of the ACA’s Medicare payroll tax on high income individuals. Another step might be to provide additional subsidies for those aged 50 to 64 to mitigate any adverse effect of the increase in the premium age-rating ratio proposed by the House.

We are under no illusions that the policy differences among Senate Republicans can be reconciled—and if they can, that the House and Senate can reach agreement when they go to conference. All we know now is that the GOP is stuck with its seven-year public commitment to creating a better system with still no clear path forward. Democrats may be enjoying the Republicans’ predicament, but neither party is likely to be viewed favorably if the current system continues to falter and ultimately fails. If that happens, the price of our polarized political environment could be steep for both sides.

The sheer magnitude of the dollars at stake should compel policymakers to find a breakthrough. The Centers for Medicare and Medicaid Services reports that national spending on health care grew 5.8 percent to $3.2 trillion in 2015, accounting for 17.8 percent of GDP. Medicare spending alone was $646.2 billion, 20 percent of the total. Medicaid another $545.1 billion, or 17 percent. Thus, the most urgent practical question may not be whose theory of government is more correct, but whether the current rate of health care spending is sustainable. We can’t think of a better answer than economist Herbert Stein’s wry observation that, “if something cannot go on forever, it will stop.”

This post was written by Alden J. Bianchi andEdward A. Lenz of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Key Tax Changes in the American Health Care Act

The American Health Care Act (“AHCA”), passed by the House of Representatives on May 4, 2017, repeals many of the taxes added by the Affordable Care Act (“ACA”) and makes changes to other tax rules. Some of the notable changes proposed to be made to the Internal Revenue Code are:

1. The individual mandate to maintain health insurance and the employer mandate to offer health insurance remain in the Code, but the taxes are “zeroed out” effective retroactively to 2016.

2. The following taxes, fees, credits and limitations are repealed as of the year shown below:

· The net investment income tax (NIIT) (2017)

· The 0.9% additional Medicare tax (2023)

· The small employer health insurance credit (2020)

· The $2500 limitation on contributions to a health flexible spending account (FSA) (2017)

· The annual fee on branded prescription drug sales (2017)

· The medical device excise tax (2017)

· The annual fee on health insurance providers (2017)

· The elimination of a deduction for expenses allocable to the Medicare Part D subsidy (2017)

· The 10% tanning salon tax (June 30, 2017)

3. The “Cadillac” tax on high cost health plans is delayed until 2026.

4. Individuals may be reimbursed for over-the-counter medications under a health savings account (HSA), health FSA or a health reimbursement arrangement (HRA) (2017).

5. The penalty tax on withdrawals from an HSA not used for a qualified medical expense is reduced from 20% to 10% (2017).

6. The bill would replace the current ACA premium tax credit with a new refundable, advanceable tax credit effective January 1, 2020. The credit could be applied toward the cost of any eligible health insurance coverage, whether purchased on or off the Exchange. The credit is age-based as follows:

Age	Annual Credit
Under 30	$2,000
30 – 40	$2,500
40 – 50	$3,000
50 – 60	$3,500
60 and over	$4,000

The maximum credit for a family is $14,000. The credit is adjusted each year by CPI + 1%.

The credit is phased out depending on the individual’s modified adjusted gross income (MAGI) for the year. It begins phasing out for an individual with income of $75,000 ($150,000 for joint filers) by $100 for every $1,000 in income above those thresholds. The MAGI dollar limitations are also indexed for inflation beginning in 2021. To be eligible to claim the credit, the individual must be covered by “eligible health insurance,” not be eligible for “other specified coverage” (including employer coverage or a government sponsored health program) and be a U.S. citizen or a qualified alien.

7. The bill would make the following changes to health savings accounts, effective in 2018:

§  The maximum contribution to an HSA would be increased to the out-of-pocket maximum (in 2017, $6,550 for self-only and $13,100 for family coverage).  Under current law, HSA contributions are limited to $3,400 for self-only and $6,750 for family coverage.
§  Both spouses could make a “catch-up” contribution to the same HSA.  Under current law, each spouse must have his or her own HSA.
§  If an HSA is established within 60 days after coverage under a high deductible plan begins, the individual could be reimbursed for medical expenses incurred within that 60-day period.  Under current law, an individual cannot be reimbursed for any expense incurred before the HSA is established.

The bill now moves to the Senate where significant changes are expected.

This post was written by Cynthia A. Moore of Dickinson Wright PLLC.

CBO Greenlights Telehealth Provisions in Senate’s CHRONIC Care Act

Last week, the Congressional Budget Office (CBO) concluded that a key piece of telehealth legislation, the CHRONIC Care Act of 2017, would not, overall, increase or decrease Medicare spending. This score is significant as it marks the first time that CBO has concluded that providing enhanced Medicare coverage for telehealth services would be budget neutral and clears the path for Congress to pass the legislation in a tough political climate.

The CHRONIC Care Act was developed by the Senate Finance Committee’s Bipartisan Chronic Care Working Group. If enacted, the bill would expand Medicare coverage of telehealth services in four ways:

Nationwide Coverage for Telestroke – Currently, Medicare will pay a physician for consulting on a patient experiencing acute stroke symptoms via telehealth only if the hospital where the patient is located is in a rural Health Professional Shortage Area (HPSA) or a county outside a Metropolitan Statistical Area (MSA). Under the CHRONIC Care Act, beginning in 2019, the geographic restriction would be eliminated and physicians would receive payment for telestroke consultations regardless of the hospital location.
Home Remote Patient Monitoring for Dialysis Therapy – Medicare requires that beneficiaries receiving home dialysis treatments have a monthly clinical assessment from their health care provider. Under current law, beneficiaries can only use telehealth to satisfy the clinical assessment requirement if the patient is at an authorized originating site (e.g., a physician office) located in a rural HPSA or a county outside an MSA. Beginning in 2019, beneficiaries could receive the required monthly clinical assessment from a freestanding dialysis facility or the patient’s home without geographic restriction.
Enhanced Telehealth Coverage for ACOs – The CHRONIC Care Act would apply the Next Generation ACO telehealth waiver criterion to the Medicare Shared Savings Program (MSSP) Track II, MSSP Track III, and the Pioneer ACO program. Specifically, the legislation would (i) eliminate the geographic component of the originating site requirement, and (ii) allow beneficiaries assigned to the approved MSSP and ACO programs to receive telehealth services in the home.
Increased Flexibility for Telehealth Coverage under Medicare Advantage Plans – Under current law, a Medicare Advantage (MA) plan may provide telehealth benefits beyond those that are currently reimbursed by Medicare. However, these enhanced telehealth services are not separately paid for by Medicare and MA plans must use their rebate dollars to pay for those services as a supplemental benefit. The CHRONIC Care Act would allow an MA plan to offer additional, clinically appropriate, telehealth benefits in its annual bid amount beginning in 2020.

The CHRONIC Care Act has been widely heralded by health care providers as a first step in removing barriers to providing telehealth services to Medicare beneficiaries. In a recent Senate Finance Committee hearing, health care providers voiced their support for greater coverage of telemedicine services. The Senate Finance Committee is in the process of marking up the bill.

This post was written by Carrie Roll of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Full Senate Set to Confirm Sonny Perdue as Agriculture Secretary

It has been nearly 14 weeks since President Donald Trump nominated Sonny Perdue, former two-term governor of Georgia, to lead the U.S. Department of Agriculture (USDA). His long wait for formal confirmation is likely to come to an end this week. The Senate is scheduled to hold a confirmation vote late Monday afternoon, where Perdue is expected to receive bipartisan support.

Perdue easily secured the Senate Agriculture Committee’s support at its business meeting on March 30 by a 19-1 vote; Sen. Kirsten Gillibrand (D-NY) voiced her opposition to his nomination and Sen. David Perdue (R-GA) – cousin of Sonny Perdue – declined to participate because of their close connection. Senator Gillibrand requested her opposition be recorded, noting her disapproval of how certain Supplemental Nutrition Assistance Program (SNAP) issues in the State of Georgia were handled by then-Governor Perdue. However, Sonny Perdue is one of President Trump’s more uncontroversial Cabinet choices, and he notably boasts the support of the top Democrat on the Senate Agriculture Committee, Ranking Member Debbie Stabenow (D-MI), who has made clear her support for the Senate to swiftly confirm Perdue for the top USDA spot.

A formal swearing-in ceremony for Perdue, likely to be held later this week, will officially recognize Perdue as the 31st Secretary of Agriculture.

This Week’s Legislative Activities:

On Monday, April 24, the Senate will hold a vote on confirmation of the nomination of Sonny Perdue to be Secretary of Agriculture.

ARTICLE BY Natasha Eckard Hammond of Squire Patton Boggs (US) LLP

Congress Begins to Evaluate Infrastructure Needs, Senate EPW to Hold Hearing this Week

The Trump Administration has provided few specifics on its trillion-dollar infrastructure proposal, and it has become increasingly clear that Congress will not act on a broad infrastructure bill in the first 100 days of the new administration. Recently, House Speaker Paul Ryan (R-WI) said the funding levels of any infrastructure proposal are unknown, and won’t be determined until Congress considers infrastructure funding in the greater context of the upcoming budget process this spring. To date, there is no consensus, even among Republicans, on how such infrastructure spending will be paid for.

However, Congress has begun to consider what issues and investments they will prioritize in an infrastructure bill by holding hearings in both the House and Senate. As we noted last week, the Senate Environment and Public Works (EPW) Committee will hold a hearing on “Oversight: Modernizing Our Nation’s Infrastructure” on Wednesday, February 8. The Senate EPW hearing follows last week’s kick-off hearing by the House Transportation and Infrastructure Committee on “Building a 21st Century Infrastructure for America.”

Recently, Senate Democrats have released their own $1 trillion infrastructure proposal. Their plan, “A Blueprint to Rebuild America’s Infrastructure,” would invest $1 trillion in infrastructure projects over ten years and create 15 million new jobs. The plan calls for enormous increases in Federal grant spending for a wide range of transportation and infrastructure projects, including schools, VA hospitals, and broadband service. For transportation, the plan pledges $210 billion on roads and bridges; $110 billion on water and sewer systems; $180 billion on rail and bus systems; $200 billion for a Vital Infrastructure Program (VIP) for mega-projects; $65 billion for ports, airports, and waterways; and $10 billion for new innovative financing tools such as an infrastructure bank.

Sen. Deb Fischer (R-NE) also recently introduced an infrastructure funding proposal, which would divert a total of $21.4 billion in revenues from Customs and Border Patrol fees to the Highway Trust Fund over FYs 2020-2024. Members of the House, including Rep. John Delaney (D-MD), are also advocating for their own infrastructure proposals.

This Week’s Hearings:

On Tuesday, February 7, the House Oversight and Government Reform Committee has scheduled a hearing titled “Accomplishing Postal Reform in the 115th Congress – H.R. 756, The Postal Service Reform Act of 2017.” The witnesses will be announced.
On Wednesday, February 8, the Senate Commerce, Science, and Transportation Committee has scheduled a hearing titled “A Look Ahead: Inspector General Recommendations for Improving Federal Agencies.” The witnesses will be:
- The Honorable Peggy E. Gustafson, Inspector General, U.S. Department of Commerce;
- The Honorable John Roth, Inspector General, U.S. Department of Homeland Security;
- The Honorable Calvin L. Scovel III, Inspector General, U.S. Department of Transportation; and
- Allison C. Lerner, Inspector General, National Science Foundation.
On Wednesday, February 8, the Senate Environment and Public Works Committee has scheduled a hearing titled “Oversight: Modernizing our Nation’s Infrastructure.” The witnesses will be:
- William “Bill” T. Panos, Director, Wyoming Department of Transportation
- Michael McNulty, General Manager, Putnam Public Service District, West Virginia
- Cindy R. Bobbitt, Commissioner, Grant County, Oklahoma
- Anthony P. Pratt, Administrator, President
- Delaware Department of Natural Resources & Environmental Control, American Shore & Beach Preservation Association
- Shailen P. Bhatt, Executive Director, Colorado Department of Transportation

ARTICLE BY Timothy W. Drake & Patricia Doersch of Squire Patton Boggs (US) LLP

“Change” Comes to Washington—What to Expect

On January 3, 2017, the 115th U.S. Congress opened with Republican majorities in both houses:

U.S. Senate: 52 Republicans and 46 Democrats and 2 Independents who Caucus with the Democrats
U.S. House of Representatives: 241 Republicans and 194 Democrats

On January 20, 2017, President-elect Donald Trump will be inaugurated as the 45th President of the United States, with an ambitious agenda set for the first 100 days, including the confirmation of his cabinet appointees and a yet-to-be-named Supreme Court nominee. Among his first acts, President-elect Trump is expected to undo many of the executive orders and “midnight regulations” of the Obama administration.

In the closing days of 2016, President Barack Obama adopted numerous federal regulations that may have served to advance and preserve his legacy. During his election campaign, Trump announced that, on his first day in office, his intention would be to roll back the executive orders adopted during the Obama administration and to seek repeal and replacement of other enactments such as the Affordable Care Act (or Obamacare). Most final regulations, however, may not simply be overturned with the stroke of the president’s pen, but must be undone by Congress, the courts, or reverse notice and comment rulemaking.

Thus, in addition to confirming President Trump’s cabinet nominations as quickly as possible, among the other early challenges for Congress will be to repeal and replace Obamacare and to invalidate en bloc the so-called “midnight regulations” and others adopted by the Obama administration or initiate a Congressional Review Act resolution of disapproval.

The first 100 days of the new Trump administration and the new 115th Congress will be busy and consumed by the following:

Senate Confirmations: Secretary of Labor-Designate Andy Puzder

Since his election, President-elect Trump has named his selections for cabinet seats, including on December 8, 2016, his choice of Andy Puzder to be the next Secretary of Labor. Puzder is the president and chief executive officer of CKE Restaurants, which has over 3,700 franchise restaurants, employing over 75,000 employees in the United States and 40 other countries. He has long been an advocate of job creation and an outspoken critic of government regulation of business, including the dramatic increase in the salary basis for exemption from overtime for “white collar” employees under the proposed overtime regulations. Puzder represents a dramatic shift from outgoing Secretary of Labor Thomas Perez.

Senate Democrats and labor unions have threatened opposition to Puzder’s confirmation. Under current Senate rules, however, confirmation requires only a simple majority since then Senate Majority Leader Harry Reid (D-NV) pushed through a rules change to eliminate 60-vote filibusters of administration and judicial nominations, except for nominations to the Supreme Court of the United States. With a majority of 52 votes, Senate Republicans should be able to confirm Mr. Puzder even if all 48 Democrats vote against his confirmation. The Senate Committee on Health, Education, Labor and Pensions has scheduled Mr. Puzder’s confirmation hearing for January 27, 2017.

Since Election Day, President-elect Trump and his transition teams (landing teams) have been hard at work vetting candidates for not only the cabinet, but subcabinet positions as well. Following Mr. Puzder’s confirmation, we expect the announcement of critical subcabinet positions at the U.S. Department of Labor, including those of deputy secretary of labor; solicitor; assistant secretaries for policy, occupational safety and health, and labor-management standards; and administrator of the Wage and Hour Division, among others.

Turning Around the NLRB and EEOC

At the National Labor Relations Board (NLRB), President-elect Trump will be able to designate lone Republican Board Member Philip Miscimarra as the new chairman to replace current Democratic Chairman Mark Pearce. He will also likely nominate two Republican members to join Miscimarra and current Democratic Members Pearce and Nancy Schiffer, thus giving Republicans a 3–2 majority. However, the task of reconsidering the staggering number of blatantly pro-union decisions by the Obama Board, which by some estimates overturned 4,559 years of well-settled Board law precedent, will be slowed by current Democratic General Counsel Richard Griffin, whose term will not expire until November of 2017. A former union lawyer, Griffin for the remainder of his term will likely insist that the NLRB’s regional offices adhere to and enforce the law established by the Obama Board, and will probably limit the opportunity to present cases to the new Trump Board for reconsideration. Since the NLRB is prohibited from issuing “advisory” opinions, the new Board will need to wait for “live cases” to rise up the pipeline. Thus, reversals of Obama Board decisions are not likely to come quickly.

At the U.S. Equal Employment Opportunity Commission (EEOC), current Democratic Chair Jenny Yang is now expected to serve out her term. President-elect Trump, however, will be able to designate Republican Commissioner Victoria Lipnic as chair and to nominate a Republican to fill the seat vacated by Republican Commissioner Constance Barker upon the expiration of Yang’s term in July of 2017. Barker’s nomination for a new term was pending in the Senate when Congress adjourned, and it must be resubmitted in the current Congress.

Overturning Federal Regulations

On his first day in office, President-elect Trump is expected to overturn numerous executive orders dating back to President Obama’s earliest days in 2009. Included may be executive orders mandating project labor agreements on federal construction projects, prohibiting reimbursement of labor relations costs for federal contractors, and setting mandatory minimum wages and paid family leave for federal contractors. Most importantly, he is likely to overturn Executive Order 13673 “Fair Pay and Safe Workplaces” requiring federal contractors and subcontractors to report “administrative merits determinations” (including alleged violations of 14 federal labor laws and equivalent state laws based on agency complaints prior to litigation and final judgment). These reports would need to be considered by federal contracting officials in the awarding of future federal contracts. Expect the so-called government contractor “blacklisting” rules and its implementing regulations and DOL guidance, already enjoined preliminarily by a court decision, to be among the first executive orders to be undone.

For its part, Congress is considering legislation to block “midnight regulations” issued by the outgoing Obama administration. During its first week in session, the new 115th Congress passed the Midnight Rules Relief Act (H.R. 21) sponsored by Representative Darrell Issa (R-CA) and the Regulations from the Executive in Need of Scrutiny (REINS) Act of 2017 sponsored by Representative Doug Collins (R-GA).

The Midnight Rules Relief Act amends the Congressional Review Act (CRA) to allow joint resolutions disapproving en bloc regulations submitted to Congress for review within 60 days of the end of a president’s term. The CRA may only be invoked on individual regulations, not a series of regulations en bloc.

The REINS Act requires that all new “major regulations” (those with an economic impact of $100 million or more) be subject to an up-or-down vote by a simple majority in both houses of Congress and be signed by the president before taking effect.

Of course, Congress already can institute a resolution of disapproval under the CRA for individual federal regulations within 60 legislative days of taking effect (or for a “reset” period upon the opening of a new Congress for regulations that were submitted to Congress for review on or after June 13, 2016, prior to its adjournment sine die). The resolution of disapproval is not subject to filibuster and, if passed and signed by the president, the same or “substantially similar” regulation may not be reintroduced and repromulgated in the future. The only federal rule ever to be disapproved under the CRA was the OSHA ergonomics standard issued in November of 2000, which was disapproved by the Republican Congress and signed by President George W. Bush in 2001.

Finally, of course, Congress may attach a “rider” to an appropriations or reconciliation bill (the latter of which is not subject to a Senate filibuster) that denies funding for the agency to enforce the regulation.

What Else?

In addition to the foregoing, Congress is expected to roll back agency regulatory powers by passing the Regulatory Accountability Act of 2017, H.R. 5 (Goodlatte, R-VA), which would repeal the longstanding so-called “Chevron deference” given to agencies’ legal interpretations. The legal standard originates from the Supreme Court’s 1984 decision in Chevron USA, Inc. v. Natural Resources Defense Council, Inc. The legislation would eliminate Chevron standards frequently used by courts to uphold agency interpretations of federal regulations, as well as change agency rulemaking and strip agency “guidance” from having legal effect. In addition, the bill would require six-month delays of enforcement for new rules and mandatory litigation stays for “major rules” that would have an impact of $1 billion or more on commerce. The bill also would require agencies to calculate the direct, indirect, and cumulative effects of new rules on small business. A vote on the bill is expected in the House in January, over the strong opposition of organized labor and environmental groups that fear that the bill will curtail labor and environmental rule making.

Other Priorities—Will the Government Be Less Dysfunctional?

Newly-elected presidents often pursue aggressive first year agendas that embody their most important policy goals enunciated during their election campaigns. President Trump will be no different, and he is likely to advance policy objectives fulfilling campaign promises on reversing government regulations as well as on immigration, trade, taxes, military spending, national security, infrastructure, and job growth. Taking on that laundry list of policy initiatives will be easier said than done. From the start of his administration, President Obama had difficulty overcoming united Republican opposition to his policy goals. For their part, Democratic leaders in the 115th Congress—led by Senate Democratic Leader Chuck Schumer (D-NY) and House Democratic Leader Nancy Pelosi (D-CA)—already promise to stand firmly against the confirmation of certain cabinet nominees and any Supreme Court nominee who in their opinion may be outside the mainstream of judicial philosophy and legislative policies they oppose. On a few issues, such as infrastructure, the Democratic leaders say they may seek bipartisan compromise. With a narrow 52-vote Senate majority, Senate Republicans will find it difficult to muster the 60 votes necessary to invoke cloture to end a Democratic legislative filibuster. Thus, expect congressional gridlock to continue, although possibly not to the same degree as over the past 12 years. Voters who are now seeking less gridlock and a less dysfunctional government may be disappointed at the pace of change.

Filibusters are meant to be dysfunctional, to be the Senate “saucer” that cools the “overheated cup” of House action by promoting extended Senate debate and deliberation. It is the main distinction between the House and Senate. Ironically, there were a number of Senate Democrats in the last Congress who supported a rules change to eliminate legislative filibusters along with the “nuclear option” advanced by then Senate Majority Leader Harry Reid (D-NV), which would have eliminated filibusters of administrative appointments and judicial nominations. Today, the legislative filibuster may be the Democrats’ salvation. Indeed, there may be some Senate Republicans who would consider eliminating the legislative filibuster. Where one stands depends on where one sits. However, Senate Majority Leader Mitch McConnell (R-KY) is unlikely to permit elimination of the legislative filibuster.

Still, the nuclear option against administrative and judicial nominations continues to stand. This means that President Trump’s cabinet nominations should be confirmed unless Senate Democrats are able to convince three Republicans to join them in voting against the nominations. It also means that judicial nominations should be quickly confirmed on simple majority votes. Currently, there are over 100 unfilled judicial vacancies—including a number of critical federal circuit court seats. The federal appellate courts are important for labor and employment policy since, in our constitutional system of checks and balances, the federal circuit courts are the appellate courts that review government regulations promulgated by the executive branch and legislation passed by Congress. Apparently, the “nuclear option” was so effective in the 114th Congress that President Obama was able to quickly push through Democratic judicial nominations, and today there are only 4 of the 12 judicial circuits with majorities appointed by Republican presidents. Expect that to change and for the circuit courts to become more balanced.

Legislation, however, is still subject to the 60-vote Senate filibuster of bills passed quickly by the larger Republican majority in the House. Thus, “change” may come to Washington, but perhaps not as easily or as quickly as some voters may anticipate.

ARTICLE BY Harold P. Coxson of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Senate Commerce Committee to Hold Chao Nomination Hearing; President-Elect Trump Infrastructure Proposal Update; “Drones Over People” Rule Expected Soon

The Senate Commerce, Science, and Transportation Committee will hold a nomination hearing for Transportation Secretary-designate Elaine Chao. In addition to serving as the Secretary of Labor under President George W. Bush, she served as Deputy Secretary at US DOT under President George H. W. Bush, Chairman of the Federal Maritime Commission under Presidents Ronald Reagan and George H. W. Bush, Maritime Administration Deputy Administrator under President Reagan, and a White House Fellow at US DOT under President Reagan. Because of her experience in these positions, Elaine Chao will bring considerable substantive transportation knowledge and experience overseeing large organizations to bear as the Secretary of Transportation. We expect she will enjoy easy confirmation by the Senate.

Elaine Chao will likely be initially tasked with crafting and then moving Trump’s infrastructure proposal through Congress. In response to the Senate’s nominee questionnaire, Ms. Chao identified several issues that she would focus on as Secretary of Transportation. These included (1) effective enforcement of safety measures, strengthening US DOT’s planning and acquisition practices, and considering new technologies in infrastructure; (2) expediting the process of making repairs and building new construction and decreasing regulatory burdens; and (3) striving for equity between urban and rural areas and among modes of transportation.

Ms. Chao’s list of focus areas is so broad as to cover nearly all key functions of the Department of Transportation, so it does not provide significant insight into what her priorities as Secretary would be. However, there are a few issues we believe Ms. Chao will prioritize. These include regulatory reform, Buy America, and private sector innovation, such as support for autonomous vehicles to improve vehicle safety and for public-private partnerships to advance capital project more efficiently.

President-Elect Trump Infrastructure Proposal Update

Throughout the presidential campaign, President-elect Trump advocated for a large infrastructure investment package, however there are few details known about the proposal at this time. Trump initially said he would “at least double” Secretary Clinton’s $275 billion infrastructure proposal, and has at times called for un-named measures to support $1 trillion in infrastructure investment.

During the campaign, Trump associated himself with an infrastructure proposal drafted by Wilbur Ross, his nominee for Commerce Secretary, and Peter Navarro, recently named as the head of a new National Trade Council to advise the President on trade issues. The Ross-Navarro proposal would provide a tax credit to equity investors in infrastructure projects with the aim of attracting greater private investment in such projects and lowering project finance costs. The proposal relies on dynamic scoring to offset the tax expenditure. Revenues gained through tax reform (including one-time funding through deemed repatriation tax on overseas earnings) has been often cited as a viable pay-for for infrastructure funding, and many believe it would be difficult to fund an infrastructure package independent of tax reform legislation.

Because equity investors support a very small fraction of transit and highway projects – those with a dedicated revenue stream to pay back such investment – tax credits for equity investments are viewed by many transportation stakeholders as only a small part of the solution to our infrastructure investment gap. Stakeholders and even some Members of Congress have made clear that any infrastructure package must include grant funding in addition to finance tools.

Trump’s selection of anti-spending crusader Rep. Rick Mulvaney (R-SC) as the Director of the Office of Management and Budget appears to signal strong fiscal discipline by the next President – in any future infrastructure spending and across the Federal budget – so few expect Trump to propose a large stimulus-style spending bill like the one Congress and President Obama adopted in 2009. House and Senate Republican leaders have publicly stated there must be responsible methods of paying for any infrastructure spending.

With reauthorization of the FAST Act still a few years away, Trump’s still-developing proposal is likely to be seen by many transportation stakeholders as the best opportunity to advance their particular interests. While both Congress and the Trump Administration may have little appetite to take on difficult issues in what Trump has billed as a much-needed investment in America’s infrastructure and economy, some straightforward provisions are likely to travel on this bill. On a broader scale, any infrastructure package could also be an opportunity to secure a long-term revenue solution for the Highway Trust Fund (HTF). By the end of the FAST Act in 2020, HTF revenues will support only 55 percent of authorized spending from the HTF. So many transportation stakeholders view Trump’s large infrastructure investment bill as a well-suited vehicle to address this funding shortfall before the end of 2020. However, the Trust Fund’s systemic revenue shortfall has not become any easier to solve, due to: the growing size of the shortfall; bipartisan objections to raising the federal fuels tax; and little support for scaling back popular infrastructure programs.

While the President-elect prioritized infrastructure investment in his campaign, there are a number of potential impediments to successfully advancing a large infrastructure package. Congressional Republicans have recently identified reform of the Affordable Care Act, tax reform, and regulatory reform as the first proposals they will advance in the 115th Congress – not Trump’s transportation plan.

Another potential impediment is that an infrastructure package is simply not a must-pass bill: the FAST Act is in place until 2020. In 2017, the transportation committees in Congress will be focused on an upcoming Federal Aviation Administration (FAA) reauthorization deadline. The current FAA extension expires September 30, 2017, and reauthorizing aviation programs will likely be a priority for House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA).

One Congressional effort that would build support for infrastructure spending is the return of earmarks. The House is likely to vote on a bill early in 2017 that would reestablish earmarks. In the past, infrastructure bills often enjoyed enormous bipartisan support because many Members were able to secure direct funding for projects in their district or State through earmarking. At this time, it is unclear if earmark supporters have the votes to overturn the earmark ban.

Regulatory Activity

“Drones Over People” Rule Expected Soon

The Federal Aviation Administration (FAA) continues to work on a proposed rule allowing the operation of unmanned aircraft systems (UAS) over people, and has been expected to release the proposed rule before the end of the Obama Administration on January 20, 2017. The proposed “drones over people” rule will significantly expand allowable UAS operations, likely allowing the operation of UAS over individuals that are not directly involved in the operation of the UAS. After the “drones over people” rule is issued, FAA will focus on drafting a propose rule allowing beyond visual-line-of-sight operations. These newly proposed rules follow the final rule on the Operation and Certification of Small Unmanned Aircraft Systems, which went into effect on August 29, 2016.

This Week’s Hearings:

On Wednesday, January 11, the Senate Commerce, Science, and Transportation Committee has scheduled a confirmation hearing on the expected nomination of Ms. Elaine Chao to be Secretary of the United States Department of Transportation.
On Wednesday, January 11, the Senate Homeland Security and Governmental Affairs Committee has scheduled a confirmation hearing on the expected nomination of General John Kelly to be Secretary of the United States Department of Homeland Security.
On Thursday, January 12, the Senate Commerce, Science, and Transportation Committee has scheduled a confirmation hearing on the expected nomination of Mr. Wilbur Ross to be Secretary of the United States Department of Commerce.

ARTICLE BY Timothy W. Drake of Squire Patton Boggs (US) LLP

U.S. Election Forecast on Congressional Leadership Changes

With the election less than a week away, we conducted in-depth analysis of possible House and Senate committee leadership changes, including committees that effect energy technology policies. Leadership of a number of House and Senate committees is bound to change due to term-limits, retirements, and perhaps election results, including the Energy and Commerce and Natural Resources House committees, and the Energy and Natural Resources and Environment and Public Works Senate committees. We have outlined those potential changes in either a Republican- or a Democratic-controlled House and Senate. To read more about these potential Congressional leadership changes, read on!

Among Republicans on the House Energy and Commerce committee, Rep. John Shimkus (IL) and Rep. Greg Walden (OR) are expected to run for Chair/Ranking Member because Rep. Fred Upton (MI) is term-limited. Rep. Shimkus has more seniority on the committee than Rep. Walden, but Walden is completing his second term leading the Republican National Congressional Committee. Both are well-liked within the Republican Caucus and are adept fundraisers. Rep. Joe Barton (TX) has the most seniority on the committee and could also choose to run for Chairman or Ranking Member. Sources are indicating that should the Democrats gain control of the House, Rep. Barton would be less interested in running for Ranking Member. Additionally, Rep. Barton is already term-limited as the top Republican on the committee and would have to seek a waiver to serve as the next Chair or Ranking Member. On the Democrats’ side, Rep. Frank Pallone (NJ) would likely remain the Ranking Member if the Republicans control the House and would likely become Chairman if the Democrats control the House.

On the House Natural Resources committee, Republican Rob Bishop (UT) would likely remain the Chairman if the Republicans control the House and would likely become the Ranking Member if the Democrats took control. For the Democrats, Rep. Raul Grijalva (AZ) could remain the Ranking Member if the Republicans retain the House and could become Chairman if the Democrats win control. However, Rep. Grijalva could choose to run for Chair/Ranking Member of the Education and the Workforce Committee if Rep. Bobby Scott (VA) is appointed to the Senate to replace Vice Presidential candidate Tim Kaine. It is unclear who would run for or become Chair/Ranking Member of Natural Resources in that scenario.

In the Senate, Republican Sen. Lisa Murkowski (AK) would likely remain Chairwoman of the Energy and Natural Resources committee if the Republicans win the Senate. However, if the Democrats control the Senate, Sen. John Barrasso (WY) could become the Ranking Member because Sen. Murkowski is term-limited as Ranking Member of Energy and Natural Resources. Sen. Barrasso could also choose to become the Ranking Member of Environment and Public Works, in which case, Sen. Jim Risch (ID) could become the Ranking Member of Energy and Natural Resources. However, sources are indicating that Sen. Barrasso, who represents a Western coal state, would likely choose to become the Ranking Member of Energy and Natural Resources, in part because it would allow Sen. Shelley Moore Capito (WV), a rising female star in the GOP who hails from an Eastern coal state, to become the Ranking Member of Environment and Public Works. For the Democrats, Sen. Maria Cantwell (WA) would likely remain the Ranking Member if Republicans remain in control or become the Chairwoman for Energy and Natural Resources if the Democrats win the Senate. Though highly unlikely, there is a scenario in which, Sen. Jack Reed (RI) becomes the Chair/Ranking Member of Appropriations and Sen. Bill Nelson (FL) then takes over as Chair/Ranking Member of Armed Services. In that unlikely case, Sen. Cantwell could choose to become the Chair/Ranking Member of Commerce, opening up the top Democratic slot on Energy and Natural Resources to Sen. Bernie Sanders (VT). (Sen. Ron Wyden (OR) would be next in line after Sen. Cantwell on Energy and Natural Resources, but Sen. Wyden will remain the Chair/Ranking Member of Finance.)

Among Republicans on the Senate Environment and Public Works committee, Sen. Barrasso could become the Chairman because Sen. James Inhofe (OK) is term-limited as Chairman and Sen. David Vitter (LA) is retiring. If the Democrats control the Senate, Sen. Barrasso could become the Ranking Member because Sen. Inhofe is again term-limited and Sen. Vitter is retiring. However, as discussed above, Sen. Barrasso would likely choose to become the Ranking Member of Energy and Natural Resources, in which case Sen. Capito could become the Ranking Member of Environment and Public Works. For the Democrats, if the Republicans or Democrats control the Senate, Sen. Tom Carper (DE) could become Chair/Ranking Member of Environment and Public Works because Sen. Barbara Boxer (CA) is retiring. According to sources, Sen. Carper is indeed preparing to take over as the top Democrat on this committee. However, Sen. Carper could choose to remain the Chair/Ranking Member of Homeland Security, in which case Sen. Ben Cardin (MD) could become the Chair/Ranking Member of Environment and Public Works. Sen. Cardin could also choose to remain the Chair/Ranking Member of Foreign Relations unless Sen. Robert Menendez (NJ) is cleared of ethics violations and is reinstated, which is unlikely in the near future. If Sen. Cardin remains the Chair/Ranking Member of Foreign Relations, which is nearly certain as long as Sen. Menendez is under indictment, Sen. Sanders could become the Chair/Ranking Member of Environment and Public Works.

ARTICLE BY David J. Leiter, Sarah Litke & Matthew Miller of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Tag: Senate

Senate Confirms Lee Francis Cissna to lead USCIS

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Better Care Reconciliation Act – Key Takeaways for Employers and Plan Sponsors

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