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Capital Thinking

Securities and Exchange Commission Advisory Committee Issues Recommendation

Posted in Financial Services

At the meeting held on June 3, 2015, in Washington, D.C., the Securities and Exchange Commission Advisory Committee on Small and Emerging Companies (“Advisory Committee”) recommended that the Securities and Exchange Commission (“SEC”) formalize the so-called Section 4(a) (1-1⁄2) exemption, a legal construction that has developed over time based on case law. The exception has not been specifically established by any written statute nor formally adopted by SEC regulation, although in no-action letters and interpretative releases the SEC has recognized it as being within the intended purpose of the Securities Act. In its essence, Section 4(a) (1-1/2) operates as a hybrid exemption combining elements of exemptions set forth in Sections 4(1) and Section 4(2) of the Securities Act. In practice, this exemption has been increasingly invoked to allow resale of privately issued securities by shareholders who are not able to rely on Securities Act Rule 144. Formalizing the Section 4(a) (1-1/2) exemption is expected to increase both liquidity and certainty of execution of such transactions, which in turn would positively impact private company capital formation and job creation.

Please read the Advisory Committee’s recommendation for more information.

Senate to Consider Nominations; House Continues Consideration of Appropriations Bills and Possible Trade Legislation

Posted in General Legislative

Senate Legislative Activity

The Senate will meet on Monday, June 22, at 3:00pm. Following any Leader remarks, the Senate will be in a period of morning business until 5:00pm, with Senators permitted to speak for up to 10 minutes each. At 5:00pm, the Senate will enter Executive Session to consider Executive Calendar #156 and #124, the nominations of Peter Neffenger to be an Assistant Secretary of Homeland Security and Daniel Elliott to be a Member of the Surface Transportation Board, respectively. There will be 30 minutes for debate on the nominations, which will equally divided.  At 5:30pm, there will be a roll call vote on Executive Calendar #156 and a voice vote on Executive Calendar #124.

Additionally, note that there is a 4:00pm filing deadline today, June 22, for all germane first-degree amendments to the Defending Public Safety Employees’ Retirement Act (H.R.2146) and the Trade Preferences Extension Act of 2015 (H.R.1295).

House Legislative Activity

On Monday, June 22, the House is not in session. On Tuesday, June 23, the House will meet at 12:00pm for morning hour and at 2:00pm for legislative business, with votes postponed until 6:30pm. The following legislation will be considered under suspension of the rules:

  1. H.R. 805 – Domain Openness Through Continued Oversight Matters (DOTCOM) Act of 2015;
  2. H.R. 2576 – TSCA Modernization Act of 2015, as amended;
  3. H.R. 893 – Boys Town Centennial Commemorative Coin Act, as amended;
  4. H.R. 1698 – Bullion and Collectible Coin Production Efficiency and Cost Savings Act, as amended;
  5. H.R. 2620 – To amend the United States Cotton Futures Act to exclude certain cotton futures contracts from coverage under such Act, as amended;
  6. H.R. 1633 – DHS Paid Administrative Leave Accountability Act of 2015, as amended;
  7. H.R. 1615 – DHS FOIA Efficiency Act, as amended;
  8. H.R. 1640 – Department of Homeland Security Headquarters Consolidation Accountability Act, as amended;
  9. H.R. 1626 – DHS IT Duplication Reduction Act of 2015, as amended;
  10. H.R. 2390 – Homeland Security University-based Centers Review Act, as amended;
  11. H.R. 1637 – Federally Funded Research and Development Sunshine Act of 2015, as amended;
  12. H.R. 2200 – CBRN Intelligence and Information Sharing Act, as amended;
  13. H.R. 1646 – Homeland Security Drone Assessment and Analysis Act, as amended; and
  14. Concur in the Senate Amendment to H.R. 615 – Department of Homeland Security Interoperable Communications

On Wednesday, June 24, the House will meet at 10:00am for morning hour and at 12:00pm for legislative business to consider H.R. 2042 – Ratepayer Protection Act of 2015, Rules Committee Print (Subject to a Rule).

On Thursday, June 25, the House will meet at 10:00am for morning hour and at 12:00pm for legislative business.  On Friday, June 26, the House will meet at 9:00am for legislative business, with last votes expected by 3:00pm.  The House will consider H.R. 2822 – Department of the Interior, Environment, and Related Agencies Appropriations Act, 2016 (Subject to a Rule), and may consider legislation related to trade.

Senate Appropriations Process Stalls as Democrats Look to Force a Budget Deal; What a Budget Deal Might Look Like

Posted in Budget and Appropriations

Legislative Activity

Senate Appropriations Process Stalls as Democrats Look to Force a Budget Deal

The Senate appropriations process has stalled, and it is unclear how Senate Majority Leader Mitch McConnell (R-KY) will proceed this week. Last Thursday, Senate Democrats followed through with their announced strategy to stop appropriations bills from reaching the Senate floor by blocking the $567 billion Defense Appropriations Bill, ignoring Senate Republican Whip John Cornyn’s (R-TX) warning that voting against the bill would be “political suicide.” Majority Leader McConnell chose to advance the Defense Appropriations Bill first to put pressure on Senate Democrats, as Defense spending typically enjoys broad bipartisan support. Republicans have already started their messaging efforts to paint Democrats as obstructionists who “voted against the troops.”

The Republican’s appropriations strategy for the coming weeks is not yet clear, but Senate Appropriations Committee member Roy Blunt (R-MO) encouraged Majority Leader McConnell to continue bringing appropriations bills to the floor to test the Democrats’ resolve. Senate Democratic Leadership again called on Republicans to “immediately schedule bipartisan budget negotiations,” and Senator Patty Murray (D-WA), who negotiated the last budget deal in 2013, said the sequester was meant to force Congress to “find smarter savings,” and was not intended to become final budget numbers.

The current appropriations impasse is further complicated by the fact that each faction believes, or at least publicly states, that they have the political upper-hand. President Obama continues to issue veto threats for any appropriations bills that follow the sequester’s spending caps or the Republicans’ budget, and there are few indications he would not follow through with those threats as he heads into his final year-and-a-half in office. Senate Democrats have already tried to tie any potential government shut-down to Republicans, and intend to continue their strategy of blocking all appropriations bills to increase pressure for a budget deal. Finally, Republicans have already forced Democrats to vote against a popular spending bill, and have shown little desire to enter into budget negotiations as they argue that Democrats will take any political fallout of a potential shut-down.

What a Budget Deal Might Look Like

If Democrats succeed in forcing Republicans to negotiate a budget deal, which would likely be several months from now, it is unclear what the final deal would include. Democrats have pointed to President Obama’s budget as a framework for a deal, which would pay for additional spending with mandatory spending cuts, revenue increases, and immigration reform. However, House Budget Chairman Tom Price (R-GA) has called revenue increases a “non-starter.” The 2013 budget deal used a mixture of mandatory spending cuts and non-tax revenue increases to provide an additional $63.2 billion in discretionary spending over two years, split equally between defense and non-defense spending, and $23 billion in deficit reduction.

It is also unclear who would negotiate a budget deal, since Senator Murray and Congressman Paul Ryan (R-WI), who negotiated the 2013 budget agreement, no longer chair the budget committees in the Senate and the House. Another concern is the impending need to raise the debt ceiling, which the Congressional Budget Office estimates will be reached in October or November and could further complicate any budget deal.

This Week’s Hearings:

  • Tuesday, June 23: The Senate Appropriations Financial Services and General Government Subcommittee will hold a hearing to review information technology spending and data security at the U.S. Office of Personnel Management.
  • Tuesday, June 23: The Senate Budget Committee will hold a joint hearing with the Senate Homeland Security and Governmental Affairs Committee titled “Measuring the True Cost of Regulations: Lessons from Great Britain and Canada in Implementing Regulatory Reform.”

FY 2016 Appropriations Committee/Subcommittee Markup Hearings

  • Tuesday, June 23: The Senate Appropriations Transportation, Housing and Urban Development, and Related Agencies Subcommittee will hold a markup of the FY 2016 Transportation, Housing and Urban Development Appropriations Bill.
  • Tuesday, June 23: The Senate Appropriations Labor, Health and Human Services, Education, and Related Agencies Subcommittee will hold a markup of the FY 2016 Labor, Health and Human Services, and Education Appropriations Bill.
  • Wednesday, June 24: The House Appropriations Committee will hold a markup of the FY 2016 Labor, Health and Human Services, and Education Appropriations Bill.

Congress Begins to Take Action on Cybersecurity Legislation

Posted in Cybersecurity

Legislative Activity

Congressional Action on Cybersecurity Legislation

Last week, the House approved a fiscal 2016 intelligence authorization bill that would compel the executive branch to provide Congress more detail on the massive hacking of the federal personnel system and sets requirements for the Cyber Threat Intelligence Center (CTIIC). One of the CTIIC provisions would require the Director of National Intelligence, James Clapper, to provide an assessment of collaborative efforts between federal agencies, and recommendations to improve those efforts. The report is due 10 months after the bill’s enactment and will be an annual report the Director would need to complete for the next three years.

In addition to the 2016 intelligence authorization bill, House Homeland Security Chairman Michael McCaul (R-TX) recently urged Senators to move quickly to pass an information sharing bill before the August recess. This comes as increased pressure has developed for the Senate to take action on cybersecurity information-sharing legislation, where several Senators have begun to advocate for cyber legislation to move to the floor quickly before spending fights and presidential politics take over the legislative agenda.

This Week’s Hearings:

  • Tuesday, June 23: The Senate Judiciary Subcommittee on Crime and Terrorism will hold a hearing titled “Cyber Crime: Modernizing our Legal Framework for the Information Age.”
  • Wednesday, June 24: The House Homeland Security Subcommittee on Cybersecurity, Infrastructure Protection, and Security Technology will hold a hearing titled “DHS’ Efforts to Secure .Gov.”

Executive Branch Activity

Office of Personnel and Management Response

In light of the massive infiltration of the Office of Personnel and Management’s (OPM) data system, the President has seen increased pressure from Congress, industry, and experts to issue a strong response. While the White House has yet to specifically name China as the responsible party for the cyber attack, many stakeholders and experts would like to see the White House begin to develop a more structured way of deterring cyber “warfare”. However, it is important to note all interested parties seem to be having trouble agreeing on what exactly the proper deterrent should be for these repeated hacks and intrusions.

Information Sharing Entities Face Challenges

Last week the U.S. Department of Homeland Security (DHS) held a workshop to discuss the agency’s plans to help guide the development of information sharing and analysis organizations (ISAOs). Through this workshop the agency announced they will pick a non-governmental agency to spearhead the development of standards for the ISAOs this summer as well as discussed the fundamentals of how an ISAO would operate. While no specifics or substantial developments were agreed upon, the Department plans on developing a white paper to inform a second workshop next month in California. The hope is that the white paper will provide some substantial ideas for how to define an ISAO for participants to comment on.

FY 2016 Labor-HHS-Education Appropriations Progress; ESEA Outlook; HEA Hearings

Posted in Education

Legislative Activity

Labor-HHS-Education Appropriations Progresses

Last Tuesday, the House Appropriations Committee’s Subcommittee on Labor, Health and Human Services, Education, and Related Agencies released its draft FY 2016 spending bill in advance of the Subcommittee’s markup the following day on June 17. This is the first time the House Labor-HHS-Education bill has been made public in three years. The measure provides $153 billion in new discretionary funding for FY 2016, a $3.7 billion decrease from FY 2015 enacted levels. Additionally, it is $14.6 billion below the President’s FY 2016 Budget Request, practically assuring another veto threat. The bill, however, does include a $1.1 billion increase over FY 2015 funding for the National Institutes of Health. The Subcommittee approved the draft bill on June 17, after defeating several amendments by Committee Democrats to increase funding for research, Pell Grants, job training and worker protection programs, and other education programs.

The full House Appropriations Committee plans to mark up the measure this Wednesday. In addition, the Senate Appropriations Education Subcommittee on Labor, Health and Human Services, Education and Related Agencies will mark up its version on Tuesday.

Elementary and Secondary Education Act Outlook

The Senate version of its ESEA reauthorization bill, the Every Child Achieves Act of 2015, continues to face delays as it awaits a vote on the Senate floor. The legislation is expected to be up for consideration in the days following the July 4 recess. The delay is attributed to the Senate’s current preoccupation with trade legislation, though some groups have hypothesized a general lack of urgency to get it done.

Higher Education Act Reauthorization Hearings

Last Wednesday, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing titled “Reauthorizing the Higher Education Act: Evaluating Accreditation’s Role in Ensuring Quality.” The hearing focused on the role of accreditation in higher education, and how to best approach reforming the system as part of the Higher Education Act (HEA) reauthorization process.

Witnesses agreed that the accreditation system needs greater transparency and must implement standardized and statistical measures. They provided varying opinions, however, on whether the accreditation system should be nationally or regionally structured.

Senate HELP Committee Chairman Lamar Alexander (R-TN) criticized the government regulation and overreach that he believes has a negative impact on many accreditors. He is against using accreditation agencies as “gatekeepers” for Title IV funds, though he acknowledged that he does not see an alternative strategy. Chairman Alexander hopes the HEA reauthorization bill will reduce the number of federal regulations and refocus accreditation agencies’ efforts on quality assessment.

Chairman Alexander also noted that the committee plans to hold another HEA reauthorization hearing after the July 4 recess, with a focus on innovation in higher education. Chairman Alexander and Ranking Member Patty Murray (D-WA) still plan on introducing a bipartisan HEA bill by September.

Executive Branch Activity

State Authorization Regulations

On July 1, 2015, the Department of Education’s state authorization regulations will take effect after being on hold since July 1, 2011 to allow institutions of higher education time to prepare. Once the rules become effective, the Department expects institutions to comply or otherwise be at risk of losing their Title IV eligibility. To comply, institutions “must be legally authorized by a State to provide a postsecondary education program, and the State must have a process to review and act upon student complaints about that institution.” Last Friday, the Department sent out a Dear Colleague Letter reminding institutions about the effective date and including information on previous guidance on the new regulations.

In both the House and the Senate, education committee members have introduced bills to repeal the Department of Education’s state authorization rules, which they plan to integrate into a larger Higher Education Act bill (or include it as part of a series of other HEA reauthorization bills). Given the HEA reauthorization timeline in both chambers, however, repealing the rule before it takes effect is not possible.

Deepwater Restoration Projects Slated for Gulf; New GHG Rule Proposed for Trucks, Transit and School Buses; House To Consider Improved Permitting Process

Posted in Environment and Natural Resources

Regulatory Activity

Deepwater Horizon Spill Restoration

The Department of the Interior’s draft Phase IV Early Restoration Plan and Environmental Assessments regarding the Deepwater Horizon Oil Spill currently proposes 10 early restoration projects. The Department is extending the public comment period on its draft until July 6.

Greenhouse Gas

On Friday, the Environmental Protection Agency (EPA) and the Department of Transportation announced a proposed rule to increase fuel efficiency for medium and heavy duty vehicles – which largely includes heavy trucks and trailers as well as school buses among others. According to the EPA, the proposed rule intends to impact the following four categories of vehicles: (1) Combination Tractors; (2) Trailers Pulled by Combination Tractors; (3) Heavy-duty Pickup Trucks and Vans; and (4) Vocational Vehicles. Of important note for cities and counties, vocational vehicles consist of “a wide variety of truck and bus types, including delivery trucks, refuse haulers, public utility trucks, transit, shuttle, and school buses. This segment also includes specialized vehicles such as emergency vehicles, and cement and dump trucks. Vocational vehicles represent about one fifth of the total medium- and heavy-duty fuel consumption.” The EPA is accepting comments now on the proposed rule.

Legislative Activity

Clean Power Plan

On Tuesday, June 24, the House Science, Space and Technology Committee will hold a joint hearing with the Subcommittee on Environment and the Subcommittee on Energy to examine potential impacts of EPA’s Clean Power Plan. The hearing will discuss a report by the U.S. Energy Information Administration (EIA) and Dr. Howard Gruenspecht, Deputy Administrator of the EIA, will testify.

Gas and Crude Oil

On Tuesday, June 23, the Senate Foreign Relations Committee, Subcommittee on Multilateral International Development, will hold a hearing concerning titled “American Energy Exports: Opportunities For U.S. Allies and U.S. National Security.”

Minerals

On Thursday, June 25, the House Natural Resources Committee, Subcommittee on Energy and Mineral Resources, will hold a hearing to consider H.R. 1937, the “National Strategic and Critical Minerals Production Act of 2015.” According to sponsors of the legislation, the bill is intended to improve the permitting process in the U.S. in order to “more efficiently develop domestic sources of the minerals and mineral materials of strategic and critical importance to United States economic, national security and manufacturing competitiveness.”

Flooding

On Tuesday, June 23, the Senate Banking, Housing, and Urban Affairs Committee will hold a full committee oversight hearing to review the National Flood Insurance Program.

Wind and Solar

On Tuesday, June 24, the House Natural Resources Committee, Subcommittee on Oversight and Investigations, will hold a hearing concerning BLM’s management of wind and solar reclamation bonds.

Air Quality

On Tuesday, June 23, the Senate Environment and Public Works Committee, Subcommittee on Clean Air and Nuclear Safety, will hold a hearing titled “The Impacts of EPA’s proposed Carbon Regulations on Energy Costs for American Businesses, Rural Communities and Families.”

Fiduciary Rule Under Scrutiny, Appropriators Continue Targeting Dodd-Frank

Posted in Financial Services

Legislative Activity

Lawmakers Consider Dept. of Labor Proposed Fiduciary Rule

Last week, the House Education and the Workforce Committee held its first hearing on the Department of Labor’s recently released Fiduciary Rule, which seeks to establish a new legal standard for brokers and require them to offer investors retirement advice that is in the investors’ best interest. Republicans continue to argue that the Department of Labor’s proposed rule is costly and unnecessary. As such, House appropriators last week marked up the FY 2016 Labor, Health and Human Services Funding Bill, which contains a provision that would prevent the Department of Labor from implementing the rule. Appropriators voted along party lines in favor of the bill and against an amendment introduced by Democrats, which would have jettisoned the provision blocking the Fiduciary Rule.

House Appropriators Vote to Keep CFTC’s Budget at Level Funding

On June 18, the House Appropriations Agriculture, Rural Development, Food and Drug Administration and Related Agencies Subcommittee marked up and approved its FY 2016 spending bill, which would keep the Commodity Futures Trading Commission’s (CFTC) budget at $250 million – the same level as FY 2015 and nearly one-third less than the Obama Administration requested.  Additionally, the legislation proposes to repeal the indemnification provisions in the Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) Act, which are seen by many as inhibiting regulators from sharing derivatives data with other countries.

This Week’s Hearings:

  • Tuesday, June 23: The Senate Banking Committee will hold a hearing titled “Oversight Review of the National Flood Insurance Program.”
  • Wednesday, June 24: The House Financial Services Task Force to Investigate Terrorism Financing will hold a hearing titled “Evaluating the Security of the U.S. Financial Sector.”
  • Wednesday, June 24: The Senate Banking Committee will hold a hearing titled “Assessing and Improving Flood Insurance Management and Accountability in the Wake of Superstorm Sandy.”
  • Thursday, June 25: The House Financial Services Subcommittee on Oversight and Investigations will hold a hearing titled “Examining Continuing Allegations of Discrimination and Retaliation at the Consumer Financial Protection Bureau.”

Regulatory Activity

CFPB May Delay Mortgage Disclosure Rule

The Consumer Financial Protection Bureau (CFPB) has announced that, despite an upcoming August 1 compliance date for certain loan disclosure rules, mortgage lenders may be provided an additional two months to comply. Recognizing an “administrative error…in meeting the requirements under federal law,” CFPB Director Richard Cordray stated that the CFPB is seeking outside input and will decide shortly whether to delay the effective date to October 1.

Separately, both the CFPB and the Federal Reserve last week released their Semiannual Regulatory Agendas.

SCOTUS Decision on ACA Subsidies Expected Any Day; IPAB Repeal Hits House Floor; Appropriations Committees Consider Health Bills; 340B Proposed Rule Released

Posted in Health Care

SCOTUS Watch

The Supreme Court is expected to issue its opinion in King v. Burwell by the end of the month, though it is unclear when the decision will be handed down. Currently, the Supreme Court has scheduled non-argument days for June 22 and 29, with a conference day scheduled for June 25. The issue in King is whether the Affordable Care Act (ACA) provides tax subsidies to individuals who purchase insurance through the federal exchange, in addition to subsidies for those who buy insurance through state-based exchanges, which is explicitly stated in the law.

Legislative Activity

House to Continue Consideration of IPAB Repeal

Majority Leader Kevin McCarthy (R-CA) has announced that the House of Representatives will complete consideration of H.R. 1190, the Protecting Seniors’ Access to Medicare Act of 2015, this week. This bill repeals the sections of the ACA that establish the Independent Payment Advisory Board (IPAB), an entity to develop proposals to reduce spending growth in the Medicare program. The Congressional Budget Office (CBO) has estimated that the repeal would cost $7.1 billion from FY 2016 to FY 2025. The House Committee on Rules adopted an amendment, offered by Rep. Joe Pitts (R-PA), which offsets the repeal costs with funds from the ACA’s prevention and public health fund. The House began considering the bill last week but a vote was postponed. It currently has 235 bipartisan cosponsors.

Appropriations Committees Mark Up Health Legislation

Following Subcommittee action last week, the House Committee on Appropriations has announced it will hold a markup of the FY 2016 Labor, Health and Human Services, and Education bill on Wednesday, June 24. The draft legislation includes $153 billion in discretionary funding ($14.6 billion below the President’s budget request), with $71.3 billion for the Department of Health and Human Services (HHS) ($3.9 billion below the President’s budget request). The bill includes over $6 billion in funds for the Health Resources and Services Administration (HRSA) ($413 million below the President’s budget request), including $265 million for the Children’s Hospital Graduate Medical Education Program. Additionally, the bill provides the Centers for Disease Control and Prevention (CDC) $7 billion (equal to the President’s budget request), including $1.56 billion for Public Health Preparedness and Response; $31.2 billion for the National Institutes of Health (NIH) to increase several research initiatives ($100 million above the President’s budget request); and $3.3 billion for the Centers for Medicare and Medicaid Services (CMS) ($919 million below the President’s budget request). The bill does not include additional funding to implement the ACA. It prohibits funds from going to the “Center for Consumer Information and Insurance Oversight” and “Navigators” programs.

The Senate Committee on Appropriations Subcommittee on Departments of Labor, Health and Human Services, Education, and Related Agencies will hold a markup on its appropriations language on Tuesday, June 23. The legislation has yet to be released.

Chairman Upton Expected To Release Manager’s Amendment for 21st Century Cures Act

After announcing that the House floor will not consider the 21st Century Cures Act this month, Committee on Energy and Commerce Chairman Fred Upton (R-MI) stated that he plans to file a manager’s amendment for the bill this coming week. Lawmakers have been in discussions over the bill’s offsets, which have remained controversial since the Committee advanced the legislation last month. Offsets currently include delaying certain Medicare Part D plan prepayments, drawing down the Strategic Petroleum Reserve, limiting federal Medicaid reimbursement to states for durable medical equipment to Medicare payment rates, and limiting federal payment for X-ray imaging services that use film.  America’s Health Insurance Plans (AHIP) has come out against the Medicare Part D offset, which is expected to lower Medicare spending by about $5 billion to $7 billion. The Advanced Medical Technology Association (AdvaMed) has expressed concerns on the durable medical equipment offset, which is expected to save $2.8 billion.

Chairman Upton expects the Committee on Ways and Means to waive jurisdiction and agree to his manager’s amendment. He predicted a floor vote would occur in early July.

Stakeholder Comments Due for Senate Finance Committee’s Chronic Care Working Group

In May, the Senate Committee on Finance Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) announced the formation of a chronic care working group, to be co-chaired by Sens. Johnny Isakson (R-GA) and Mark Warner (D-VA). The committee’s working group has requested stakeholder input on strategies to improve outcomes for Medicare patients with chronic conditions, including the use of telehealth and remote monitoring technology. The deadline to respond to the committee’s working group is this Monday, June 22.

This Week’s Hearings:

  • Tuesday, June 23: The Senate Committee on Appropriations Subcommittee on Departments of Labor, Health and Human Services, Education, and Related Agencies will hold a markup on the Labor, Health and Human Services, Education, and Related Agencies Appropriations Act, 2016.
  • Wednesday, June 24: The House Committee on Ways and Means Subcommittee on Oversight will hold a hearing titled “Rising Health Insurance Premiums Under Obamacare.”
  • Wednesday, June 24: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining the Administration’s Approval of Medicaid Demonstration Projects.”
  • Wednesday, June 24: The House Committee on Appropriations will hold a markup on the FY 2016 Labor, Health and Human Services, and Education bill.
  • Wednesday, June 24: The Senate Committee on Veterans’ Affairs will hold a hearing titled “Pending Health Care and Benefits Legislation.”
  • Thursday, June 25: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining Public Health Legislation: H.R. 2820, H.R. 1344, and H.R. 1462.” H.R. 2820, the Stem Cell Therapeutic and Research Reauthorization Act, provides federal support for cord blood donation and research so as to increase patient access to transplant. H.R. 1344, the Early Hearing Detection and Intervention Act of 2015, reauthorizes a program for early detection, diagnosis, and treatment regarding deaf and hard-of-hearing newborns, infants, and young children. H.R. 1462, the Protecting Our Infants Act of 2015, develops recommendations and improves prevention, treatment, and data on prenatal opioid abuse and neonatal abstinence syndrome.

Regulatory Activity

HRSA Unveils 340B Proposed Rule

On Wednesday, June 17, HRSA published a notice of proposed rulemaking titled “340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties.” The 340B drug pricing program is designed to permit covered entities “to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” Participating drug manufacturers are not permitted to charge covered entities prices that exceed the defined 340B ceiling prices for covered outpatient drugs.

The ACA amended the 340B regulations to require the development and publishing of “precisely defined standards and methodology for the calculation of ceiling prices” and to allow for the imposition of civil monetary penalties to non-compliant manufacturers. This rule proposes a procedure for calculating the 340B drug ceiling price and for estimating the ceiling price for new covered outpatient drugs. Additionally, this rule would define the instances of overcharging, which would result in the imposition of civil monetary penalties to non-compliant manufacturers.

The deadline for comments is August 17, 2015.

Other Activity

MedPAC and MACPAC Release June Reports to Congress

On Monday, June 15, the Medicare Payment and Advisory Commission (MedPAC) released its June report to Congress titled “Medicare and the Health Care Delivery System.” MedPAC is an independent congressional agency that is charged with advising Congress on the Medicare program. Each March and June, the Commission issues reports to Congress. Of note, this report outlines a package of recommendations to address hospital short-stay policy issues, which includes withdrawing the Centers for Medicare and Medicaid Services’ (CMS) two-midnight rule.

On the same day, the Medicaid and Children’s Health Insurance Program (CHIP) Payment and Access Commission (MACPAC) released its biannual mandated “Report to Congress on Medicaid and CHIP.” Similar to MedPAC, MACPAC is a non-partisan legislative agency that is charged with providing policy and data analysis, and making recommendations to Congress on issues affecting Medicaid and CHIP. Among other issues, this report addresses: Medicaid coverage of dental benefits for adults; the intersection of Medicaid and child welfare; behavioral health in the Medicaid program; and the use of psychotropic medications among Medicaid beneficiaries.

CBO Issues 2015 Long-Term Budget Outlook

On Tuesday, June 16, CBO released the “2015 Long-Term Budget Outlook,” which projects the long-term outlook for the federal budget over the next decade and through 2040. This report addresses the outlook for federal health care programs, including Medicare, Medicaid, and CHIP. CBO predicts that if current laws remain unchanged, an aging population, rising health care costs, and increased spending attributable to the ACA would drive up spending for large federal programs, and will continue to rise substantially relative to gross domestic product.

CBO Predicts Effects of Repealing the ACA

On Friday, June 19, the CBO published the “Budgetary and Economic Effects of Repealing the Affordable Care Act.” In this report, the CBO and the Joint Committee on Taxation project the budgetary and economic consequences of repealing the ACA over the next ten years and beyond. This report projects that, excluding the effects of macroeconomic feedback, ACA repeal would increase federal budget deficits by $353 billion over the period of 2016 to 2025.

CBO’s projection comes as the Supreme Court is expected to issue a decision in King v. Burwell.

Senate Appropriations Panel Approves Homeland Security Spending Bill; Senate Set to Vote on Transportation Security Administration Nominee; House Considers DHS-Related Legislation, While Panel Addresses Airport Screening Concerns

Posted in Homeland Security

Legislative Activity

Senate Appropriations Panel Approves Homeland Security Spending Bill

This week, the Senate Appropriations Committee approved its FY 2016 Homeland Security spending bill. The measure, adopted 26-4, provides $40.213 billion in funds for the U.S. Department of Homeland Security (DHS), $765 million above the FY 2015 enacted levels but $1.2 billion less than requested by the President. The bill increases funding for Customs and Border Protection to $11.08 billion, 3.5 percent above currently enacted levels. However, the Senate panel cut funding for the Transportation Security Administration (TSA) by 1.5 percent to $4.72 billion.

Committee Vice Chairwoman Barbara Mikulski (MD), the panel’s top Democrat, called the measure “a good bill,” but also emphasized it would be better if it matched the level requested by the Administration. All Senate appropriations bills are in limbo, as Democrats have joined the President in protesting the Republicans’ budget plan and are threatening to block consideration of any measure raised for debate by the chamber.

Senate Set to Vote on Transportation Security Administration Nominee

On Monday, June 22, the Senate will vote to confirm Vice Admiral Peter Neffenger to head TSA, after his nomination was advanced by the Senate Homeland Security and Governmental Affairs Committee on June 15.

Vice Admiral Neffenger’s confirmation comes as the agency continues to address the results of covert testing that found airport screeners failed to detect prohibited items in 67 out of 70 test cases. In fact, Senator Ben Sasse (R-NE) voted against Vice Admiral Neffenger’s nomination due to his concerns that DHS leadership has not sufficiently admitted the depth of the agency’s problems and demonstrated the urgency posed by the uncovered weaknesses. Following the vote, Committee Chairman Ron Johnson (R-WI) issued a statement calling Vice Admiral Neffenger “the right person for the job.”

House Considers DHS-Related Legislation, While Panel Addresses Airport Screening Concerns

This week, the House of Representatives will consider several bills impacting DHS operations, including:

  • H.R. 1633, the DHS Paid Administrative Leave Accountability Act of 2015;
  • H.R. 1615, the DHS FOIA Efficiency Act,
  • H.R.1640, the Department of Homeland Security Headquarters Consolidation Accountability Act;
  • H.R. 1626, the DHS IT Duplication Reduction Act of 2015;
  • H.R. 2390, the Homeland Security University-Based Centers Review Act;
  • H.R. 2200, the CBRN [Chemical, Biological, Radiological and Nuclear] Intelligence and Information Sharing Act; and
  • H.R. 615, the Department of Homeland Security Interoperable Communications.

On Tuesday, June 16, the House Homeland Security Subcommittee on Transportation Security considered two bills addressing the weaknesses uncovered among airport screening facilities during covert testing. The first, H.R. 2750, would require TSA implement recent recommendations by the DHS Inspector General regarding airport worker vetting, while H.R. 2770 would require TSA develop a preventative maintenance validation process for security screening equipment, penalizing contractors who do not comply.

This Week’s Hearings:

  • Wednesday, June 24: The House Homeland Security Subcommittee on Counterterrorism and Intelligence will hold a hearing titled “Admitting Syrian Refugees: The Intelligence Void and the Emerging Homeland Security Threat.”

Senate to Act on Trade Measures, including TPA; Secretary of Defense to Attend NATO Defense Ministerial Meeting This Week in Brussels, While Ceasefire Violations Continue in Eastern Ukraine

Posted in Defense, International

TPA Moves Separately, Senate Vote Sequencing Outlined

After the House Rules Committee approved a vote on a standalone Trade Promotion Authority (TPA) bill – unlinking it from the Trade Adjustment Assistance (TAA) bill that previously failed in a vote – the House passed the measure last Thursday by a vote of 218 to 208. This action now sends TPA as a standalone measure back to the Senate for a separate vote.

Majority Leader Mitch McConnell (R-Kentucky) quickly outlined the Senate vote sequencing for this week for TPA, TAA and a trade preferences bill to reach President Barack Obama’s desk before 4 July, saying it will take trust on both sides to accomplish that goal. The Majority Leader confirmed the TAA vote would follow the TPA vote in the Senate, affirming there would be enough votes to pass TAA. The two bills will each need 60 votes in order to pass. Majority Leader McConnell filed two cloture motions last Thursday afternoon to limit debate on: (1) a trade preferences bill, which will be the vehicle for advancing TAA, and (2) the TPA measure passed by the House. If cloture is invoked this Tuesday, the final vote on TPA and the TAA-trade preferences measure would occur in the Senate on Wednesday, 24 June. If the Senate passes the TAA-trade preferences measure – which includes reauthorization of the Africa Growth & Opportunity Act (AGOA) and the Generalized System of Preferences (GSP), as well as a Haiti preference program – the measure would return to the House for a vote.

Customs Measure – Conferencing Ahead

While the current approach is to pass TPA uncoupled from TAA, Senate Majority Leader McConnell and Speaker of the House John Boehner (R-Ohio) have sought to reassure pro-TPA Democrats that TAA will make it to President Obama’s desk. This reassurance includes Majority Leader McConnell’s promise to incorporate changes to U.S. anti-dumping and countervailing duty laws in the TAA-trade preferences measure that have been sought by the U.S. steel industry. The Senate Majority Leader also said the House and Senate will conference on their respective customs bill as soon as possible, but first both chambers must pass a motion to enter into conference and appoint conferees. It remains unclear whether this will happen before Congress recesses at the end of this week in observance of the Fourth of July holiday.

Ex-Im Bank

With the U.S. Export-Import (Ex-Im) Bank’s charter due to expire at the end of the month and given this week’s push to complete votes on a series of trade measures before recessing for the Fourth of July holiday, Congress will likely not reauthorize the Bank in time. On 18 June, Senator Chris Coons (D-Delaware) said in an interview that it would be difficult for him to take another vote on TPA without “some path forward” for Ex-Im reauthorization, the customs bill and TAA. However, many expect lawmakers will seek to instead attach an Ex-Im reauthorization provision to a highway spending bill that must be passed by the end of July.

Russia/Ukraine Crisis

Secretary of Defense Ashton Carter will be in Europe, with stops in Germany, Estonia and Belgium, this week to discuss Russian aggression with NATO allies, while also attending the NATO Defense Ministerial.  Last week, envoys of Ukraine, Russia, the pro-Russia separatists and the Organization for Security and Cooperation in Europe (OSCE) gathered in Minsk, Belarus, to discuss implementation of the Minsk agreements. The French Foreign Ministry reported a ministerial meeting between Russia, Ukraine, France and Germany would be held in Paris on 23 June. Meanwhile, NATO Supreme Allied Commander General Philip Breedlove acknowledged there is increased violence along the line of contact in eastern Ukraine.

U.S. Secretary of State John Kerry, who has been recovering for several weeks following a broken leg, participated in last Tuesday’s daily State Department press briefing, providing readout of his recent call with Russian Foreign Minister Sergey Lavrov. Secretary Kerry said to Foreign Minister Lavrov, “that in the absence of a reduction in the hostilities, and in the absence of further progress of the implementation, Europe and the United States are going to be united in a rollover of the current level of sanctions, certainly, and whether or not more comes depends on what happens on the ground.” Last Wednesday, the EU Foreign Ministers agreed to extend the sanctions on Russia for an additional six-months. In light of the recent aggression and increased violence in eastern Ukraine, the United States and EU are also reported to be preparing additional sanctions to impose on Russia and the pro-Russia separatists.

White House Press Secretary Josh Earnest said last Monday that the Administration remains concerned about the reported flow of material and personnel from the Russian side of the border into Ukraine. The Press Secretary also alleged the Russian military continues to provide weapons and assistance to separatists in Eastern Ukraine and that Russian military personnel are actively involved in that effort. He added the Administration is considering placing military hardware in Eastern European NATO member countries as part of a U.S. reassurance strategy. If this option is approved, Earnest said it would be a message to the world, most directly to NATO allies, that the United States is serious about living up to its Article V NATO commitments. However, some have cautioned that such actions could lead Russia to build up its own military equipment along its border.

Last Thursday, while in the Czech Republic, U.S. Assistant Secretary of State for European Affairs Victoria Nuland sought to downplay Russian President Vladimir Putin’s announcement that he would add more than 40 new intercontinental ballistic missiles (ICBM) to Russia’s nuclear arsenal this year. The Assistant Secretary noted that Moscow is modernizing some existing missiles and said that it should stick to limits set in arms control agreements. She reiterated that the United States will be watching Russia’s ICBM modernization. Meanwhile, U.S. Secretary of State John Kerry has said no one wanted to see backsliding “to a kind of a Cold War status.”

  • On Tuesday, 23 June, the Senate Foreign Relations Subcommittee on Multilateral International Development, Multilateral Institutions, And International Economic Energy, And Environmental Policy will hold a haring titled, “American Energy Exports: Opportunities For U.S. Allies and U.S. National Security.”
  • On Friday, 26 June, the House Armed Services Subcommittee on Strategic Forces will hold a hearing titled, “Assuring National Security Space: Investing in American Industry to End Reliance on Russian Rocket Engines.”

Iran and Nuclear Deterrence

The deadline for concluding the P5+1 Talks with Iran and devising a comprehensive plan for addressing Iran’s nuclear program is fast approaching. Foreign Ministers and the chief negotiators will be in Vienna this week trying to clinch a deal with Iran. Iran’s parliament approved draft legislation on Sunday that would bar inspections of military sites as part of a final deal negotiated with the P5+1 countries. The United States will likely object to this perceived redline, keeping in mind that any final deal with Iran faces intense scrutiny by a skeptical U.S. Congress.

  • On Thursday, 25 June, the Senate Foreign Relations Committee will hold a hearing titled, “Evaluating Key Components of a Joint Comprehensive Plan of Action With Iran.”
  • On Wednesday, 24 June, the Senate Foreign Relations Committee will hold a hearing titled, “Lessons Learned From Past Weapons of Mass Destruction (WMD) Negotiations.”
  • On Thursday, 25 June, the House Armed Services Committee will hold a hearing titled, “Nuclear Deterrence in the 21st Century”
  • On Thursday, 25 June, the House Armed Services Subcommittee on Oversight and Investigations will hold a hearing titled, “Update on Findings and Recommendations of the 2014 Department of Defense Nuclear Enterprise Review.”

Syria/Iraq

Despite the Syrian regime’s agreement to destroy the government’s chemical weapons in 2013, the Organization for the Prohibition of Chemical Weapons has since found chlorine gas has been “systematically and repeatedly” used. The U.N. Security Council met on Friday to discuss the issue of accountability, as the government and opposition forces continue to deny responsibility for alleged recent uses of weaponized chlorine gas. More than 70 countries – including European countries and the United States – have signed a letter sent to UN Secretary-General Ban Ki-moon demanding that the Syrian regime stop indiscriminate aerial attacks that use barrel bombs and have killed thousands of civilians. The letter also urges the UN Security Council to prevent the Syrian Air Force from future aerial attacks.

Testifying last Wednesday before the House Armed Services Committee, Secretary of Defense Ashton Carter and Joint Chiefs of Staff Chairman General Martin Dempsey presented a dismal outlook on the situation in Iraq and discussed a possible US strategy in case the country’s borders dissolve. Recognizing there is a culture of unwillingness in Iraqi military forces to fight, Secretary Carter and General Dempsey discussed training Sunni tribal fighters as part of the decision announced last week to send 450 additional US forces to the country. General Dempsey said there are limits to what the United States can do to stabilize a country torn by sectarian strife and the advances of ISIL.

  • On Wednesday, 24 June, the House Armed Services Subcommittee on Emerging Threats & Capabilities will hold a hearing titled, “The Counterterrorism Strategy Against the Islamic State of Iraq and the Levant (ISIL): Are We on the Right Path?”

NDAA Update

Last Thursday, the Senate passed its FY 2016 National Defense Authorization Act (NDAA) by a vote of 71-25. The Senate will now have to conference with the House to resolve differences in their respective versions before the measure can be sent to President Obama for signature.

Senate Democrats Block Defense Appropriations Measure

Senate Democrats joined with President Obama in objecting to the Republican budget plan by procedurally blocking consideration of an appropriations bill raised last Thursday. Senate Majority Leader Mitch McConnell (R-Kentucky) tried to begin debate on the defense spending bill, which would have been the first of the twelve appropriations measures to be brought to the Senate floor.

Upcoming Presidential Visit to Africa

The White House announced on Friday that in late July, after President Obama stops in Kenya, he will then travel to Ethiopia. In Kenya, President Obama will hold bilateral meetings and participate in the 2015 Global Entrepreneurship Summit, an annual conference that connects entrepreneurs with business leaders, international organizations, and governments. The trip to Addis Abba will include bilateral meetings with the Government of Ethiopia and with the leadership of the African Union. While this will be the President’s fourth trip to Africa, it is his first to both of these countries and the first visit of a sitting U.S. President to the African Union headquarters, underscoring U.S. efforts to work with sub-Saharan Africa countries to accelerate economic growth, strengthen democratic institutions, and improve security.

Climate Change

In a 184-page papal letter, Pope Francis wrote last week that climate change is a global problem with far reaching environmental and social consequences, especially for the poor. He called on developing countries to limit the use of nonrenewable energy and for developed nations to assist poorer nations with sustainable development. In blunt language, the Pope said, “The earth, our home, is beginning to look more and more like an immense pile of filth.”

President Obama welcomed His Holiness Pope Francis’ encyclical, saying he deeply admired the Pope’s decision to make the case – clearly, powerfully, and with the full moral authority of his position – for action on global climate change. The President said he looks forward to discussing climate change with Pope Francis when he visits the White House in September and called on nations around the world to be prepared to address points raised by the Pope at the U.N. Climate Change Conference later this year in Paris (30 November – 11 December).

Additional SFRC and HFAC Hearings

  • On Tuesday, 23 June, the Senate Foreign Relations Committee (SFRC) will hold a confirmation hearing for the following individuals to be U.S. Ambassadors: Glyn Townsend Davies (Thailand); William Heidt (Cambodia); Atul Keshap (Sri Lanka and the Maldives); and Alaina Teplitz (Nepal).
  • On Wednesday, 24 June, the House Foreign Affairs Subcommittee on the Western Hemisphere will hold a hearing titled, “Colombia: Peace with the FARC?”
  • On Thursday, 25 June, the House Foreign Affairs Committee (HFAC) will markup two bills:  (1) R. ____, Department of State Operations and Embassy Security Authorization Act of 2015, and (2) R. 2037, United States Commission on International Religious Freedom Reauthorization Act of 2015
  • On Thursday, 25 June, the House Foreign Affairs Subcommittee on Global Human Rights will hold a hearing titled, “Is Academic Freedom Threatened by China’s Influence on U.S. Universities?”

Looking Ahead

Washington will likely focus on the following upcoming matters:

  • 24-24 June: NATO Defense Ministerial in Brussels
  • 30 June: U.S. Export-Import Bank charter expires
  • 30 June: P5+1 Talks with Iran deadline to reach a deal
  • 13 July: President Obama to host Conference on Aging
  • [TBD] July: President Obama to travel to Kenya attend the Global Entrepreneurship Summit
  • 15 September: 70th Session of the U.N. General Assembly (UNGA) opens in New York City
  • 24 September: Pope Francis to address Congress and meet with President Obama
  • 28 September: General debate of the UNGA begins
  • 30 Nov.-11 Dec.: U.N. Global Climate Conference in Paris