“The
United States district courts are the trial courts of
the federal court system. Within limits set by
Congress and the Constitution, the district courts have
jurisdiction to hear nearly all categories of federal
cases, including both civil and criminal matters. There
are 94 federal judicial districts, including at least
one district in each state, the District of Columbia,
and Puerto Rico. Three territories of the United
States–the Virgin Islands, Guam, and the Northern
Mariana Islands–have district courts that hear
federal cases, including bankruptcy cases.” www.uscourts.gov. On
April 10, 2006, the cost of using these federal court
services went up due to the Deficit Reduction Act of
2005 (hereinafter the “Act”) signed into
law by President Bush on February 8, 2006.
The
federal courts are just one segment of society that will
be affected by the Act. Because of the Act’s
vastness and the voluminous details, this article touches
only on a few of the changes imposed by the Act. Ten
titles are included in the Act, which are:
TITLE
I – AGRICULTURE PROVISIONS
TITLE II – HOUSING AND DEPOSIT INSURANCE PROVISIONS
TITLE III – DIGITAL TELEVISION TRANSITION AND
PUBLIC SAFETY
TITLE IV – TRANSPORTATION PROVISIONS
TITLE V – MEDICARE
TITLE VI – MEDICAID AND SCHIP
TITLE VII – HUMAN RESOURCES AND OTHER PROVISIONS
TITLE VIII – EDUCATION AND PENSION BENEFIT PROVISIONS
TITLE IX – LIHEAP PROVISIONS
TITLE X – JUDICIARY RELATED PROVISIONS
Title
X of the Act–Judiciary Related Provisions–imposes
a $100 increase in the civil filing fees in the U.S.
District Court. In the U.S. Court of Appeals, the
filing fee is increased by $200. Filing fees for
Chapter 7 Bankruptcy cases are increased by $25 and $85
for Chapter 13 actions. The Congressional Budget
Office (“CBO”) estimates that these increased
fees will increase offsetting receipts by $474 million
over the 2006-2010 period and by about $1 billion over
the 2006-2015 period.
Beginning
April 10, 2006, parties who file civil complaints or
state court removal actions must pay a $350 filing fee. When
combined with a district court fee of $5 for filing a
notice of appeal, the total amount payable for an appellate
court filing now amounts to $455. The Chapter 7
filing fee in the bankruptcy court is now $245 and the
Chapter 13 filing fee in the bankruptcy court is $235. It
is estimated that there could be around 1.1 million Chapter
7 cases and almost 500,000 Chapter 13 cases filed annually. The
additional fees collected for bankruptcy filings are
estimated to offset receipts by a total of $69 million
annually after 2006.
Under
the Act, these increased fees will be deposited into
a special U.S. Treasury fund and will not be made available
to the district courts for spending unless set forth
in an appropriation act. In the past, all fees
would have been recorded as offsetting receipts and would
have been available to the judiciary to spend without
further appropriation action.
Title
IX of the Act regarding LIHEAP Provisions appropriates
approximately $1 billion for 2007 for the Low-Income
Home Energy Assistance Program of the Department of Health
and Human Services. The CBO estimated that Title
IX would result in expenditures of nearly $469 million
in 2007 and $625 million over the 2007-2009 period. See www.cbo.gov.
The
largest budgetary effects of the Act may stem from changes
in federal student loan programs. Under Title VIII,
Education and Pension Benefit Provisions, these changes
are estimated to account for $11.9 billion in net savings
through 2010. New formulas for lenders’ yields,
a higher interest rate for parent borrowers, a new fee
on the guaranty agencies, a reduction in mandatory funding
for administrative payments, and reduced insurance for
lenders will contribute to decreased spending. The Act
raises the interest rates on Stafford loans from a variable
rate of 4.75 to 5.38 percent to 6.8 percent and from
6.125 percent to 8.5 percent on Parent Loans for Undergraduate
Students (PLUS) effective July 1, 2006. A drafting
error with PLUS loans states some schools would be at
a fixed rate of 7.9 percent, rather than 8.5 percent. Federal
officials have indicated that they will correct this
error prior to the July 1 effective date.
Title
V of the Act, titled “Medicare,” prevents
wealthier seniors from using Medicare to pay for their
nursing home care when they have transferred assets to
their children within a five-year look-back period. The
look-back period prior to this Act was three years. The
extended “look-back” provision applies to
all income and assets disposed of by an individual after
February 8, 2006, the date of the enactment of the Act. For
income and assets disposed of or transferred to other
ownership prior to February 8, 2006, the look-back periods
of three years for income and assets and five years for
certain trusts would apply. Specifically, the penalty
period, or period of ineligibility, for Medicaid would
attach to certain individuals who had transferred assets
for less than fair market value on or after a “look-back
date.”
The
CBO has estimated that the Act will save $5.4 billion
in projected Medicare spending and $4.7 billion in Medicaid
spending over the next five years by making significant
changes in hospital reimbursement, Medicaid qualification,
Medicare Advantage plan reimbursement, and the cost of
health care to Medicaid recipients and by requiring many
providers to adopt formal compliance programs. Under
Subtitle A—Provisions Relating to Medicare Part
A, of Title V, Medicare, payments to hospitals will be
reduced in some cases where the patient has acquired
an infection during a hospital stay. Also,
Medicare’s payment rates beginning in fiscal year
2007 will be reduced by 2 percent if the hospital does
not report certain quality-related data. The CBO
estimates that these provisions will reduce spending
by $0.3 billion over the 2006-2010 period and by $0.8
billion over the 2006-2015 period.
Under
Title VII of the Act, Human Resources and Other Provisions,
Section 452(k)(1) (42 U.S.C. 652(k)(1)) which allowed
for the triggering of passport denials for persons with
child support arrearages of over $5,000, has been changed
by striking $5,000 and inserting $2,500. The effective
date for the amendment is October 1, 2006.
H.
Res. 687, offered by Democratic Minority Leader Nancy
Pelosi (D-CA) on February 16, 2006, notes that the “Republican
Leadership permitted a vote on House Resolution 653 to
concur in a Senate amendment to the conference agreement
on Budget Reconciliation, despite the inclusion of inaccurate
numbers in provisions that cost the Medicare program
an additional $2 billion dollars.” The resolution
further notes that although “the Senate Enrolling
Clerk mistakenly changed critical numbers, which had
a major financial significance for Medicare, and had
notified the House of those errors two weeks prior to
the vote on February 1, 2006, the Republican Leadership
deliberately chose to ignore that notification and instead
allowed the House to vote on an incorrect version of
this legislation.” And the resolution alleges
the concealment of these errors resulted in a different
law being enacted than the bill that was cleared by the
House on February 1, 2006. The effect of these
actions raises serious constitutional questions and may
jeopardize the legal status of the legislation. A
Washington Post article on February 9, 2006, states, “There
are questions about the legality of signing a bill the
House technically did not pass.” H. Res.
687 was tabled.
Practitioners
need to be aware of the significant changes brought about
by the Deficit Reduction Act of 2005. The Act influences
both the costs of litigation and the manner in which attorneys
have to advise their clients in areas as diverse as student
loans, Medicare eligibility, and child support. The
questionable constitutional status of the Act must also be
noted.
