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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

Michigan Law Firm - Warner Norcross + Judd LLP

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The Michigan Legislature virtually adjourned for the summer after finishing its work on a state budget for the upcoming fiscal year and rescuing the Detroit Public School system from financial collapse. The Governor signed the School Aid and Higher Education budget, otherwise known as the Omnibus “school bus” and the budget for all state departments. Those things left undone included enactment of a new state energy policy, how to regulate and control the distribution and use of medical marijuana, whether to allow for internet gaming and whether to expand the scope of practice of nurse anesthetists.

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Control of the House of Representatives for the next legislative session will be contingent upon the November election results and both Democrats and Republicans are gearing up for a hotly contested campaign, the results of which may be influenced by the Presidential vote at the top of the ticket. 

Department of Health and Human Services

The Department of Health and Human Services (DHHS) is by far the largest of any of the state budgets. DHHS oversees Medicaid and the Medicaid expansion program known as the Healthy Michigan Plan, other non-Medicaid health program, and since its merger with the now defunct Department of Human Services, a whole host of children’s programs and programs for the elderly.

Some of the highlights of this year’s DHHS budget include:

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Department of Environmental Quality

The Department of Environmental Quality (DEQ) has been under enormous criticism over the past year for what critics and a special task force convened by the Governor see as lack of responsiveness to the Flint water crisis. This year the Legislature has appropriated tens of millions of dollars toward programs to alleviate the crisis. The FY 2016-2017 budget adds even more.

Other highlights of the DEQ budget include a $14.9 million appropriation from Clean Michigan Initiative bond proceeds to be used at contaminated sites deemed the highest priority. In total, the DEQ budget amounts to nearly $500 million gross.<a href="#note_2">2</a>

Higher Education and K-12 Budget

While funding levels for higher education moderately increased, critics of the appropriation said the Legislature was allowing the State’s great university system to be threatened with disrepair. Both Michigan State University and the University of Michigan voted to increase tuition 3.9 percent for in-state tuition in order to raise more revenue.<a href="#note_4">4</a>

Governor Signs Detroit Public School Rescue Package

The Detroit Public School System (DPS) will split into two districts, the old one to pay off existing amassed debt, and the other to commence with new operating funds. The total package amounts to $617 million, of which $467 million is earmarked for existing debt.

The new district will have a new board, but will be under the watchful eye of the Financial Review Commission which must approve of large financial decisions. Academic achievement within DPS will be responsible to the School Reform/Design Office.

The bill signing was the culmination of months of work and negotiation. Originally the Senate’s version, spearheaded by Sen. Goeff Hansen (R-Hart), had called for more state aid and a greater role for local officials by the creation of the Detroit Education Commission (DEC). The DEC would have had authority to determine whether additional charter schools within the district would be allowed. That idea was shot down in the House. Conservatives in the House also insisted on a lower financial aid package. Seeing that House conservatives would not back down from their version, the Senate concurred with minor variations and the Governor signed the bill into law.

Graduate Medical Education Funding

The new state budget imposes new reporting requirements on quality controls for hospitals receiving Graduate Medical Education (GME) funding. Sen. Jim Marleau (R-Lake Orion), the chair of the DHHS subcommittee, strongly believes people need information on the quality of the hospital facilities they might choose. The language in the budget requires the information to be available by October 1, 2018. Two items of particular concern to Marleau are information on the number of infections acquired by patients while in the hospital and things such as surgical misadventures. 

The City of Flint will be receiving $144.3 million in this fiscal year and $38 million in FY 2016-2017. This assistance, plus that which has already been given to address the City’s water emergency, amounts to a total of $232.8 million according to the nonpartisan Senate Fiscal Agency.

The Department of Education was given money to also assist with alleviating the Flint crisis and to prevent similar situations. The FY 2016-2017 budget continues the Child Development and Care Program for Flint in an amount of over $8 million. In addition, the Legislature included $4.5 million to reimburse local school districts for the cost to test water. A cap of $950 per school building was placed on the appropriation.

Biosimilar Substitution

For months, the Legislature has been dealing with legislation which would allow a pharmacist to substitute an interchangeable biological drug product in lieu of a prescribed biological drug product. The controversy, which has stalled enactment of a bill, involved the notice requirement imposed upon pharmacists toward prescribing physicians. A bill sponsored by Rep. Ken Yonker (R-Caledonia) did not require a pharmacist to give notice of the substitution to the prescribing physician. Proponents of the notice requirement were recipient groups and the physician community, saying that it was important for the patient’s safety to share this information. Opponents of the notice requirements, such as pharmacists and health insurers, argued that like generic substitutions, there was no need for such notice. Moreover, they argued, a meaningless notice requirement would act as another barrier to substitution which would only benefit and protect drug companies who had existing products on the market.

To counter Rep. Yonker’s bill, Rep. John Bizon (R-Battle Creek), a physician, introduced HB 4812, a biosimilar substitution bill that required a pharmacist’s notice to a physician of the substitution. The bill overwhelmingly passed the House and was sent to the Senate Health Policy Committee. Once in the Senate, HB 4812 was substituted with a new version, one which removed the notice requirement and instead required a pharmacist to retain an electronic record of the substitution for two years. The substitute was then reported from the Senate Health Policy Committee to the full Senate where it has stayed since February because of the opposition from physicians, recipient groups and some pharmaceutical manufacturers.

Medical Marijuana Regulation Must Wait Until the Fall

Since the people approved a ballot proposal allowing for the use of medical marijuana, the State has been trying to deal with ways to regulate its sale, distribution and use. During this legislative session, lawmakers have been waiting to see the results of two efforts to again bring the question of marijuana regulation, or lack of it, before the voters. One ballot questions the deregulation of marijuana entirely, allowing for its recreational use. However, that same measure also allows for its taxation. The other proposal only addresses medical uses for marijuana. Both proposals appeared to have gained enough petition signatures to make their way onto the ballot, but a challenge over the validity of those petitions succeeded before the Board of State Canvassers. Specifically, the Board rules that many of the signatures for both initiatives were over six months old and hence were stale and invalid. Opponents claim there is no statutory authority for the Board to base its decision, and the backers of total deregulation say they will go to court to earn their way on the ballot. Meantime, the Legislature appears to be waiting to see how the ballot proposal drama plays out.

Nurse Anesthetists Seek Autonomy

Certified Registered Nurse Anesthetists (CRNAs) have been seeking independence and autonomy from physician anesthesiologists for years. CRNAs claim they are relied upon in surgery now in a majority of jurisdictions around the country and in federal facilities such as Veteran’s Administration hospitals without supervision. Sen. Mike Kowall (R-White Lake), the Senate Majority Floor Leader, has sponsored SB 1019, which gives CRNAs a measure of independence, but still requires a patient centered team with a physician being part of that team.  The bill has been reported from Committee and is now on the Senate floor. While the bill is a watered down version of its original, it is seen as a major step in the right direction by an organized group of specialty nurses. It is also seen as a gain toward a measure of independence from physician supervision and ultimately enabling pass through reimbursement.

Fighting Prescription Drug and Opioid Abuse

By Executive Order,<a href="#note_5">5</a> Governor Rick Snyder has created the Michigan Prescription Drug and Opioid Abuse Commission, to be responsible for monitoring indicators of controlled substance abuse and diversion in the state. Membership on the Commission will include one pharmacist, one representative of pharmaceutical manufacturing, one substance abuse treatment provider, one member representing the general public, one allopathic doctor, one osteopathic doctor, one dentist, one veterinarian, one physician’s assistant, one registered nurse, two law enforcement officers, one psychologist, one representative from a Michigan hospice organization, one chronic pain sufferer, one representative from a Michigan medical school and one representative from a statewide pharmacy association.

Revisions to Insurance Code

A three bill legislative package which gives health plans greater flexibility in offering products to the public was finally enacted.

HB 4933, sponsored by Rep. Tom Barrett (R-Charlotte), amends the Patient’s Right to Independent Review Act. It revises a number of provisions regarding an individual’s request for an external review of an adverse determination by a health insurance carrier.

HB 4934, sponsored by Rep. Robert Kosowski (D-Westland), amends the Coordination of Benefits Act to reorganize the order of benefits determination when an individual is covered under multiple health benefit plans. If an individual is covered by two or more plans, the insurer that issued the primary plan is required to pay or provide benefits. If the individual is covered by more than one secondary plan, the bill dictates the order under which the secondary plan benefits would be determined in relation to one another.

HB 4935, sponsored by Rep. Tom Leonard (R-Dewitt), amends the Insurance Code.&nbsp; Among other things, the Legislation;

Last week the Governor signed the package into law. 

Controversial Omnibus Energy Legislation Now on Senate Floor

SBs 437 and 438 impose a whole series of new requirements on the Public Service Commission (PSC), establish a sunset of December 31, 2018 for electric utilities to apply for a certificate of necessity (CON) to increase generation capacity, require electric utilities to file an integrated resource plan (IRP) when applying for a CON, reduce from $500 million to $100 million the minimum cost threshold requirement for a CON application filed before the December 31, 2018 sunset date and ultimately require each electric utility whose rates are regulated by the PSC to file an IRP within two years of the legislation’s effective date.&nbsp; Moreover, the Legislation amends that portion of the PSC law known as the Customer Choice and Electricity Reliability Act to do, among other things:

SB 438 repeals provisions of the Clean, Renewable and Efficient Energy Act that establish a renewable energy standard. The standard consists of a renewable energy capacity portfolio and a renewable energy credit portfolio. It also amends the Act regarding energy optimization programs, net metering, renewable and energy credits, among other things.<a href="#note_8">8</a>

While the bills were reported from the Committee just before the Legislature adjourned for the summer, opposition to the package is considerable from the Michigan Chamber and larger users of electricity such as school districts and large retail manufacturing concerns who believe the package will only lead to higher rates. Look for a real battle with the issue in the fall. 

THE STATUS OF POLITICAL RACES

At the time of this writing, former U.S. Senator and Secretary of State Hillary Clinton holds a comfortable lead in the Michigan Presidential race against the presumptive Republican nominee, business man Donald Trump. Clinton’s lead is not surprising, as a Republican has not taken Michigan electoral votes since 1988. Polling has consistently shown Clinton besting Trump by anywhere from four to eleven percent,<a href="#Note_9">9</a> albeit this was done prior to the conclusion of the FBI investigation regarding the handling of her emails. Still, it would appear at this time that, barring some bombshell, the State’s electoral votes will once again go to the Democratic Party candidate.

U.S. House of Representatives

The Michigan Congressional delegation consists of nine Republicans and five Democrats. Democrats, however, believe they have a possibility of picking up two seats from the Republicans, in the 1st and 7th Districts.

The 1st District consists of the entire Upper Peninsula and the northern tier of the Lower Peninsula. Incumbent Republican Congressman Dan Benishek is not seeking another term and Democrats see an opportunity to pick up a seat in a district which could swing to either Party in a Presidential election year when Democrats generally do well. The Democratic Party contenders are Lon Johnson, former State Democratic Party Chair and Jerry Cannon, former Kalkaska County Sheriff. Due to his access to money and other resources, Johnson is considered the favorite to win the nomination.

On the Republican side, State Senator Tom Casperson of Escanaba and former State Senator Jason Allen of Alanson are the two leading contenders for their Party’s nomination, although retired Marine Corp General John Bergman is running an aggressive campaign as well.&nbsp; Recently, a poll revealed Casperson with a lead,<a href="#note_10">10</a>&nbsp; but Allen used to represent the more populous area of the district and his candidacy should not be underestimated. At this point, the race is too close to call.

The other district where the Democrats believe they have a shot at a pick-up is in Michigan’s 7th District, which consists of much of Washtenaw County, Eaton and Jackson Counties, and the border counties of Branch, Hillsdale, Lenawee and Monroe. The 7th District has many very conservative areas, but overall it has a Republican base of only 53 percent. &nbsp;

The Republican incumbent is Tim Walberg from Tipton, one of the more conservative members of the House. Walberg is now in his third term, is well entrenched, and will be difficult to defeat.

Walberg’s Democratic Party challenger is State Representative Gretchen Driskell.  Driskell has many local connections, should be well funded and works very hard. The race should be a close one.

State House of Representatives

The Republicans now hold the majority in the House of Representatives by a margin of 63-45-1 independent, with one vacancy due to the recent death of Rep. Julie Plawecki, a Democrat. Democrats believe they can make gains, especially in a presidential year and especially with the troubles faced by the Republican Snyder Administration, such as the Flint water crisis. At this point, it appears the Democrats should gain seats, but it will be very difficult for the Party to gain the seats necessary to win a majority.

1House Fiscal Agency, FY 2016-2017 Department of Health and Human Services Summary: Conference Report, Article X, House Bill 5294 (H-1) CR-1 pp 73, 74, 82, 83 84, 88 and 89.  <a href="http://www.legislature.mi.gov/documents/2015-2016.billanalysis/house/pdf/2015-HLA-5294-4802 B883.pdf" target="_blank" rel="noreferrer noopener">http://www.legislature.mi.gov/documents/2015-2016.billanalysis/house/pdf/2015-HLA-5294-4802 B883.pdf</a> 2House fiscal Agency, FY 2016-2017, Department of Environmental Quality Summary: Conference Report, Article VII, House Bill 5294 (H-1) CR-1, June 30, 2015 pp 40-41, <a href="http://www.legislature.mi.gov/documents/2015-2016.billanalysis/house/pdf/2015-HLA-5294-4802 B883.pdf" target="_blank" rel="noreferrer noopener">http://www.legislature.mi.gov/documents/2015-2016.billanalysis/house/pdf/2015-HLA-5294-4802 B883.pdf</a> 3Senate Fiscal Agency, Public Act 249 of 2016, Senate Bill 801 (S-1) CR-1 Education Omnibus Appropriations Bill, FY 2015-2016 and FY 2016-2017 p 1, <a href="http://www.legislature.mi.gov/documents/2015-2016/bill analysis/senate/pdf/2015-SFA-0801-n.pdf" target="_blank" rel="noreferrer noopener">http://www.legislature.mi.gov/documents/2015-2016/bill analysis/senate/pdf/2015-SFA-0801-n.pdf</a> 4MLive, June 15, 2016, McVicar, Brian, <a href="http://www.mlive.com/news/index.ssf/2016/06/msu_to_hike_tuition_by_37_to3.html" target="_blank" rel="noreferrer noopener">http://www.mlive.com/news/index.ssf/2016/06/msu_to_hike_tuition_by_37_to3.html</a> 5Executive Order No. 2016-15 6Senate Fiscal Agency, H.B. 4933 (S-1) – 4935 (S-1), Summary of Bill Reported From Committee, June 2, 2016, <a href="http://www.legislature.mi.gov/documents/2015-2016/billanalysis/senate/pdf/2015-SFA-4933-f.pdf" target="_blank" rel="noreferrer noopener">http://www.legislature.mi.gov/documents/2015-2016/billanalysis/senate/pdf/2015-SFA-4933-f.pdf</a> 7Senate Fiscal Agency, SB 437 (S-4) and 438 (S-4), Summary of Bill Reported From Committee, May 31, 2016, <a href="http://www.legislature.mi.gov/documents/2015-2016/billanalysis/senate.pdf/2015-SFA-0437-f.pdf" target="_blank" rel="noreferrer noopener">http://www.legislature.mi.gov/documents/2015-2016/billanalysis/senate.pdf/2015-SFA-0437-f.pdf</a> 8Ibid. 9Detroit News/WDIV-TV poll in late May 2016, Clinton 43%, Trump 39%;  EPIC-MRA, poll in March 2016, Clinton held a 10 percentage point lead; Survey/USA poll in March 2016, Clinton held an 11 percentage point lead in Michigan. 10In a Denno Research/MIRS poll released May 21, 2016, Casperson had a 24% lead, Allen 16.5% and Bergman 4%.

Senior Counsel

James G. “Jim” Cavanagh

Government Advocacy and Affairs

From the Capitol – July 2016

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From the Capitol – July 2016

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