On December 29, 2007, the President signed S. 2499 , the Medicare, Medicaid, and SCHIP Extension Act of 2007 ( P.L. 110-173 ). This Act was passed by the House on December 19, 2007, and by a voice vote in the Senate on December 18, 2007. The Act makes changes to the nation's three major health programs, Medicare, Medicaid, and the State Children's Health Insurance Program (SCHIP), as well as other federally funded programs. Perhaps the most prominent provisions of the Act were to (1) suspend the Medicare physician payment cut scheduled to take effect and (2) provide SCHIP funding through March 2009. The update formula for Medicare physician payment would have required a reduction in the fee schedule for physician reimbursement of 10.1% as of January 1, 2008, and by roughly 5% annually thereafter. SCHIP needed to be reauthorized because Title XXI of the Social Security Act, as established by the Balanced Budget Act of 1997 (BBA 97, P.L. 105-33 ), specified national appropriation amounts only from FY1998 to FY2007. The President vetoed two bills prior to P.L. 110-173 ( H.R. 976 , H.R. 3963 ) that would have provided federal funding for SCHIP in FY2008 through FY2012. In response to these vetoes, four continuing resolutions ( P.L. 110-92 , P.L. 110-116 , P.L. 110-137 , and P.L. 110-149 ) appropriated $5 billion for federal SCHIP allotments in FY2008 through December 31, 2007. P.L. 110-173 mandates a 0.5% increase in the Medicare physician fee schedule for the six-month period from January 1, 2008, through June 30, 2008, and provides FY2008 and FY2009 SCHIP allotments through March 31, 2009. It also redistributes any FY2006 funds that are unspent by FY2008 to states that are projected to experience shortfalls. For 2008, the Act provides up to $1.6 billion to shortfall states and additional sums to territories. For the first two quarters of FY2009, up to $275 million is appropriated for the same purpose. The Act also extends a number of expiring provisions and programs. These extensions affect Medicare plans and providers and Medicaid payments and programs. The Act also includes funding for some miscellaneous activities. Regarding Medicare Advantage plans, the Act allows Medicare Special Needs Plans to continue to restrict their enrollment to Medicaid-entitled institutionalized beneficiaries and other specified individuals until January 1, 2010. Also, cost-based plans under Medicare may continue to operate in an area with two local or two regional Medicare Advantage plans until January 1, 2009. Extensions that affect Medicare payments for certain providers and services include, among others, extending the secretarial authority to reclassify certain hospitals to areas with higher wage index values. The Act allows qualified rural hospitals that provide clinical diagnostic laboratory services to continue to be reimbursed under a reasonable cost system rather than a fee schedule. The Act also extends exceptions to annual per beneficiary payment limits on outpatient physical therapy services and speech language pathology services for the next six months. Certain pathology laboratories are allowed to continue billing hospitals directly for their services. The Act extends the Medicare incentive payment program for certain physicians providing services in scarcity areas and Medicare payments for the accommodation of physicians ordered to active duty in the Armed Services. The Act also extends cost reimbursement for brachytherapy services and cost reimbursement to therapeutic radiopharmaceuticals. Many extensions also affect certain Medicaid payments and programs. The Act extends increased payments for Medicaid disproportionate hospital share (DSH) allotments for Tennessee and Hawaii to provide additional assistance to certain hospitals that provide a disproportionate share of care to low-income patients with special needs. It also continues Medicaid benefits through June 30, 2008, for certain low-income families that would otherwise lose coverage because of changes in their income under the Transitional Medical Assistance (TMA) program. Medicaid's coverage of Medicare part B premiums under the Qualifying Individual (QI) program is extended through June 2008, including an allocation of $200 million for this program. S. 2499 also prohibits the Secretary from taking action to restrict Medicaid coverage of school-based, health-related services, including transportation and administrative activities for the next six months. Miscellaneous activities include providing additional funds under the State Health Insurance Assistance Programs to assist Medicare-eligible individuals in obtaining information and counseling on enrollment in health insurance. Medicare funds are also used to make grants for Area Agencies on Aging and Aging and Disability Resource Centers for FY2008 and FY2009. The Act also includes provisions that extend the Title V Abstinence Education block grant through June 30, 2008, and amend the Public Health Service Act to provide for research into the prevention of Type I diabetes. Grants for the prevention and treatment of diabetes among American Indians and Alaskan Natives are also provided. In addition, the Medicare Payment Advisory Commission (MedPAC) will become a congressional agency. Finally, additional funds are provided to the Current Population Survey to improve the collection of data on state populations of low-income children Because the pay-go rule as reestablished by the 110 th Congress requires all considered bills to neither have the net effect of increasing the deficit nor reducing the surplus, the Act includes a number of offsets to pay for the aforementioned provisions. These offsets include a reduction in federal payments for the Medicare Advantage stabilization fund in 2012. The Act also strengthened procedures and additional funding for the determination of Medicare's responsibility as a secondary rather than a primary payer for covered services. The market basket update for certain discharges is eliminated, and the compliance requirements for payment are modified for Inpatient Rehabilitation Facilities (IRFs) for FY2008 and FY2009. Another offset requires the Secretary of Health and Human Services (HHS) to use constant volume weighting in the computation of the average sales price (ASP) for the payments for most Medicare part B drugs. Payment rates for certain diagnostic laboratory tests are also changed. Finally, the Act modifies the statutory definition of and requirements for Long-Term Care Hospitals that participate in Medicare and authorizes a study on the establishment of a national long-term care hospital facility and patient criteria, among other purposes. The Congressional Budget Office (CBO) estimated that S. 2499 would result in a net savings to the federal government of $100 million between FY2008 and FY2012. Included in this calculation is an estimate of a spending increase for certain SCHIP, Medicaid, and miscellaneous provisions that would total approximately $1.8 billion. It also includes an estimate of approximately $1.8 billion in savings as a result of the direct effects of the Medicare provisions (saving approximately $1.6 billion) and the interactions between provisions (saving approximately $200 million). This report provides short descriptions of the provisions contained in S. 2499 . For additional assistance, please contact a CRS specialist or analyst. Contact information for these individuals is included in the table. The Medicare, Medicaid, and SCHIP programs are briefly described below. More complete and detailed descriptions of the programs are available from CRS. Medicare is the nation's health insurance program for persons aged 65 and over and certain disabled persons. In FY2008, the program will cover an estimated 44.6 million persons (37.3 million aged and 7.3 million disabled) at a total cost of $456.3 billion. Federal costs (after deduction of beneficiary premiums and other offsetting receipts) will total $389.7 billion. In FY2007, federal Medicare spending will represent approximately 13% of the total federal budget and 3% of GDP. Medicare is an entitlement program, which means that it is required to pay for all covered services provided to eligible persons, so long as specific criteria are met. Medicare consists of four distinct parts: Part A (Hospital Insurance, or HI); Part B (Supplementary Medical Insurance, or SMI); Part C (Medicare Advantage, or MA); and Part D (the new prescription drug benefit added by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MMA, P.L. 108-173 ). The program is administered by the Centers for Medicare and Medicaid Services (CMS) in the Department of HHS. Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services, as well as long-term care, to more than 63 million people at an estimated cost to the federal and state governments of roughly $317 billion. Each state designs and administers its own version of Medicaid under broad federal rules. State variability in eligibility and covered services, and how those services are reimbursed and delivered, is the rule rather than the exception. In the federal budget, Medicaid is an entitlement program that constitutes a large share of mandatory spending. Federal Medicaid spending is open-ended, with total outlays dependent on the spending levels of state Medicaid programs. SCHIP is authorized under Title XXI of the Social Security Act. In general, this program allows states to cover targeted low-income children with no health insurance in families with income that is above Medicaid eligibility levels. As of July 2006, the highest upper-income eligibility limit under SCHIP had reached 350% of the federal poverty level (FPL) in one state. States may enroll targeted low-income children in an SCHIP-financed expansion of Medicaid, create a new separate state SCHIP program, or devise a combination of both approaches. States choosing the Medicaid option must provide all mandatory benefits and all optional services covered under the state plan, and must follow the nominal Medicaid cost-sharing rules (with some exceptions). In general, separate state programs must follow certain coverage and benefit options outlined in SCHIP law.