Holder and Sebelius argue it would be impossible to control costs without the new healthcare law's individual mandate.

Welcome to The Hill's evening roundup of the day's health policy news and advance look at tomorrow's schedule.

Monday's health news: 

As was widely predicted, a federal judge in Virginia ruled Monday that the healthcare reform law's individual mandate is unconstitutional. Judge Henry Hudson of the U.S. District Court for the Eastern District of Virginia stopped shy, however, of overturning the whole law, and restricted his ruling to the mandate that people buy insurance starting in 2014 "and directly-dependent provisions."

Next stop: Supreme Court. The case is widely expected to end up before the Supreme Court, as are several other lawsuits against the Democrats' reform law — including a 21-state lawsuit in Florida whose oral arguments will be heard Thursday. Incoming Majority Leader Eric Cantor (R-Va.) in a statement Monday called on the Obama administration to request that the courts skip the appeals process and send the issue straight to the high court.

Republicans ecstatic: Notable among the Republican victory declarations was Sen. Orrin Hatch's immediate response. The Utah Republican, who supported an individual mandate when Republicans proposed the idea in 1994, fears a Tea Party challenge in the 2012 primary. http://bit.ly/g3c29Q

White House unimpressed: The Obama administration quickly responded with a blog post calling the decision a "narrow ruling" that was "just one of many recent rulings on similar cases that have come down in recent months." http://bit.ly/dY9nTZ

Judge has ties to pro-repeal firm: Hudson, a George W. Bush appointee, is a passive investor in a conservative law firm whose clients include reform opponents, The Huffington Post has pointed out. http://huff.to/aTWlpL

IRS issues drug tax guidance: The Internal Revenue Service on Monday released guidance on the healthcare reform law's tax on drug makers. The tax, which should raise about $2.3 billion a year, will target branded prescription drug sales of more than $5 million to Medicare and other government programs. http://bit.ly/dKm3OP

Doctors seeking $200M owed by Medicare: Doctors are asking the Medicare agency to quickly explain how it will dole out $200 million in overdue reimbursements following "a highly disruptive year" for physician payments. Healthcare reform enacted this year called on the Centers for Medicare and Medicaid Services (CMS) to reimburse doctors retroactively to Jan. 1, 2010, on several provisions, including extending the floor for a Medicare payment scale used to determine relative costs of practicing medicine in specific locations. http://bit.ly/e8LB5F

Top Democrat vows to defend reform's health savings: House Majority Leader Steny Hoyer (D-Md.) said Monday that Democrats' strategy to reform entitlement programs includes "sticking to the cost-control provisions we passed in the health care bill." Republicans vow to repeal the law, but Democrats say that would add to the federal deficit. http://bit.ly/gZBnXT

IPAB defined: Hoyer's remarks about the Democratic agenda for the next Congress comes as the Congressional Research Service released a 37-page analysis of the reform law's Independent Payment Advisory Board. The controversial provision would propose cuts to Medicare payments if the federal government's healthcare costs grow too fast.

Obama breathes easy with passage of childhood nutrition bill: Failing to pass his wife's priority would have had him "sleeping on the couch," the president said Monday as he signed the Healthy, Hunger-Free Kids Act. The $4.5 billion bill expands free lunches and makes school lunches more nutritious. http://bit.ly/eqJnhf

CMS seeks input on Independence at Home: CMS held a listening session with stakeholders on Monday to seek input on a provision of the healthcare reform law that creates an "Independence at Home Demonstration." The demo will test a payment incentive and service delivery model that relies on home-based primary care teams designed to provide better and cheaper care.

Report issues recommendations on "dual eligibles": Two liberal groups on Monday released a plan to deal with the soaring healthcare costs of poor older Americans who qualify for both Medicare and Medicaid. The plan's five principles: start with a well-designed healthcare delivery system; ensure strong beneficiary protections; engage dual eligibles and their families in program design; ensure combined Medicare/Medicaid funds to enhance healthcare delivery; and establish a culture of quality improvement. http://bit.ly/f7scCS  

On the agenda for Tuesday: 

Baby boomers and the reform law: The pro-healthcare-reform Commonwealth Fund will release a report in the morning outlining how 18.3 million people ages 50 to 64 will benefit from the new law. The biggest help to this population will come in 2014, when they will be able to access comprehensive insurance through expanded Medicaid and subsidized private insurance through insurance exchanges, the organization said.

Health IT year in review: The Office of the National Coordinator (ONC) for Health Information Technology will kick off a two-day review of the agency's progress in 2010. Health and Human Services Secretary Kathleen Sebelius, CMS Administrator Donald Berwick and ONC head David Blumenthal are scheduled to speak Tuesday.

Around the Web: 

Rep. Steve King (R-Iowa) outlines GOP repeal strategy on Fox News: "We know that the president would veto that when it gets to his desk but we need a test vote so we know where people stand and we can start marching down through the appropriations bills, every one of them, putting language in them that prohibits any of the funds that are appropriated from being used to either implement or enforce Obamacare." http://bit.ly/eNmTWG

Maine doctors will urge the newly elected governor and attorney general not to join efforts to repeal healthcare reform, the Portland Press Herald reports. http://bit.ly/dQ9IfW

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Doctors are asking the Medicare agency to quickly explain how it will dole out $200 million in overdue reimbursements following “a highly disruptive year" for physician payments.

Healthcare reform enacted this year called on the Centers for Medicare and Medicaid Services (CMS) to reimburse doctors retroactively to Jan. 1, 2010, on several provisions, including extending the floor for a Medicare payment scale used to determine relative costs of practicing medicine in specific locations. Some states were set to receive significant increases due to changes in the scale, according to the Friday letter signed by more than 100 physicians groups.

The Medicare and Medicaid Extenders Act of 2010, which provided a one-year delay in a scheduled cut to Medicare physician rates, included $200 million to process the payment increases, the letter said.

The letter said uncertainty surrounding Medicare physician payments was disruptive to doctor practices. Congress enacted stopgap measures to delay scheduled cuts to Medicare payments several times this year, and on three occasions, temporary cuts went into effect.

“The payment uncertainties and delays were highly disruptive,” the letter said. “Many practices were forced to seek loans to meet payroll expenses, lay off staff or cancel capital improvements and investments in electronic health records and other technology.”

Further, the final 2010 fee schedule undervalued some cardiology codes due to a CMS calculation error, the letter said. Most of the claims have not been adjusted, and some were 40 percent lower than they should have been, the letter said.

A federal judge in Virginia ruled Monday that the healthcare law's insurance mandate is unconstitutional.

Sen. Orrin Hatch (R-Utah) was quick to praise the Virginia district court's ruling that parts of the healthcare law are unconstitutional.

Hatch, who could face a tough primary challenge in 2012, pointed out he was the first senator to argue publicly that the individual mandate is unconstitutional.

That was one of the sections the Virginia judge struck down. U.S. District Court Judge Henry E. Hudson also struck down “directly dependent provisions” while upholding the rest of the law. The decision marks the first major step in a lawsuit destined for the Supreme Court.

“Today is a great day for liberty,” Hatch said in his statement. “Congress must obey the Constitution rather than make it up as we go along. Liberty requires limits on government, and today those limits have been upheld.”

In the 1990s, Hatch actually supported a bill that would have required the individual mandate as part of an effort to kill the Clinton healthcare reform. His office has said since that time, Hatch has examined the constitutionality of the issue and now sees it as unconstitutional.

Hatch also signed a friend-of-the-court brief in regards to another lawsuit against the healthcare law. This suit will be heard Dec. 16 in Florida. 

The six-term Utah senator might not be the only one looking to 2012.

The Virginia lawsuit was brought by Republican state Attorney General Ken Cuccinelli, who is a rising GOP star in the state and mentioned as a 2012 Senate candidate. 

— Jason Millman and Mike Lillis contributed to this post.

The Internal Revenue Service on Monday released guidance on the healthcare reform law's tax on drugmakers. The tax, which should raise about $2.3 billion a year, will target branded prescription drug sales of more than $5 million to Medicare and other government programs.

The pharmaceutical industry agreed to the tax during the healthcare reform debate because those costs are more than offset by the extra business from the 32 million additional Americans the law aims to cover by 2019.

The guidance proposes a methodology for calculating the fee. It also uses the proposed methodology to provide the companies with a preliminary 2011 fee calculation.

The guidance gives interested parties until June 2 to comment.

Obama joked: "Had I not been able to get this bill passed, I would be sleeping on the couch."

Liberal groups issued policy recommendations Monday morning on how to manage care for a typically costly population of so-called “dual eligibles” — people who qualify for both Medicare and Medicaid.

Because of generally poorer health and greater needs for high-cost services, the country's 8.8 million dual eligibles are the most expensive population within the Medicare and Medicaid programs and the most difficult to coordinate care for, according to a report issued Monday morning by the Center for American Progress and Community Catalyst.

According to the report, dual eligibles make up 18 percent of Medicaid enrollees but consume 46 percent of program spending. Meanwhile, they comprise 16 percent of Medicare enrollees but consume 25 percent of spending.

The healthcare reform law includes a number of provisions aimed at improving care coordination for dual eligibles, including a new Federal Coordinated Health Care Office within the Centers for Medicare and Medicaid Services. The new Center for Medicare and Medicaid Innovation at CMS, which will test payment and service delivery models, will benefit dual eligibles, the groups said.

The policy paper calls on the federal government and states to pursue new opportunities for managing dual eligibles that focus on five principles: start with a well-designed healthcare delivery system; ensure strong beneficiary protections; engage dual eligibles and their families in program design; ensure combined Medicare/Medicaid funds to enhance healthcare delivery; and establish a culture of quality improvement.

A Virginia federal judge is expected to issue a decision on the constitutionality of the new healthcare reform law on Monday.

U.S. District Judge Henry Hudson will decide whether the federal government can require individuals to purchase health insurance, in accordance with the Constitution's commerce clause. Whatever Hudson rules Monday, he said in October the case will wind up in the Supreme Court.

A federal court in Florida will hear oral arguments Thursday on a healthcare reform lawsuit filed by 20 states. In October, U.S. District Judge Roger Vinson allowed the lawsuit to challenge two constitutional provisions: whether the law’s individual mandate violates the commerce clause, and whether the federal government can require states to expand their Medicaid programs. 

The Senate will consider the food-safety bill this week after House leaders tucked it into a continuing resolution to keep the government funded through Sept. 30. The $1.1 trillion CR narrowly passed the House, 212-206, after House Republicans objected to the legislative maneuver.  Senate Appropriations Committee Chairman Daniel Inouye (D-Hawaii) is expected to include the CR into an earmark-loaded omnibus bill.

Senate Democrats will try again to pass $7.4 billion in health benefits and compensation to Ground Zero workers after failing a vital cloture vote on Thursday. Senate Republicans held up the bill partially because they want to finalize the budget and Bush tax cuts before dealing with other business. About 60 members on Thursday backed a proposal to include the health benefits bill into the Bush tax cuts extension.

On Friday, the Food and Drug Administration is expected to rule if it will rescind approval of Avastin for advanced breast cancer treatment. Just last week, Britain’s healthcare agency rejected the drug for the same purpose.

Another FDA panel this week will review whether mercury-based dental fillings exceed Environmental Protection Agency-approved levels. 

On Monday, the Centers for Medicare and Medicaid Services will host a conference call to gather stakeholder input on the design and development of the Independence at Home Demonstration included in healthcare reform. The project will enable Medicare beneficiaries with multiple chronic conditions to receive primary care in their homes.

Also on Monday, the liberal Center for American Progress will host a discussion panel on the future of financing and caring for Medicare and Medicaid dual eligibles. Edo Banach, senior adviser for CMS’s Federal Coordinated Health Care Office, will serve as a panelist.

The libertarian Cato Institute will be in the Rayburn House Office Building on Thursday to discuss the GOP budget agenda and how the next Congress should address entitlement spending.