Virginia lawmakers recess without Medicaid, budget deal

By Gary Robertson

RICHMOND, Virginia (Reuters) - Virginia's legislature has recessed without reaching agreement with Democratic Governor Terry McAuliffe over a budget or Medicaid expansion.

McAuliffe, a former Democratic Party fundraiser, and the Republican-dominated House of Delegates are deadlocked over a two-year pilot expansion of Medicaid, the federal healthcare program for the poor the governor has proposed.

House lawmakers meeting in a two-day special session defeated McAuliffe's proposed $96 billion two-year budget late on Tuesday. The House then passed its own version of the budget without Medicaid expansion, seen as a priority for the governor, before adjourning.

The Democratic-controlled state Senate will reconvene April 7 to take up the budget fight anew. A budget must be approved by June 30 or risk state operations starting to shut down.

Republicans are asking McAuliffe to deal with the budget and Medicaid in separate sessions.

"We would be more than happy to debate Medicaid in a special session," said Kirk Cox, Republican House majority leader. "I think is afraid he loses all his leverage without the budget."

McAuliffe, who made Medicaid expansion the centerpiece of his gubernatorial campaign last year, has not responded to the rebuff.

But he has said that accepting $2 billion in federal funds to expand Medicaid under the Affordable Care Act would release money that could be used to create jobs, raise state salaries, bolster pensions and implement health reforms.

(Editing by Ian Simpson and Gunna Dickson)

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Government shutdown looms as lawmakers feud

By Richard Cowan and Rachelle Younglai

WASHINGTON (Reuters) - The U.S. government braced on Friday for the possibility of a partial shutdown of operations on October 1 as Congress struggled to pass an emergency spending bill that Republicans want to use to achieve Tea Party-backed goals, such as defunding the new healthcare reform law.

While there was still a chance of averting a shutdown, time was running out.

The Senate on Friday was on track to pass legislation keeping the federal government operating beyond midnight Monday.

But doubt remained about how and when it would be received in the Republican-controlled House of Representatives, where Republicans feuded over a plan that would both please Tea Party conservatives and avert widespread agency shutdowns.

A shutdown would likely to result in up to 800,000 federal employees being furloughed. Most visible to the public, if past shutdowns are a guide, are museum closings in Washington that outrage tourists and attract television cameras, and possible delays in processing tax filings, for example.

But the government does not grind to a halt.

Large swaths of "essential" activity continue, including sending out benefit checks and national security-related operations. Agencies were in the process of determining which employees would be considered essential and which not.

REPUBLICANS FIGHTING OBAMACARE

"Obamacare," the healthcare reform law set for launch on October 1, would continue to be implemented, beginning a period of open enrollment for individuals to purchase insurance.

Concern over fiscal negotiations in Washington sent the dollar close to a seven-month low and pressured world equities on Friday.

The impasse has sent the cost of insuring against a U.S. sovereign default to its highest level in four months. U.S. stocks fell in early trading on Friday as worries grew over Washington's gridlock. Concern over fiscal negotiations sent the dollar close to a seven-month low.

As lawmakers stared down the midnight Monday deadline when the current fiscal year ends - and government funding along with it - the Democratic-led Senate was set to deliver on President Barack Obama's call for an emergency funding bill with no add-ons, such as defunding the healthcare law.

The House could vote on that measure in an unusual Saturday session. But all indications were it would tack on a new measure to that bill, which likely would be rejected by the Senate and make a shutdown all the more likely.

One House Republican aide, who asked not to be identified, said leaders were weighing attaching a one-year delay of the healthcare law to the spending bill, "but that's not set in stone."

A feel of desperation seeped through the Capitol, even though many held out hope that a last-minute deal can be struck to avoid shutting down activities ranging from school lunch programs for poor children, paying U.S. troops, foreign embassy operations and some airport security screenings.

"Holy God, you created us for freedom, so keep us from shackling ourselves with the chains of dysfunction," intoned Senate Chaplain Barry Black at the opening of Friday's Senate session.

DEBT CEILING FIGHT LOOMS

Earlier, Republican Senator John McCain blamed members of his own party for the difficulties in passing legislation to fund the government beyond Monday. Congress also faces the hard task of raising the limit on federal borrowing authority, which Republicans are targeting for controversial add-ons.

Without a debt limit increase by October 17, Treasury Secretary Jack Lew has warned, the United States would have a difficult time paying creditors and operating the government.

"We are dividing the Republican Party rather than attacking Democrats. We are now launching attacks against Republicans ... so it's very dysfunctional," McCain said on the CBS program "This Morning."

McCain and a band of other more moderate Republicans are expected to join in with Democrats later on Friday to pass a stripped-down bill to fund the government until November 15, giving Congress more time to come up with a budget measure running through September 30, 2014, the end of the fiscal year that starts on Tuesday.

Tea Party conservatives' insistence on using these two important fiscal bills to advance their small-government agenda comes as a new Gallup Poll shows the country's patience with them could be wearing thin, even though there still are a significant number of supporters.

According to the survey, 22 percent of U.S. adults think of themselves as supporters of the movement.

That is down 10 points from the apex of Tea Party popularity in 2010, when they influenced enough elections to return House control to Republicans.

House Republican leaders early on Friday were either still undecided on how to handle the unfolding crisis in Washington or were not giving any clues.

"We're still waiting for the Senate to act," said one House Republican leadership aide.

(Editing by Fred Barbash and Mohammad Zargham)

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U.S. government shutdown looms as lawmakers feud

By Rachelle Younglai and Thomas Ferraro

WASHINGTON (Reuters) - The U.S. government braced on Friday for the possibility of a partial shutdown of operations on October 1 as Congress struggled to pass an emergency spending bill that Republicans want to use to achieve Tea Party-backed goals, such as defunding the new healthcare reform law.

While there was still a chance of averting a shutdown, time was running out.

Indicative of lawmakers' desperation, some mulled the possibility of passing a bill to keep the government running for a very short period of time, 10 days or so, to avert a shutdown and provide more time to work out a longer-term deal.

Representative Shelley Moore Capito of West Virginia, a senior House Republican, told Reuters: "People are talking about a 10-day CR," a so-called continuing resolution to fund the government through October 10.

That could put the subsequent temporary funding bill on a similar timetable to a debt limit increase Congress must pass or risk a government default on its loans.

House Democratic leader Nancy Pelosi, during a press conference, warned Republicans against lumping those two measures together. "It's two different subjects," she said.

The Senate on Friday was on track to pass legislation keeping the U.S. government operating beyond midnight on Monday.

But doubt remained about how and when it would be received in the Republican-controlled House of Representatives, where Republicans feuded over a plan that would both please supporters of the conservative Tea Party movement and avert widespread agency shutdowns.

A shutdown would likely result in up to 800,000 federal employees being furloughed. Most visible to the public, if past shutdowns are a guide, are museum closings in Washington that outrage tourists and attract television cameras, and possible delays in processing tax filings, for example.

But the government does not grind to a halt.

Large swaths of "essential" activity continue, including benefit checks and national security-related operations. Agencies were in the process of determining which employees would be considered essential and which not.

REPUBLICANS FIGHTING OBAMACARE

"Obamacare," the healthcare reform law set for launch on Tuesday, would continue to be implemented, beginning a period of open enrollment for individuals to purchase insurance.

Concern over fiscal negotiations in Washington sent the dollar close to a seven-month low and pressured world equities on Friday.

The impasse has sent the cost of insuring against a U.S. sovereign default to its highest level in four months. U.S. stocks fell in early trading on Friday as worries grew over Washington's gridlock. Concern over fiscal negotiations sent the dollar close to a seven-month low.

As lawmakers stared down the midnight Monday deadline when the current fiscal year ends - and government funding along with it - the Democratic-led Senate was set to deliver on President Barack Obama's call for an emergency funding bill with no add-ons, such as defunding the healthcare law.

The House could vote on that measure in an unusual Saturday session. But all indications were it would tack on a new measure to that bill, which likely would be rejected by the Senate and make a shutdown all the more likely.

One House Republican aide, who asked not to be identified, said leaders were weighing attaching a one-year delay of the healthcare law to the spending bill, "but that's not set in stone."

A feel of desperation seeped through the Capitol, even though many held out hope that a last-minute deal could be struck to avoid shutting down activities ranging from school lunch programs for poor children and paying U.S. troops to foreign embassy operations and some airport security screenings.

"Holy God, you created us for freedom, so keep us from shackling ourselves with the chains of dysfunction," intoned Senate Chaplain Barry Black at the opening of Friday's Senate session.

DEBT CEILING FIGHT LOOMS

Earlier, Republican Senator John McCain blamed members of his own party for the difficulties in passing legislation to fund the government beyond Monday. Congress also faces the hard task of raising the limit on federal borrowing authority, which Republicans are targeting for controversial add-ons.

Without a debt limit increase by October 17, Treasury Secretary Jack Lew has warned, the United States would have a difficult time paying creditors and operating the government.

"We are dividing the Republican Party rather than attacking Democrats. We are now launching attacks against Republicans ... so it's very dysfunctional," McCain said on the CBS program "This Morning."

McCain and a band of other more moderate Republicans are expected to join in with Democrats later on Friday to pass a stripped-down bill to fund the government until November 15, giving Congress more time to come up with a budget measure running through September 30, 2014, the end of the fiscal year that starts on Tuesday.

Tea Party conservatives' insistence on using these two important fiscal bills to advance their small-government agenda comes as a new Gallup Poll shows the country's patience with them could be wearing thin, even though there still are a significant number of supporters.

According to the survey, 22 percent of U.S. adults think of themselves as supporters of the movement.

That is down 10 points from the apex of Tea Party popularity in 2010, when they influenced enough elections to return House control to Republicans.

House Republican leaders early on Friday were either still undecided on how to handle the unfolding crisis in Washington or were not giving any clues.

"We're still waiting for the Senate to act," said one House Republican leadership aide.

(Additional reporting by Thomas Ferraro, Kim Dixon and Caren Bohan; Editing by Fred Barbash, Mohammad Zargham and Jim Loney)

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EU lawmakers back strict new approval system for medical devices

By Charlie Dunmore

BRUSSELS (Reuters) - European Union lawmakers backed a strict new approval system for high-tech medical devices on Wednesday, raising industry fears of added delays in getting new products to market that could dull Europe's competitive edge.

Members of the European Parliament's environment committee voted in favor of a new pre-market authorization system of randomized clinical trials for implantable devices, covering everything from hip replacements to artificial heart valves.

Moves to tighten the rules followed a 2011 scandal involving France's now defunct Poly Implant Prothese (PIP), which for up to a decade made substandard breast implants with industrial-grade silicone that were used by hundreds of thousands of women around the world.

Some critics said the scandal was the result of Europe's current authorization system, which is less strict than in the United States where extensive testing is required before new products are approved for sale.

In response, the EU's executive - the European Commission - has proposed increased monitoring of device manufacturers and tougher government oversight of the 80 or so mostly private Notified Bodies that currently decide on product safety.

But Wednesday's committee vote went far beyond the Commission's original proposals, calling for the establishment of a new pre-marketing assessment system for high-risk devices, which would be identified on a case-by-case basis and only authorized with the approval of the European Commission.

Europe's 100 billion euro ($135 billion) medtech industry has said that would add years to the time it takes to bring new devices to market, removing a key advantage that EU companies enjoy over their U.S. rivals.

"The proposed regulatory system will not only unnecessarily delay by three years patient access to the latest lifesaving medical technology, but also deliver a devastating financial blow to Europe's 25,000 small and medium-sized device makers," EU trade group Eucomed said in a statement.

The body also questions whether the EMA will have the capacity to evaluate the 400 to 600 so-called "Class III", or high-risk, devices that currently reach the market each year in Europe.

Major makers of medical devices include Johnson & Johnson, Medtronic, Boston Scientific, Abbott, Allergan and Smith & Nephew.

Reflecting the deep divisions on the issue, Wednesday's parliamentary vote followed more than 900 amendments by lawmakers to the Commission's original proposal.

If the committee's stance is confirmed by the full parliament in the coming weeks, it will form the basis of the assembly's negotiating position in subsequent talks with EU governments to finalize the rules.

(This story corrects paragraph 6 to remove reference to European Medicines Agency)

(Editing by Ben Hirschler and Anthony Barker)

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