Health Care Funding, Policies in the 2023 Consolidated Appropriations Act

  • Regulations
  • 1/18/2023
Female doctor explaining medical report To a female Patient

Key insights

  • Mandatory 4% Medicare PAYGO cuts averted
  • Public health emergency (PHE) flexibilities extended for telehealth, hospital at home
  • Wind down of required state Medicaid coverage and funding bump
  • Physician pay cut partially reduced, 200 new residency slots created
  • Mental, behavioral health and substance use disorder a focus

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The new federal consolidated appropriations act includes some major changes for health care funding and policies, from physician payments and rural hospital programs to addressing mental health and substance use disorder along with policies on winding down the public health emergency for state Medicaid programs.

The new law — the Consolidated Appropriations Act of 2023 (Public Law 117-328) — provides government funding for federal agencies in 2023 and changes various health care rules for 2023 and beyond. Agency funding levels for discretionary spending are increased in many instances over current year levels.

For example, the Department of Health and Human Services (HHS), which will receive an almost $10 billion increase to $120.7 billion with increases directed toward the National Institutes of Health, the Centers for Disease Control and Prevention, and the Health Resources and Services Administration. In addition, the law includes a significant boost in funding — over $22 billion — to the Department of Veterans Affairs.

While we do not cover every item in the new omnibus law that impacts health, we highlight major focus areas and policies of interest.

Payment policies, program extensions

One high priority funding cut that didn’t happen was the statutorily required pay-as-you-go (PAYGO) reduction to Medicare. This is now precluded from taking place in 2023 and 2024. Without congressional intervention, a 4% Medicare reduction would have been required.

For physicians, the law partially addresses concerns with impending reimbursement cuts. Physicians had advocated for a full reprieve from the roughly 4.5% pay cut they will see in Medicare reimbursements starting January 1, 2023. While Congress did not fully eliminate this cut, it reduced it to 2% in 2023 and around 3% in 2024.

In other words, the law reduced the cut by 2.5% for 2023 and by 1.25% in 2024. On the flip side, Congress extended a payment increase for those participating in qualifying advanced alternative payment models. The increase will be a 3.5% boost through 2025.

For rural hospitals, the law extends two key Medicare programs — the low volume adjustment and the Medicare dependent hospital — for another two years, through September 30, 2024.

Rural home health providers will continue to see a 1% bump in reimbursement through December 31, 2023.

Ground ambulance providers will continue to see add-on payments extended through December 31, 2024.

Popular public health emergency flexibilities extended

The law extends various public health emergency (PHE) flexibilities, including the acute care hospital at home program and telehealth policies.

Hospital at home waivers and flexibilities were allowed beginning in 2020 for approved hospitals and systems. The waivers allow qualifying patients to receive care in their homes and for hospitals to still be reimbursed by Medicare as if those services were in the hospital.

The Centers for Medicare & Medicaid Services (CMS) indicates that 114 systems, 259 hospitals in 37 states have been approved for this waiver flexibility as of December 16, 2022. The new law extends this waiver flexibility through December 31, 2024.

For telehealth, the PHE provided many popular flexibilities. These are now statutorily extended through 2024:

  • Allowing telehealth in non-rural locations.
  • Allowing the home as an acceptable originating site.
  • Allowing for audio-only telehealth, as opposed to the normal “synchronous” audio-video requirement.
  • Expanding the list of eligible practitioners who can provide telehealth services to include occupational therapists, physical therapists, speech-language pathologists, and audiologists.
  • Allowing federally qualified health centers and rural health clinics to continue to provide telehealth services.
  • Delaying the required in-person visit within six months of a mental health services provided via telehealth.
  • Permitting telehealth services to meet face-to-face recertification requirement for hospice care.

Workforce funding

The law reauthorizes or authorizes various programs addressing workforce capacity, including:

  • Providing an additional 200 Graduate Medical Education (GME) funded residency positions in 2026. A minimum of 100 positions must be dedicated to psychiatry and psychiatry subspecialty residencies. In addition, at least 10% of positions would be distributed each to rural hospitals, hospitals operating above their cap, hospitals in states with new medical schools or branches/campuses, and hospitals that serve health professional shortage areas.
  • Reauthorizing the Public Health Workforce Loan Repayment Program for loan repayment to individuals in exchange for working in a public health department.
  • Authorizing a Bio-Preparedness Workforce Pilot Program for loan repayment for health professionals with specialized knowledge in infectious diseases and emergency preparedness and response activities to maintain an adequate supply of such professionals.
  • Reauthorizing the community health worker program to promote healthy behaviors and outcomes in medically underserved communities, including directing funds to be used to recruit, hire, train, and retain community health workers; support community health workers in providing education and outreach in their communities; and to educate community members.
  • Reauthorizing the community health centers and rural health clinics program for accredited continuing medical education for their primary care providers. This includes specialty care through existing service delivery locations and allows for clinical training components between primary care providers and clinical specialists.

Mental health, substance use disorder

The law includes billions of dollars to address mental and behavioral health along with substance abuse disorder (SUD). This is clearly an area of health care focus in the omnibus. Some of the policies include:

  • Establishes Medicare coverage of marriage and familiar therapist and mental health counselor services for mental health care services beginning in 2024.
  • Creates 200 new GME slots, as noted above, with at least 100 of those positions designated for psychiatry and psychiatry subspecialties.
  • Initiates a 50% payment increase for psychotherapy crisis services provided in a mobile unit beginning 2024.
  • Adjusts Medicare’s partial hospitalization services to include intensive outpatient mental health services beginning January 1, 2024.
  • Requires HHS to update this methodology and data it uses in setting the Inpatient Psychiatric Facilities Prospective Payment System rates starting in 2025.
  • Allocates funding grants to communities and community organizations that meet criteria as certified community behavioral health clinics.
  • Provides funding for youth early intervention and strategies for suicide prevention.
  • Gives funding to SUD treatment and prevention and state opioid response grants.
  • Reauthorizes the community mental health services block grant and the substance use and prevention, treatment, and recovery block grant.
  • Provides grants or cooperative agreements to promote integrated care models (behavioral-primary care).
  • Reauthorizes grants to states, tribes, and tribal organizations to establish, improve, or maintain maternal mental health and SUD programs for pregnant or postpartum women.
  • Authorizes grants for consumer-run nonprofit organizations, tribes and tribal organizations, Urban Indian Organizations, or tribal consortia to provide peer-supported mental health services, including virtual peer support.

Medicaid post-PHE, CHIP programs

Since early 2020, state Medicaid programs have been required to maintain their Medicaid enrollments to receive an increased bump of 6.2% to their federal Medicaid matching rate, known as the FMAP. This new law now provides states with a timeline and a phase-down of these “maintenance of effort” requirements and accompanying FMAP bump as follows:

  • Medicaid eligibility redeterminations (i.e., ending maintenance of effort requirements) may begin April 1, 2023.
  • States are allowed one year to complete eligibility redeterminations.
  • States must follow various policies and submit reports to HHS. These include having accurate beneficiary contact information, attempting to contact individuals using more than one modality prior to any disenrollment action, and submitting monthly reports to HHS with required information. The law allows for corrective action plans and fines for failure to follow the requirements.
  • Enhanced FMAP matching rates will phase down by quarter. The FMAP bump will remain at 6.2% through March 31, 2023, but then drop to 5% for April – June 2023. It will drop to 2.5% for July – September and then to 1.5% in the fourth quarter of 2023. It will fully phase out on January 1, 2024.

The new law also requires states to provide children eligible for Medicaid with continuous coverage for a year.

The Children’s Health Insurance Program funding is extended through fiscal year 2029.

U.S. territories will continue to receive their increased Medicaid matching rates either temporarily (Puerto Rico) or permanently (all other U.S. territories).

Assorted provisions

The law includes many other policies including:

  • Research, oversight, surveillance on virus, biosecurity, supply chain, and enhancing production and development of certain products.
  • Drugs and biologics, manufacturing, and emerging technologies.
  • Medical device cybersecurity requirements for manufacturers, including to develop processes to secure devices, have plans to identify and address cybersecurity vulnerabilities, and provide required information to FDA in any premarket submissions.
  • CMS required to release data used in developing the behavioral offset for the patient driven grouping model for home health care payments.
  • Policies to increase diversity and modernization of clinical trials.
  • Clinical laboratory fee schedule cut delayed until January 1, 2024.
  • Medicare coverage for certain lymphedema garments beginning 2024.
  • Non-opioid treatments currently packaged into the Medicare payment for outpatient surgeries will be separately reimbursable from 2025 through 2027.

How we can help

There is a lot to unpack in the Consolidated Appropriations Act of 2023. As the new year begins, this is an opportunity to review these changes and what the future will look like once the public health emergency officially ends.

From strategic to tactical and financial insights, CLA’s health care team can help.

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