- While the debt ceiling and government funding are the first priorities for Congress, it may take up various health-policy related issues — including those affecting nursing homes, telehealth, and behavioral health.
- Hospitals continue to advocate for more funding as the industry recovers from the pandemic, but other issues like site neutral payments and tax-exempt status may garner congressional attention.
- Physicians will press Congress for a longer-term solution to reimbursement cuts while nursing homes will continue to advocate for better reimbursements as it is still recovering from the pandemic.
- Because getting anything through Congress will be more difficult, we anticipate federal regulatory agencies will play an outsized role this year.
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Congress begins this term with a split majority — Democrats control the U.S. Senate while Republicans control the U.S. House of Representatives. The margin of control in each chamber is small, meaning there is little room for error when working to pass any bill.
The to-do list of must-pass legislation for Congress is funding the federal government and addressing the debt ceiling limit, which was triggered earlier this year. While Congress must address these two issues, there may be additional policies that could also be considered or pushed.
Here is our outlook for 2023:
2023 Key Regulatory, Congressional Timelines
- March-April — FY2024 federal budget proposed and considered
- April 1 — FMAP transition and Medicaid redeterminations begin
- April/May — Medicare trustees report expected
- April-July — Annual CY22 and FY22 Medicare proposed rulemakings (skilled nursing, hospitals, physicians, etc.)
- May 11 — COVID-19 public health emergency ends
- June/July — Federal debt limit extension deadline approaches
- September 1 — Deadline for list of 10 Part D drugs subject to Medicare negotiation (enacted under the Inflation Reduction Act)
- September 30 — End of federal fiscal year
- December 31 — End of temporary 2.5% physician fee schedule (PFS) relief, APM Bonus Extension; PFS relief will go to 1.5% on January 1
Source: Health Policy Source
The two issues Congress must resolve this year relate to the debt ceiling and funding the federal government.
The debt ceiling is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refund, and other payments, according to the Department of the Treasury. Congress has raised the debt ceiling 78 times since 1960 – under both Republican and Democrat presidents. The most recent was December 16, 2021 (Public Law 117-73), setting the limit at $31.381 trillion.
In early January, Treasury Secretary Janet Yellen advised Congress the U.S. was approaching the debt ceiling and the agency would begin taking “extraordinary measures” to keep within the limit. Those measures will likely be exhausted by summer, at which time Congress must have acted to avoid default.
The second issue is the federal appropriations process. The Consolidated Appropriations Act of 2023 (CAA, 2023) extended government funding through the federal fiscal year, which ends September 30, 2023. The president will release his budget in March, but it will not be the bill Congress passes. Instead, Congress will spend the coming months in committee hearings and negotiations on what can actually muster passage in a split-control Congress. Their negotiations will need to be completed by October 1, 2023, or risk a government shutdown.
As a reminder, the federal appropriations process relates to funding discretionary spending, which requires an annual congressional vote. Mandatory spending, on the other hand, does not require an annual vote because funding is authorized by existing laws. Mandatory spending accounts for roughly two-thirds of federal government spending and includes programs like Medicare and Social Security.
|Question||Funding the Federal Government||Addressing the Debt Ceiling|
|What is the issue?||Congress must fund the federal government (passing 12 appropriations bills or passing a continuing resolution (CR)). The current CR extends funding through September 30, 2023. Failure to act would mean a government shutdown.
||The debt ceiling applies to the level of borrowing the United States can use to pay its debts and obligations. The current ceiling is $31.381 trillion. Congress must either raise the debt ceiling or suspend the debt ceiling to avoid defaulting.|
|What spending does it impact?||The federal appropriations process impacts discretionary program spending. This spending requires annual congressional votes.
||The debt ceiling applies to all of government obligations/spending, including mandatory programs, such as Medicare and Social Security.|
|Has Congress ever failed to act?||A government shutdown has periodically occurred in the past. Some shutdowns have lasted a few days, others longer.||A default has never happened.|
Economic impact if funding bills, debt ceiling not addressed
Failure to pass all 12 appropriations bills or a CR to fund government would result in a full government shutdown. Passage of some of those 12 bills but not all would result in a partial shutdown. The economic impact would depend on the length of the shutdown and the agencies impacted.
There have been a variety of government shutdowns over the years. The most recent shutdown lasted five weeks, from December 22, 2018, through January 25, 2019. The Congressional Budget Office estimated this shutdown delayed roughly $18 billion in federal discretionary spending (compensation, purchases of goods, services, suspension of some federal services), which lowered the projected level of real gross domestic product by $8 billion or 0.2%. The impact was felt heaviest by federal employees and private sector businesses dependent on federal contracts for goods and services. Therefore, while the macroeconomic impact may have been muted, the shutdown did have large impacts on certain individuals and businesses.
A breach of the debt ceiling has never happened and would have far broader and potentially very negative economic impacts. Once the United States hits the debt ceiling, the government will no longer be able to issue any more debt and will be limited to cash on hand. Since the government is running a more than trillion-dollar deficit, that means more money is needed than there will be available and economic impacts could quickly spiral. Opinions are varied as to what those impacts would look like.
What else could be in the mix for Congress?
Even though the debt ceiling and government funding are the first priorities for Congress, committees and work on other legislation will continue. Some issues will be pushed by industry stakeholders, others by members of Congress.
- Pharmaceutical and life science companies — There is still advocacy afoot to address the Section 174 tax law change related to research and experimental costs, though companies should be prepared for the law to remain as is. Additionally, the Centers for Medicare & Medicaid (CMS) will release the first 10 Medicare Part D drugs that will face new price negotiations as enacted under the Inflation Reduction Act. The pharmaceutical industry will turn its attention heavily to the regulatory process to affect these Medicare drug negotiations and potentially even the legal process. Some in Congress may also focus on how to advance new technology and innovations.
- Physicians — Congress partially mitigated ongoing Medicare reimbursement reductions for 2023 and 2024 under the CAA, 2023. However, this means Congress has now waded into the issue for the past several years, akin to what used to happen with the sustainable growth rate. Congress can either continue this yearly exercise, which no one wants, or work with stakeholders to develop a longer-term payment solution.
- Nursing homes — Skilled nursing facilities are under significant financial pressure and pressure to improve staffing levels. On the latter, CMS is expected to release its minimum staffing requirements and advocacy efforts are already in full swing on this topic. An industry still reeling from the pandemic, it is pushing for a recognition of existing labor shortages as well as for increased reimbursements.
- Hospitals — Hospitals continue to advocate for more funding as the industry recovers from the pandemic. Examples include additional payments for COVID patients once the public health emergency (PHE) ends and an add-on payment for metro “anchor” hospitals. However, more Medicare spending will be a difficult sell in the House. Industry is watching for the Medicare trustees report and its annual projection of Medicare solvency. Current projections are through 2028. During his state of the union address, President Biden said he would not allow Medicare benefits to be cut, but he also said he would add “decades” onto the Medicare trust fund. Watch for issues like site neutral payments to pop up again as potential savings. Tax-exempt status will also be an ongoing issue that garners congressional attention.
- Insurance companies — Medicare Advantage plans have come into the crosshairs on a variety of issues, such as “upcoding” and prior authorizations. Congress could focus on payment reductions or legislation reigning in prior authorizations. Plans are already facing headwinds from CMS in the form of the recently finalized risk adjustment data validation audits to claw back funds going back as far as 2018. CMS then proposed what will result in reduced base rates for Medicare Advantage plans in 2024.
- 340B program — There has been an ongoing struggle between stakeholders — Congress, HRSA, pharmaceutical companies, and 340B covered entities — for years. The result is many lawsuits, including the most recent ones related to limiting use of contract pharmacies. The ongoing problems may push Congress to act, but that could be tricky. The most recent large-scale changes were made over a decade ago under the Affordable Care Act. Revisiting this statute may result in changes one or both sides don’t like, which is always a risk. But Congress could also then address an ancillary issue of including rural emergency hospitals as covered entities.
- Telehealth —Telehealth saw a huge boost during the pandemic and has demonstrated its effectiveness and popularity. Now that the PHE will officially end May 11, many of the payment and regulatory flexibilities will also end. Congress enacted extensions for certain policies (through 2024), but there is growing support for Congress to make those permanent and chart a sustainable path forward for this modality of care delivery.
- Behavioral health — Congress will continue to focus on mental health, behavioral health, and substance use disorder. These topics garner bipartisan support, including funding and programs in the CAA, 2023.
- Waste, fraud, abuse, oversight — Over the decades, Congress has found savings in Medicare and Medicaid by targeting “waste, fraud, and abuse” via program integrity policies. Expect a renewed focus here. Additionally, oversight of all things health care — from legislative hearings to legislation or regulatory policies — will be on the docket.
Must-pass legislation will get done. A few additional policies may gain enough bipartisan support or become part of a negotiated package, but we don’t expect a grab-bag of items to be in play. This is largely due to split control of Congress by slim majorities and new rules approved by the majority party (Republicans) in the U.S. House. For example, the House now will operate under CUTGO, Cut-As-You-Go, which would require any new mandatory spending be offset by mandatory spending cuts of equal or greater value, and not, say, by using tax increases as an offset.
It is yet to be seen how the new Republican majority in the House, a new speaker, new house rules, a slim Democrat majority in the Senate, and the legislative process will work on big-ticket negotiations like the debt ceiling and government funding. The result could be quick, clean legislation (i.e., no ancillary issues attached to it) or the process could be far more complicated. In the give and take of negotiations, we don’t expect any hyper-partisan issues to see the light of day, though we could see a Democratic or Republican policy moving if coupled with a priority from the other political party.
Finally, because getting anything through Congress will be more difficult, we anticipate federal regulatory agencies will play an outsized role this year. To the extent policy changes can be made via rulemaking, health care stakeholders and the president will turn to those agencies to advance their agendas. Keep your eyes on the Federal Trade Commission, the Department of Health & Human Services, and CMS.
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