A “spicy” lame duck session for the 117th Congress and other things to expect after midterm elections

Erika Grotto: What midterm elections could mean for healthcare, today on HFMA’s Voices in Healthcare Finance podcast. Hello, and welcome to the podcast. I’m your host, Erika Grotto. On today’s episode, we’re breaking down the potential effects of the midterm elections on healthcare policy. Longtime listeners will be happy, I’m sure, to hear from our friend Chad Mulvany from the California Hospital Association. We’re also excited to introduce HFMA’s newest policy director, Andrew Donohue. Here’s HFMA Senior Editor Nick Hut to kick off the conversation. 

Nick Hut: Thanks, Erika, and everybody, if you’re looking for insight on the healthcare policy implications of the midterm elections, you’ve come to the right place because you’re going to hear from two experts who will tell you pretty much everything you need to know. First we have Andrew Donohue, who is a new healthcare finance policy director with HFMA. Andrew, welcome, and please tell us a little bit about yourself.  

Andrew Donohue: Yeah, Nick, thanks for having me. I’ve been excited to be here. I’m a longtime listener. I’m new to the HFMA team. I started my career as a health policy advisor on Capitol Hill. I did that for a number of years and then wanted to get down to the grassroots level, so I worked in senior financial operations roles across the Southeast for for-profit systems and not-for-profit. Came back to HFMA just because I love the policy and advocacy side of things. I think we are entering one of the most disruptive eras in human history and certainly for the healthcare industry, so I really like to be involved in that conversation and look forward to it today. 

Hut: Excellent. And then we also have Chad Mulvany, who was a longtime HFMA policy director and a Voices in Healthcare Finance podcast stalwart before leaving us for the California Hospital Association, where he’s now vice president for federal policy. So Chad, welcome back to the podcast. 

Chad Mulvany: Thank you, Nick. Appreciate the opportunity to be here with you and Andrew, and certainly there’s a lot going on in D.C. now that impacts hospitals. I couldn’t think of a better crew to unpack it with than you and Andrew, so looking forward to our discussion. 

Hut: Super. Likewise. And just to set the stage, we know that Republicans won a slim majority in the House of Representatives. Democrats maintained a slim majority in the Senate. As of this recording, we don’t know the final numbers in either chamber, but regardless, we’re looking at a very closely divided Congress over the next two years. But Chad, before we look too far down the road to the 118^th Congress, there are some key issues that have to be settled during the last month or so of the 117^th, right? 

Mulvany: There certainly are, and the one thing I will say, it’s Friday, November 18 as we’re recording this, what I would say as Nick alluded to, there’s a lot of dust that still needs to be settled. The crystal balls still probably are a little hazy. But in terms of what I expect out of the lame duck, at a minimum, some type of budget bill has to be passed by December 16. And certainly, conventional wisdom is that something will get passed, and while all end-of-year sessions are frantic, trying to wrap up the budget and any unfinished business before the holidays, this lame duck could be particularly spicy, given the fact that we’re looking at divided government for the next Congress. So there’s a sense in D.C. that this may be the best opportunity for many items on a lot of people’s wish lists, not just the healthcare sector, to move for awhile. So you know, in terms of outcomes, while there’s a lot of things on the agenda, there may be a bit of a traffic jam occurring with some leadership shakeouts and then also just the number of things that people want to get into a year-end bill. 

Hut: So thanks for the rundown, Chad. What are the most urgent priorities for hospitals and health systems at this point? 

Mulvany: Yeah, there are a couple of them, and I think it’s kind of a long list. You know, at the macro level, as I said, I think we get a 2023 budget deal done before the end of this Congress, so it takes the risk of a shutdown off the table, and I do think that’s important because in the next Congress, in some corners, there may be a little bit more willingness to use government funding to extract policy concessions related to spending, which could possibly target Medicare, and we’ll have to certainly watch for that. If we do get a budget bill done, as we expect, in the lame duck, I expect a couple of things to be included in it. The first thing would be stopping the 4% PAYGO cuts to Medicare, and this is a side effect of the American Rescue Plan. And the PAYGO cuts are required by 2020 budget rules, which require lawmakers to offset the cost of legislation. And certainly given the current environment that a lot of HFMA’s members are facing, if a 4% cut went into effect on Medicare payments, it would be absolutely devastating. So I think it would be safe to say that this gets kicked down the road at least for a year. Also pretty high on the list of things that I think get done will be an extension of the Medicare dependent hospital and the low adjustment programs. Extension currently runs through the 16^th. I think similar to the PAYGO cuts, this also gets done. And then I think the third thing that will absolutely be included in there is some type of fix for physician reimbursement. Unfortunately, we are now back to partying like it’s 2009 again, given that this is sort of analogous to the SGR in a way. And right now, physicians are facing a 4.5% across-the-board cut. What I’m hearing and seeing in the trade press is that Congress is considering reducing that by anywhere between 2 and 3%. There are a couple of other things that are in the cards as well. I mean, certainly there’s a lot of talk about a debt limit suspension until after the 2024 elections. Again, because in the new Congress there may be some element that may be interested in extracting Medicare or other entitlement cuts to increase the debt limit, I think there’s a risk that if this doesn’t get done, we could find ourselves in another situation where we’re looking at Medicare cuts. So that’s certainly something that people are interested in doing. However, I don’t know how much time there is and whether the votes actually exist to get that done. Also important to physicians and folks in value-based payment models would be an extension of the 5% advanced alternative payment model participation bonus, which expires at the end of this year. My understanding is that Senate finance committee staff are pushing to include it. However, the hangup like everything in D.C. is money. And so to make the budgetary math work on this, the extension may be shorter than people like, or it may be a little bit more limited than people would like, but at this point, something is better than nothing. One of the other things that I think is pretty prominent on peoples’ lists is a two-year extension of telehealth. And as I was thinking about this discussion, this is certainly one of the things that I would have put in the “will happen” bucket. However, given that we’re likely going to get another extension of the PHE, which is currently scheduled to end in January, I think that maybe Congress might be willing to take a pause on this given that we’ll get another 90 days at this PHE plus another 150 from what’s already in statute. And so while this enjoys bipartisan support, I think without sort of a little bit more pressure on Congress from a time crunch standpoint, and the other competing priorities, this one may get kicked down the road. And then I think we’ll also probably see Medicare Advantage prior auth reform. This could also end up riding, especially if CMS can get a rule out on prior auth reform, which would then lower the CBO score on this. And then those are sort of the big ticket items. There are a couple of other items that are also on the wish list that I know a number of stakeholders are pursuing, us included. An additional safety net payment for hospitals, and there are a couple of different models floating around that would provide much-needed additional funds to safety net hospitals. We’ve certainly seen with what’s happened with Atlanta Medical Center in Georgia and other hospital closures. These hospitals are now at risk, placing patients and communities at risk. So that’s something we’re certainly pushing for. Also, a Medicare temporary per diem or add-on for administrative days. We’re hearing from our members and I know folks across the country are having a hard time getting patients discharged to post-acute care settings due to a lack of staff and also due to prior auth issues to make, and so that’s certainly an ask that’s on the table that’s also much needed. That’s pretty much the panopoly of options that are out there. 

Hut: Alright, well, thanks for that. Just a ton of great information and important items to keep an eye on over the next month before we get to 2023. So turning to you, Andrew, this past Congress, the one that’s just wrapping up, passed one sort of marquee healthcare item in the Inflation Reduction Act. What do you think could possibly be accomplished during the upcoming Congress in terms of issues that could relate for providers? 

Donohue: With the 118^th, we’re looking at the next years. That’s January 2023 through January 2025, and two years feels like a lot of time, but it’s not as many legislative business days as you’d think, and particularly in the run-up to 2024 election cycle that’s at least contentious from what we can see. So it’s going to be hard to push significant health policy or reform through in general, just for time, but there are two other realities that I want to bring up, and the first is the political reality for Republicans. Healthcare policy has really kind of fallen out of favor with Republicans since 2018. We all remember that’s when they were pushing the repeal and replace for Obamacare, and that really failed and backfired for them in that election cycle, and it kind of just left the issue off their agenda. McCarthy, he did establish a task force on healthcare called Healthy Future, and there was the Republican “commitment to America,” which was kind of the GOP’s policy blueprint for healthcare in a Republican-controlled House, but those were really scant on details. They kind of boiled down to transparency, competition, health savings account, a little bit more of telemedicine, which is promising. But generally speaking, there’s kind of a lack of focus for Republicans, and that’s going to be exacerbated in the 118^th Congress by an overwhelming incentive to politicize a lot of the oversight responsibilities that they’ll have in the House. And that’s not a judgmental statement. It’s just a political reality, so we really expect a lot of committee and Republican focus on the House side to be aggressive oversight of the first two years of the Biden administration. So we’re going to do a lot of lookbacks. We’re going to look at Covid. What were the origins of the virus? How did the Biden administration respond with the PHE? Where did all the dollars go? And for our members, really with the PRF funding, we really want them to stay on top of their reporting right now and some of the audit requirements that may be coming. Gonna be a lot of scrutiny on school policies, how Biden responded to that with child nutrition regulations, relief money that went to the schools, lost learning from school closures. So that kind of realm is where we see a lot of the focus. Also, the Affordable Care Act family glitch fix. Spouses, independent children of employees weren’t able to get the equivalent coverage that others were, and how the Biden administration fixed that is going to be a focus. Republicans take issue with using executive action to contradict law. Also, implementation of Medicare drug negotiations. The Inflation Reduction Act, as we all know, has substantial reforms to our ability to negotiate with the pharmaceutical industry. Republicans are going to really want to scrutinize how Democrats evolve that because they have so many—it’s really open ended. You know, initially, it’s a small list of drugs, and then it can grow over time, and it’s the agencies that will grow that. So Republicans are going to push back on that and highlight the harms to drug research. So in the House, it’s going to be more of an offensive strategy. In the Senate, I think we’re going to see a lot more defense, and that’s because they’re not in control of the committee agenda. They’ve already lost control of the Senate, so for Republican Senators, they’re really looking at their electoral map in 2024, and they’re excited. They see a lot of opportunity. They see a lot of vulnerable Democrats that are going to be up for reelection like the Joe Manchins and the Krysten Sinemas. And so they’re really going to want to put them on the spot and make them very uncomfortable. So it’s just going to be throwing a lot of sand in the legislative gears. So that’s kind of the Republican political reality. What can Democrats do in response to that? I think there’s a lot of pragmatism and awareness that the legislative shop is a little bit closed for business. Biden’s probably going to shift a lot of the resources and focus to the regulatory agenda, the executive powers that he holds. For a long time, healthcare’s been central to the political agenda for Democrats, so not only the past two years, Biden, but for the decade before that, we had a lot of action that agencies now have to implement, a lot of laws that were put into place, and they’ve bitten off a lot. And so there’s a lot that these agencies need to chew, and I think Secretary Becerra said it the best, with HHS—finally, we can concentrate on trying to execute on everything Congress gave us to do. And so that’s where Biden’s going to be looking to score his points in the run-up to the 2024 election, making his case in the regulatory side of things. So again, drug pricing, IRA implementation, interoperability and prior authorization that Chad mentioned, price transparency, good faith estimate provisions in the No Surprises Act, advanced EOBs, PHE flexibilities, and then just kind of the traditional stuff—the annual payment rules, IPPS, OPPS, PFS. We’re going to have the next cycle of Medicare Advantage and Part D payment rules rolling out soon. Updates to Medicaid managed care policies, Cancer Moonshot, the Advanced Research Projects Agency for Health. All these are kind of pet projects of Biden that he really thinks he can define his agenda on. And then health equity across CMS programs and models. So I’m going to pause there, because I want Chad to chip in a little bit on what he thinks in the tea leaves he’s seeing, but it’s going to be a little bit of a gridlocked Congress. 

Mulvany: Andrew, I agree exactly with everything you’ve said in terms of gridlock, makes sense to me. It’s certainly in the tea leaves that I’m reading as well. And I think you’ve alluded to it in your comments about the shift toward regulatory focus and really the administration sort of driving the health policy agenda or being one of the predominant drivers. I think one of the things that we’ll see additional maybe increased focus on coming out of CMS is looking at payment reform and alternative payment models. Certainly, CMS has the goal of getting 100% of Medicare beneficiaries in some type of total cost of care APM by 2030. Not a lot of shopping days when you start to think about the work that’s going to be done. And I know that CMS and CMMI are now thinking long and hard about different models to get the specialists engaged in some type of total cost of care model beyond the standard portfolio of bundled payments that we have now. I think you’re absolutely right about particuarly price transparency in terms of oversight. We saw the letter from the leaders of the House Energy and Commerce Committee asking GAO to investigate hospital compliance. So I think that we’re going to see a report that comes out of that in the coming months, once that work is wrapped up. And certainly I would anticipate that it’s going to be picked up in the trade press. And I think you’re right. I think also the No Surprises Act implementation across the board is going to come under Congressional committee scrutiny, definitely in the House and possibly in the Senate as well.  

Donohue: That’s something, Chad, we’ll want to watch, but you said something that triggered a thought in my mind, and I was talking about CMMI, and really advancing the value-based care agenda, and you and I know, we’ve been having this conversation in the industry for over a decade of having one foot in both canoes. That metaphor’s getting a little tiring, but something I’m watching and I’m concerned about, so I want to get your take on it is, you know, everntaully with Medicare, we’re going to have to get a little bit more creative with the solutions to slow down spending. Sight of care shifts, value-based care movement pushing the age out a little bit. These are things that I don’t really think are going to bend the cost curve down, and I think we’re going to start to look at more painful cuts—cuts to providers, more aggressive measures with drug pricing, changes to Medicare Advantage. MA’s getting so big that we can’t avoid it anymore. But where I’m really concerned is the scrutiny coming on hospitals. We’re a huge piece of the spending pie, maybe 30%, and if you compare that to drugs, for instance, maybe 8% of the pie, we’ve kind of taken drugs off the table with the IRA and Medicare drug pricing, at least for a little while. So if we are going to push to take cost down, I think hospitals are coming next when I read the newspapers. Wall Street Journal yesterday, the article said hospitals often don’t help needy patients, even those who qualify. And I know there’s a release in North Carolina, a lot of scrutiny over not-for-profit health systems making a margin on Medicare patients. Whether or not that was analyzed correctly is open to debate, but the scrutiny is really intensifying. Medical debt was in the Arizona state ballot. You mentioned price transparency, No Surprises Act. We’ve got questionable debt collections being discussed, so kind of the hero sheen of hospitals seems to be wearing off a little bit. I was looking some of the bills that are being considered, and McCarthy’s Republican healthcare task force, I said earlier was scant on details, but there was a proposal in it, and McCarthy gave Representative Spartz the nod to pursue this, to really crack down on the higher costs that physician offices owned by hospitals. She also developed a bill, and she’s going to try to provide more power over anti-competitive behaviors with hospitals giving the FTC more rights to pursue that. And she’s breaking these bills apart so they can be slipped into larger packages. She’s not coming up with some comprehensive solution, and that concerns me. And in the Senate, you see Senators Tammy Baldwin, Democrat, and Mike Braun, Republican, they’ve got this bipartisan measure targeting anti-competitive provisions of contracts between health insurers and hospitals, so I guess what I’m asking you, Chad, is, the climate seems to be moving against hospitals in a way I haven’t seen. Are you feeling that? Seeing that? 

Mulvany: You know, unfortunately I think you are right. The halo effect from Covid and all the really great/heroic work that hospitals and the folks that work there did to save communities is really unfortunately come off. It didn’t last anywhere near as long as it should have. And while hospitals are 30% of the Medicare spend, I think the challenge is, if you look at hospitals’ Medicare margins and the percentage of patients treated by hospitals that are on Medicare, yes, they could cut hospital payments, but I think you’re going to risk seeing a number of hospitals go bankrupt. Certainly, even without significant cuts, just with inadequate growth rates on inpatient rates, on outpatient rates, you’re already seeing hospitals struggling. Certainly some of the ones that are more focused in safety net areas or in rural areas are really struggling financially. So it’s going to be a really sticky wicket for Congress, or at least a challenging balance for Congress to solve. On the consumerism issues, I think you’re absolutely right. I think there’s a higher heightened sensitivity to that, and I think we could continue to see more pressure on that, and I think a lot of that will come through the No Surprises Act. And then the last piece, consolidation, I think you’re absolutely right. I think there will be more emphasis on mergers. I think we’ll continue to see a very aggressive FTC going out and challenging mergers and markets, which is also unfortunate because in a lot of instances, the mergers do end up improving quality, improving outcomes for patients, helping patients access services that they may not have been able to get in their communities, and also given some of the challenges that hospitals are facing financially, they’re going to need a partner to help with capital needs, they’re going to need a partner to help sustain operations and think about how you ensure that there is some care delivery system in a community that can’t support it at this time. So again, all very delicate things that, if Congress rushes in and takes an aggressive and maybe not as thoughtful approach, they can do real harm. 

Hut: Alright, well, so this has just been a fantastic discussion. My one big takeaway is that there are just a ton of things to watch for, and we’ll certainly be doing that over the next month and during the lame duck Congress and during the next couple of years. So thank you both, Andrew and Chad. Great stuff. 

Donohue: Thank you, Nick. 

Mulvany: Yeah, thank you, Nick. Always a pleasure to be here.  

Grotto: Voices in Healthcare Finance is a production of the Healthcare Financial Management Association and written and hosted by me, Erika Grotto. Sound editing is by Linda Chandler. Brad Dennison is the director of content strategy. Our president and CEO is Joe Fifer. The third report in this year’s Healthcare 2030 series is out now. It’s called “Realigning Care and Coverage,” and it’s available at hfma.org. And if you want to talk to our team, we’d love to hear from you. You can email us at [email protected].