The FY24 HHS budget covers key programs for rural hospitals while tightening spending in some areas

The newly passed budget covering HHS during the remainder of FY24 contains notable provisions for healthcare providers.

The roughly $117 billion departmental budget for the next six months was set in an appropriations bill that was passed by Congress and signed by President Joe Biden within hours of the March 22 expiration of funding for the federal departments included in the bill.

FY funding was supposed to be in place by Oct. 1 but was repeatedly delayed when Congress could not agree on terms, with a series of continuing resolutions instead maintaining FY23 funding levels. All departments faced constrained spending increases in FY24 relative to past years, based on a debt-ceiling agreement last June between Biden and former Rep. Kevin McCarthy, who was House speaker at the time.

A bill passed two weeks ago funded other departments and included arguably the biggest news for providers from the latest appropriations cycle: the delay of a four-year, $32 billion cut to Medicaid disproportionate share hospital payments, and mitigation of a 2024 cut to Medicare physician payments.

Rural healthcare funding                                                                       

The new legislation provides $64.3 million for the Health Resources and Services Administration’s (HRSA’s) rural hospital grant program, including $20.9 million for grants helping small rural hospitals with quality improvement and health IT adoption and $5 million to provide technical assistance for rural emergency hospitals. There’s also up to $1 million to enhance coordination between rural providers and the U.S. Department of Veterans Affairs.

Also in the funding is $4 million for the Rural Hospital Stabilization Pilot Program, a grant program designed to bolster rural hospitals in expanding services to meet the needs of their communities. The program received $16 million less than requested.

The allocation for the overall rural hospital grants program is flat relative to FY23, which essentially amounts to a decrease, given inflation. However, grants for rural health services more broadly were increased by $8 million.

Graduate medical education (GME) received $60 million, which likewise is flat year-over-year. HHS is directed to prioritize institutions in states that are in the top quintile based on projected primary care provider shortage, and the minimum subsidy per each of those states is $1 million.

While the bill boosts funding for GME at children’s hospitals by $5 million, many HRSA programs designed to bolster the healthcare workforce stayed flat relative to the prior year, including grants for behavioral health workforce education and training, which received nearly $225 million less than requested.

Accommodations for hospitals

Some of the bill’s pertinent provisions take the form of guidance and directives to CMS in support of smaller and rural hospitals.

For example, the agency is instructed to extend the low-wage index hospital policy, which boosts payments for hospitals in the 25^th percentile or lower of the Medicare wage index. The policy was implemented in FY20 and already was in place through FY24. Congress seeks a continued extension to ensure the collection of sufficient data for CMS to evaluate the policy.

CMS also is charged with supporting hospitals that lose eligibility for the sole community hospital (SCH) designation based on distance and market-share criteria. Such hospitals should be granted a reasonable transition period away from SCH status.

A $240 million allocation is being made for state, regional and local entities to advance hospitals’ preparedness for and response to emergencies akin to the COVID-19 pandemic.

Several dozen hospitals and health systems received funding — generally in the six or seven figures for outlays such as facilities, equipment and workforce training — as part of earmarks included by individual senators or representatives.

Cutbacks in some areas

Most of Medicare is not subject to the appropriations process since it is designated as a mandatory program, as is the federal portion of Medicaid funding. Nonetheless, federal contributions to the Supplemental Medical Insurance Trust Fund (i.e., Medicare Part B) are set to decrease by almost $60.4 billion. That reduction is offset by a $9.80 increase in the Part B premium, which took effect at the start of 2024.

Some of the decrease in Part B funding is to divert the spending to other programs, such as efforts to combat healthcare fraud and abuse.

Many programs did not receive the funding that proponents or the White House had requested. For example, funding for community health centers was maintained at last year’s level, which was $80 million less than requested. The National Health Service Corps received a $3 million increase, which was $47 million under the request.

Funding for several public-health and prevention programs of the CDC fell short of the requested amount by nine figures. Those include sub-agencies that focus on immunization and respiratory diseases, sexually transmitted diseases and tuberculosis, chronic disease prevention and health promotion, environmental health, and public-health infrastructure and capacity. The CDC’s Office of Readiness and Response received a $55 million increase, close to the requested amount, for its work to help the healthcare system respond to emergencies.

Mental-health programs of the Substance Abuse and Mental Health Services Administration are getting a $77 million increase, but that’s $719 million less than the requested amount. Funding for substance abuse treatment programs is rising by $2 million, or nearly $180 million less than the request. Funding for state opioid response grants was kept flat after a request for $425 million more.