In Congress, it’s status quo for Medicaid DSH payments and the Medicare physician fee schedule

Yet another short-term federal funding measure from Congress included yet another brief extension of full funding for Medicaid disproportionate share hospital (DSH) payments.

With funding for much of the federal government set to expire Jan. 19, Congress agreed on a continuing resolution that keeps all agencies fully operational until March. Medicaid DSH payments are guaranteed to remain at their current levels through at least March 8. Without the extensions that were passed at the end of September, the middle of November and last week, a four-year, $32 billion cut to DSH payments would have begun.

Whether Congress keeps pushing the payment cut a little way down the road or comes up with a longer-term plan remains to be seen. A large healthcare-focused bill that passed the House in December and is pending in the Senate would limit the payment cut to $16 billion over two years beginning in 2026.

Physician payments not addressed

The continuing resolution (CR) also maintains short-term funding for graduate medical education, community health centers and the National Health Service Corps, along with diabetes research conducted through the National Institutes of Health.

The bill also extends the floor for the work geographic practice cost index until March 8, helping to maintain a modicum of payment stability for physician practices in markets with lower labor costs.

But physician practice advocates are displeased about the lack of legislative action to address the Medicare payment cut that began with the new year. The physician fee schedule for 2024 included a decrease of $1.15 in the conversion factor, amounting to a reduction of more than 3.3%. The aggregate payment cut since 2020 is 9.1%.

CMS said it has been statutorily obligated to implement cuts in recent years due to provisions in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), along with budget neutrality requirements stemming largely from increases to payments for evaluation and management services.

Thus, the impetus is on Congress to mitigate the cut. A bill that was passed in late 2022 reduced the decrease in Medicare physician payments by 2.5% in 2023 and 1.25% in 2024. So far, no legislative vehicle for further boosting payments has emerged that can pass amid the gridlock over FY24 federal funding.

“We are disappointed that Congress chose not to stop serious Medicare cuts for physician services in the temporary CR,” Jesse M. Ehrenfeld, MD, MPH, president of the American Medical Association, said in a written statement. “Failure to reverse these cuts will create access issues for patients and small, independent physician practices, especially those in rural and underserved areas.”

Possible solutions in the works

The Lower Costs, More Transparency Act — the bill that would soften the Medicaid DSH cut — does not address the physician fee schedule. But other bills pending in both the House and Senate would do so. With bipartisan support for such action, physicians hope a viable legislative solution can still present itself.

“We recognize that Congress’s work is far from done and urge lawmakers to reverse these cuts at the soonest opportunity,” Ehrenfeld said.

Another policy issue affecting physicians is the loss of incentive payments for participating in advanced alternative payment models (APMs). The bonus payment was 5% through the 2022 performance year but since has been whittled down to zero.

Bipartisan, bicameral legislation would provide a two-year extension of the 5% bonus and modify a 2024 increase in the share of Medicare payments or patient encounters that need to take place through an APM for the provider to earn the incentive.

If Congress does not extend the bonus payment, there still would be a financial inducement to participate in APMs. Starting with the 2024 performance year (corresponding to the 2026 payment year), advanced APM participants receive a 0.75% update to their conversion factor through the Medicare fee schedule, compared with 0.25% for other practices.