Federal funding legislation would address Medicaid DSH cuts, physician payments and more

March 8 update

The Senate passed the appropriations bill by a 75-22 vote, getting it to the White House for President Joe Biden to sign hours before funding for some federal departments would have expired and a big cut to Medicaid disproportionate share hospital payments would have begun.

Attention now turns to HHS and other departments for which funding is scheduled to expire March 22. The consensus among analysts seems to be that the effort to reach an agreement on those appropriations will be more contentious and difficult than the debate leading up to Friday’s final passage of the first bill.

Original story

Legislation to extend funding for the federal government through the end of FY24 includes relevant provisions for hospitals and physicians.

The bill takes a big cut to Medicaid disproportionate share hospital (DSH) payments off the table through 2024. The four-year, $32 billion cut would be reduced to three years and $24 billion, with the cut scheduled to begin Jan. 1, 2025.

One pay-for to cover the Medicaid DSH change is a continuation of the freeze on an enhanced federal payment to Medicaid managed care organizations. The higher payment for beneficiaries who are eligible for Medicaid because of the Affordable Care Act expansion was scheduled to be restored in FY24.

The bill confirms tighter eligibility criteria for designated Medicare low-volume hospitals. A hospital’s annual discharges would have to be under 800 starting in 2025, down from a 3,800 limit currently, for the facility to receive the supplemental payment.

The change already was set to take effect after the limit had been raised during the pandemic. Language in the bill confirms the lower limit will be in effect starting Jan. 1, 2025 (as opposed to at the start of FY25).

Although the bill contains key healthcare provisions, there is no funding for HHS and its sub-agencies. That money is scheduled to be slotted into a separate appropriations bill.

March 8 is the deadline for Congress to pass the first bill — the one postponing the Medicaid DSH cut — before funding expires for a handful of departments. The House passed the bill by a 339-85 vote Wednesday, sending it to the Senate.

Funding for HHS, among other departments, would expire March 22 if the second bill is not passed by then.

Help for physicians

Physicians would receive a payment boost in the first bill to lessen the reduction they incurred this year under the Medicare physician fee schedule. A 1.68% increase would bring the net decrease to 1.66% for 2024, compared with a 3.34% cut without the pending provision.

The floor for the Medicare work geographic practice cost index would be extended through 2024, preventing a potentially substantial payment cut for practices in areas with lower physician labor costs.

The bill also includes a partial extension of incentive payments for practices that participate in advanced alternative payment models (APMs) as defined in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

As is, 2024 participation in advanced APMs does not entail a Medicare bonus payment. The pending bill establishes a bonus of 1.88%, down from 5% as recently as 2022 and 3.5% in 2023.

“This incentive is critical to supporting clinicians who are accountable for improving quality and lowering costs for patients,” the National Association of ACOs said in a written statement.

Other healthcare provisions

Funding for community health centers, the National Health Service Corps and graduate medical education would be extended through Dec. 31, as would funding for federal research on Type 1 diabetes.

The bill also includes an extension of the requirement that state Medicaid programs cover medication-assisted treatment for opioid-use disorder. It also extends the option established in the 2018 SUPPORT Act for states to cover Medicaid beneficiaries who have a substance-use disorder (SUD) and receive care in certain institutions for mental diseases.

HHS would be required to issue guidance to states on opportunities to increase Medicaid access to mental-health and SUD care providers, including in rural and underserved areas, and to integrate behavioral healthcare with primary care in the program.

What’s not included

House committee leaders had been hoping they could use the appropriations bills as a mechanism to get Lower Costs, More Transparency Act provisions through the Senate. That bill passed the House by a 320-71 vote in December but has not progressed since.

If not the entire bill, which includes Medicare site-neutral payment for drug administration services, House Energy and Commerce Committee leaders thought the price transparency provisions could be included, as could a requirement for off-campus outpatient departments to bill Medicare under a separate national provider identifier.

However, none of those provisions made it into the pending appropriations package as various other elements took priority. Assuming they’re likewise left out of the second appropriations bill, proponents conceivably will have to wait until the lame-duck session at the end of the year for the next viable opportunity to see them through.