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Insights and Trends

Healthcare Headlines from the Hill: May Edition

Stay ahead of the latest regulatory shifts and healthcare breaking news with Headlines from the Hill.

In this month’s edition you will find:

Medicare and Medicaid Policies Set to Impact Hospital Financials.

The Congressional Budget Office (CBO) highlighted several health-related policies the agency estimates would save hundreds of billions of dollars from 2023-2033 – such as lowering federal pay for Medicaid, reforming Medicare Advantage benchmarks, increasing Medicare Part B premiums, and limiting provider taxes – during presentation at a conservative think tank-sponsored event on entitlement reform.

Paragon Health Institute, which hosted the hour-long panel on the need for entitlement reforms, has also proposed reforms to Medicare Advantage and lower federal payments for the Medicaid expansion population to help rein in skyrocketing spending on healthcare.

    • CBO is also assessing how federal policies affect competition, noting some policies may incentivize providers to move from independent practices to larger systems.
    • CBO also estimates the federal government could save between $41 billion and $526 billion by limiting state taxes on healthcare providers.

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Healthcare Spending Projected to Increase 66% Over 30 Years.

The CBO has released updated estimates of federal spending on major healthcare programs, projecting that there will be a significant increase in spending for major healthcare programs, amounting to about 40% of noninterest outlays by 2054. Growth in spending on Medicare is projected to account for more than two-thirds of the increase over the next 30 years, and federal health insurance subsidies will total $25 trillion.

CBO is further examining how federal policies related to consolidation, health behaviors, and prevention (including biopharmaceutical treatments) will impact these estimates. Congress historically tends to act when the situation becomes more acute, such as approaching the expiration of a trust fund. However, it is expected that some discussion of CBO’s policy proposals will curtail federal Medicaid and Medicare spend and calibrate tax subsidies to sustain health insurance coverage.

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Medicaid Access/Managed Care: CMS Releases Favorable Final Rules.

The Centers for Medicare and Medicaid Services (CMS) recently released two final rules addressing access, quality and payment in Medicaid, CHIP and Medicaid/CHIP Managed Care plans. Together, the Medicaid Access and Managed Care rules include new and updated requirements for states and managed care plans that would establish consistent access standards and a standardized approach to transparently review and assess Medicaid payment rates across states.

Importantly, the Managed Care rule finalizes a policy related to Medicaid State Directed Payments (SDPs) that requires states to ensure each provider receiving a state-directed payment attests that it does not participate in any arrangement that holds taxpayers harmless for the cost of a tax in violation of federal requirements. Despite this adverse decision, the policy would not take effect until January 2018 – giving states time to address the future funding challenges created by the requirement, as well as time for related litigation to determine CMS’ authority to make this change.

Concurrently, CMS released a new Informational Bulletin saying that it will not enforce its February 17, 2023, Informational Bulletin related to private arrangements and provider tax programs until CMS implements the provisions in today’s rule beginning in 2028. Both the Texas and Florida Medicaid programs have challenged this Bulletin in federal court, and the bulletin ensures that no states will have the policy enforced. Other highlights of the two final rules include:

    • Changing requirements related to Medicaid State Directed Payments (SDPs), including:
      • Requiring that provider payment levels for inpatient and outpatient hospital services not exceed the average commercial rate.
      • Removing unnecessary regulatory barriers to help states use state-directed payments to implement value-based payment arrangements.
      • Requiring states to submit state-directed payment evaluations every three years if the SDP costs (as a percentage of total capitation payments) exceed 1.5 percent.
    • Establishing national maximum standards for certain appointment wait times and stronger state monitoring and reporting requirements related to access and network adequacy.
    • Requiring states to conduct independent secret shopper surveys of Medicaid and CHIP managed care plans.
    • Requiring states to conduct an annual enrollee experience.
    • Requiring changes to the treatment of SDPs in the calculation of managed care plan medical loss ratios.

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Rural Hospital Stabilization Act Passed.

The bill would establish the Rural Hospital Stabilization Pilot Program to provide grants to rural hospitals for purposes of ensuring local access to services. The bill authorizes stabilization grants administered by the Federal Office of Rural Health Policy.

The bill would ensure that struggling rural hospitals, CAHs and REHs, as well as providers of technical assistance, will be able to apply for grants. The legislation ensures that for hospitals, grants may be used for minor renovations, care delivery training, hiring new staff or supplementing compensation of existing staff and equipment acquisition. It also ensures that for providers of technical assistance, grants may be used to help hospitals seek grants or use grant funding. It also requires reporting on facilities and technical assistance providers receiving grants.

Rep. Feenstra said the bill gives a lifeline to hospitals and a critical tool needed for hospitals facing closures or the risk of cutting services. Rep. Linda Sanchez (D-CA) noted that underserved communities are not limited to rural areas and the underlying bill is too narrow in scope. Rep. Doggett said the bill misses the mark and highlighted several problems related to Medicare Advantage as it continues to grow and negatively impact CAHs. Rep. Dwight Evans (D-PA) said while it is important to uplift rural hospitals, underserved communities everywhere need to be addressed.

    • Adopted – the AINS makes a technical change to the reference statute. Rep. Sanchez questioned whether there were safeguards to ensure that taxpayer funded grants do not go towards private equity-owned hospitals. She said underserved communities should also be considered through this grant program.

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