What's In and Out for Healthcare in the Year-End Funding Package

Lawmakers unveiled their long-awaited $1.7 trillion government funding package on Dec. 20, 2022. As of publishing, it seems likely that a vote on final passage in the U.S. Senate will occur at some point on Dec. 22, with a final up-or-down vote in the House of Representatives taking place ahead of the Dec. 23 government funding deadline.

The information below is focused on notable healthcare policies and is not reflective of every policy or funding level.

Medicare

Medicare Physician Payment Reductions: The omnibus package seeks to stave off expected reductions to Medicare reimbursement for physician services over the next two years. Accordingly, the omnibus increases the Medicare conversion factor by 2.5 percent for 2023 and 1.25 percent for 2024.

Alternative Payment Model (APM) Bonuses: Currently, Advanced APMs can only earn the 5 percent payment incentive through the end of 2022. (There is a two-year lag between performance and payment years.) After this time, there will be a gap year between the expiration of the bonus payments and the restart of modest annual payment updates, leaving less incentive for providers to participate in an Advanced APM in 2023. To address this, the omnibus provides a one-year extension of the bonus for providers who are part of APMs – but rather than keep that bonus at 5 percent, the bill lowers the bonus to 3.5 percent. The bill also extends the current freeze on participation thresholds for qualification for the APM bonuses for an additional year.

PAYGO: The omnibus halts the looming statutory Pay-As-You-Go (PAYGO) cut in 2023 and 2024. PAYGO requires, among other things, that mandatory spending and revenue legislation not increase the federal budget deficit over a 5-year or 10-year period. Should such legislation be enacted without offsets, the Office of Management and Budget (OMB) is required to implement sequestration, or across-the-board reductions, in certain types of mandatory federal spending. The Congressional Budget Office (CBO) estimated that a Statutory PAYGO sequester in fiscal year (FY) 2022 resulting from the American Rescue Plan Act of 2021 passage would cause a 4 percent reduction in Medicare spending or cuts of approximately $36 billion.

Telehealth: The omnibus continues Medicare's expanded access to telehealth by extending COVID-19 telehealth flexibilities for an additional two years through Dec. 31, 2024. The bill also extends through calendar year 2024 the flexibility to exempt telehealth services from the deductible in high-deductible health plans (HDHPs) that can be paired with a Health Savings Account (HSA).

Medicare Extenders: The omnibus extends the Medicare low-volume payment adjustment and the Medicare-dependent hospital program for two years through Sept. 20, 2024. The bill also extends the add-on payments for ground ambulance services under the Medicare Fee Schedule through Dec. 31, 2024.

PAMA: The omnibus delays by one year pending payment reductions and data reporting periods for the Clinical Laboratory Fee Schedule under the Protecting Access to Medicare Act (PAMA).

Wound Therapy Device Payment: Adjusts payment for disposable negative pressure wound therapy devices by using the supply price to determine the relative value for the service.

Separate OPPS Payment for Non-Opioid Packaged Treatments: The omnibus provides a separate (capped at 18 percent) Medicare payment, from 2025 through 2027, for non-opioid treatments that are currently packaged into the payment for surgeries under Medicare's Outpatient Prospective Payment System (OPPS).

CBO Part D Data Authorization: Authorizes the CBO to access prescription drug payment data, including rebate and direct and indirect remuneration (DIR) data, under Medicare Part D.

Acute Hospital Care at Home Waivers: The omnibus will extend the waivers by two years until the end of 2024. CMS has approved more than 250 hospitals to participate in the acute hospital care at-home program.

Nursing and Allied Health Education Payments: The bill eliminates the annual cap on total payments and excludes any resulting increase from factoring into calculations for nursing and allied health education payments for such providers for 2010 through 2019.

Sequester Extension and Other Offsets: The package would take about $7.1 billion from the Medicare Improvement Fund and extend sequestration for the first six months of FY 2032 to help offset the package cost. The sequester policy would also smooth out the sequester cuts in later years and keep the Medicare sequestration percentages at 2 percent for FY 2030 and FY 2031.

Medicaid

Medicaid and the Children's Health Insurance Program (CHIP): The omnibus extends funding for CHIP for two years through FY 2029.

Continuous Eligibility for Children Under Medicaid and CHIP: The omnibus requires children to be provided with 12 months of continuous coverage in Medicaid and CHIP, effective Jan. 1, 2024.

Modifications to Postpartum Coverage Under Medicaid and CHIP: The bill makes permanent a state option to allow states to continue to provide 12 months of continuous coverage during the postpartum period in Medicaid or CHIP.

Medicaid Redeterminations Transitioning From Medicaid FMAP Increase Requirements: Under the Families First Coronavirus Response Act, each state was eligible for a 6.2 percentage point increase in its Federal Medical Assistance Percentage (FMAP) if it met several conditions. Among these was the institution of a continuous enrollment policy for Medicaid beneficiaries. Under maintenance of enrollment (MOE) agreements, states could not remove individuals from Medicaid rolls until the end of the COVID-19 public health emergency (PHE). Now, the omnibus lets states start Medicaid redeterminations (eligibility checks) at the beginning of April, even if the PHE is still in effect. Currently, the PHE is set to end on Jan. 11, 2023, but is expected to be extended until mid-April 2023. The resumption of the redeterminations is expected to lead to millions of people losing Medicaid coverage. This proposal was included to offset the cost of expanding Medicaid coverage of women postpartum and extending CHIP for another five years.

Medicaid Funding for U.S. Territories: The omnibus extends Puerto Rico's higher federal Medicaid match of 76 percent through FY 2027 and permanently extends a higher federal Medicaid match of 83 percent for American Samoa, the Commonwealth of the Northern Mariana Islands, Guam and the U.S. Virgin Islands.

Requiring Accurate, Updated and Searchable Provider Directories: The bill codifies requirements that apply to Medicaid managed care organizations, prepaid inpatient health plans and primary care case management entities regarding the publication of searchable and regularly updated directories of healthcare providers in their networks, including providers of mental health and substance use disorder services (also applies to state Medicaid fee-for-service programs). The requirements take effect on July 1, 2025.

Medicare Mental Health Care

Marriage/Family Therapists and Licensed Professional Counselors: The bill allows marriage and family therapists to receive payment from Medicare for providing covered mental health services to Medicare beneficiaries beginning Jan. 1, 2024.

Medicare Funded Residency Positions: The omnibus provides the distribution of 200 new Medicare-supported graduate medical education (GME) slots, 50 percent of which are allocated for psychiatry and psychiatry subspecialties.

Intensive Outpatient Services: The omnibus revises Medicare's partial hospitalization benefit to provide coverage of intensive outpatient services on Jan. 1, 2024.

Payment for Crisis Psychotherapy Services: The bill establishes a 50 percent payment increase in Medicare Physician Fee Schedule payment rates for crisis psychotherapy services when furnished by a mobile unit, as well as additional settings on Jan. 1, 2024.

Payment Methodology Update for Inpatient and Psychiatric Units: The U.S. Department of Health and Human Services (HHS) Secretary is required to update the methodology for determining payment rates under the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS) beginning in the rate year 2025 based on new data collection for inpatient and psychiatric units.

HHS Outreach for Behavioral Health Integration Services: The omnibus requires HHS to conduct outreach to physicians and other healthcare providers on the availability of behavioral health integration services as a covered benefit and report findings to Congress.

Reauthorizations: The bill reauthorizes the National Suicide Prevention Lifeline Program, the Community Mental Health Service Block Grants, and the renamed Substance Use and Prevention, Treatment, and Recovery Block Grants. The bill also includes grant funding to support maternal mental programs and establishes a maternal mental health hotline and a related task force.

Pandemic Preparation

Senate Confirmation of CDC Director: The omnibus requires Senate confirmation of the Director of the Centers for Disease Control and Prevention (CDC) beginning on Jan. 20, 2025, establishes specific functions of the Director and requires an agency-wide strategic plan to be developed every four years that describes the CDC's priorities and objectives.

CDC Advisory Committee: The omnibus requires the CDC Director to establish or maintain an advisory committee within the CDC to advise the Director on policy and strategies that enable the agency to fulfill its mission, which may include informing strategic planning and advising on prioritization and performance metrics.

Office of Pandemic Preparedness and Response Policy: The omnibus establishes an Office of Pandemic Preparedness and Response Policy to advise on pandemic preparedness and response policy and to support coordination and communication within the federal government related to preparedness and response.

PHEP: Updates the Public Health Emergency Preparedness (PHEP) cooperative agreements to ensure coordination between health departments and other state agencies to improve preparedness and emergency response planning, and requires PHEP recipients to provide technical assistance to other agencies with increased risk of outbreak.

CDC Data Capabilities: Authorizes the CDC Director to continue activities related to developing capabilities for the analysis, modeling and forecasting of public health emergencies and infectious disease outbreaks, including by leveraging the capabilities of public and private entities. It also requires the HHS Secretary to issue an annual report on these activities for the next five years.

Public Health Data: The bill directs the HHS Secretary to help states, localities, territories and tribes better leverage public health data that is de-identified as applicable to support public health responses, such as by improving data use agreements between relevant federal agencies and other public and private entities, and authorizes the creation of best practices by the agency.

HHS Report on CDC Dissemination of Public Health Data: The bill directs HHS to issue a report within one year on current practices and objectives, as well as associated progress and challenges, related to CDC collection and dissemination of public health data during public health emergencies.

FDA

Public Workshop on Cell Therapies: The omnibus requires the U.S. Food and Drug Administration (FDA) to convene a public workshop on best practices for generating scientific data necessary to facilitate the development of human cell-, tissue- and cellular-based medical products and the latest scientific information about such products.

Modernizing Accelerated Approval: The omnibus requires the FDA to specify conditions for required post-approval studies and authorizes the agency to require post-approval studies to be underway at the time of approval or within a specified time period following approval. The omnibus also clarifies and streamlines the existing authority to withdraw approvals where sponsors fail to conduct studies with due diligence.

National Centers of Excellence in Advanced and Continuous Pharmaceutical Manufacturing: The omnibus directs the FDA to designate qualified institutions of higher education (or consortia of such institutions) as National Centers of Excellence in Advanced and Continuous Pharmaceutical Manufacturing and to provide grants to the centers. Each designated center must conduct research on advanced and continuous pharmaceutical manufacturing technologies and must share information from such research with the FDA. (Currently, most drug production involves batch manufacturing, which typically takes longer than continuous manufacturing processes.)

Labeling Changes: The bill clarifies that a generic drug can remain eligible for approval if the listed drug changes its labeling within 90 days of when the generic application is otherwise eligible for approval (except changes to the "Warnings") as long as the generic drug submits revised labeling within 60 days of approval.

Clinical Trial Diversity: The omnibus requires FDA to take a series of actions intended to modernize and improve clinical trials, including increasing the diversity and engagement of trial participants.

NIH

NIH/ARPA-H: The omnibus includes an increase of $2.5 billion for the National Institutes of Health (NIH). It also authorizes the Advanced Research Projects Agency - Health (ARPA-H) within the NIH. While ARPA-H is housed at NIH, the provision requires HHS to publish specific exemptions from NIH policies for ARPA-H in pursuit of a more independent initiative. A total of $1.5 billion is appropriated for ARPA-H for FY 2023 (far less than the $5 billion requested by the Biden Administration). Notably, the bill states that ARPA-H cannot be on the NIH campus in Bethesda, Maryland, and that ARPA-H must have offices in at least three geographic areas.

SAMHSA

Medication Assisted Treatment (MAT) and Medication Access and Training Expansion (MATE): With regard to Substance Abuse and Mental Health Services Administration (SAMHSA) programs, the omnibus expands patient access to opioid addiction treatment by making it easier for healthcare providers to dispense buprenorphine for opioid use disorder maintenance or detoxification treatment. The bill also requires healthcare providers to complete training on identifying and treating patients with substance use disorders.

Not Included

Pharmacy Benefit Managers (PBMs): A PBM transparency bill that had passed the House of Representatives earlier this year was not included. However, it is widely expected that PBM reform will be a focus of oversight in the next Congress.

The Verifying Accurate Leading-edge IVCT Development (VALID) Act: The Act would bring in vitro diagnostic tests and lab-developed tests (LDTs) under one risk-based framework, allowing the FDA to oversee tests regardless of whether they came from clinical laboratories or from commercial companies. The medical device industry embraced the proposal. However, the clinical lab industry decried it as double regulation because labs must comply with the Clinical Laboratory Improvement Amendments.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.