Biden Budget Addresses Medicare Solvency, Coverage, Workforce, Oversight
The Biden Administration released the Fiscal Year (FY) 2024 budget, including for all agencies within the Department of Health and Human Services (HHS). The HHS Budget in Brief provides an overview of those budget and legislative policy priorities. It is aspirational only and will not become law, though there is always the chance various policies may come up in negotiations.
As we’ve said in our earlier article, the budget and debt ceiling will be a test of how negotiations and governing work in the split control Congress. Next up in this process will be the release of the majority U.S. House Republican budget resolution.
Medicare Solvency, CMS Savings
The budget proposes a variety of policies to extend Medicare Part A solvency to 2050. Several are tax-related, such as increasing the net investment income tax from 3.8% to 5% for those making above $400,000 and including business income. Another proposal increases the Medicare tax rate from 3.8% to 5% on those making over $400,000.
Expanding the Inflation Reduction Act’s Medicare drug negotiation authority provides $160 billion in savings by increasing the number of drugs subject to negotiation and moving up the timelines for drugs to be subject to negotiation. Other policies include an extension of the existing 2% sequester for an additional $37 billion in savings. Plus, authorizing HHS to negotiate Medicaid supplemental rebates on behalf of states brings in $5.3 billion.
An additional $5.2 billion is directed to health care fraud and abuse control in Centers for Medicare & Medicaid Services (CMS) programs and for the HHS Office of Inspector General. According to HHS, the investment will yield $19.7 billion in savings over 10 years. The budget would also save $21.7 billion by requiring Medicaid and CHIP managed care plans to meet a minimum loss ratio (MLR) of 85% which is akin to Medicare Advantage (MA). States would be required to collect from these plans if they fail to meet the MLR.
Health care coverage, expansions, funding
On the other hand, the proposed budget would significantly increase spending through other policies. Key among them is a boost of $150 billion to Medicaid’s home and community-based services (HCBS). Another $183 billion would go to make the Affordable Care Act’s (ACA) enhanced premium tax credits permanent. Additionally, the budget proposes to provide Medicaid-like coverage to individuals in states that have not expanded Medicaid under the ACA at a cost of $200 billion.
For behavioral health, there are many proposed changes. There is increased funding for community health centers to provide behavioral health services while also requiring those services. Mental health parity would apply to Medicare and the 190-day lifetime cap on Medicare stays in a psychiatric hospital would be eliminated. Medicare would also establish a new benefit category for other types of providers in behavioral health, such as clinical social workers or certified addiction counselors, as determined by CMS. The new provider types would be authorized to directly bill Medicare for various services and allowed to bill under a qualifying skilled nursing facility (SNF), in FQHCs/RHCs as well as through digital technology. The proposed budget would also require Medicare to cover three behavioral health visits without cost sharing. The budget would also make the certified community behavioral health clinic model permanent at a cost of $20 billion.
For Indian Country, the budget would make Indian Health Services (IHS) funding mandatory in FY 2025 and would increase IHS funding by 36% or another $2.5 billion. Under the proposed mandatory structure (as opposed to discretionary appropriations), IHS funding would grow automatically to address inflationary factors, key operational needs, and existing backlogs in both health care services and facilities infrastructure.
Part D drug coverage would have a new permanent benefit that requires all Part D plans, including standalone prescription drug plans and Medicare Advantage prescription drug plans, to offer a Medicare standard list of generic drugs at a maximum copayment of $2 for a 30-day supply across all phases of the prescription drug benefit until the beneficiary reaches the out-of-pocket maximum.
Medicaid would require states to cover mothers for 12 months postpartum.
Workforce funding
There are multiple policies to increase funding for various workforce programs. The budget includes more funding for the National Health Service Corps (NHSC) to $966 million to train workforce, an increase of $548 million. The NHSC is extended through 2026. For behavioral health, an additional $190 million would be allocated to train 18,000 behavioral health providers. There is $37 million directed to the Minority Fellowship Programs, an increase of $17 million.
With respect to nursing, a total of $350 million is targeted at increasing the nursing workforce. This is an increase of $49.5 million, which includes $32 million to expand, enhance and modernize nursing education programs.
The Teaching Health Center Graduate Education Program includes $157 million to extend and increase funding through FY 2026 with a goal of supporting over 2,000 resident slots for primary care physicians and dental providers.
There is $25 million for a new program to support a culture of wellness in hospitals, rural health clinics, community health centers and medical professional associations.
Oversight policies
There are numerous oversight policies in the proposed budget. A few policies of interest relate to Medicare Advantage (MA). MA plans would be required to meet an MLR of 85% for MA supplemental benefits. There would also be more review of diagnoses codes, as confirmed by the medical record, prior to receiving risk adjusted payments.
The proposed budget outlines multiple policies related to nursing homes, which track the Administration’s ongoing efforts here. One proposal changes accountability for civil monetary penalties in long-term care facility closures from the “administrator” to an “owner, operator, or owners or operators.” CMS would be granted enforcement authority on the owners of a facility after the facility has closed and against owners or operators of multiple facilities that provide persistent substant and noncompliant care. Further, CMS would be allowed to deny a Medicare or Medicaid provider agreement based on past compliance history of their owned or operated facilities.
Private equity (PE) and Real Estate Investment Trusts (REIT) are the subject of another proposal to require skilled nursing facilities (SNFs) with PE or REIT ownership – direct or indirect – to provide additional financial disclosures beyond cost reports. This would be above and beyond what is required for other provider types. Any percent ownership interest, as opposed to the current 5% or more, would be required to be reported.
The Administration’s yet-to-be released proposal on nursing home minimum staffing levels is a large concern for an industry already facing workforce shortages and slowed financial recovery. The HHS budget in brief states: “CMS will release a proposal in spring 2023 for minimum staffing levels in nursing homes, and to address hiring, HHS and the U.S. Department of Labor are working together to make hundreds of millions of dollars available for training and recruiting of nurses and caregivers.”
Reach out to CLA if you have questions or your organization would benefit from our operational assessment tools, financial insights or digital assistance.
Long-term care facilities could be charged “re-survey” fees if surveyors have to come back three times to determine if deficiencies have been addressed. There are also increased civil money penalties on long-term care facilities based on the severity of the deficiencies within a facility. The most egregious cases would be capped at a $1 million fee.
CMS would also need to revalidate data submitted by nursing facilities for the Nursing Home Compare website and allow for enforcement action if data is inaccurate. Enforcement action could include a 2% reduction in claims payment. CMS would institute a risk-based approach for long-term care facilities recertification, allowing for CMS to survey high-performing facilities less frequently and redirect those resources to low-performing facilities.
Other assorted proposals
There are many other proposals across all health care sector and programs. A few others to highlight:
- Community health workers. Workers could provide select, evidence-based support services if working under the direction of a patient’s primary care provider for prevention and care navigation for chronic or behavioral health conditions, in addition to screening for social determinants of health and linkage to social supports.
- Small rural hospitals. The budget provides $30 million towards helping rural communities sustain their healthcare infrastructure. Of that, $10 million will support a new program will target rural hospitals at-risk for imminent closure. In addition, $20 million for a new pilot program that would provide support to at-risk rural hospitals to enhance and or expand needed service lines. This pilot program would provide market assessments of participating hospitals to assess gaps in services and those clinical areas where expansion would meet local need and generate additional service volume for the participating hospital.
- Medicare Diabetes Prevention Program. Would be made permanent under Part B.
- Value-based purchasing programs. Creation of programs for outpatient hospital departments, ambulatory surgical centers and inpatient psych facilities, akin to programs already in place for other settings.
- Home Health value-based purchasing program. Made permanent.
- Existing hospital programs. Combine five existing programs – value-based purchasing program, inpatient quality, hospital acquired conditions, readmissions and promoting interoperability – into one program.
- No Surprises Act. Extends the out-of-network requirements to ground ambulances. Provides additional funds for the independent dispute resolution process.
- Telehealth. Provides $2 million to create two Centers of Excellence in Telehealth Implementation.
- Insulin costs. Monthly insulin costs would be capped at $35 cap for group and individual market coverage, akin to what is already in place for Medicare beneficiaries under the Inflation Reduction Act
- Cancer Moonshot. An additional $500 million directed towards the initiative.
How we can help
The above list of changes along with many others not referenced could impact health care funding and programs. While this budget will not be enacted as is, a variety of policies could garner bipartisan support, such as addressing the health care workforce shortages, burnout/wellness, rural hospitals and behavioral health. Further, the budget provides directional insights into the Administration’s priorities—priorities that may show up in other legislation or regulations in the future.
If you have questions on how any of these could impact you and how you can respond, reach out to your CLA advisor.
Jennifer Boese is the Director of Health Care Policy at CLA. She is a highly successful public policy, legislative, advocacy and political affairs leader, including working in both the state and federal government as well as the private sector. She brings over 20 years of government relations and public policy knowledge with her to CLA. Well over half of her career has been spent dedicated to health care policy and the health care industry, affording her a deep understanding of the health care market and environment, health care organizations and health care stakeholders. Her role at CLA is to provide thought leadership, policy analysis and strategic insights to health care providers across the continuum related to the industry's ongoing transformation towards value. A key focus of that work is on market innovations and emerging payment models. Her goal is to help CLA clients navigate and thrive in an increasingly dynamic health care environment.
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