The health-related provisions of the December 2022 omnibus bill

The December 2022 omnibus spending bill is a sprawling and lengthy measure covering a wide array of important matters, including many within healthcare. With control of the House set to switch to the GOP in the 118th Congress, leaders in both parties decided to close out the 117th by attaching as much bipartisan legislation to the year-end megadeal as was possible. One consequence of this collective decision is that more significant health-related provisions were attached to the final bill than might have been expected a few months ago.

 

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The following is an overview of the approved health-related policies that are expected to have the most significant effects on providers and program beneficiaries:

  • Suspension of the Pay-As-You-Go Sequester. Federal budget law requires Congress to pay for tax cuts or mandatory spending increases with offsetting tax hikes or spending cuts (so-called “statutory pay-as-you-go,” or paygo). Failure to do so leads to across-the-board spending reductions (called “sequesters”), including within Medicare. Congressional approval of an expensive and debt-financed COVID response bill in March 2021 pushed the paygo scorecard into deficit, which would have led to a planned 4.0% cut in Medicare provider payments starting in January 2023. In the omnibus bill, Congress suspended the paygo cuts through 2024.
  • Budget Control Act Sequester Extension. The Budget Control Act of 2011 created a separate sequester process to hit budget targets, with cuts to Medicare’s payments of 2%. Originally, this sequester was scheduled to run for a decade but Congress has extended it several times since 2011 to help pay for other bills. The December 2022 omnibus extended it again, though part of 2032.
  • Medicare Physician Fees. If Congress had not intervened, Medicare fees for physician services were scheduled to be cut by 4.5% starting in January. In real terms, the cut would have been even deeper because inflation has been elevated throughout 2022. The omnibus legislation partially rolled back the expected cuts over the next two years, to 2% in 2023 and around 3.5% in 2024. However, this relief is not expected to fully satisfy the physician community. Physician associations are expected to pressure Congress this year to approve further relief for 2024.
    The omnibus bill also extended bonus payments for physicians participating in alternative payment models (APMs) through 2025. The bonus will be 3.5% during the extension.
  • The omnibus extended through 2024 the pandemic-related policies which allowed Medicare to provide reimbursement for clinician services provided through audio or video communications with patients.
  • Unwinding the Pandemic-Related Enhanced Medicaid Matching Rate. To help states through the pandemic, Congress increased the Medicaid matching rate by 6.2 percentage points through the duration of the federal public health emergency (PHE). In return, states were required to suspend eligibility redeterminations. The omnibus deal includes a framework for unwinding these pandemic-era policies. States can begin redeterminations of eligibility in April 2023 without losing access to the enhanced federal matching rate. However, the additional federal funding is now scheduled to phase out gradually from April to December 2023. Beginning in January 2024, the pre-pandemic federal matching rules will apply. States are expected to work through the redetermination process gradually over a full year, and to have processes in place to determine whether households losing Medicaid coverage are eligible for subsidization through the Affordable Care Act exchanges.
    The Congressional Budget Office (CBO) estimated this provision would reduce Medicaid costs by $22.1 billion over ten years because, in its baseline projection, the PHE was not expected to end until July 2023, at which point states would have been allowed to begin redeterminations. The savings assigned by CBO to moving forward the redetermination process was instrumental in allowing many other health-related changes that will increase federal costs to be included in the final deal.
  • Continuous 12-Month Coverage of Children. Beginning in 2024, states will be required to provide a minimum of 12 months of continuous coverage for children determined to be eligible for either Medicaid or the Children’s Health Insurance Program (CHIP).
  • Pandemic Preparedness. A series of bipartisan measures to improve the government’s planning for future pandemics were attached to the omnibus. The most important of these provisions is the creation of a permanent office within the Executive Office of the President dedicated solely to planning and preparing for the possibility of future pandemics. The law makes several other changes to improve the capacity of federal agencies to implement readiness measures and harden the nation’s defenses, including through investments in better data collection and analysis.

In addition to these provisions, the omnibus includes expanded authorizations and funding for various mental health and substance abuse prevention and treatment efforts. Among the many provisions is the authorization of Medicare payments for counseling and other mental health services.

The wide range of health-related matters addressed in the December omnibus deal will lessen the pressure for immediate action in the current Congress. However, it will not be possible for the federal government to run on autopilot for a full two years. Congress must increase the debt ceiling needs by mid-year to allow the government to meet its obligations, and it must approve appropriations, or at least a continuing resolution, to keep federal agencies open for business after September 30. Therefore, even in an environment of sharp partisan division, some bipartisan cooperation will be required this year to prevent these “must-do” items from becoming triggers for protracted crises.

James C. Capretta is a columnist for State of Reform and a senior fellow at the American Enterprise Institute.