As we alerted members to before the holidays, Congress enacted an “Omnibus” end-of-year spending package just in time to avoid a government shutdown. The 4,155-page legislation addressed a wide range of issues, including Medicare payment. The Omnibus fully averted the 4% PAYGO sequestration for 2023 and 2024, but did not technically eliminate this sequestration. Rather, the legislation pushed forward the “balance due” to 2025. While this ensures full relief of the 4% sequester for providers in 2023 and 2024, it also ensures that this sequestration will need to be addressed again by Congress before 2025. With regard to the Physician Fee Schedule conversion factor, the Omnibus covered only 2.5% of the 4.5% needed for 2023 and only 1.25% for 2024. That leaves Medicare providers with an approximately 2% cut in 2023. The impact for 2024 is less quantifiable since the conversion factor for that year is not yet known. Since the legislation was signed into law, CMS released an updated 2023 conversion factor reflecting this congressional intervention, so there should be no disruption to claims processing.
Among other Medicare provisions, the Omnibus extended by two years the telehealth flexibilities originally created pursuant to the COVID public health emergency and extended the safe harbor allowing coverage of telehealth services in high deductible health plans. The legislation also provided an extension at 3.5% of the expiring 5% bonus for providers in alternative payment models and – in a provision welcomed by the medical community – the bill provided funding for 200 new residency slots, with half of those directed to psychiatry or psychiatry subspecialties.
In a very disappointing provision, the Omnibus extended the existing 2% Medicare sequester (which is already in effect) by six months in 2032. In other words, Congress levied additional cuts on providers in 2032 to partially avert cuts to providers in 2023 and 2024, and to help pay for other spending priorities in the 1.6-trillion-dollar bill. Not surprisingly, the provider community expressed frustration and disappointment at the legislation.
In the past year, lawmakers on both sides of the aisle in both chambers introduced legislation to offset the full cuts and exerted significant pressure on congressional leadership to ensure that the 4.5% conversion factor reduction was averted in full. Some lawmakers also expressed opposition to the budget gimmickry of offsetting near-term cuts with long-term cuts. However, the pressure of a looming government shutdown ensured that a sufficient number of Members voted for the bill to ensure passage, even if they disliked provisions in it.
The continued annual reimbursement reductions combined with inflation have created a near-impossible business environment for physician practices, which in turn affects beneficiary access. In the year ahead, the physician community will aggressively push Congress towards long-term Medicare Physician Fee Schedule stabilization.