President Biden Releases FY 2025 Budget: What’s NOT in It?
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March 14, 2024 – Earlier this week, President Biden released his Fiscal Year (FY) 2025 President’s Budget. As a reminder, every year, the White House releases a budget that serves as its official funding request to Congress for the following fiscal year, which begins in October. And that’s exactly what it is: a request. Congress can choose to accept or reject any of the budget’s proposals.
The budget typically includes both agency-specific funding requests that would be handled through Congress’s appropriations process and legislative proposals for Congress’s authorizing committees to consider. Healthcare-related legislative proposals usually involve structural reforms to the Medicare and Medicaid programs and/or private insurance market to add or refine benefits; cut costs; or address fraud, waste and abuse.
While the budget likely will not be adopted in its entirety (or at all), it is still an extremely useful exercise for the Administration. The budget is an opportunity for the Administration to show Congress and the public what it really cares about.
Like last year’s budget, the FY 2025 budget includes significant cross-cutting priorities – stay tuned for our comprehensive summary of the main health-related proposals. In the meantime, I want to take a different approach and note the policies that were not included. In my view, these omissions can provide an indication of issues the Administration chose to de-prioritize during this election year.
Here are nine health-related issues that the Administration could have addressed in the budget, but which did not make the cut:
- Medicare Advantage (MA) Spending: For at least the second year in a row, the US Department of Health and Human Services (HHS) Budget in Brief acknowledged the high payment rates to MA plans, noting that “payments to plans are higher than they would be to provide Part A and B benefits in Original Medicare, negatively affecting Part A solvency and increasing Part B premiums for beneficiaries.” However, the budget offers no solution to address this issue. The budget includes a few MA-related proposals, but none of them score any savings by the actuaries at the Centers for Medicare & Medicaid Services (CMS), meaning that they are not projected to reduce overall payments to MA plans.
- Physician Payment Reform: As discussed in last week’s Regs & Eggs blog post, physicians and other clinicians will likely face another cut to the Medicare physician fee schedule (PFS) conversion factor in 2025. While Congress is considering various proposals to deal with some of the underlying issues in the PFS (such as the budget neutrality requirement and the lack of an inflationary update), the Administration did not present its ideas for how to provide more stability to physician payments in the budget.
- Merit-Based Incentive Payment System (MIPS) Revisions: The budget does not propose any reforms to MIPS, the main quality program for physicians under Medicare. Over the years, stakeholders have identified many issues with the program. For example, in a March 2018 report, the Medicare Payment Advisory Committee (MedPAC) laid out some of the main problems with MIPS and concluded that MIPS was not achieving its intended goal of improving quality and reducing costs. MedPAC recommended that the program be eliminated and replaced with an alternative program that measures quality improvement at a population level rather than the individual patient level. While the issues identified by MedPAC and others, including the American Medical Association and the physician community, continue to exist in MIPS, the budget does not lay out any recommendations for making the program more successful or popular among clinicians and patients.The budget also does not request additional funding to continue the $500 million exceptional bonus pool, which expired in 2022. The exceptional bonus pool had provided an additional payment incentive for MIPS high performers.
- Advanced Alternative Payment Model (APM) Bonus Extension: Over the last two years, Congress has extended the bonus that was initially made available under the Medicare Access and CHIP Reauthorization Act (MACRA) for clinicians to participate in Advanced APMs. However, while the initial annual bonus (through 2022) was 5%, the extensions have been smaller (3.5% for 2023 and 1.88% in 2024). Advanced APMs require clinicians to take on downside financial risk and are seen by many as viable value-based payment alternatives to the traditional fee-for-service payment approach (which only reimburses for services based on the volume of services delivered). Many stakeholders have stated that in order to continue to spur participation in these models, the incentive payments should be closer to the 5% level that MACRA initially granted. Since the Administration did not indicate a position on the continuation of these incentive payments in the budget, it inherently deferred to Congress on this important issue.
- Telehealth and Hospital-at-Home Extensions: At the end of this calendar year, major Medicare waivers put in place during the COVID-19 public health emergency (PHE) are set to expire, including the Medicare telehealth waiver and the hospital-at-home program. With respect to telehealth, the main waivers granted since the COVID-19 PHE relate to the originating site requirement and the geographic restriction. If those waivers expire, the telehealth benefit under Medicare would once again be mainly restricted to rural areas, and patients would be required to visit a facility in most cases to receive a telehealth service (instead of receiving one from home). The hospital-at-home model is also extremely popular, as it allows patients to receive hospital-level services at home via telehealth and in-person visits. Many stakeholders have repeatedly pushed Congress to extend the waivers long term, but the Administration does not mention either waiver in the budget.The HHS Budget in Brief does state in the CMS Private Insurance chapter that “to support equitable treatment and increased access of covered mental health and substance use disorder services plans and issuers, the budget also supports a standardized definition of mental health and substance use disorders, as well as a permanent expansion of telehealth and other remote care services” (emphasis added). However, I have confirmed with HHS that the statement relates to other proposals in the budget and does not refer to an extension of the Medicare COVID-19 waivers.
- Site-Neutral Policies: The concept of paying the same amount for the same service delivered across different healthcare settings is not new, and Congress has enacted site-neutral policies in the past (for example, the Bipartisan Budget Act of 2015 equalized payments for services furnished at many off-campus hospital outpatient departments to the amounts paid for those services when furnished in a physician’s office or ambulatory surgical center). However, policymakers have been looking to expand upon these existing site-neutral policies. In fact, Congress is currently considering many site-neutral proposals, which McDermottPlus has discussed in a series of +Insights. However, in this year’s budget, the Administration did not pick any one of these proposals (or develop its own) to recommend for adoption. While site-neutral policies tend to be savers (which could offset other proposals in the budget that cost money), the Administration chose other policies (such as tax proposals and expansions of drug negotiations under the Inflation Reduction Act) for savings instead.
- Comprehensive Strategy on Artificial Intelligence (AI): While the budget sporadically mentions new initiatives and funding initiatives stemming from the president’s October 30, 2023, Executive Order on AI, it does not provide a comprehensive strategy for establishing guidelines or principles for use of AI in healthcare.
- Funding to Support the Mental Health and Wellbeing of Healthcare Workers: In last year’s budget, the Health Resources and Services Administration (HRSA) requested $25 million to support “Health care entities, including entities that provide health care services, such as hospitals, community health centers, and rural health clinics, or to medical professional associations, to establish or enhance evidence-based or evidence informed programs dedicated to improving mental health for health care professionals.” These programs were authorized under the Dr. Lorna Breen Health Care Provider Protection Act, P.L. 117-105, an Act named for a beloved emergency physician who took her life at the beginning of the COVID-19 PHE. While clinician burnout and stigma around receiving mental health services are still major issues, the FY 2025 HRSA budget justification does not request any funding for these programs.
- Pharmacy Benefit Manager (PBM) Reform: As described in this +Insight, PBMs are key stakeholders in the drug supply chain that function as intermediaries between insurance providers and pharmaceutical manufacturers. PBMs administer prescription drug benefits and seek discounts for insurers such as Medicare Part D standalone plans and commercial plans, including MA, Medicaid managed care organizations and employer-sponsored health plans. PBMs often create formularies, negotiate rebates with drug manufacturers, process claims, create pharmacy networks, review drug utilization and manage mail-order specialty pharmacies. Congress and other stakeholders have raised questions about PBMs’ operations and their impact on drug prices and out-of-pocket costs for patients. In the 118th Congress, several key committees have advanced legislation that would increase PBM transparency and reporting obligations and modify other business practices. Momentum on all these bills has stalled, however, and the president’s budget does not address possible PBM reform in any way.
If you have any questions about what was included (or not included) in the budget, even beyond the items listed here, please feel free to reach out to me!
Until next week, this is Jeffrey saying, enjoy reading your regs with your eggs.
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