Communications

(Jan. 17, 2025) – The 119th Congress has been seated, and its business is underway. In the first quarter of 2025, the newly minted dual-chamber Republican majority will be tested by three major issues: the confirmation of incoming President Donald Trump's cabinet and leadership team, the adoption of the full fiscal year 2025 budget for the federal government, and the passage of budget reconciliation legislation to extend the expiring Trump tax cuts. All three of these priorities will have significant impacts on health care providers.

The first two items are well-known. Robert F. Kennedy, Jr. and Mehmet Oz, President-Elect Trump's nominees to head up the U.S. Department of Health and Human Services and Centers for Medicare & Medicaid Services, respectively, will likely bring new health care priorities that must be vetted and considered. The outlines of a budget agreement are easy to see despite the winding road Congress might need to get to yes, and hospitals are likely to see wins on the LVH/MDH designations and PAYGO/DSH cut decisions. The third matter–budget reconciliation–is not as well-known, and early indications are that providers are in for a fight early in the 119th Congress.

The issue is the extension of tax cuts passed by budget reconciliation during the Trump administration's first year. Budget reconciliation is a legislative maneuver allowing Congress to bypass its regular budgetary debate rules to address emergencies. Bills passed under this process can only last ten years when the underlying laws revert to their status quo. Originally designed to make spending cuts during difficult times, reconciliation has become a method of cutting taxes so long as the revenue and spending numbers line up. The Trump Administration tax cuts were passed in 2017 in a reconciliation bill scheduled to last only eight years, hence their timeliness now.

Because taxes affect revenue, all direct spending elements of the Social Security Act, including Medicare and Medicaid (and Social Security itself), are on the table as potential offsets. So far, as concerns health care providers, the main offsets GOP leaders have been eyeing are Medicare sequestration extensions, Medicare site-neutral payments, Medicaid block grants/FMAP changes and reductions to the ACA’s premium tax credit.

As of now, Medicare sequestration by law will end in 2032. When initially passed in 2013, sequestration had been expected to end in 2021, but subsequent bills saw this as an easy offset, a can that could get kicked down the road to fund budgets now. Budget reconciliation supporters will likely look at this offset because it is large and has no immediate effect; indeed, this offset could be used only for what it would save the federal government in 2032, 2033, 2034, and 2035. For years, KHA has clarified to our congressional delegation that Medicare sequestration is fundamentally unfair and should not be extended beyond 2032.

Site-neutral payment schemes generally fall into four categories: full site-neutral payments even for hospital campuses, HOPD site-neutral payments, elimination of telehealth facility fees, and the prohibition on hospitals from negotiating higher payments from insurance companies in relation to other provider types. Of these four, the first provides the most significant offset but will be politically challenging for Congress. The fourth is ideologically opposed in general by Republicans while not producing any offsets for their purposes, Likely, the debate will hinge around options two and three, and KHA will continue to work with our delegation to explain to them why hospitals should be treated differently because we are already required to abide by EMTALA.

Medicaid block grants and federal match changes are politically problematic for a host of reasons, namely that such ideas are challenging to implement in such a way that does not turn certain states into winners and others into losers. Block grant proposals have been around for decades. Still, their design is usually projected to cause massive budget shortfalls at state levels of government, and Congress usually pulls back from them. The same is true of FMAP changes: many Republicans represent states that expanded Medicaid, so those states would be forced to either change their Medicaid programs to accommodate a new and reduced FMAP, or they would need to raise revenue at the state level to fill in the gaps. For Kansas, this would complicate the provider tax program and cast the future of how Medicaid is administered in the state into doubt. We will work with our delegation on any plan to help them understand its impact on Kansas hospitals.

Finally, ACA-enhanced premium tax credits are on the chopping block in budget reconciliation negotiations. Already set to expire at the end of 2025, counting this change as an offset seems like a logical place the GOP would go to save money in the overall bill. The CBO estimates that as many as four million people would lose coverage if these tax credits were to expire, and this would have a downstream effect on uncompensated care at hospitals. Further, it is unlikely to save the federal government as much money as they think, considering that DSH payments, particularly in non-expansion states like Kansas, would likely increase.

We look forward to serving Kansas hospitals as we work through these thorny issues in the 119th Congress. As for our team at KHA, which manages our federal advocacy and regulatory efforts, we are making some changes. Audrey Dunkel will focus more of her time on the hospital provider assessment program, and Jaron Caffrey will join Landon Fuller in working on our federal advocacy efforts. In addition, with Ron Marshall's upcoming retirement, Larry Van Der Wege will be helping on the federal regulatory side. As always, contact any of our team with your federal advocacy issues. KHA's website has a list of Kansas Congressional Delegation members, their staff, committee assignments, and various ways to contact them. Thanks!
--Chad Austin