(February 2025) – The 119th Congress 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 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. Hospitals will likely see wins on the low-volume hospital/Medicare-dependent hospital designations and pay-as-you-go/Medicaid Disproportionate Share Hospital payment reduction 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 Affordable Care Act'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. However, 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. 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, hospital outpatient department 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 generally opposed by Republicans while not producing any offsets for their purposes. Likely, the debate will hinge on options two and three. KHA will continue to work with our delegation to explain 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 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 have expanded Medicaid, so those states would be forced to either change their Medicaid programs to accommodate a new and reduced FMAP or 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 clarify its impact on Kansas hospitals.
Finally, ACA-enhanced premium tax credits are at risk in budget reconciliation negotiations. Already set to expire at the end of 2025, considering this change as a budget offset seems logical for the GOP to save money in the overall bill. The CBO estimates as many as four million people could lose coverage if these tax credits were to expire. This would have a downstream effect on uncompensated care at hospitals. Furthermore, it is unlikely that DSH payments will save the federal government as much money as anticipated, especially given DSH payments, particularly in non-expansion states like Kansas, are likely to increase.
We look forward to serving Kansas hospitals as we work through these thorny issues in the 119th Congress.