Federal Health Policy Update for December 19

The following is the latest health policy news from the federal government for December 13-19. Some of the language used below is taken directly from government documents.

Congress

Funding for the operation of the federal government will expire tomorrow, December 20, unless Congress passes a funding bill. Earlier this week, congressional leaders agreed on a continuing resolution that included a number of health care priorities, including relief from scheduled Medicaid DSH cuts, relief for Medicare physician payment cuts, extension of telehealth flexibilities, extension of the Acute Hospital Care at Home program, a number of changes in the practices of pharmacy benefit managers (PBMs), and more. Yesterday evening, however, under pressure from Republican factions in the House, Elon Musk, and President-elect Trump, that deal fell apart.

It is unclear at this time what, if any, funding bill can pass to prevent a government shutdown. We will continue to update you on the status of health care provisions that may be included in an end-of-year bill.

MedPAC Rate Recommendations for 2026

MedPAC’s commissioners met last week and the primary subject of their two-day meeting was proposed Medicare rate recommendations for 2026, with the agency unveiling the following preliminary recommendations:

Physicians and other health professional services – an increase of 1.3 percent in base rates and another 1.7 percent increase for clinicians who qualify under MedPAC’s previous clinician safety-net recommendation, broken down into a 4.4 percent increase for primary care clinicians and 1.2 percent for all other clinicians.
Hospital inpatient and outpatient services – the increase in base rate payments specified under current law plus one percent and the redistribution of current Medicare disproportionate share (Medicare DSH) and Medicare DSH uncompensated care payments through MedPAC’s own proposed Medicare Safety-Net Index supplemented with another $4 billion of new federal money.
Skilled nursing facilities – a three percent reduction of current rates, which MedPAC believes would have no adverse effect on access to care.
Inpatient rehabilitation facilities – a seven percent reduction of current base rate payments, which MedPAC believes would have no adverse effect on Medicare beneficiaries’ access to care but “could increase financial pressure on some providers.”
Home health services – a seven percent reduction of Medicare base rate payments, which MedPAC states would have no adverse effect on access to care.
Hospice services – MedPAC proposes eliminating the 2025 increase in hospice base rates, which it believes would have no adverse effect on access to care.
Outpatient dialysis services – MedPAC supports the update prescribed in current law.

MedPAC’s commissioners will vote on their final Medicare rate recommendations early next year.

Go here for summaries of the issues and key points and links to the presentations delivered by MedPAC staff and find a transcript of the two-day session here.

340B

In response to the pharmaceutical company Sanofi-Aventis’s announcement that it plans to implement a credit model for sales of certain outpatient drugs to 340B-covered entities starting January 6, HHS’s Health Resources and Services Administration (HRSA), which oversees the 340B program, has written to Sanofi to warn the company that this unapproved credit proposal violates Sanofi’s obligations under the 340B statute and that HRSA expects Sanofi to cease implementation of its announced plan. Find Sanofi’s letter announcing its intentions here and learn about HRSA’s response from its warning letter to Sanofi.

Department of Health and Human Services

HHS’s Office of the Assistant Secretary for Technology Policy (ASTP), formerly the Office of the National Coordinator for Health Information Technology (ONC), has published its Health Data, Technology, and Interoperability: Protecting Care Access (HTI-3) Final Rule. The rule reflects ASTP’s efforts to improve information sharing while protecting patient privacy. Among other measures, it finalizes the addition of “reproductive health care” to the defined terms for purposes of the information blocking regulations; finalizes revisions of two previously established information blocking exceptions: the privacy exception and the infeasibility exception; and finalizes the new protecting care access exception. Learn more from this ASTP fact sheet and the final rule.
ASTP has unveiled the newly redesigned Standards Implementation & Testing Environment (SITE) as an all-in-one testing hub for the ONC Health IT Certification Program. Find the new site here and a brief ASTP introduction of it here.
Amid recent efforts to establish a comprehensive crisis response system for behavioral health through a variety of financing sources, HHS’s Office of the Assistant Secretary for Planning and Evaluation (ASPE) has prepared a federal funding compendium of crisis services that examines recent changes and trends in federal funding sources to support behavioral health crisis services and the interplay of shifts in the behavioral health crisis system and how it is funded. Find that report here.
A new ASPE study examines the extent to which therapist practices and nursing homes have adopted telehealth services for physical therapy, occupational therapy, and speech-language pathology; the major challenges and facilitators in adopting telerehabilitation services; and whether these services were effective in addressing patient care and staffing needs during the COVID-19 public health emergency. Learn more from the ASPE report “Use of Medicare-Covered Telerehabilitation for PT/OT/SLP Services during the COVID-19 PHE.”
ASPE has posted a report on the use of inpatient psychiatric facilities by Medicare beneficiaries with dementia. Find that report here.
Twelve of the 13 states selected by HHS’s Office of the Inspector General (OIG) for review did not accurately calculate the federal share of Medicaid collections subject to the increased COVID-10 federal Medical Assistance percentages. As a result, those states retained money that should have been returned to the federal government. Learn more about the OIG’s findings and their implications from this report.
Medicaid gross spending on ten selected diabetes and two selected weight-loss drugs totaled more than $9 billion in 2023, an increase of 540 percent from 2019, the OIG reported in a new review. Find that report here.
The OIG has updated its work plan of audits and reviews for the rest of December. Find the updated plan here.
HHS’s Office of Information Security and Health Sector Cybersecurity Coordination Center have published a bulletin about threat actors who are currently conducting a credential harvesting campaign targeting grantees in the health sector. Credential harvesting is a technique leveraged by cyberattackers to collect legitimate usernames and passwords from unwitting victims for the purposes of using them in future attacks. The result can be fraud, data theft, disruption of critical systems, or other malicious efforts. The bulletin outlines various techniques used for credential harvesting, offers recommendations for defense and mitigation, and directs readers to additional resources. Find the bulletin here.

Centers for Medicare & Medicaid Services

CMS has announced that it is ending its Medicare Advantage Value-Based Insurance Design (VBID) model at the end of 2025 because of its cost. According to the agency, “Excess costs to the Medicare Trust Funds of this magnitude – $2.3 billion in Calendar Year (CY) 2021 and $2.2 billion in CY 2022 associated with the VBID model, based on the prior and forthcoming evaluation reports, respectively – are unprecedented in CMS Innovation Center models. Additional analyses of model performance and policy options demonstrated that these substantial costs were driven in part by increased risk score growth and Part D expenditures and that no viable policy modifications could address these excess costs.” Learn more about the reasoning behind CMS’s decision from this CMS announcement.
State Medicaid agencies in Michigan, New York, Oklahoma, and South Carolina will be the first to participate in CMS’s new Innovation in Behavioral Health Model. Implementation will begin on January 1, 2025. The model will focus on improving the quality of care and behavioral and physical health outcomes for adults enrolled in Medicaid and Medicare with moderate to severe mental health conditions and substance use disorder. Learn more about the model and its design and objectives from the Innovation in Behavioral Health Model web page, which includes an announcement about the model’s launch in the four states.
CMS has announced the release of a new framework that presents its five-year strategy for improving health care delivery and the care experience by addressing administrative burdens and other frictions in the programs it oversees and within the health care system more broadly. The framework is built around seven priorities:

- integrate the voice of the patient and caregiver into opportunities to increase equity in care access and delivery
- improve patient safety and reduce administrative burden in care transitions
- address well-being and experience for health care workers across the health care enterprise
- improve care approval processes to increase access to care and reduce care delays
- reduce redundant or outdated data collection, documentation, and reporting requirements
- leverage technology to accelerate innovation and the adoption of best practices
- convene and support public-private partnerships to advance health care experience and burden reduction efforts

Learn more from this CMS introduction to its strategy and from the CMS document “Optimizing Care Delivery: A Framework for Improving the Health Care Experience.”

CMS has posted a bulletin presenting its calendar year 2025 update of its clinical laboratory fee schedule and laboratory services subject to reasonable charge payment. Find the bulletin here. The changes take effect on January 1.
CMS has posted a bulletin presenting its calendar year 2025 update of the durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) fee schedule. Find the bulletin here. The changes take effect on January 1.
CMS has issued additional guidance to states on Medicaid and CHIP eligibility and services for incarcerated juveniles and those who will soon be released from incarceration. Find that guidance and an accompanying FAQ here.
As part of an initiative to modernize and improve data management, the CMS Center for Clinical Standards and Quality will decommission the use of SAS Viya for data processing on December 31, 2025. During calendar year 2025, CMS will transition away from the use of SAS Viya to Databricks for its measures. Learn more from this CMS announcement and this CMS video.

HHS Newsletters and Reports

CMS – MLN Connects – December 19
CMS blog – “Lessons from CMS’ Acute Hospital Care at Home Initiative”
AHRQ News Now – December 17
HRSA eNews – December 5 (includes funding opportunities)

HHS Videos

CMS – 2025 MVP Development and Maintenance Webinar – overview of Merit-based Incentive Payment System (MIPS) Value Pathways (MVPs) development and maintenance for the 2025 performance year of the quality payment program.
CMS’s Center for Clinical Standards and Quality – Data and Analytics Town Hall – training and demonstrations.

Medicaid and CHIP Payment and Access Commission (MACPAC)

MACPAC members met publicly last week in Washington, D.C. Supporting their deliberations were the following presentations:

Go here for MACPAC’s own summary of the meeting.

MACPAC has published its annual “MACStats: Medicaid and CHIP Data Book,” which presents comprehensive data on Medicaid and the State Children’s Health Insurance Program (CHIP). The publication includes a wide range of current statistics on these two safety-net programs and an overview with key statistics on Medicaid and CHIP; trends in Medicaid; Medicaid and CHIP enrollment and spending with information on benefits, managed care, and program administration; Medicaid and CHIP eligibility; and measures of beneficiary health, use of services, and access to care. Learn more from “MACStats: Medicaid and CHIP Data Book.”

Centers for Disease Control and Prevention (CDC)

The CDC has confirmed the first severe case of bird flu in the U.S.; the patient is in Louisiana. Learn more from this CDC news release.

National Institutes of Health

After declining significantly during the COVID-19 pandemic, substance use among adolescents has continued to hold steady at lowered levels for the fourth year in a row, according to the latest results from an NIH-funded study. The latest data shows stable and declining trends in the use of most drugs among young people. Learn more from this NIH news release.

Congressional Budget Office (CBO)

The CBO has published a new report reviewing options for reducing mandatory federal health care spending. Those options are:

establish caps on federal spending for Medicaid
limit state taxes on health care providers
reduce federal Medicaid matching rates
increase the premiums paid for Medicare Part B
reduce Medicare Advantage benchmarks
adopt a voucher plan and slow the growth of federal contributions for federal employees’ health benefits
introduce enrollment fees in TRICARE for life
introduce minimum out-of-pocket requirements in TRICARE for life
change the cost-sharing rules for Medicare and restrict Medigap insurance
reduce Medicare’s coverage of bad debt
consolidate and reduce Medicare payments for graduate medical education at teaching hospitals
modify payments to Medicare Advantage plans for health risk
reduce payments for hospital outpatient departments
reduce payments for drugs delivered by 340B hospitals

Learn more from the CBO report “Options for Reducing the Deficit: 2025 to 2034.”

Government Accountability Office (GAO)

HHS’s Substance Abuse and Mental Health Services Administration (SAMHSA) should pursue opportunities to improve data collection, share information, and ease reporting burden for the grants it awards to address opioid use disorder grants, the GAO has concluded in a new report. Find that report here.

Stakeholder Events

CMS – Home Health, Hospice, and Durable Medical Equipment Open Door Forum – January 8

CMS will hold an open-door forum for home health, hospice, and durable medical equipment providers on Wednesday, January 8 at 2:00 (eastern). Go here to register to participate.

CMS – Hospital Open Door Forum – January 14

CMS will hold a hospital open-door forum on Tuesday, January 14 at 2:00 (eastern). Go here to register to participate.

MedPAC – Commissioners Meeting – January 16-17

MedPAC’s commissioners will hold their next public meeting virtually on Thursday, January 16 and Friday, January 17. An agenda and information about how to participate are not yet available but when they are they will be posted here.

CMS – Physicians, Nurses, and Allied Health Open Door Forum – January 16

CMS will hold an open-door forum for physicians, nurses, and allied health professionals on Thursday, January 16 at 2:00 (eastern). Go here to register to participate.

MACPAC – Commissioners Meeting – January 23-24

MACPAC’s commissioners will hold their next public meeting virtually on Thursday, January 23 and Friday, January 24. An agenda and information about how to participate are not yet available but when they are they will be posted here.

CMS – Rural Health Open Door Forum – January 23

CMS will hold an open-door forum for rural health care providers and organizations on Thursday, January 23 at 2:00 (eastern). Go here to register to participate.

CMS – Long-Term Services and Support Open Door Forum – January 28

CMS will hold an open-door forum for providers of long-term services and supports on Tuesday, January 28 at 2:00 (eastern). Go here to register to participate.

Federal Health Policy Update for December 19