Washington Update: Monday, March 13, 2023

After MedPAC news, hospital community debates future role of LTCHs.

With MedPAC reconsidering the wisdom of “unifying” post-acute care, the role of LTCHs is again being debated and Select Medical is at the center of the effort. We are encouraging policymakers to expand the remit of LTCHs — especially after playing a crucial role during the pandemic and after a decade’s worth of declining LTCH spending. Medicare spends $30 billion on SNFs, $9 billion on IRFs and, only $3.5 billion on LTCHs.

But now the question is … what are the policy options for LTCHs?

What expanded role for LTCHs would make the most sense? One school of thought says LTCHs should be able to treat other types of high-acuity patients. Another school of thought says LTCHs should get paid higher reimbursements for providing care to the very sickest patients – especially in rural and underserved areas. Finally, a third school is a mixture of these and other ideas. We are working with the AHA, NALTH and others to assess the political feasibility of each policy.

US BUDGET DEBATE

President Biden proposes plan to restore solvency for Medicare trust fund.

To restore Medicare Part A solvency, the Biden Administration proposed raising taxes on those making more than $400,000 and reducing what Medicare pays for some prescription drugs. The White House proposal would raise the “Net Investment Income tax,” created by the Affordable Care Act, from 3.8% to 5% for all Americans earning more than $400,000 per year. The tax applies to capital gains and investment income.

But… the proposal has no chance of getting thru the Republican House.

The Biden Medicare plan serves as a statement of priorities as he clashes with Republicans over the future of the Medicare program. The plan is meant to challenge Republicans who have yet to put forward their own plan. Republicans oppose tax increases so, if they put a plan forward, it would have to rely on cuts in patient benefits or provider rates. Medicare and Social Security are, by far, the two biggest Federal spending programs, representing 42% of annual spending.

The Medicare proposal is part of President Biden’s US Budget blueprint.

President Biden’s budget proposal is the third of his presidency. It calls for a federal budget of $6.8 trillion, representing about 29% of the nation’s GDP of

$23 trillion. Annual budget deficits would still grow in coming years but remain below the historically high levels seen over the past few years as COVID-relief continues to wind down. The budget contains some $5 trillion in proposed tax increases on high earners and corporations over a decade.

The fiscal cliff approaches with debt-limit to run out in two months.

The budget proposals from President Biden and House Republicans carry extra importance because of the stakes of the debt-limit fight. Congress must raise the current $31 trillion cap or risk a default. Republicans say they will leave entitlement programs untouched but are also committed to creating a balanced budget over the next decade, which is nearly impossible to do without raising taxes, cutting defense spending, or cutting entitlement spending.

Meanwhile, Republican Freedom Caucus call for immediate spending cuts.

On Friday, a powerful group of Republicans – the Freedom Caucus, now led by Rep. Scott Perry (R-PA) – announced they will only vote to raise the debt-limit if they can secure about $130 billion in immediate spending cuts. The ultimatum could complicate efforts to raise the limit. Freedom Caucus members have promised to use the debate to extract spending cuts from the Biden Administration. The caucus includes 47 House Republicans or 22% of the House GOP.

Budget debate reveals the difficulty of future choices.

The parties’ entrenched positions set Washington up for several bruising months of debt-limit debate. The Wall Street Journal noted this week that “if lawmakers take raising taxes and cutting Medicare, Social Security, defense and veterans programs off the table, Congress would need to cut 85% of spending in all other categories to balance the budget” and, even then, the budget would only balance ten years out.