House passes bill that would extend Medicare sequester cuts until December

Dive Brief:

  • The House passed a bill Friday to extend the pause on Medicare sequester cuts until Dec. 31. The cuts have been on hold for a year but are set to go back into effect at the end of March.
  • The bill passed on a 246-175 bipartisan vote and also exempts the latest $1.9 trillion pandemic relief bill from budget rules that would have imposed additional cuts on Medicare payments to providers.
  • We now look forward to working with the U.S. Senate to achieve relief from the pending Medicare sequester cuts before they go into effect,” the American Hospital Association said in a Friday statement.

Dive Insight:

After President Joe Biden signed the latest $1.9 trillion pandemic relief package, provider groups including the American Hospital Association immediately called on Congress to pass a new bill extending the pause on Medicare sequester cuts.

The latest package did incude $8.5 billion in funding for rural hospitals, but excluded additional funding overall for the provider relief fund that AHA sought.

Those opposed to extending the cuts point out that many larger health systems turned a profit last year, and some even returned relief funds.

The sequester was part of a 2012 deal to avoid hitting the federal debt ceiling, cutting most Medicare payments to providers by 2%. While it has remained on the books since, the Coronavirus Aid, Relief, and Economic Security Act suspended the cuts as providers grappled with pandemic-induced financial strains. They are slated to go back into effect March 31.

But physician practices are still facing financial challenges including higher overhead costs and lost revenues due depleted volumes and delayed elective procedures, the American Medical Association said in a Tuesday letter to House Speaker Nancy Pelosi and Minority Leader Kevin McCarthy urging them to extend the moratorium.

The bill also shields providers from an additional Medicare statutory pay-go cut of up to 4% that the budgetary impact projected under the newest relief package would have triggered. 

Those cuts would amount to about $36 billion for 2022, according to an AHA estimate. 

“Injecting additional uncertainty into the healthcare system is an unnecessary distraction during a time when physicians and others are focused on fighting the pandemic,” AMA wrote in its letter to lawmakers. “Our physicians now need further relief, as the COVID-19 pandemic will surely extend well beyond the first quarter of this year,” it said.

On Monday, Sens. Susan Collins, R-Maine, and Jeanne Shaheen D-N.H., introduced a bill in the Senate to extend the pause throughout the public health emergency.

That bill, however, would extend sequestration, which is scheduled to expire at the end of fiscal year 2030, through FY 2031.

A report from the fiscal watchdog group Committee for a Responsible Federal Budget estimates extending the pause through the end of 2021 would cost $10 billion, and said legislators should not do so without offsets.

“Allowing further extensions without offsets could set the stage for a longer-term sequester repeal that would be significantly more costly,” the report said.

Through pandemic relief legislation the government has already allocated nearly $400 billion of gross support and $300 billion of net support to healthcare providers, and “total provider revenue itself has largely recovered,” according to the report.

“Hospital revenue in particular appears to have recovered, and major health systems have been reporting continued profitability. While rural providers might still be suffering some revenue loss, the American Rescue Plan just set aside an additional $8.5 billion for support,” it said.