Federal healthcare update

By Jarrod Fowler, MHA
FMA Director of Health Care Policy and Innovation

Enhanced ACA subsidies expire 

The Affordable Care Act (ACA) originally included subsidies to help patients purchase insurance on the now widely known federal exchange. However, these subsidies only assisted individuals and families up to 400% of the federal poverty level and became progressively less generous as income rose. 

During the Covid era, Democrats expanded or “enhanced” these subsidies by removing the income limits and by making them generally more generous. These enhanced subsidies were designed by law to expire at the end of 2026 absent additional federal legislation to renew them. Ultimately, Congress allowed the enhanced subsidies to lapse, thereby reinstating the original, less-generous subsidies that have been in place during most of the law’s history. The decision not to renew the subsidies was contentious. Democrats highlighted the number of people who depend on these subsidies to keep their coverage more affordable. Republicans cited the tens of billions of dollars the enhanced subsidies cost, along with the need for broader healthcare reforms to address underlying affordability issues.  

Florida has 4.7 million ACA marketplace enrollees – more than any other state – and most of them will be affected by the recent changes in the form of higher premiums and/or higher out-of-pocket costs. In some cases, the cost of comparable coverage may double or more. It remains to be seen how many will drop their coverage or curtail their use of insurance because of these changes. It also remains to be seen whether Republicans will reach a deal or compromise of some kind to retroactively keep the subsidies in place while working on broader reforms. The likelihood of that happening is hard to predict. In any case, healthcare policy will be an important issue from now until the 2026 midterm elections.
 

New fee schedule: increases and productivity adjustments

The Medicare Physician Fee Schedule (PFS) is not routinely updated to reflect market-based cost increases, and it cannot be adjusted to do so under the proposed efficiency policy without congressional action. Under the new rule, the Centers for Medicare & Medicaid Services (CMS) applies a retrospective productivity adjustment covering the past five years, lowering physician payment rates based on assumed gains in efficiency while continuing to exclude an inflationary update — an increase that inpatient and outpatient hospital payment systems receive annually.

CMS has identified several categories of services that would be excluded from the efficiency adjustment. These include most time-based services, such as evaluation and management visits, care management codes, behavioral health services, telehealth services listed by CMS, and maternity services with a global period designated as MMM. Notably, despite CMS’s stated intent to exempt time-based services, some codes that are primarily time-driven appear on the list of affected services.

It is also important to note that a 2.5% reduction to a code’s work relative value unit (RVU) does not translate directly into a 2.5% decrease in total reimbursement. Payments under the Medicare PFS are calculated using three components: work RVUs, practice expense RVUs, and professional liability insurance RVUs. Each component is adjusted by the applicable GPCI, summed together, and then multiplied by the conversion factor to determine the final payment amount.

According to estimates from the American Medical Association, the cumulative impact of the efficiency adjustment is expected to reduce overall Medicare reimbursement by approximately 1% for most medical specialties. Moreover, this decrease must be considered in light of the 3.26% to 3.77% conversion factor update that will raise physician pay on the net. 

The FMA and many of our partners in organized medicine remain deeply concerned about the productivity adjustment and have continued to warn Congress that Medicare payments must rise significantly, at least matching the rate of inflation on an annualized basis, in order for the program to remain viable for seniors.