Congress averted a government shutdown, but hospitals face billions in cuts

With the COVID-19 pandemic, hospitals can’t afford the looming cuts, advocates say. The reductions could come at the end of the year if lawmakers don’t act.

Congress avoided a federal government shutdown late Thursday, but hospitals and healthcare organizations fear the loss of billions of dollars in federal aid if lawmakers don’t act soon.

In the nick of time, Congress passed a short-term spending bill Dec. 2 to prevent a partial shutdown of the federal government. Lawmakers agreed on a measure that funds federal programs through Feb. 18. President Joe Biden signed the bill Friday, a day before the shutdown would have occurred.

However, lawmakers haven’t addressed looming cuts to Medicare that could cost hospitals and providers billions, according to the Association of American Medical Colleges and other healthcare advocates.

Leonard Marquez, the AAMC’s senior director of government relations and legislative advocacy, said it’s not just about the impact on hospitals and their finances.

If the looming cuts aren’t averted, Marquez said, “What does it mean for access to care? What does it mean for patients?”

The prospect of cuts provide another headache for hospitals that have struggled throughout the COVID-19 pandemic and have dealt with unpredictable costs. For hospitals, this is the worst possible time for a loss in federal aid, healthcare advocates said.

Advocates for healthcare organizations are urging Congress to eliminate the 4% statutory cut from the “pay-as-you-go” provision and are calling on Congress to extend the moratorium on the 2% Medicare payment sequester. They also want to maintain a 3.75% increase in Medicare physician payments in 2022. On Dec. 7, the House passed a bill to delay the cuts, but the measure still must pass the Senate.

Sequestration is the automatic reduction of government spending spelled out in federal law. It’s generally a tool to promote compromises on spending. Under the law, spending cuts go into effect if lawmakers can’t broker an agreement.

The sequester moratorium is slated to expire Dec. 31. If those cuts aren’t stopped, hospitals and healthcare systems could see a $4.7 billion reduction in Medicare fee-for-service payments in 2022, advocates say.

The “pay-as-you-go” rule refers to a 2010 federal law that says spending bills can’t add to the budget deficit over a 5- or 10-year period. Under “PAYGO,” as it’s dubbed, a spending increase is supposed to be offset by a reduction elsewhere.

A PAYGO sequester has never been triggered before. But if Congress doesn’t act to block it, hospitals would lose $9.4 billion in Medicare payments in 2022. (Earlier, this year, the American Hospital Association produced a state-by-state projection of the projected cuts.)

AAMC’s teaching hospitals would lose $2.2 billion if the PAYGO sequester isn’t blocked, the group said.

Marquez said he’s “cautiously optimistic” that lawmakers will act and prevent the cuts. But he and other healthcare advocates are wary that Congress hasn’t acted already. After all, Congress barely averted a government shutdown with a temporary spending measure.

“We’re concerned that Congress has not yet addressed these cuts,” Marquez said. “We continue to hear that lawmakers on both sides of the aisle are working to address this, they want to address these cuts.”

Rick Pollack, president and CEO of the American Hospital Association, said he wasn’t pleased Congress didn’t address the pending cuts amidst the COVID-19 pandemic, particularly with the emergence of the Omicron variant.

“Now is not the time to impose additional financial hardship,” Pollack said in a statement. “It would be an outrage to not protect the very caregivers who are fighting this relentless virus every day. Congress and the Administration must now act quickly to remove the uncertainty these cuts are creating in order to stop this potential threat to the patients and communities we serve.”

This week, the AHA and a host of other healthcare organizations crafted a joint letter urging congressional leaders for relief before the end of the year.

While Marquez said he thinks Congress will avert the cuts, he said it’s not clear if lawmakers will do so by Dec. 31.

If the cuts go into effect at the end of the year, Congress can still move retroactively to address them early in the new year. But Marquez said healthcare providers need certainty on federal funding and would prefer a remedy sooner than later.

“The further you go into January, the more problematic it becomes,” he said. “It’s one of the key reasons it’s important to get it done before the end of the year.”

While much concern is focused on extending the moratorium on sequester cuts, Marquez said the AAMC and other groups are anxious to see Congress continue the increase in Medicare Physician Fee Schedule payments. Doctors caring for Medicare patients would take a hit if there’s a reduction, he said.

“We’re very concerned about the Physician Fee Schedule cut,” Marquez said.

Looking ahead, healthcare advocates have said they hope Congress can move on a federal budget for a 2022 fiscal year sooner than later. Some legislative proposals would offer substantial spending increases for healthcare and medical research in 2022. The 2022 fiscal year ends in September.

With mid-term elections looming in 2022, lawmakers could opt for more short-term measures that would keep federal agencies funded at current levels. Healthcare groups are urging lawmakers to approve spending measures that would offer more aid to the National Institutes of Health, public health programs and academic medical centers.

“We want Congress to finish the fiscal year 2022 appropriations as quickly as possible,” Marquez said.