News

Public Programs Had Lower Improper Payments in FY2024

• Improper payments in Medicare and Medicaid during FY2024 remained consistent with or lower than FY2023, despite tens of billions of dollars in disbursements. CMS noted, not all improper payments are considered fraudulent and may result from administrative errors made by states, contractors, or providers during the billing process. Medicare fee-for-service had the largest rate of improper payments in FY2024, with a rate of 7.4%, or $31.2B, which is in line with the FY2023 rate of 7.5%. The second highest rate was found in the Medicaid Program at 5.1% and $31.1B. This is significantly lower than FY2023, which had an 8.6% rate of improper payments. According to CMS, nearly 80% of the Medicaid payments identified were related to insufficient documentation and did not indicate any fraud involvement. Medicare Advantage had the lowest rate of improper payments at 5.6% in FY2024, totaling $19.1B. This is slightly lower than the FY2023 rate of 6%. Part D improper payments were 3.7% or $3.6B in FY2024. Changes to the payment methodologies in the last year prevent a comparison for Part D payments to FY2023. The Children’s Health Insurance Program (CHIP) saw the largest decrease in improper payments between fiscal years. CHIP had a rate of 6.1%, in FY2024 compared to 12.8% in FY2023. Improper payments totaled $562.9M for advanced premium tax credits, or just over 1%, for the 2022 plan year which is higher than the 0.6% rate from the 2021 plan year (Health Payer Specialist, November 20).

President-elect Trump’s Nominee for HHS Secretary, RFK Jr. Considers Changes to Medicare Physician Payments

• The Washington Post reports that RFK Jr. is assessing a major change to Medicare’s payment formula, including a possible shift to Medicare incentive payments towards primary care and disease prevention. While nothing has been finalized, and the HHS position requires confirmation from the Senate, the plan is said to include the review of thousands of billing codes (MSN, November 21).

Trump Names Additional Nominees for Senior Federal Leadership Positions

• On November 22, President-elect Donald Trump nominated Janette Nesheiwat, MD, as surgeon general and announced several other appointments to senior staff roles. Nesheiwat is medical director at CityMD, a network of New York and New Jersey urgent care clinics. The Office of the Surgeon General is responsible for providing citizens with scientific information on healthcare options and options on risk reduction for illness. The President-elect also announced Dave Weldon, MD, to serve as the Director of the Centers for Disease Control and Prevention and Marty Makary, MD as the head of the U.S. Food and Drug Administration; (Modern Healthcare, November 22).

Telehealth Extension Likely to Be Short-Term as Congress Plans Budget Adjustments

• Despite a push from lobbyists for a two-year telehealth extension in the year-end budget package, it is increasingly likely that the next extension will be for a 90-day period or possibly one year due to House Speaker Mike Johnson’s (R-LA) plan for a three-month continuing resolution (CR) in mid-December, followed by a reconciliation package early next year. With Republicans set to control the White House, House of Representatives, and Senate in 2025, they are preparing to push for a short-term CR while crafting a budget that reflects their policy priorities. While lobbyists have long advocated for a permanent solution to telehealth provisions, some have suggested a one-year extension as a more cost-effective alternative to the two-year plan (Inside Health Policy, November 21).

CMS Expands Residency Program to Combat Physician Shortage

• Effective July 2025, the Centers for Medicare and Medicaid Services (CMS) will release 200 new graduate medical education (GME) residency slots, expanding across 33 states and approximately 109 teaching hospitals. Approximately 70% of the new slots will be dedicated to primary care and psychiatry, aiming to address physician shortages by providing more opportunities for medical students in underserved areas. The Association of American Colleges (AAMC) estimates that the U.S. physician shortage could reach up to 86,000 by 2036. Medicare, the largest funding source for residency programs, allocated $16.2B for the slots in 2020, though hospitals and groups like the AAMC and the American Medical Association (AMA) have voiced concerns about insufficient number of slots and outdated payment formulas. To qualify for a new slot, hospitals must meet one of the following four criteria: located in a rural area, training several residents that exceed their current GME slots, located in a state with new medical schools or branch campuses, or located in a Health Professional Shortage Area. For the latest slots, New York received the most with 16, followed by Illinois and Arizona which received 9 new slots each. AMA and AMC continue to urge Congress to provide additional funding and pass legislation like the Resident Physician Shortage Reduction Act of 2023, which proposes adding 14,000 more residency slots over seven years. Advocates argue that boosting funding and residency opportunities is critical to keeping up the growing health care demands of an aging U.S. population and addressing gaps in primary care access (Modern Healthcare, November 22).

Federal Legislation

Extensive Nonprofit Bill Passes the House, Moves to Senate

• On November 21, the U.S. House of Representatives passed a bill which allows a sitting president to eradicate the tax-exempt status of a non-profit organization if the organization is deemed as terrorist-supporting. Non-profit organizations like Planned Parenthood and the American Civil Liberties Union opposed the bill and some Democratic lawmakers voiced frustration that the bill did not include sufficient due process protections and wanted an American hostage protection provision addressed separately. The bill now goes to the Senate for consideration (Fierce Healthcare, November 21).

Federal Regulation and Guidance

Biden Administration Releases New Rule That Proposes Coverage for Anti-Obesity Medications in Medicare and Medicaid, Includes Modifications to MLR Reporting

• On November 26, the Biden administration proposed a new rule that aims to update regulations for Medicare Advantage (Part C), Medicare Prescription Drug Benefit (Part D), Medicaid, Medicare Cost Plans, and Programs of All-Inclusive Care for the Elderly (PACE). It outlines changes related to Star Ratings, marketing and communications, agent/broker compensation, health equity, drug coverage, dual eligible special needs plans (D-SNPs), utilization management, network adequacy, and other program areas, including the Medicare Drug Price Negotiation Program. The proposed rule also includes recommendations to formalize existing subregulatory guidance in the Part C and Part D programs and intends to significantly broaden access to anti-obesity medications for individuals enrolled in Medicare and Medicaid. Approximately 42% of the U.S. population is affected by obesity, now recognized as a chronic condition, that continues to be associated with a higher risk of all-cause mortality and several related health issues, including diabetes, cardiovascular disease, stroke, and certain cancers. Another significant update included in the proposed rule relates to how payers calculate and report their medical loss ratio (MLR). Under the proposed rule, healthcare plans will be required to provide more detailed information on the allocation of their medical expenditures. Additionally, new safeguards will be implemented to ensure that administrative costs are excluded from the MLR calculation. The proposed rule is scheduled to be published in the Federal Register on December 10, 2024, and will be out for public comment for 60 days, until January 27, 2025 (The White House, November 26; Federal Register, November 26; Health Payer Specialist, November 26).