Biden Signs Funding Bill: Telehealth, Medicare Cuts, and PBM Impacts

January 29, 2025

President Joe Biden recently enacted a funding bill carrying significant implications for the healthcare sector. This legislation addresses key areas such as telehealth flexibilities, Medicare payment cuts for physicians, and pharmacy benefit managers (PBMs). The bill’s contents, stakeholder reactions, and broader implications for the healthcare landscape are explored in detail.

Extension of Telehealth Flexibilities

Temporary Extension Amid Pandemic

The bill extends telehealth flexibilities for an additional three months, a notable reduction from the initially proposed two-year extension. Telehealth emerged as a crucial tool during the COVID-19 pandemic, allowing healthcare services to be provided remotely at a time when in-person visits were fraught with challenges. This brief extension is vital for telehealth providers like Teladoc, which experienced a significant surge in demand during the pandemic but now face challenges in sustaining growth as many healthcare providers and patients return to in-person care. The extension reflects ongoing concerns about the accessibility and viability of telehealth services as a cornerstone of modern healthcare delivery.

Stakeholder Reactions

Organizations such as the American Telemedicine Association (ATA) and Telehealth Access for America have expressed gratitude for the granted extension. However, these organizations, along with other stakeholders in the healthcare industry, emphasize the pressing need for permanent, reliable access to virtual healthcare services. Kyle Zebley of the ATA highlights this temporary extension as an important incremental step but reiterates the necessity for more lasting solutions that ensure continued access to telehealth. The ATA underscores the importance of making telehealth a permanent feature of the healthcare ecosystem to adapt to and meet the needs of both providers and patients in an evolving landscape.

Medicare Payment Cuts for Physicians

Exclusion of Relief Measures

A critical aspect of the funding bill is the exclusion of relief from scheduled Medicare cuts for physicians, an omission that has drawn vehement criticism from various physicians’ groups, including the American Medical Association (AMA). These groups highlight the dire consequences such reductions could have on patient access to healthcare and the financial viability of physician practices, which are already strained. The ongoing reductions threaten to destabilize private practices, forcing some to consider reducing services or closing entirely, further diminishing the availability of care for Medicare patients.

Impact on Healthcare Accessibility

Bruce Scott, the AMA president, emphasized that this is the fifth consecutive year Congress has failed to prevent Medicare cuts, projecting significant impacts on healthcare accessibility and the sustainability of private practices. Without intervention, physicians face a 2.8% reduction in Medicare funding starting in 2025, part of a broader trend of declining Medicare rates over the past two decades when adjusted for physician costs. Physician organizations advocate for policies that tie annual reimbursement increases to inflation, a policy supported by influential advisory groups and members of Congress. They argue that such measures are necessary to maintain the viability of physician services and ensure stable, predictable access to care for Medicare beneficiaries.

Pharmacy Benefit Managers (PBMs) Reform

Role of PBMs in the Drug Supply Chain

PBMs act as intermediaries between payers and pharmaceutical companies, and their influential role in the drug supply chain has come under increased scrutiny from Washington lawmakers and healthcare advocates. The original funding agreement sought to impose significant reforms on PBMs, mandating that they pass through all rebates received from drug manufacturers to their plan clients in Medicare and the group health market. Such measures were envisioned to bring greater transparency and fairness to the pricing of prescription medications and limit practices that critics argue contribute to higher drug prices for patients and payers alike.

Legislative Action and Future Prospects

Despite the intense focus on PBM reform, the final bill did not include these provisions, leaving a major industry practice unregulated. Nonetheless, PBM reform remains a potential area for legislative action in the coming year, buoyed by interest from notable figures. Legislative efforts aim to address concerns about PBMs’ role in the healthcare system and their impact on drug pricing. Although the immediate effect of such reforms on drug prices remains uncertain, advocates argue that increased transparency and accountability in the PBM sector could ultimately benefit consumers and contribute to a more sustainable and equitable drug supply chain.

Additional Provisions and Broader Impacts

Acute Hospital Care At Home Program

The legislation includes an extension of the CMS’ Acute Hospital Care At Home program through March 31, continuing a program introduced during the pandemic to alleviate hospital capacity constraints. This initiative enables approved Medicare-certified facilities to deliver inpatient-level care directly in patients’ homes, a measure designed to maintain healthcare accessibility even amid ongoing public health challenges. The extension of this program underscores its vital role in providing flexible, high-quality care in a manner that adapts to the evolving needs of the healthcare system and patients during times of crisis.

Community Health Centers and Medicaid

In addition to other provisions, the bill reliably extends funding for community health centers and prevents payment cuts in Medicaid for hospitals that serve vulnerable populations. These measures are crucial for maintaining healthcare access in underserved communities, ensuring that critical services remain available to those most in need. By extending these funds, the legislation aims to support the infrastructure that allows these organizations to continue operating and providing essential care, thereby bolstering the overall resilience and inclusivity of the healthcare system.

Legislative Process and Criticisms

President Joe Biden recently signed into law a significant funding bill that has major implications for the healthcare sector. This comprehensive legislation touches on several critical areas, including telehealth flexibilities, which have become increasingly important in the wake of the COVID-19 pandemic. It also addresses reductions in Medicare payments to physicians, ensuring that vital services to seniors remain sustainable. Furthermore, the bill takes aim at pharmacy benefit managers (PBMs), who play a crucial role in the pricing and accessibility of prescription medications.

Stakeholders across the healthcare landscape have reacted to this legislation with varying opinions, reflecting the diverse interests and priorities within the sector. Some praise the bill for its progressive steps toward modernizing healthcare delivery, while others express concerns about potential financial impacts. Overall, this legislation represents a significant step in shaping the future of healthcare policy in the United States, carrying broad implications for patients, providers, and payers alike.

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