Government Shutdown Avoided, Medicare Cuts Remain
The President signed a critical spending bill, the American Relief Act, 2025 (H.R. 10545) on December 21, 2024, averting a government shutdown but leaving significant gaps in healthcare provisions. The bill has drawn mixed reactions, particularly from the healthcare sector, as several key measures included in earlier bipartisan resolutions were ultimately excluded. Among the retained provisions, acute hospital care at home and telehealth waivers received short-term extensions until March 31, 2025. However, this fell short of the original bipartisan proposal, which sought a five-year extension for acute hospital care and a two-year extension for telehealth services. Advocates have criticized the lack of long-term planning for these programs, which have been instrumental in expanding access to care during and after the COVID-19 pandemic.
One of the most controversial aspects of the bill is the decision to allow a 2.8% Medicare physician payment cut to take effect on January 1, 2025. When adjusted for inflation, the reduction is estimated at 6.3%, according to the California Medical Association. Dr. Bruce A. Scott, President of the American Medical Association (AMA), expressed deep concern over declining reimbursement rates, warning Congress’s failure to address declining Medicare reimbursement rates for the fifth consecutive year would lead to physicians being forced to close their practices or leave the profession entirely, intensifying issues with patient access to healthcare. Similarly, Anders Gilberg, Senior Vice President of Government Affairs at the Medical Group Management Association (MGMA), called the bill a “huge congressional failure,” emphasizing that the cuts will not only affect Medicare but also impact commercial contracts tied to Medicare rates and Medicaid reimbursements in states using Medicare as a benchmark.
The Medicare Payment Advisory Commission (MedPAC) recommended inflation-based updates to Medicare payments related to the Medicare Economic Index (MEI), but Congress failed to adopt these measures despite rising healthcare delivery costs which are expected to increase by 3.5% in 2025.
In addition to the Medicare cuts, the final legislation omitted several other healthcare reforms that gained bipartisan support. Prior authorization reform, which aimed to simplify the insurance pre-approval process was excluded. The AMA criticized this omission, stating it represents a win for insurance companies at the expense of patients. Proposed regulations to increase oversight of pharmacy benefit managers and efforts to incorporate key drug pricing reforms were removed, despite strong bipartisan backing. Advocacy groups such as Patients for Affordable Drugs Now (P4ADNow) denounced this decision, citing missed opportunities to lower healthcare costs for consumers.
The bill passed the House of Representatives with a vote of 366-34-1 and the Senate with a vote of 85-11. While the spending bill succeeded in avoiding a government shutdown, it fell short in addressing systemic issues within the healthcare sector. The omissions in long-term planning and essential reforms have left healthcare providers and advocacy groups concerned about the future of patient care and the financial viability of medical practices. Moving forward, it is clear that substantial legislative action will be needed to secure a more sustainable and equitable healthcare system.
