A Government Shutdown Is Likely on the Horizon: Will the Regulatory Process Also Hit Pause? - McDermott+Consulting

A Government Shutdown Is Likely on the Horizon: Will the Regulatory Process Also Hit Pause?

A Government Shutdown Is Likely on the Horizon: Will the Regulatory Process Also Hit Pause?

McDermottPlus is pleased to bring you Regs & Eggs, a weekly Regulatory Affairs blog by Jeffrey Davis.

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September 28, 2023 – Before jumping into the blog post this week, I want to give a special shout-out to my son, Jacob, who is turning 8 today! Happy birthday, Jacob, and many more!

Now, on to this week’s Regs & Eggs!

Passing the 12 annual appropriations bills that fund the federal government for the next fiscal year (which starts on October 1), or enacting a stopgap continuing resolution in the interim, seems to come down to the wire every year. But this year it appears increasingly likely that Congress will miss the deadline, causing a lapse in appropriations and a government shutdown. There has been much discussion about the implications of a shutdown, especially now that federal departments such as the US Department of Health and Human Services (HHS) have released contingency plans outlining the programs and activities that will remain operational and stating how many staff will be furloughed or “exempt” and can continue working. While it’s important to understand these plans and the totality of their implications, my colleague Erica Stocker and I want to highlight the effect that a shutdown could have on regulations and the regulatory process.

First, let’s cover the basics. In general, federal staff can continue working if they are funded by a source other than the annual appropriations bill, or if there is money left over from the previous fiscal year that is allowed to be “carried over” to support staff, programs and activities the following year. Commissioned Corps officers remain working as well. Further, some staff who are necessary to “ensure that fully funded programs continue operation, and that funded entitlement benefits are paid,” can continue working. These exceptions to the federal staff who are furloughed can be significant. According to the HHS contingency plan and latest summary tables, only about 40% of staff will be furloughed. Put another way, more than half of the staff must continue working on October 1 even if an appropriations bill doesn’t pass by September 30.

As someone who was a federal employee during the 2013 shutdown, I can tell you that many of the staff who continue working won’t be going about their normal jobs as of October 1. Now, there are some staff who can continue doing the same work they did on September 30. These staff work on programs with already-approved funding, such as the Centers for Medicare & Medicaid Services (CMS) Innovation Center (CMMI), or funding from user fees, such as the Clinical Laboratory Improvement Amendments program. However, other staff are kept on just to keep basic programs and activities functioning. These individuals are needed to ensure an “orderly” shutdown, or are used to make sure that entitlement programs such as Medicare and Medicaid keep operating so that beneficiaries can continue to receive healthcare services. Doing just enough to “keep the lights on” for these essential programs and activities is a far cry from what the government can accomplish normally. For example, Medicare and Medicaid beneficiaries can still go to their doctor or visit a hospital, and clinicians and facilities can still provide and bill for services. But depending on how long a shutdown lasts, providers could see a lag in their payments until Medicare Administrative Contractors receive additional funding. And although CMMI staff can continue developing new alternative payment models, any new model that CMMI plans to formally announce would likely be delayed, because the CMS and Office of Management and Budget (OMB) staff who are responsible for helping to approve and roll out new models could be furloughed.

So, with that context, how might a shutdown affect the federal regulatory process? The answer is: it depends on how long the shutdown lasts! If a shutdown lasts a few days, there probably will be no impact on the regulatory process. However, a shutdown lasting a few weeks or months could have a significant impact. Some major regs are expected to be released soon, including the No Surprises Act independent dispute resolution (IDR) proposed reg and most of the major Medicare calendar year payment final regs (the physician fee schedule and the outpatient prospective payment system final regs, to name a few). However, the CMS staff who work on these regs and the OMB staff who review the regs before they are released will likely be furloughed. If OMB staff can’t work on regs, especially staff within the Office of Information and Regulatory Affairs, then regs simply can’t be released. Therefore, unless CMS and HHS staff can do a ton of work between now and the end of the day September 30 to get the regs released, we may be looking at a delay in the release dates. If a long shutdown looks likely on Friday, September 29, Erica and I wouldn’t be surprised to see a big “dump” of regs (such as the IDR operations proposed reg) that are currently in OMB clearance and are close to being released.

However, it would be highly unlikely that the calendar year Medicare regs would be included in such a reg dump. The Medicare regs are required to come out on or around November 1 (60 days prior to the start of the next calendar year), but if the shutdown lasts a full month and there are fewer staff to work on them or approve them, CMS’s only option may be to put these regs out late. If that happens, CMS would have to decide whether the final regs can go into effect with less than 60 days’ notice or if their effective date should be pushed back. Following the 2013 shutdown, CMS released the Calendar Year 2014 Physician Fee Schedule almost four weeks late, on November 27, 2013. However, CMS waived the requirement for the final reg to be published 60 days in advance of the calendar year, stating that it “would be contrary to the public interest to delay the effective date” of the reg.

Beyond the major regs, any operational tasks or guidance that CMS and other federal agencies are working on would also likely be put on hold. For example, a government shutdown may further delay additional CMS guidance related to the No Surprises Act IDR process, potentially keeping the IDR process mostly suspended even longer. While CMS staff working on the No Surprises Act may be funded through the IDR user fees, any necessary approvals by HHS or OMB staff could be delayed because of furloughs. Further, if clinicians have questions about Medicare policies or scores under the Merit-based Incentive Payment System (MIPS), there may not be anyone available to answer them. As I know from my own experience, furloughed staff are not allowed to answer phone calls or look at or respond to emails until the shutdown is over (furloughed staff may be occasionally called in to perform a specific function or duty that is deemed essential, but once that function or duty is completed, they go back to being furloughed).

In all, a long government shutdown would truly put a pause on the regulatory process. Although a government shutdown has many serious implications (such as closure of national parks or federal employees and members of the military not being paid for the duration of the shutdown), the downstream ramifications of delayed regs should not be ignored. Healthcare regs are essential to ensure that clinicians and facilities are reimbursed for their services, that services are appropriately valued, that new drugs and devices are approved, and that quality of care is properly assessed. A world without regs, or one in which regs aren’t released when they should be, could cause confusion and affect healthcare providers’ financial stability. We sincerely hope that the shutdown, if it does occur, won’t last long and that we won’t have a prolonged period of regulatory delays as a result.

Until next week, this is Jeffrey (and Erica) saying, enjoy reading regs with your eggs.

For more information, please contact Jeffrey Davis. To access the full archive of Regs & Eggs, visit the American College of Emergency Physicians.

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