You know you’re dealing with a very long piece of legislation when the summary alone is 53 pages. [1] That’s easy reading compared to the entire document, which weighs in at 4,155 pages. Signed into law on December 29 of last year, the Consolidated Appropriations Act, 2023 [2] — often referred to as the omnibus spending bill — includes several provisions that are relevant to healthcare, financial planning, and retirement planning. Here’s a brief look at just a few of them.
Telehealth
During the height of COVID, telehealth showed itself to be a viable and valuable alternative to in-person care. This legislation acknowledges this by extending telehealth coverage or “flexibilities” in two main ways. First, it expands the locations where telehealth is considered valid. Second, it extends the coverage for audio-only telehealth services—especially valuable to those who are not comfortable with or able to use video telehealth technology. [3]
Physician Reimbursement
There has been significant disappointment in the healthcare industry that this legislation maintained cuts in Medicare reimbursement amounts for physicians. While the percentage of the cuts will be reduced compared to earlier plans, any cuts at all are considered unacceptable by the physician community.
Pandemic Preparedness
The new legislation also includes significant funding for increasing our preparedness to respond to pandemics. This includes over a dozen provisions, but the two that might be of interest are efforts to enhance the collection of public health data and the establishment of the Centers for Public Health Preparedness and Response.
SECURE 2.0
Among the 4,155 pages are over 90 provisions that may affect retirement savings plans. [4] This is well beyond the scope of a short blog like this, but it’s worth pointing out two provisions here:
Age Increase for RMDs
The requirement to start taking Required Minimum Distributions (RMDs) will increase from age 72 to age 73 in 2023. It will increase to age 75 in 2033. Also, the penalty for not taking an RMD will be reduced from 50 percent to 25 percent of the amount required to be withdrawn, and to 10 percent if corrected within two years.
In 2023, plan participants who are 50 and older can contribute an extra $7,500 per year annually into their 401(k) account. This amount will increase to $10,000 per year starting in 2025, but for participants age 60 to 63. By the way, after 2023, catch-up contributions for participants earning over $145,000 per year will need to be made on a Roth (or after-tax) basis.
Sample of Spending
With such a massive amount of funding in this legislation, we thought it would be of interest to pick out a few to see where some of it is going. [5] Of course, the dollar amounts within the bill vary enormously. Here are three examples:
• $47.5 billion to the National Institutes of Health. This includes increased investments in research to address Alzheimer’s disease, cancer, and opioids among other major health issues.
• $118.7 billion for veterans medical care through the Department of Veteran Affairs
• $1.5 billion for the Advanced Research Projects Agency for Health (ARPA-H) with the goal of accelerating the development of scientific breakthroughs for diseases such as Alzheimer’s, diabetes, and cancer.
The Takeaway
Other provisions in the Act cover the expansion of access to long-term care insurance, creating new tax credits for caregivers, and providing specific tax incentives for long-term care expenses. It also includes a provision to create a new long-term care insurance program.
The U.S. federal budget deficit now exceeds $1.3 trillion, [6] so it may not be such a coincidence that this Appropriations Act was “only” $400 billion above that. It did, after all, help avert a partial government shutdown in a rather timely manner. Politics aside, we as financial advisors need to keep up with certain parts of these spending bills in order to help us understand larger economic and business trends. While we were at it, we thought you’d like to be aware of a few provisions as well.
Sources:
1https://appropriations.house.gov/sites/democrats.appropriations.house.gov/files/FY23%20Summary%20of%20Appropriations%20Provisions.pdf
2https://www.congress.gov/bill/117th-congress/house-bill/2617/text
3https://www.medicaleconomics.com/view/federal-budget-for-2023-medical-groups-praise-telehealth-flexibilities-pan-cuts-to-medicare-physician-payments
4https://www.adp.com/spark/articles/2023/01/secure-20-act-of-2022-makes-sweeping-changes-to-retirement-savings-plans.aspx
5https://www.aha.org/special-bulletin/2022-12-20-appropriations-committees-release-omnibus-spending-bill-health-provisions
6https://www.usdebtclock.org/
