The ever-changing healthcare policy landscape will witness at the federal level regulatory changes driven by the need to transform healthcare delivery, quality and innovation. Looking forward in 2024, this summary examines a number of healthcare innovation topics that have seen significant policy activity in recent years and that are relevant to healthcare stakeholders, including providers, plans, electronic health record (EHR) vendors and health technology companies.

Stakeholders should use this summary to examine existing regulatory and compliance gaps, prepare their organizations to comply with forthcoming federal regulations, and keep apprised of federal funding opportunities. For more information on these policy developments, please contact the professionals listed below, or your regular Crowell contact.

Key takeaways

  • In 2024, we expect the federal government to build upon the significant progress made in the previous year to enact policy on healthcare and innovation issues, impacting digital health, health equity, and value-based care.
  • Congress is working to finalize Fiscal Year (FY) 2024 appropriations legislation that will fund the federal healthcare programs. This legislation will likely leave out some highly debated items such as site neutral payment policies for hospitals, hospital price transparency measures, and pharmacy benefit manager (PBM) reforms; however, there may be additional opportunities later in the year, possibly in the lame duck session, to include healthcare priorities in must-pass legislation. A number of legislative efforts have been focused on ensuring healthcare affordability and supporting transparency. Healthcare issues are top of mind for voters in the upcoming 2024 Presidential Election.
  • The Biden Administration will continue to work to advance via federal rulemaking its top health policy priorities. On March 11, the White House released the President’s FY 2025 Budget, which proposes providing federal funding to support a number of the Administration’s healthcare policy priorities, including lowering prescription drug prices, ensuring access to behavioral healthcare and strengthening mental health parity, improving women’s health outcomes, and advancing innovation through the Advanced Research Projects Agency for Health (ARPA-H). The President’s budget is a non-binding policy framework to inform Congressional action on spending legislation, but it signals the Biden-Harris Administration’s continued focus on specific healthcare policy priorities. 

Healthcare Artificial Intelligence (AI)

It is no surprise that we start our list off with AI, considering the flurry of policy activity and market developments we have seen in the previous year. The landscape of AI/machine learning (ML)-enabled tools as well as other types of digital health technologies is evolving at an unprecedented pace. A number of federal agencies have recently issued regulations and publications governing the use of AI systems and technologies in the health and human services sector. President Biden signed an Executive Order (EO) to establish new agency requirements in AI governance and innovation. It directs the Department of Health and Human Services (HHS), within the next year, to establish an HHS AI Task Force and develop a strategic plan on responsible deployment of AI, develop a quality strategy, address nondiscrimination, and establish an AI safety program.

In accordance with the AI EO, we expect federal agencies to build upon the guidance and publications they have already issued to govern healthcare AI. As organizations continue to adopt AI/ML tools, federal agencies will likely issue additional regulation—informed by public comment—to address specific issues regarding real-world use of these tools and specifically focus on enabling transparency, advancing safety and effectiveness, and ensuring patient privacy and security. We outline recent AI policy and program updates and provide analysis for specific agencies below.

  • The Office of the National Coordinator for Health Information Technology (ONC): ONC recently finalized the Health Data, Technology, and Interoperability: Certification Program Updates, Algorithm Transparency, and Information Sharing (HTI-1) Final Rule, which includes new requirements for developers of health information technology (IT) who include AI/ML-enabled clinical decision support (CDS), or predictive decision support intervention (DSI), in health IT modules. ONC emphasized that it extended the compliance deadlines for other provisions in the HTI-1 Final Rule so that developers could focus on implementing the predictive DSI requirements.
  • The U.S. Food and Drug Administration (FDA): As of October 2023, the FDA has approved over 170 AI/ML-enabled medical device tools, which are authorized to be marketed in the U.S. It has also issued numerous guidance and publications on AI/ML tools, including those related to drug development and device software functions. FDA Commissioner Robert Califf has spoken about the need for Congress to provide FDA additional authority to establish guardrails for algorithms beyond its current regulatory framework. We expect the FDA to be involved in policies related to safety of AI-enabled medical devices and continue to provide guidance in this area.
  • The Centers for Medicare & Medicaid Services (CMS): CMS has still not developed a pathway for reimbursement for use of AI-enabled technology. As this technology continues to proliferate, we will likely see CMS include proposals or requests for comments in 2025 fee schedule rules, as they consider payment approaches. CMS also recently published guidance on Medicare Advantage plans’ use of AI tools to make coverage decisions, addressing concerns but creating a pathway for use of AI based on individualized determinations that do not lead to biased results. We anticipate CMS will continue to respond to use of AI within CMS programs and may create additional guidance, in line with wider HHS’ efforts and in accordance with the EO.

Stakeholders should also expect to see additional Congressional action to regulate healthcare AI tools. The House and Senate health committees of jurisdiction have held hearings to discuss the benefits and dangers of using AI/ML tools for clinical care and other health care operations purposes. In September 2023, Senator Bill Cassidy (R-LA), Ranking Member of the Senate Committee on Health, Education, Labor and Pensions (HELP), issued a request for information (RFI) asking for stakeholder feedback on healthcare AI policy issues to identify current challenges and receive recommendations to inform potential legislation. In February 2024, House leadership also recently launched a bipartisan task force to develop and discuss policy guardrails for AI. According to a press release, the task force will seek to produce a report that will include guiding principles, recommendations, and bipartisan policy proposals. We also expect additional action from the Senate on its efforts to develop legislation to regulate and enable trustworthy AI, including in healthcare.

Health Data Privacy

We expect that both the Administration and Congress will take steps to advance policies related to health data privacy in the coming year. The President recently issued an EO directing federal agencies to issue regulations to protect sensitive personal data from exploitation by countries of concern that threaten U.S. national security and foreign policy, including provisions directing HHS and other departments and agencies to issue guidance ensuring that federal resources are not used to facilitate such access to Americans’ sensitive health data. The HHS Office for Civil Rights (OCR) is expected to finalize modifications to the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule (Privacy Rule) to add protections related to reproductive health data in response to the Dobbs v. Jackson Women’s Health Organization decision. OCR also has recently issued final modifications to the regulations governing confidentiality of substance use disorder data (i.e., Part 2 Regulations) to limit the restrictions and more closely align the rules with the Privacy Rule. There will likely be education sessions to support entities in understanding the rules as they modify their policies to accommodate these changes.

The Federal Trade Commission (FTC) has begun to take a leading role in health privacy oversight by initiating enforcement actions against companies that used consumer health data not covered under HIPAA without individuals’ authorization. Specifically, in 2023, the FTC took enforcement actions against three health apps for their use of health data under section 5 of the FTC Act and the Health Breach Notification Rule (HBNR). This year, we anticipate the FTC will finalize amendments to the HBNR to expand its authority regarding privacy of health data not regulated by HIPAA. We also anticipate more enforcement with regard to use and disclosure of health data by the FTC.

Members of Congress have proposed legislation to establish a comprehensive data privacy framework. Although these efforts have often carved out HIPAA, there is nonetheless continued interest in protecting health data. In February 2024, Senator Cassidy released a report to propose policy recommendations to revise the HIPAA framework and ensure privacy protections for health data. In the report, Senator Cassidy highlights recent health data breaches and outlines several proposals to modernize the HIPAA framework and other privacy regulations. We expect additional Congressional action in this area, including from the Senate HELP Committee, in the coming year.

Interoperability

Enabling systemwide interoperability has been a priority for the Biden Administration, with ONC leading and coordinating interoperability efforts at the federal level. ONC recently published the HTI-1 Final Rule and in the next few months will be releasing the HTI-2 Proposed Rule, which would include further changes to interoperability policies. In line with the release of the CMS Interoperability and Prior Authorization Final Rule, the HTI-2 Proposed Rule will likely include additional policies to improve the prior authorization process. The HTI-2 Proposed Rule will also include proposals to address information blocking and better standardize public health data infrastructure.

ONC continues to issue polices on and operationalize the Trusted Exchange Framework and Common Agreement (TEFCA), which has the goal to establish a universal governance, policy, and technical floor for nationwide interoperability. Since December 2023, ONC has officially designated a number of Qualified Health Information Network (QHIN) participants that have begun operating to share data under the Common Agreement’s policies and technical requirements. The TEFCA recognized coordinating entity (RCE) released in January 2024 draft Common Agreement Version 2.0 in addition to other TEFCA materials and allowed stakeholders to submit feedback. The RCE plans to finalize the TEFCA materials at the end of March. Stakeholders should expect to see this year major developments on TEFCA and other interoperability updates from ONC and the RCE. 

Prescription Drugs

In 2024. the Biden Administration will continue to implement the Inflation Reduction Act (IRA), a 2022 law which gave HHS the authority to negotiate with pharmaceutical companies the prices for certain prescription drugs. CMS announced in August 2023 the first 10 drugs covered under Medicare Part D selected for negotiation. Negotiations with participating drug companies and underway, and negotiated prices for selected drugs will become effective beginning in 2026. The FY 2025 President’s Budget builds on the IRA and contains a number of provisions related to lowering prescription drug prices. Specifically, it proposes expanding Medicare’s ability to negotiate directly with drug manufacturers to lower the price of some of the costliest single-source brand-name Medicare Part B and Part D drugs. It also proposes expanding inflation rebates and the $2,000 out-of-pocket prescription drug cost cap beyond Medicare and into the commercial market, among other drug pricing provisions.

In addition, Congress has been examining legislation to address high prescription drug prices, primarily through increased transparency in and changes related to PBMs. The House recently passed the Lower Costs, More Transparency Act, which includes policies to strengthen price transparency requirements for hospitals, insurers, and PBMs and to require consistent Medicare payment for physician-administered drugs in hospital outpatient departments or doctors’ offices. While passage of sweeping bipartisan, bicameral legislation is unlikely, the recent House vote and deliberations on these same issues in several Senate committees demonstrates that leaders of the health committees of jurisdiction and other members are focused on transparency and prescription drug reforms.

Medicare Flexibilities & Reimbursement

In 2024, Congress will likely focus on Medicare policy changes as expirations for key programs come closer, including those related to telehealth coverage and Medicare reimbursement policies. Specifically, Congress must pass legislation prior to 2025 if certain telehealth and the Acute Hospital Care at Home Waiver flexibilities are to continue beyond 2024. CMS enacted telehealth flexibilities during the COVID-19 pandemic, including flexibilities regarding geographic and originating site requirements. CMS also allowed certain Medicare-certified hospitals to treat patients with inpatient-level care at home, waiving specific hospital Conditions of Participation that require 24-hour onsite nursing for patients. Without Congressional action, these flexibilities will expire at the end of 2024. In a partial government funding bill signed into law on March 8, Congress included policies to address cuts to the Medicare Physician Fee Schedule (PFS) that went into effect on January 1. The legislation softens the decrease from -3.37% to -1.69% and is effective from March 9 to the end of 2024 but does not provide for retroactive claims processing.

In February 2024, several members of the Senate formed the Medicare Payment Working Group to investigate and propose reforms to PFS and make updates to the Medicare Access and CHIP Reauthorization Act (MACRA). It remains to be seen whether there is bipartisan, bicameral support, and enough legislative days on the calendar, to enact these broader Medicare payment reforms in an election year.

Value-based Care

In 2021, CMS outlined several CMS Innovation Center Strategic Objectives and charted a ten-year path to drive accountable and value-based care, identifying a goal to every Medicare beneficiary in an accountable relationship by 2030. According to CMS, patients will continue to participate in value-based care models, which will be fueled by an increase in commercial value-based care adoption, greater enrollment in Medicare Advantage, and the Medicare Shared Savings Program (MSSP). CMS continues introduce models to provide incentive payments and address populations beyond primary care to other specialties. The CMS Innovation Center also recently announced models related to expanding access to behavioral health services and bolstering primary care and maternal health care. These models have a specific focus to address health-related social needs (HRSNs) and to advance health equity. The FY 2025 President’s Budget includes proposals to expand value-based care programs, including implementing new programs for certain healthcare facilities to improve quality and health outcomes as well as making permanent the Home Health Value-Based Purchasing Model. We expect that the Innovation Center will continue to introduce disease or issue-specific models to address specific populations groups.

Photo of Jodi G. Daniel Jodi G. Daniel

Jodi Daniel is a partner in Crowell & Moring’s Health Care Group and a member of the group’s Steering Committee. She is also a director at C&M International (CMI), an international policy and regulatory affairs consulting firm affiliated with Crowell & Moring. She…

Jodi Daniel is a partner in Crowell & Moring’s Health Care Group and a member of the group’s Steering Committee. She is also a director at C&M International (CMI), an international policy and regulatory affairs consulting firm affiliated with Crowell & Moring. She leads the firm’s Digital Health Practice and provides strategic, legal, and policy advice to all types of health care and technology clients navigating the dynamic regulatory environment related to technology in the health care sector to help them achieve their business goals. Jodi is a contributor to the Uniform Law Commission Telehealth Committee, which drafts and proposes uniform state laws related to telehealth services, including the definition of telehealth, formation of the doctor-patient relationship via telehealth, creation of a registry for out-of-state physicians, insurance coverage and payment parity, and administrative barriers to entity formation.

Photo of Stacie Heller Stacie Heller

Stacie Heller is a senior policy director in Crowell & Moring’s Government Affairs group in the Washington, D.C. office. She assists clients in their efforts to shape legislative and regulatory policy. Stacie brings nearly 30 years of experience leading policy, patient and market…

Stacie Heller is a senior policy director in Crowell & Moring’s Government Affairs group in the Washington, D.C. office. She assists clients in their efforts to shape legislative and regulatory policy. Stacie brings nearly 30 years of experience leading policy, patient and market access, communications, and advocacy strategies.