United States: What's Next In Washington? - January 2023 Edition

The dust from the 2022 Midterm Elections has settled and the 118th Congress has begun. Republicans were successfully able to flip control of the House and now have a 222-212 majority with one vacancy to be filled. Democratic Congressman Donald McEachin (VA-04) passed away in late November and a special election is slated to take place in late February. Democrats maintained control of the Senate and gained a seat with Pennsylvania Lt. Gov. John Fetterman's (D) victory over Dr. Mehmet Oz (R) for retiring Sen. Pat Toomey's (R-PA) seat. Incumbent Sen. Raphael Warnock (D) won the runoff election in Georgia against challenger Herschel Walker (R) in December. Democrats will now hold the Senate 51-49.

With a new session underway, members are beginning to discuss the issues they plan to tackle in the new Congress. This includes legislation that was left over from the 117^th Congress and promises that were made on the campaign trail. A narrowly split Congress opens the door for bipartisan collaboration on key issues as new leadership takes over for the Republicans and Democrats. Without holding both chambers of Congress, the Biden Administration will continue to implement its regulatory agenda stemming from legislation passed in the 117^th Congress.

See below for greater detail on several key issues that will determine this month's agenda, new party leadership, legislative priorities, committee leadership, and more in this month's edition of What's Next in Washington? presented by the Foley & Lardner Federal Public Affairs team.

Recap of December

December began with the runoff elections in Georgia between Incumbent Sen. Raphael Warnock (D) and challenger Herschel Walker (R). Warnock won reelection and will now serve a full six-year term. This gives Senate Democrats a 51-49 edge in the Senate and will allow them to retain majorities on committees. Sen. Kyrsten Sinema (I-AZ) also announced that she will be leaving the Democratic Party and registering as an Independent. Sinema stated that she would still hold her committee assignments but will not attend Democratic caucus meetings. Sinema is up for reelection in 2024 and will run as an Independent.

Congress averted a government shutdown by passing an annual appropriations bill at the end of December. Senate Appropriations Chair Patrick Leahy (D-VT) and Ranking Member Richard Shelby (R-AL), both of whom retired at the conclusion of the 117^th Congress, were able to pull together the $1.7 trillion-dollar Consolidated Appropriations Act of 2023 (CAA) to fund the government through September 30^th, 2023. The final package includes the Electoral Count Reform Act, retirement savings reforms, additional funding for Ukraine, and a provision that bans the use of the app TikTok on government devices. Additionally, lawmakers boosted spending for the Department of Defense, appropriated funds to carry out the implementation of the Infrastructure Investment and Jobs Act and the Chips and Science Act. A notable absence in the bill was tax extenders. Democrats and Republicans could not find a deal that would satisfy both parties' goals. Democrats wanted an expansion of the Child Tax Credit, while Republicans wanted to extend various tax proposals from the 2017 Tax Cuts and Jobs Act, including research and development tax credits. Both sides have decided to punt the issue to the 118^th Congress.

Start of the 118th Congress

Despite its split nature, the 118^th Congress opens the door to a multitude of bipartisan cooperation. Bipartisanship may coalesce around permitting reform, tax extenders, energy policy and trade policy. To see a full rundown of priorities of the 118^th Congress, you can read more from the Foley team here.

Key Senate committees will now have new leadership. Sen. Patty Murray (D-WA) takes over for retired Sen. Patrick Leahy (D-VT) as chair of the Senate Appropriations Committee, while Sen. Susan Collins (R-ME) takes over the ranking member position for retired Sen. Richard Shelby (R-AL). Sens. Bernie Sanders (I-VT) and Bill Cassidy (R-LA) will take the reins on the Senate Health, Education, Labor and Pensions Committee (HELP), while Sen. Sheldon Whitehouse (D-RI) takes over for Sen. Sanders as the chair of the Senate Budget Committee. Sen. Tim Scott (R-SC) will take over for retired Sen. Pat Toomey's (R-PA) ranking membership on the Senate Banking, Housing, and Urban Development Committee.

Party leadership of the House will have a completely new look for the 118^th Congress. Republicans now control the majority, which involves electing a new speaker of the House. After multiple ballots, House Republicans voted in Kevin McCarthy (R-CA) as speaker. Conservative opposition from members of the House Freedom Caucus, as well as freshman Republicans, led to the first multiple ballot speaker election since the 63^rd Congress in 1923. Rep. Steve Scalise (R-LA) will now become House Majority Leader and Rep. Tom Emmer (R-MN) won the race to become House Majority Whip. Rep. Elise Stefanik (R-NY) was reelected Republican Conference Chair, Rep. Mike Johnson (R-LA) was reelected as Republican Conference Co-Chair, and Rep. Richard Hudson (R-NC) will now take over as the National Republican Congressional Committee Chair.

House Democratic Leadership has a new look after Speaker Nancy Pelosi (D-CA) and Majority Leader Steny Hoyer (D-MD) announced that they will be stepping down from leadership in the 118^th Congress. Rep. Hakeem Jeffries (D-NY) is now the House's top Democrat as Minority Leader, Rep. Katherine Clark (D-MA), will become the Minority Whip, and Rep. Pete Aguilar (D-CA) will become the Democratic Caucus Chair. Rep. Ted Lieu (D-CA) will now become the Democratic Conference Vice-Chair and Rep. Joe Neguse (D-CO) will become Chair of the Democratic Policy and Communications Committee. Previous Democratic Whip Jim Clyburn (D-SC) will remain on the leadership team as Assistant Caucus Leader, while previous Speaker Nancy Pelosi (D-CA) will retain the title of "Speaker Emerita" and previous Majority Leader Steny Hoyer (D-MD) will retain a leadership role on the House Appropriations Committee.

The House Ways and Means Committee will have a new Chairman with the flip of control to the Republicans and the retirement of Rep. Kevin Brady (R-TX). Rep. Jason Smith (R-MO) will chair the committee, while Rep. Richie Neal (D-MA) will retain his spot as top Democrat. The House Budget Committee will have new leaders as Rep. Brendan Boyle (D-PA) will succeed retired Rep. John Yarmuth (D-KY) as Ranking Member, and Rep. Jodey Arrington (R-TX) will take over as chair. House Democrats endorsed Rep. Rick Larsen (D-WA) for Ranking Member of the Transportation & Infrastructure Committee, and Rep. Jamie Raskin (D-MD) as ranking member of the Oversight Committee. Rep. Virginia Foxx (R-NC), the current top Republican on the House Education & Labor Committee, was granted a waiver and will lead the Committee in the 118^th Congress, which has regained its Republican majority title, the "Education and Workforce Committee".

The House Republican steering committee has so far named the new ratios and new members to the "A" committees, including Appropriations, Energy and Commerce, Financial Services, and Ways and Means. New and returning members have also been named to the House Agriculture committee, with the expectation that remaining House ratios will be negotiated this week and Republican leadership is expected to announce lists for Transportation and Infrastructure, Judiciary, and Armed Services as soon as today or tomorrow. Senate committees are expected to take shape after a return from recess later this month, and the same goes for House Democrats. We will continue to update our list here.

All in all, the 118^th Congress brings 86 new members of the House and Senate into the fold. Seven new senators and 79 new representatives will make up the new Congress. You can learn more about the new Members here.

What's Left Over from the 117th Congress?

The 117^th Congress was an extremely productive legislative session with the passage of multiple major legislative packages, government funding, and a variety of bills. However, there is still unfinished business that was not passed in time for the 118^th. During negotiations of the CAA, Democrats, and Republicans attempted to coalesce around a "tax extenders" package that would extend or expand multiple parts of the tax code. A notable absence from these negotiations was that of the State and Local Tax deduction (SALT). SALT was a key sticking point during negotiations of the Build Back Better Act and remains a hot-button issue in states where Republicans made major gains including, New York, New Jersey, and California. The 2017 Tax Cuts and Jobs Act set a cap on SALT deductions, with a sunset in 2025, however there has been increasing calls for a repeal of the SALT cap prior to then. As it was in the 117^th Congress, SALT is sure to be on the docket in the 118^th Congress.

There was an influx of legislation throughout the 117^th Congress aimed at regulating the tech industry. Despite their bipartisan nature, none were enacted. The American Data Privacy and Protection Act passed out of the House Energy and Commerce Committee with near unanimous support in 2021, but it failed to get the backing of Senate Commerce Chairwoman Maria Cantwell (D-WA) or House Democratic leadership. Sen. Amy Klobuchar's (D-MN) American Innovation and Choice Online Act, which aims to limit tech companies from preferencing their own products and services, was reported out of the Senate Judiciary Committee, but also failed to pass. House Judiciary Chairman Jim Jordan (R-OH) has stated that the committee is likely to take up content moderation legislation. The Supreme Court will also hear cases related to content moderation issues and Section 230 of the 1996 Communications Decency Act this upcoming term, which could affect the legislative outlook on this issue.

Many outstanding pieces of healthcare legislation and priorities will need to be reintroduced, including Cures 2.0, mental health legislation, pharmacy benefit manager (PBM) reform, among others. Since 2021, House Republicans have been working to create a blueprint for their healthcare plans through the creation of the Healthy Future Task Force, chaired in the 117^th Congress by Reps. Brett Guthrie (R-KY) and Vern Buchanan (R-FL). The overall goals of the 17-member task force are to modernize the health care system to help lower costs, develop better therapies and cures, and provide Americans with more choices. Among other things, priority items for this group on behalf of House Republicans include prevention of cyberattacks against healthcare providers; expansion of Medicare device coverage; tech oversight and innovation; oversight of health agencies; and drug affordability for seniors. Additionally, it is certain that investigations into the handling of the COVID-19 pandemic will be a key part of the House Republican's investigatory agenda.

Regulatory Agenda

Last week, the Office of Management and Budget released the Biden Administration's "2022" Unified Regulatory Agenda and Regulatory Plan, with 2,651 rule changes listed. They touch on areas ranging from energy standards, implementation of portions of the Inflation Reduction Act (IRA), including its guidance on EV tax credits, and various other items related to health and safety, clean air and water, and climate change. With regards to the EV tax credits, the Biden Administration already issued some guidance on the $7,500 tax credit for consumers, which went into effect on January 1. However, guidance on the sourcing of critical minerals and battery components that vehicles must meet to qualify for tax incentives has been delayed until March.

Implementation will continue for the Infrastructure Investment and Jobs Act, including its highly anticipated hydrogen hubs. In December, the Department of Energy (DOE) released encouragement/discouragement notifications to projects, encouraging 33 out of the 79 concept projects to continue with their full application, which is due April 7, 2023. Projects that did not get a letter of encouragement are not disqualified from applying for funding. DOE is anticipated to select six to 10 projects in the summer or fall of 2023 for a total of $7 billion in investment.

On December 30, the Environmental Protection Agency (EPA) and Army Corps of Engineers issued their finalized rule on the Waters of the United States (WOTUS) guidelines. The new rule would give federal protection to large waterways that are adjacent to them, utilizing terms that were rooted in the 2006 Rapanos v. United States ruling and the Obama Administration's 2015 rule. WOTUS rules have been subject to significant litigation efforts since their introduction in the 1970s. The Supreme Court is currently considering Sackett v. EPA, which could alter the rules placed by the EPA. Additionally, some members of Congress, led by Sen. Shelley Moore Capito (R-WV), are calling for use of the Congressional Review Act (CRA) to counter the Biden Administration's new rule. The CRA allows for Congress to repeal an agency's rule with the passage of a joint resolution in both the House and the Senate, in addition to the President's signature or an overriding veto.

The Advisory Committee on Ground Ambulance and Patient Billing (GAPB), created by The No Surprises Act, will convene for the first time on January 17 with the requirement of submitting a report 180 days after that first meeting that includes recommendations on the disclosure of charges and fees for ground ambulance services, insurance coverage, and the ultimate prevention of surprise billing. You can read the latest press release from CMS and register for this virtual meeting here.

Implementation of the Medicare and Medicaid provisions of the IRA will continue in the following ways:

• Cost-sharing for insulin (Medicare prescription drug plan, Traditional Medicare)
• Cost-sharing for vaccines (Medicare Part D) and full coverage for ACIP-recommended vaccines (Medicaid, CHIP)
• Medicare Part B rebates for drug manufacturers
• Co-insurance for some drugs (Traditional Medicare Part B)
• CMS will announce the first 10 drugs selected for the Drug Price Negotiation Program (Medicare Part D)

The Public Health Emergency (PHE) will be renewed again before its current expiration date of January 12, but the Biden Administration is seeking an end to the declaration as early as this spring. They have promised states a 60-day notice before ending the health emergency to provide them with enough time to create a plan of action. Two pieces that have already been untied from the PHE via the CAA are Medicare telehealth extensions (which will now continue through 2024), and the expiration of continued Medicaid enrollment. As of April 1, states will be able to start removing ineligible residents from the Medicaid program. A coverage freeze was initially brought on by the Families First Coronavirus Response Act (2020) and was tied to the PHE. However, the CAA unties the Medicaid freeze from the PHE. The Center for Medicaid and CHIP Services (CMCS) released a memo detailing key dates for expiration of enrollment and plans to meet with and provide assistance to states.

The Food and Drug Administration seeks to gain more authority over tests developed in academic or hospital labs, and Commissioner Robert Califf intends to do so through the rulemaking process. A provision in the CAA that would have solidified this reform was ultimately removed before passage.