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HIMSS26: Building the Foundation for Interoperable, AI-Ready Healthcare 

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Key Insights from the 2026 HIMSS Global Health Conference and What They Mean for Your Organization  

American healthcare is confronting two urgent realities. First, the administrative burden on clinicians and patients remains very high. Prior authorization delays, manual intake forms, fragmented records, and identity challenges continue to drive cost and erode the trust that is the foundation of the provider-patient relationship. At the same time, artificial intelligence (AI) capabilities are advancing rapidly, outpacing governance frameworks, regulatory structures, and data infrastructure. Together, these dynamics are the defining operational challenge of 2026. 

Federal policy is responding less through sweeping new regulation than through coordinated execution levers. The Centers for Medicare & Medicaid Services (CMS) initiatives, including the Health Technology Ecosystem, information blocking enforcement, Health Data, Technology, and Interoperability (HTI-5) Proposed Rule , and the prior authorization (PA) final rule, reflect a shift toward making interoperability operational in production environments. What distinguishes this moment from prior efforts is the explicit linkage between interoperability and AI. Federal leaders are saying openly that reliable, trustworthy, and deflationary AI depends on disciplined data exchange, identify, and governance. 

The 2026 HIMSS Global Health Conference & Exhibition (HIMSS26), March 9–12, in Las Vegas, NV, marked a marked a turning point in which the industry began translating that message into tangible organizational decisions. Two Health Management Associates (HMA), companies actively engaged in the program: the Leavitt Partners digital health team moderated sessions in the preconference forums and Interop Experience Pavilion, and Wakely Consulting Group, lent their expertise in Medicare Advantage (MA), Medicaid managed care, risk adjustment, and quality measurement—the areas in which FHIR-based infrastructure will directly reshape performance and risk management. 

This article reflects what these teams learned and what it means for the industry. 

What We Learned at HIMSS 

Several themes surfaced throughout the conference, not as isolated ideas but as shared assumptions of the field shaping near-term strategy: 

Successful AI deployments rely on interoperability and quality data.  Across sessions and conversations, speakers emphasized that success will require not just access, but data that are standardized, governed, and semantically consistent. The promise of AI is advancing quickly, but many organizations are still working to build the data foundation needed to support it. 

CMS-aligned networks are paving the way for federal transformation. Concrete pledge deadlines, and a Centers for Medicare & Medicaid Services (CMS) Administrator willing to say publicly that healthcare is the only sector where technology has failed to be deflationary, sent a signal that the industry took seriously. Voluntary frameworks are being seen as previews of future requirements. 

Information blocking enforcement is no longer theoretical. Officials from ASTP/ONC confirmed that notices of potential nonconformity have already gone out to health IT firms under the certification program, and more are on the way. With Department of Health and Human Services Office of the Inspector General penalties of up to $1 million per active violation and more than 1,500 complaints filed since the federal portal launched, the compliance calculus has shifted. Dr. Thomas Keane, National Coordinator for Health Information Technology, was direct: Developers that block information risk losing their certification, and their clients risk losing access to CMS payment incentives. The long implementation runway is over, enforcement is now active, and the consequences are real. 

The federal vision for AI is patient-first. CMS Administrator Dr. Mehmet Oz said to slow the inflationary effects of the growth in healthcare technology, he wants to put agentic AI tools in the hands of every Medicare beneficiary before the end of this administration—an ambitious goal. He cautioned, however, that none of it works without building the necessary data infrastructure now. AI is the destination; interoperability is the road. 

CMS is ready to pivot to digital quality measures and put investment behind it. CMS and ASTP/ONC leadership announced that all quality measures will now be modeled on HL7 FHIR. MultiCare Connected Care showed it working in production. Early adopters will shape the pathway and gain strategic advantage as the transition accelerates. Successful transformation will require simplified workflows, established lines of accountability, and a product-oriented mindset geared toward data and interoperability. 

Identity is a known gap, but the solution is taking shape. Patient matching, provider directories, and consumer-facing credentialing came up in nearly every policy and technical session. The $6 billion CMS cited for annual provider directory validation waste alone captured attendees’ attention. But HIMSS26 brought concrete, live progress on the credential side and a Leavitt Partners-moderated preconference session focused on moving the industry from alignment in principle to alignment in production. 

Governance is now an operational discipline. Health system chief information officers and chief medical information officers described governance structures already in place and under active revision. The shift from “we need governance” to “our governance needs to evolve” was palpable. 

Consumer technology has entered the clinical conversation. Emory Hillandale Hospital’s announcement of the first all-Apple facility signaled that the boundary between consumer devices and clinical infrastructure is evolving. 

Autonomous AI systems were everywhere. Vendors demonstrated how AI agents are handling administrative workflows, such call centers, revenue cycle, scheduling, and PA. Health system leaders acknowledged real deployments alongside real uncertainty about governance, security, and identity management for non-human actors in clinical environments. The technology is moving faster than the frameworks designed to oversee it. 

What It Means: Five Insights 

The CMS Health Technology Ecosystem is redefining what “interoperable” means for federal programs; TEFCA will scale what it proves 

For years, interoperability has been a certification checkbox rather than a functional description. The CMS ecosystem is changing that by tying the definition to observable behaviors: HL7 FHIR APIs that respond, encounter notifications that fire, identity verification that works at the front door. More than 700 organizations have pledged; CMS has set hard deadlines (March 31 for initial results, July 4 for advanced capabilities), and the agency is tracking outcomes, not just attestations. 

In the fireside chat moderated by Leavitt Partners Principal Ryan Howells, Dr. Thomas Keane was direct: The regulatory cycle is slow, and what the ecosystem can produce in nine months is what the regulations will eventually codify. Organizations that shape this work now will have less catching up to do when it becomes mandatory. 

The Trusted Exchange Framework and Common Agreement (TEFCA), which now exchanges 600 million health records across 75,000+ organizations (up from 10 million in January 2025), is the rising tide that scales what the speedboat networks prove. And state-level health information exchanges (HIEs) remain strategically important given their governance structures, trust relationships, and operational capabilities. 

Provider directory is the sleeper issue 

Patient matching and digital identity got considerable attention, but a provider directory may be the highest-yield near-term opportunity. CMS estimates $6 billion is wasted annually simply validating where providers practice, what licenses they hold, and what insurance they accept—a problem that compounds every time a payer, health system, or patient tries to connect with the right clinician through the right channel. 

A real-time, standardized provider directory is foundational to PA, network adequacy, and care navigation. It is also one of the three heavy lifts that the CMS Health Technology Ecosystem is actively working to address. Organizations that invest now in clean, FHIR-based provider data will be ahead of an upcoming requirement. 

Semantic Consistency Determines AI Outcomes 

The distinction between syntactic interoperability (data move between systems) and semantic interoperability (data means the same thing in every system) was a running thread through the Interoperability and HIE Forum. Dan Liljenquist, chief strategy officer at Intermountain Healthcare, put the operational reality plainly during his keynote address: Intermountain is building a unified semantic data layer in the cloud—ingesting EHR data daily, normalizing it against common models, making it computable across 34 hospitals—because without that layer, AI produces unreliable outputs at scale. 

Graphite Foundry, the mechanism Graphite Health is developing as a nonprofit collaborative, represents a model where health systems build shared semantic infrastructure rather than solving the same problem independently behind proprietary walls. The broader implication: AI strategy and data infrastructure strategy are the same, and organizations that treat them separately will find that their AI investments underperform. 

Digital Identity and Privacy Architecture are Converging 

Policy and industry discussions reflected growing alignment around higher‑assurance digital identity, privacy‑preserving design, and consistent credentialing. Progress in this area reduces friction for patient‑directed access while supporting trust and security across ecosystems.  

Mr. Howells moderated the preconference session, Bridging Digital Worlds: Identity Federation Strategies Across B2B and B2C Ecosystems, which brought together CMS Chief Health Technology Officer Alberto Colon Viera, David Bardan (CLEAR), Wes Turbeville (ID.me), and Renee Edwards, Applied AI at UnitedHealth Group. The session produced three concrete outcomes:  

  • CMS confirmed Medicare.gov is now live with CLEAR, ID.me, and Login.gov, meaning consumers can choose which credential they use and relying parties can leverage that same credential to authenticate consumers into their own systems.  
  • Participants agreed on a common IAL2 token payload.  
  • UnitedHealth Group announced United Health Group’s pursuit of Kantara certification and unification of all their portals to a single identity based on IAL2. 

Identity has long been a blocker to scalable patient access. Aligning on a common IAL2 model removes another friction point and moves the industry closer to a future in which patients can securely access their medical records through the apps they choose. 

Interoperability is Expanding Beyond Traditional Boundaries  

For years, FHIR-based infrastructure has been built primarily around clinical and claims data. But two sessions in signaled meaningful progress on two long-neglected fronts: pharmacy and oral health. Pharmacy data — critical to medication management, managed care, and complete longitudinal records—are increasingly being drawn into the standards-based exchange ecosystem, including the recognition of pharmacists as clinicians whose data and clinical contributions belong in the longitudinal record. 

Patients are also gaining real-time visibility into their own pharmacy benefits: the Consumer Real-Time Pharmacy Benefit Check, an open FHIR-based standard, puts cost and coverage information directly in patients’ hands at the point of prescribing — a meaningful step toward the same patient empowerment that the “kill the clipboard” and digital identity work is driving elsewhere in the ecosystem.  

Oral health data, long absent from the medical record despite its correlation with diabetes, cardiovascular disease, and maternal health, is now the subject of active federal interoperability investment across CMS, the Veterans Health Administration, and the Indian Health Service. Leavitt Partners’ alliances in both domains—the Oral Health Interoperability Alliance and the Pharmacy Interoperability and Clinical Services Alliance (PICSA)—are helping shape the technical and policy frameworks that will bring these data streams into the broader ecosystem. Whole-person care requires whole-person data, and the field is finally building the infrastructure to support it. 

What Remains Unresolved 

Despite momentum, several issues remain unresolved:  

The Role of Payers in TEFCA and National Exchange is Still Evolving 

There is growing interest in extending TEFCA beyond provider-to-provider exchange to support payer use cases such as quality measurement, care management, and prior authorization. However, questions remain around participation models, data rights, governance, and value alignment. Until these are resolved, payer engagement will likely remain uneven, limiting the full potential of nationwide exchange. 

The Business Case for Interoperability is Not Yet Consistently Realized 

While the policy direction is clear, the economic incentives are still misaligned. Providers often bear the operational burden of data exchange, while financial benefits may accrue elsewhere. Similarly, investments in interoperability infrastructure do not always translate into immediate or measurable returns. Advancing adoption will require clearer ROI pathways, shared incentives, and models that distribute value more equitably across stakeholders. 

Governance and Operating Models are Still Catching Up to the Technology. 

There is increasing recognition that interoperability at scale is not just a technical challenge — it is a governance challenge. Questions around enforcement, delegation of authority, participant accountability, and operational oversight remain active areas of development. As exchange expands, these governance structures will need to mature rapidly to sustain trust and ensure consistent implementation. 

Near-term signals, such as CMS responses to pledged-network deadlines, finalization of HTI5 and related rules, continued prior authorization modernization, and digital quality measure implementation, will shape the next phase of execution. 

What We’re Watching 

Extending Open Standards to Rural and Underserved Providers 

The Rural Health Transformation Program offers a unique opportunity to expand the open standards ecosystem being built. Leavitt Partners and Wakely are engaged in both the policy conversations and implementations that will determine how to ensure this opportunity can transform healthcare. 

March 31 and July 4 deadlines 

CMS set these dates publicly and specifically. How the agency responds to organizations that miss them will signal how serious the voluntary framework really is and how quickly it becomes a program condition. 

HTI-5 Finalization and HTI-6 Proposed Rule 

ONC’s proposed rule to focus certification on HL7 FHIR APIs, algorithm transparency, and interoperability is still in proposed form. Finalization, as proposed, would transform the vendor landscape and remove the safe harbor that legacy proprietary interfaces have relied on. 

Prior Authorization is Moving 

The federal regulations and last summer’s voluntary commitment by more than 60 health insurers covering 257 million Americans across commercial, Medicare Advantage, and Medicaid markets has created a moment of regulatory and industry alignment. Payers committed to reducing the volume of services requiring PA, standardizing electronic PA using HL7® FHIR® APIs, and answering at least 80 percent of electronic requests in real time by 2027. The direction is clear, the commitments are specific, and the infrastructure to support them — HL7® FHIR® APIs being built for patient access and the ecosystem is the same infrastructure PA modernization requires. Leavitt Partners and Wakely are watching closely as implementation moves from pledge to production.  

The Digital Quality Measure (dQM) Enters the Implantation Phase 

CMS has made clear where the market is headed: digital quality measurement built on HL7 FHIR. The challenge now is execution. FHIR infrastructure developed for prior authorization or patient access can be leveraged for quality reporting as well, creating the potential for reusable investment across use cases. But the transition to dQM is not simply a technology upgrade; it is a broader business transformation that will require changes in workflows, governance, and organizational readiness. 

Digital Identity Momentum 

The IAL2 token payload agreement, Medicare rollout of digital identity, and United Health Group’s Kantara pursuit signal that the industry is aligning on a shared credential infrastructure. Leavitt Partners will continue to support the development and adoption of the open identity standards that make patient-directed access real across payers, providers, and health technology platforms. 

The infrastructure for an interoperable, AI-ready healthcare system is being built under real policy pressure in real-world environments. HMA companies bring health IT policy and open standards expertise to help organizations shape and navigate that landscape as well as actuarial and implementation depth to translate it into financial and operational decisions. Organizations that invest in the foundation—data, identity, standards, governance—will be positioned to move faster and more responsibly as AI capabilities continue to advance. 

We Can Help 

HMA companies are uniquely positioned to help organizations move from interoperability strategy to real-world execution. We provide end-to-end support across digital quality measurement transformation, policy-to-operations execution, pharmacy interoperability, oral health interoperability, digital insurance cards, and the actuarial and financial modeling needed to assess performance impact, revenue implications, and reporting risk. Leavitt Partners and Wakely professionals were active participants in HIMSS26 conversations and bring the policy, operational, measurement, and financial expertise needed to help clients prepare for what comes next. 

This blog reflects policy signals and public session content from the 2026 HIMSS Global Health Conference. It represents the perspective of Leavitt Partners and Wakely Consulting Group, both HMA Companies, and does not constitute legal or regulatory advice

Fiscal 2027 State Budget Proposals: Provider Taxes, Medicaid Financing, and OBBBA Effects

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As of March 15, 2026, most governors had released proposed budgets for state fiscal year (FY) 2027. In addition, several governors in states that enacted biennial budgets in 2025 have released supplemental proposals. These FY 2027 state budget proposals signal how governors are responding to Medicaid financing changes, provider tax phase downs, and new implementation costs created in the 2025 Budget Reconciliation Act (P.L. 119-21, OBBBA). 

Given the requirement enacted in OBBBA, this year’s state budgets are more than spending plans. They are critical policy tools governors will use to navigate changes in federal funding, new program requirements, and increasing pressures across Medicaid and broader healthcare markets. 

The FY 2027 budgets indicate how governors are attempting to balance competing imperatives: maintaining healthcare coverage and access, stabilizing provider networks, financing Medicaid obligations, and aligning state healthcare and health-related programs with new federal rules. Healthcare provider taxes, revised funding priorities, and targeted funding proposals are key levers in the process of balancing budgets. 

Health Management Associates Information Services (HMAIS) has published its final iteration of the FY 2027 Proposed State Budget Overview Report (subscriber access required), which examines proposed FY 2027 state budgets (January 22, 2026, A Look at Proposed State Fiscal Budgets). Our March 2026 issuance covers all proposed FY 2027 budgets for non-biennial budget states and some supplemental budget proposals for states that enacted biennial budgets in 2026. Following is a look at key trends in Medicaid proposals and some of the substantial budget proposals that are discussed within the report. 

Provider Taxes and Medicaid Financing Under OBBBA 

One notable fiscal federal policy change under OBBBA is the phase down of the Medicaid provider tax programs, a financing mechanism many states rely on to draw down federal matching funds and support provider payments. The federal law freezes existing provider tax programs, prohibits new ones, and requires Medicaid expansion states to phase down the minimum allowable tax rate from 6 to 3.5 percent by 2032. 

In addition, OBBBA places new limits on state-directed payments, capping them at 100 percent of Medicare rates for expansion states and 110 percent for non-expansion states. Grandfathered payment arrangements will be phased down by 10 percent annually beginning in 2028. 

FY 2027 state budget proposals highlight how these changes will have substantial and long-term fiscal impacts, even if some effects are delayed. Examples include: 

  • Arizona estimates it will receive $5.3 billion less in federal support between FY 2029 and 2033 as a result of policy changes. 
  • California projects that state expenditures for Medi-Cal will grow $2.4 billion in FY 2027, largely because the Medical Provider Interim Payment expires in FY 2026 and a decrease in managed care organization (MCO) tax revenue available to support the Medi-Cal program. Gov. Gavin Newsom’s proposed FY 2027 budget assumes a transition period for the decreased MCO tax through December 31, 2026. 
  • Connecticut Gov. Ned Lamont’s proposed supplemental budget for the 2025–27 fiscal biennium calls for reducing hospital provider taxes by $275 million. Connecticut increased supplemental payments and provider taxes during the 2025 legislative session, but the governor’s proposal would reduce the inpatient hospital provider tax rate from 6 percent to 4.1 percent. 
  • Illinois projects that most of the budgetary impacts will begin in FY 2028, with federal Medicaid support reduced by approximately $2.8 billion annually by FY 2031. 
  • New York Gov. Kathy Hochul’s budget proposal updates the managed care tax spending plan and estimates the state will collect $1.5 billion fewer receipts than anticipated in fiscal 2027. 

Implementation Costs: Staffing, Systems, and Administrative Burden 

Along with the decreased federal funding, implementing OBBBA carries significant administrative and operational costs, compounding pressure on state budgets. 

According to an Associated Press analysis of 25 state budget protections, states will need to spend up to $1 billion in federal and state funds on technology upgrades and additional staff to fully implement the Medicaid work and community engagement requirements. Many FY 2027 budgets reflect this reality, with new investments focused on expanding staffing capacity and modernizing eligibility and data systems. For example:

  • Michigan’s proposed budget, for example, includes $186.6 million from the state general fund to fully implement OBBBA, including $80.3 million in all funds to hire additional full-time employees who can meet the increased workload. 
  • Missouri proposes $294.6 million and dedicated staff members to comply with OBBBA. 
  • Arizona proposes a $14.4 million one-time investment and dedicated OBBBA implementation staff. 

Several governors also propose investments to help beneficiaries remain enrolled amid more frequent eligibility checks and new requirements. For example: 

  • Kentucky proposes $35.6 million in FY 2027 and $11 million in FY 2028 to modify the Medicaid information technology systems and other administrative systems to cover increased costs for the more frequent six-month eligibility redeterminations and to implement the new community engagement and work requirements. 
  • Rhode Island proposes $32.7 million for technology modifications to the RIBridges software to maintain compliance for various health and human services programs to align with OBBBA. 

What to Watch: FY 2027 Budget Decisions and Medicaid Financing Risks 

Upcoming provider tax phase downs and caps on state-directed payments constrain core funding tools just as implementation costs for staffing and systems are rising, forcing difficult decisions about coverage, provider support, and administrative capacity. Providers face growing uncertainty as tax supported supplemental payments are reduced or restructured, with potential implications for cash flow, service availability, and network participation. 

Managed care plans, meanwhile, must navigate shifting rate development assumptions, changes in provider payment arrangements, and increased enrollment churn tied to eligibility and redetermination changes. 

While the timing and magnitude of effects vary, these proposals underscore that provider tax and supplemental payment changes are more than abstract future concerns. They already are shaping FY 2027 budget decisions and long-term Medicaid financing strategies. 

Most state legislatures are still debating their spending plans, making it critical to track which proposals are included in FY 2027 budgets, which are scaled back, and which are eliminated. These budget decisions will play a central role in determining market stability, access to care, and program sustainability in the years ahead. 

HMAIS will publish additional reports in the coming months summarizing each state’s enacted budget. The first iteration is expected in May 2026. 

Connect with Us 

As the policy and funding landscapes continue to evolve, states and other stakeholders need to remain flexible. HMA brings the expertise, tools, and insights needed for stakeholders to stay on top of the rapidly changing environment. For questions or to connect with an HMA expert, contact Andrea Maresca and Kathleen Nolan. 

The full report is available to HMAIS subscribers. Questions can be directed to Maddie McCarthy. 

Connecting the Dots: Medicaid Community Engagement Requirements and State Readiness for 2027

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New federal Medicaid community engagement requirements, along with more frequent redetermination and a reduced retroactive eligibility timeframe, take effect January 1, 2027. These changes are reshaping state Medicaid policy agendas, budget decisions, and eligibility system design as states prepare to implement federally mandated work and community engagement requirements for the Affordable Care Act (ACA) expansion population. This blog addresses the forthcoming policy changes, key issues related to eligibility and information systems, and timely actions for state partners preparing to meet the new requirements.

Community engagement requirements often are discussed in broad terms: whether they encourage self-sufficiency or create barriers. For state Medicaid agencies, managed care plans (MCPs), and providers, however, the more immediate and consequential question is operational: Is the Medicaid program—across eligibility systems, data flows, partner roles, and communications—ready to administer these requirements without losing eligible people? 

Based on our work with states, Medicaid programs, and community partners, the answer is dependent on the approach to execution. Specifically, it hinges on how states prepare their systems and partners for compliance with community engagement requirements without placing undue burden or expectations on beneficiaries, government agencies, MCPs, and community partners. 

Federal Context: Medicaid Community Engagement Requirements Beginning in 2027 

Under federal law, states that extended Medicaid to able‑bodied adults in the ACA Medicaid expansion population (up to 138 percent of the federal poverty level) must: 

  • Apply community engagement requirements to expansion adults, unless they qualify for an exemption 
  • Conduct eligibility redeterminations at least every six months for these enrollees 
  • Reduce retroactive coverage eligibility from 90 to 30 days 
  • Verify community engagement or exemptions using available data sources 
  • Enforce consequences for noncompliance beginning in 2027 

Forthcoming federal guidance and regulations will clarify key implementation details. In the interim, states are using the statutory framework to design the necessary policy changes. For example, many states will move beyond a simple “requirement” model toward support-oriented programs that make compliance achievable for enrollees, minimizes administrative churn, and leverages available data and information systems functionality to reduce compliance burden. In so doing, states need to use existing federal guidance to answer the following questions: 

  • Who is in scope and who is exempt and how are exemptions verified without creating new burdens on enrollees and the people and systems that support them? 
  • What counts as a “qualifying activity” for compliance with the community engagement requirement (e.g., education/training and caregiving)? 
  • Which data sources can be deemed as “authoritative” for verifying compliance? 
  • How and when will beneficiaries be notified, supported, and given opportunities to supply missing information? 
  • How do they track compliance with the community engagement requirement and address its intended and unintended impacts? 
  • How do the verify eligibility for new applicants and what process do they use to monitor ongoing compliance for existing enrollees? 

Analyis and planning for community engagement is underway now, state by state, and will determine whether the mandates will increase employment, education, and volunteerism and yield the expected health and economic benefits or drive avoidable coverage loss. 

From Policy Requirement to Workable Medicaid Community Engagement Implementation 

The community engagement, redetermination, and reduced retroactive coverage requirements touch multiple components of a Medicaid enterprise, including: 

  • Eligibility and enrollment systems and renewal workflows 
  • Data sources (wage databases, SNAP/TANF interfaces, workforce systems, education/training records) 
  • Managed care member services and, potentially, capitated payments 
  • All engagement with contact centers (e.g., phone, chat, text messaging, email, beneficiary portal, etc.) 
  • Document processing 
  • Notices, appeals, fair hearing processes, and case management 
  • Reporting, audit trails, and quality assurance 

In other words, the backend systems that support compliance with the community engagement requirement must be designed and built for real-world administration and meet oversight requirements. Backend system readiness is among the most important operational issues for expansion states, as it will dictate the overall timeline and success in meeting Medicaid leaders’ goals. 

How Medicaid MCPs and Providers Will Support Enrollees 

The Centers for Medicare & Medicaid Services (CMS) collaborated with Medicaid technology companies to meet the compressed community engagement implementation timeline, the scale of system changes required across eligibility and verification workflows, and long-standing cost and capacity constraints. States are being asked to implement these complex new expectation largely within existing eligibility platforms, which were designed for purposes other than continuous activity tracking or cross-agency data exchange. 

Although these arrangements may improve affordability and speed, states must still assess whether vendor-offered solutions align with their specific policy choices, data sources, partner roles, and operational risk tolerance. 

Medicaid MCPs and provider groups, including hospitals and federally qualified health centers (FQHCs), will be on the front lines of enrollee retention. These organizations should engage with states now to ensure systems and information flows support their work. MCPs should focus on access to: 

  • Timely actionable information regarding which members are subject to the requirement 
  • Visibility into exemption status and pending verification 
  • Clear rules and data feeds that support proactive outreach 
  • Alignment on plan member communications 

Primary care providers, hospitals, FQHCs, and behavioral health providers play a critical role in identifying and supporting exemptions. If the exemption processes are slow, unclear, or burdensome, patients with legitimate medical or functional limitations may lose coverage and providers may incur increased uncompensated care costs. Providers should be engaging states to solidify: 

  • Streamlined, clinically grounded exemption processes 
  • Clear guidance on documentation standards 
  • Fast, predictable exemption determinations 
  • Feedback loops when exemption requests are denied or incomplete 

Community engagement requirements will require coordination with nontraditional partners, such as: 

  • Departments of Labor/Workforce Development 
  • Community colleges, adult education, and training programs 
  • SNAP/TANF agencies (and their employment and training programs) 
  • Community-based and faith-based organizations, organizations that offer volunteer and community service opportunities, and local workforce boards 
  • Employers, chambers, and sector-based workforce intermediaries 

These partners can become essential to making the policy workable for enrollees, but they often have timelines, data standards, funding streams, and performance incentives that differ from Medicaid’s. Partners should be in conversation with states now about investments in a cross-agency and cross-sector governance structure that answers practical questions about the definitions, systems and workflows, and beneficiary experience. 

States Should Act Now 

A real and preventable risk is embedded in the 2027 timeline: coverage loss among healthy, working adults who remain eligible but cannot navigate new processes. States must look across every part of their Medicaid system, decide what they need each partner to do, and ensure those partners have the information, tools, and authority to act. Plans and providers must be clear and advocate for what they need to prevent eligible individuals from losing coverage. 

Handled well, this is an opportunity to modernize systems, strengthen cross-sector coordination, and may demonstrate whether community engagement can yield a net benefit to members—not just add steps to maintaining coverage. 

Connect with Us 

HMA Medicaid experts assist Medicaid and state policymakers with the following: 

  • Policy-to-operations design 
  • Cross-agency governance and partner alignment 
  • Information systems impact assessment, change planning, testing strategies and readiness metrics 
  • Scenario planning and beneficiary impact analysis 
  • Communications and operational playbooks 
  • Program integrity, reporting, and audit support 

HMA contributors to this article include Erin Dorrien, Kaitlyn Feiock, Andrea Maresca, and Juan Montanez. 

HMA Blog Series 

The Health Management Associates (HMA) Connecting the Dots blog series brings our experts together to examine the major policy, program, and market forces shaping healthcare coverage, delivery systems, and financing in 2026. The posts look beyond individual changes to connect emerging developments across programs and markets to help leaders understand what’s changing, why it matters, and how their decisions shape the path ahead. This month our experts weigh in on preparations for Medicaid Work and Community Engagement Requirements.  

Outlook 2026: What CMS’s Proposed 2027 NBPP Signals for ACA Marketplaces, States, and Consumers

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The Centers for Medicare & Medicaid Services (CMS) proposed 2027 Notice of Benefit and Payment Parameters (NBPP) marks a notable shift in Marketplace policy, expanding lower premium plan options, relaxing certain federal standards, and moving more implementation and oversight responsibility to states and Marketplaces. It also introduces eligibility and verification policies that could significantly affect enrollment, operations, and market stability. 

To unpack what this could mean for plan year 2027 and beyond, Andrea Maresca spoke with Zach Sherman, Managing Director for Coverage Policy and Program Design at Health Management Associates (HMA); Lina Rashid, Principal at HMA; and Michael Cohen, PhD, Principal at Wakely, an HMA company, who, alongside colleagues, published a Policy Brief on state-level and consumer impacts, as well as a Wakely White Paper on the proposed rule. 

 Q: When you zoom out from the technical details, what are the big takeaways from the proposed 2027 NBPP for states, consumers, and issuers? 

Lina Rashid: At a high level, the proposal reallocates risk and responsibility across the system. Consumers may see more lower premium options through expanded catastrophic plan eligibility and more flexible bronze plan design, but often with more cost-sharing, higher deductibles, or greater complexity. For consumers, affordability is about more than just premiums; it’s about how much healthcare costs for individuals and their families overall and the cost of care when they need it. 

States are being given options to take on more oversight and operational responsibility but without additional federal funding. And issuers are being given more flexibility, but it comes with uncertainty regarding enrollment and risk mix. 

Zach Sherman: The rule’s cumulative effect matters more than any one policy. Expanded catastrophic eligibility, higher out-of-pocket exposure, relaxed network standards, and tighter verification requirements all interact. Together, they raise questions about access, affordability, and whether Marketplaces are equipped to manage administrative and enrollment disruption. 

Q: The paper highlights potentially significant enrollment effects. What’s driving that dynamic? 

Michael: Two things stand out. First, the proposal implements statutory changes that remove advance premium tax credit (APTC) eligibility for certain lawfully present immigrants beginning in 2027. CMS estimates more than a million people could lose eligibility, and it’s reasonable to expect most of them will exit the individual market. 

Second, the proposed income verification changes could generate millions of data matching issues (DMIs) that temporarily or permanently cut off access to advance premium tax credits. While CMS projects a relatively modest disenrollment effect, our analysis suggests losses could be meaningfully higher depending on how quickly issues are resolved. We estimate that approximately 4.7 million enrollees could receive DMIs under the proposal, and upward of 80 percent of them could temporarily or permanently lose access to APTCs, putting coverage at risk. 

Zach: If consumers can’t afford the full premiums while resolving a data issue, many will drop coverage. That creates churn and administrative strain that Marketplaces must manage. 

Q: How do these policies affect state Marketplaces and regulators specifically? 

Zach: States are being asked to do more across multiple fronts. Network adequacy oversight is shifting toward states that conduct effective rate review. States may also choose or feel pressure to take on Essential Community Provider (ECP) review authority, including for new non-network plans. Accepting that responsibility requires legal authority, staff capacity, and technical infrastructure. 

At the same time, states may need to stand up the State Exchange Improper Payment Measurement (SEIPM) program, which CMS acknowledges will increase administrative burden. 

The proposed State Exchange Enhanced Direct Enrollment (SBE-EDE) option is also a significant shift. Rather than operating a centralized consumer enrollment platform, Marketplaces would focus on certifying, overseeing, and monitoring multiple third-party entities. As a former director of a state-based Marketplace program, I know this is a fundamentally different operational posture that comes with oversight and compliance costs. 

Q: The proposal also introduces non-network plans. What should stakeholders be watching here? 

Michael: Non-network plans may offer lower premiums, but they change how access works. Provider participation depends on the willingness to accept the plan’s payment as payment in full. On paper a plan may meet access standards, but in practice consumers could face difficulty finding care. That places additional oversight responsibility on states to determine whether access is sufficient in practice. If aggressively priced non-network plans disproportionately attract healthier enrollees, it can create financial risk for issuers and for the broader market. 

Q: What does this mean for market stability going forward? 

Zach: Stability will vary by state. States that invest in oversight, consumer assistance, and operational readiness—often a state-based Marketplace—may be better positioned to manage these changes. Others may see sharper enrollment declines or access issues. That divergence across states is an important signal from this proposal. 

Q: What should states and stakeholders be doing right now? 

Zach: States should be doing scenario planning, assessing which flexibilities to adopt, where to maintain higher standards, and whether they have the capacity to take on expanded responsibilities. These decisions will shape how the rule plays out on the ground. 

Michael: Issuers should be stress testing pricing assumptions, risk adjustment exposure, and operational readiness. All stakeholders should remember that comments on the proposed rule are due March 13, 2026. 

Lina: Notably, CMS is not done with regulatory reforms. The agency solicited comment on medical loss ratio (MLR) policies and paused Essential Health Benefit benchmark updates, as well as issues not covered in this proposed rule, such as revisions to the Section 1332 waiver and Section 1333 interstate compacts. States and issuers should be tracking what may come next, not just what’s in this proposal.

Strategies to Address Fraud, Waste, and Abuse in Non-Emergency Medical Transportation

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Fraud, waste, and abuse (FWA) in Medicaid non-emergency transportation (NEMT) remain a persistent challenge for state Medicaid programs and health plans because of the scale and complexity of the benefit. NEMT is a critical, mandatory benefit intended to ensure eligible Medicaid beneficiaries without reliable transportation can get to necessary medical appointments. Numerous investigations and audits, however, have revealed that some transportation providers bill for trips that never occurred, inflate mileage, fabricate tolls, or even recruit patients with kickbacks to generate fraudulent claims, diverting limited program funding away from legitimate care needs.

The NEMT benefit represents a small share of Medicaid costs—estimated at around 1 percent of total Medicaid spending. With the codification of NEMT as a required benefit in 2020, market analysts forecast NEMT will grow considerably, nearly doubling in market size from 2021 to 2028.

Comprehensive, nationwide estimates specific to NEMT FWA are limited. Federal and state audits like those in Indiana, New York, and Massachusetts, however, have uncovered millions of dollars in claims that did not comply with federal and state requirements, underscoring systemic vulnerabilities in oversight and documentation. For example, a 2022 federal audit of New York Medicaid NEMT found an estimated $84 million in unallowable federal reimbursements and another ~$112 million that may not have complied with requirements over two years.[1]

Furthermore, individual criminal cases have involved schemes of $1 million to more than $2 million in falsely billed transportation services. Isolated settlements and audits indicate that fraud and abuse can be substantial locally even if we lack a clear, reliable national aggregate estimate.

A 2025 report by Health Management Associates (HMA) about NEMT contracting approaches found an opportunity for states and health plans that administer non-emergency transportation to leverage technology and require or incentivize new strategies to improve program integrity and quality in NEMT going forward. Some of the identified strategies to address FWA include:

  • Adopting or requiring digital solutions—such as GPS trip verification, electronic visit logs, and real-time data analytics—to detect irregular billing patterns before claims are paid, replacing outdated paper logs and manual reconciliations that were prone to error and exploitation.
  • Focusing trip verification efforts on standing orders (pre-approved authorizations often for repeated treatments), given that they comprise the largest share of trips and are often vulnerable to fraud.
  • Positioning and educating medical facilities to be critical partners in preventing FWA by confirming appointment attendance, either via phone or signature on the trip log.
  • Automating mileage reimbursement (for enrollees who drive themselves or are driven by family members or friends) through a mobile app, which enabling riders to schedule and track their trips and submit claims quickly while allowing NEMT brokers to verify the mileage using GPS. This system would also allow brokers to better target their anti-fraud efforts, such as requiring additional documentation only for higher reimbursement amounts.

Since the publication of that report, several state Medicaid programs have issued NEMT procurements that maintain a strong emphasis on preventing FWA. For example, the 2025 Wisconsin NEMT RFP included provisions to promote greater collaboration between the Wisconsin Department of Health Services (DHS) Office of Inspector General (OIG) and NEMT broker, including “quarterly and ad hoc meetings to discuss open complaint investigations, red flag patterns, and establish safeguards for ongoing or suspected fraud, waste, and abuse” and imposed penalties for fraud incidents that go undetected by the broker.

FWA in Medicaid NEMT may represent a fraction of overall program spending, but the consequences are outsized: Every improper payment diverts resources away from beneficiaries who depend on transportation to access essential care. As states, health plans, and NEMT brokers modernize contract requirements, strengthen oversight, and embed technology-driven verification into their contracts and operations, the focus is shifting from retrospective recovery to proactive prevention, transparency, and accountability in transportation services.

Continued collaboration among Medicaid agencies, brokers, medical providers, and oversight entities will be critical for sustained progress. By pairing smarter contracting with real-time data tools and clear accountability, states and Medicaid health plans can better safeguard public dollars while ensuring that NEMT remains a reliable lifeline for the people it is designed to serve.

Learn more about how HMA Helps NEMT Stakeholders Overcome Challenges. If your organization is ready to talk about how HMA can help advance your NEMT goals, please contact one of our experts below.

Related Resources:

[1] US Department of Health and Human Services, Office of Inspector General. New York Claimed $196 Million, Over 72 Percent of the Audited Amount, in Federal Reimbursement for NEMT Payments to New York City Transportation Providers That Did Not Meet or May Not Have Met Medicaid Requirements. September 12, 2022. Available at: https://oig.hhs.gov/reports/all/2022/new-york-claimed-196-million-over-72-percent-of-the-audited-amount-in-federal-reimbursement-for-nemt-payments-to-new-york-city-transportation-providers-that-did-not-meet-or-may-not-have-met-medicaid-requirements/.

2027 NBPP Proposed Rule Signals Further Marketplace Changes

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The Centers for Medicare & Medicaid Services (CMS) 2027 Notice of Benefit and Payment Parameters (NBPP) proposed rule, published February 11, 2026, arrived at a pivotal moment for the Affordable Care Act (ACA) Marketplaces. The temporary enhanced premium tax credits (ePTCs), first expanded in 2021 and extended through 2025, expired at the end of last year, returning Marketplace subsidies to their original ACA structure in 2026. As we discussed in earlier articles (here and here), that shift is already affecting affordability, plan selection, and enrollment dynamics—particularly for consumers who are ineligible for premium assistance. 

The proposed 2027 NBPP represents a significant reset for the Marketplace, reflecting CMS vision and policy priorities to strengthen program integrity while expanding plan design flexibility and consumer choice as a pathway to affordability, as well as policies to defer to state authority. Healthcare organizations and other interested stakeholders may submit comments on the proposed rule through March 13, 2026. 

The remainder of this article addresses the key policy proposals and considerations for issuers, states, and consumer groups. 

CMS’s Proposals 

The proposed NBPP for 2027 sets standards for the Exchanges and ACA-compliant individual and small group markets and updates payment parameters for risk adjustment and risk adjustment data validation (RADV). The rule also implements changes approved under the 2025 Budget Reconciliation Act, (P.L. 119-21, OBBBA) and includes a range of policies spanning plan certification, eligibility and verification, and Exchange oversight. 

Expanded Plan Design Flexibility 

CMS proposes to discontinue standardized plan options in the Federally-facilitated Marketplace (FFM) and remove limits on the number of non-standardized plans offered by issuers on the FFM and state-based Marketplaces on the federal platform (SBE-FPs). Issuers would be permitted to decide whether to discontinue existing standardized or chronic condition plans or continue them with modified cost sharing. 

Considerations: This change is designed to allow greater innovation in plan design. It also raises questions about the potential return of a more complex Marketplace shopping experience for consumers who will have to shift through more plans. 

Certification of Non-Network QHPs 

One of the most consequential proposals would allow “non-network” plans to be certified as qualified health plans beginning in 2027. These plans would not rely on contracted provider networks. Instead, they would set benefit payment amounts and require issuers to demonstrate that sufficient providers—including Essential Community Providers (ECPs) and mental health and substance use disorder providers—are willing to accept those amounts as payment in full. 

Considerations: CMS positions non-network plans as a way to create lower premium options. For states and issuers, this proposal introduces new oversight and operational considerations related to access standards, consumer protections, the risk of balance billing or access gaps for consumers, and potential market instability. 

Changes in Catastrophic and Bronze Cost Sharing 

The proposed rule would further expand access to catastrophic plans by codifying hardship exemptions for individuals ineligible for advance premium tax credits (APTCs) or cost-sharing reductions (CSRs) because of projected income. CMS also proposes to allow multiyear catastrophic plans with contract terms of up to 10 consecutive years. In addition, CMS proposes new flexibility for certain bronze plan designs in the individual market. In both cases, CMS proposes to allow catastrophic and bronze plans to exceed the annual maximum out-of-pocket limit. 

Consideration: These policies reflect CMS’s emphasis on affordability through lower premiums and expanded consumer choice, while shifting more financial risk to enrollees through higher cost sharing. 

Network Adequacy and Essential Community Providers 

CMS proposes to give states greater discretion in provider access for network adequacy and ECP certification reviews, including allowing federally funded exchange (FFE) states to conduct their own reviews if CMS determines they have sufficient authority and technical capacity. CMS also proposes to reduce the minimum percentage of ECPs that issuers must include in their networks from 35 percent to 20 percent. 

Considerations: These changes reduce federal prescriptiveness and could lower issuer compliance costs but also place more responsibility on states to monitor access and ensure that vulnerable populations are not adversely affected. 

Essential Health Benefits and State Mandates 

The proposed rule would prohibit issuers from including routine non-pediatric (adult) dental services as an Essential Health Benefit (EHB). More significantly for states, CMS proposes changes to cost defrayal requirements for state-mandated benefits, requiring states to cover the cost of benefits considered “in addition to EHB” under specified criteria, even if those benefits are embedded in the state’s EHB benchmark plan. 

Consideration: These changes could have direct budgetary implications for states, pricing implications for issuers, and could stunt or potentially decrease benefits for consumers. 

Program Integrity and Increased Eligibility Verification 

CMS includes a robust set of program integrity provisions, including: 

  • Strengthened standards for agent, broker, and web broker marketing practices 
  • Required use of a US Department of Health and Human Services (HHS)-approved consumer consent and application review form 
  • Codification of OBBBA policies and reintroduction of Program Integrity rule provisions not previously implemented, including expanded special enrollment period (SEP) verification and increased eligibility standards for enrollees applying for APTCs (see Navigating CMS’s 2025 Marketplace Rule: What It Means for ACA Marketplaces, Insurers, and Consumers) 
  • Implementation of the State Exchange Improper Payment Measurement (SEIPM) program for state-based Marketplaces 

Consideration: These policies continue CMS’s heightened scrutiny of enrollment activity and subsidy eligibility. CMS’s policies are likely to increase data matching issues (DMIs), which could increase burden on Marketplaces and enrollees, resulting in reduced enrollment. 

Preparing for Policy Driven Changes in ACA Marketplaces 

The 2027 NBPP underscores a clear policy shift away from extending federal subsidies toward advancing a Marketplace framework that emphasizes program integrity, state flexibility, and expanded plan design options as mechanisms to promote affordability and consumer choice. 

The proposed rule sets the stage for significant strategic and operational decisions for issuers and states ahead of the 2027 plan year. Health Management Associates (HMA), including Wakely, an HMA company, works with issuers modeling enrollment and risk shifts and to assist in pricing decisions. States also should consider the need for new strategies and approaches to adapt to federal policy changes that are expected for ACA Marketplace programs. 

For more information about the policies described in this article, support with scenario-based modeling of enrollment and data-informed strategy development for 2027 and beyond, please contact our experts Michael Cohen, Lina Rashid, or Zach Sherman. 

CBO’s New Baseline Signals Shifting Cost and Risk Dynamics in Medicaid and Medicare

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On February 11, 2026, the Congressional Budget Office (CBO) released The Budget and Economic Outlook: 2026 to 2036 report. The publication, which represents the first time CBO has released Medicare and Medicaid spending baseline projections since January 2025, reflects the impact of the 2025 Budget Reconciliation Act (P.L. 119-21, OBBBA), recent changes to Medicare reimbursement for skin substitute products, and the latest Medicare Part D and Medicare Advantage bids.

CBO’s baseline serves many functions, including serving as the official “scorekeeping” benchmark used for cost estimates of proposed legislation under consideration in Congress.

Changes to CBO’s Medicaid Baseline

CBO decreased its projections of 2026–2035 Medicaid mandatory outlays by approximately $514 million from its January 2025 baseline update. The main driver of that reduction is the impact of the Medicaid provisions in the 2025 Budget Reconciliation Act, which CBO expects will reduce total Medicaid enrollment by 13.1 million people in 2035. The drop in Medicaid spending from the OBBBA-related enrollment reductions was partially offset by technical changes CBO made to the Medicaid baseline.

Medicaid costs per enrollee grew by 16 percent in 2025, which was more than CBO had anticipated. The agency attributes the cost per enrollee growth to a reported decrease in the average health status of Medicaid enrollees following the end of the COVID-era continuous eligibility policy.

CBO anticipates that payment rates for Medicaid managed care plans will begin to rise in 2026 because of this decrease in the average health status of enrollees, and the agency has updated the Medicaid baseline accordingly (see Figure 1).

Source: HMA analysis of CBO’s January 2025 and February 2026 Budget and Economic Outlook reports.

Changes to CBO’s Medicare Baseline

Compared with its January 2025 baseline, CBO increased its projections of Medicare’s 2026–2035 mandatory outlays by about $1 trillion (roughly $942 billion, by Health Management Associates (HMA) calculations). The main driver of that increase came from CBO’s updates to its Medicare Part D spending projections, which were increased to reflect higher than expected 2026 bids from private insurance plans that administer the Part D benefit. According to their 2026 bids, Part D plans anticipate a 35 percent increase in their annual per enrollee costs in 2026—a trend that CBO was not expecting and wants to study further. Part D spending per beneficiary in 2035 is now projected to exceed $4,000, up from less than $3,000 in the January 2025 baseline (See Figure 2).

The agency’s Medicare Part A fee-for-service (FFS) spending projection increase was the result of larger than expected increases in 2025 enrollment and per enrollee spending. Those trends were also seen in Medicare Part B FFS but were partially offset by the Centers for Medicare & Medicaid Services’s (CMS) recent reimbursement changes to skin substitute products. Overall, CBO estimates that the skin substitute reform issued in CMS’s Medicare Physician Fee Schedule (MPFS) and Outpatient Prospective Payment System (OPPS) CY 2026 final rules will save $245 billion over the 2026–2035 period, including the effects on the Medicare Advantage (MA) program (see Figure 3).

Finally, CBO reduced its spending projections for MA compared to the January 2025 baseline. This change was made to reflect lower-than-expected Medicare Advantage enrollment in 2025, although the spending implications of lower enrollment were partially offset by higher-than-expected bids in 2026 by providers of MA plans (see Figure 4).

Source: HMA analysis of CBO’s January 2025 and February 2026 Budget and Economic Outlook reports.
Source: HMA analysis of CBO’s January 2025 and February 2026 Budget and Economic Outlook reports.
Source: HMA analysis of CBO’s January 2025 and February 2026 Budget and Economic Outlook reports

Contact an HMA Expert Today

Interested in understanding how CBO’s latest baseline update affects the federal budgetary implications of certain Medicare or Medicaid policy topics or proposals? Contact our experts, Mark Desmaris and Rachel Matthews, to learn more about HMA’s “CBO-style” federal budgetary scoring work, which relies on The Moran Company’s long-standing methodology. [1]

Beyond federal budget scoring, HMA is working with states, health plans, and providers to assess how changes in enrollee health status are affecting utilization, costs, and payment rates—and what those trends may mean for Medicaid and MA organizations and providers. Our teams support states in evaluating managed care rate setting and program design, help Medicaid and MA plans anticipate risk and bid implications, and assist providers in understanding how changes in patient acuity could affect care delivery, contracting, and financial performance.

[1]Specifically, we apply our understanding of CBO precedents to predict how CBO will likely evaluate the budgetary impact of the legislation in question. We use our best judgment to adopt the assumptions CBO would tend to use, with the understanding that any variance in the assumptions CBO ultimately adopts could cause our estimate to differ from theirs.

Congress Advances FY 2026 HHS Appropriations Bill with Health Extenders and PBM Reforms

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On February 3, 2026, Congress finalized federal funding for fiscal year (FY) 2026, with the House passing the Consolidated Appropriations Act (CAA), 2026, with a vote of 217-214, following Senate approval last week. The president signed the CAA (H.R. 7148) shortly thereafter. The law provides full-year appropriations for the Departments of Health and Human Services (HHS), Housing and Urban Development, Labor, and several other departments. 

This year’s HHS funding bill is notable not only for what it includes, but also for what it omits. It restores or maintains funding for key public health and research agencies previously proposed for elimination in the president’s FY 2026 budget request, extends several healthcare programs, and contains a significant package of pharmacy benefit manager (PBM) reforms. All of this activity comes as the Administration announces new grant programs and policy efforts related to its signature priorities. 

In this article, we review the major funding and policies approved in the HHS spending bill. We also address key considerations for healthcare organizations as they anticipate downstream funding and policy developments and develop advocacy initiatives for federal FY 2027 bills. 

HHS Funding Levels and Direction 

The bill provides $116.8 billion for HHS, an increase of $210 million over FY 2025, and rejects large-scale structural reorganizations proposed in the president’s FY 2026 budget. This provision preserves funding for the Agency for Healthcare Research and Quality (AHRQ), Centers for Disease Control and Prevention (CDC), Health Resources & Services Administration (HRSA), and the Substance Abuse and Mental Health Services Administration (SAMHSA) 

Table 1. HHS Agency Funding Highlights, FY 2026 

Agency  FY 2026 Funding  (+/-) Compared with FY 2025 
Administration for Strategic Preparedness and Response (ASPR) $3.7 billion +$58 million  
CDC $9.2 billion level funding 
Centers for Medicare & Medicaid Services (CMS), administrative expenses only  $3.7 billion level funding  
 HRSA $8.9 billion +$415 million  
National Institutes of Health (NIH) $48.7 billion  +$929 million  
SAMHSA $7.4 billion  +$65 million  

The bill also extends mandatory funding for community health centers, special diabetes programs, the National Health Service Corps, and Teaching Health Center Graduate Medical Education. 

PBM Reforms in the Package 

In one closely watched area of federal policymaking, the FY 2026 package includes a substantial set of PBM-related reforms that largely mirror the bipartisan package negotiated but not enacted in December 2024. These reforms have implications across Medicare Part D, commercial insurance, and employer-sponsored plans. 

The legislation contains the following PBM reforms: 

  • Prohibits PBMs from deriving remuneration linked to drug prices for Medicare-covered Part D drugs 
  • Restricts spread pricing in Medicaid, eliminating a major driver of PBM revenue 
  • Requires contractual transparency, mandating that PBMs clearly define pricing terms in agreements with Part D plan sponsors 
  • Adds new PBM reporting obligations, including drug price reporting and rebate disclosures 
  • Requires 100 percent passthrough of rebates in ERISA-regulated plans for new, renewed, or extended contracts beginning 30 months after enactment 
  • Expands audit rights for plan sponsors 
  • Codifies the “any willing pharmacy” requirement for Medicare plan sponsors 

These provisions position 2026 as a consequential year for PBM regulation, increasing transparency, strengthening plan leverage, and heightening HHS oversight. 

Healthcare Extenders and Program Reauthorizations 

The bill includes a broad set of Medicaid, Medicare, and public health program extenders, affecting providers, patients, states, and managed care plans. 

Medicaid 

  • Postpones reductions in the Disproportionate Share Hospital (DSH) allotments until FY 2028 
  • Changes the DSH cap calculation to broaden which patient costs count toward Medicaid shortfall 
  • Requires states to develop and implement a process to allow certain out-of-state pediatric providers to deliver services without additional screening for three years 
  • Removes age limits on Medicaid’s Ticket to Work program, allowing adults older than age 65 to participate and requires state compliance by January 1, 2028 
  • Establishes new maternity care reporting requirements for rural hospitals, with dedicated federal funding for hospitals and states to comply with the reporting 

Medicare 

Congress extends several key programs and payment provisions, including: 

  • Telehealth flexibilities through December 31, 2027 
  • Incentive payments for participation in eligible alternative payment models through payment year 2028 (for performance year 2026) and applies an adjustment amount of 3.1 percent for 2028 
  • Acute Hospital Care at Home waivers through 2030 
  • Low-volume and Medicare-dependent hospital payment adjustments 
  • The 1.0 work geographic practice cost index floor used in the calculation of payments under the Medicare physician fee schedule through December 31, 2026 
  • Add-on payments for ambulance services 
  • Continuation of Part D coverage for certain antivirals and modifications to hospice payment caps 

Behavioral Health Policy 

The appropriations bill was finalized as the administration announced new funding and policy initiatives to support behavioral health, crisis services, workforce expansion, and youth mental health—efforts mirrored in SAMHSA’s increased appropriations. 

SAMHSA’s $7.4 billion budget includes: 

  • $1.6 billion for State Opioid Response grants 
  • $1.01 billion for the Mental Health Block Grant 
  • $535 million for the 988 Suicide and Crisis Lifeline 

Considerations for Stakeholders 

Federal funding and policy developments affect state budget dynamics as many states are now releasing 2026–2027 budget proposals as well as the operational and growth plans of healthcare organizations and partners. 

A few key takeaways from the FY 2026 funding bill include: 

  • Federal appropriations signal congressional and administration priorities and have downstream impact on upcoming rounds of grant cycles, including SAMSHA and HRSA awards. 
  • The approved funding and certain policy extensions provide operational stability and reduce near-term fiscal pressure, such as the further delay of Medicaid DSH cuts. The extra time will allow healthcare entities to prepare for future reductions and plan for financial sustainability. 
  • Agency and program funding emphasize oversight, program integrity, and compliance. In addition, fraud and program integrity priorities are woven into certain new policies and program extensions, including PBM reforms, flexibility for pediatric care across state borders, and rural maternity cost reporting requirements, among others. 

Connect with Us 

If you would like deeper analysis or state and stakeholder-specific effects, HMA’s policy experts are available to assist. 

2026 Marketplace Open Enrollment: Where the Numbers Currently Stand

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On January 28, 2026, the Centers for Medicaid & Medicare Services (CMS) posted a national snapshot detailing 2026 Open Enrollment (OE) results. Although this report is neither a complete nor final picture of 2026 Marketplace enrollment activity, it is likely to be the last OE data CMS publishes for some time. A comparison of 2026 and 2025 Open Enrollment results can be found in Table 1.

Table 1. Comparison of 2026 and 2025 Open Enrollment

20262025Net Change
Total22,973,21924,166,491(1,193,272)
New Consumers3,382,1893,938,907(556,718)
Returning Consumers19,591,03020,227,584(636,554)

A summary of our analysis on these 2026 OE results and how they compare with 2025 data can be found below. This analysis builds on the findings in Wakely’sIndividual ACA Open Enrollment Insights So Far from January 2026.

  • Overall, topline plan selections are down from last year. Total enrollment decreased by 5%, with new enrollment down 14% and renewals down 3%.
  • State-based marketplace (SBM) enrollment declined modestly, but the data are as of January 10, and many SBMs are continuing to enroll people through the end of January.
    • New Mexico plan selections increased by 14% over last year, the largest increase of any state, driven by state-funded subsidies mirroring the expired enhanced premium tax credits (ePTCs).
    • Georgia plan selections decreased by 14%, the largest SBM year-over-year decline.
  • The federally facilitated marketplace (FFM) experienced an overall decrease of 5%. FFM data are as of January 15 and therefore measures plan selections after the OE period has ended. Within the FFM, state-by-state results varied significantly.
    • Texas led all FFM states with a 5% increase, whereas Ohio and North Carolina experienced 20% and 22% decreases in enrollment, respectively.
    • Some of this variation is surprising and not readily explainable from the available data and will be a focus of future Health Management Associates and Wakely analyses.
  • The data include neither effectuated enrollment nor paid enrollment—data which will be key to fully understanding 2026 enrollment trends and the impact of changing federal policies, including the ePTC expiration and changing eligibility standards introduced in 2026 as the result of P.L. 119-21 (OBBBA).
    • Initial data from SBMs suggest significantly higher rates of cancellations and disenrollments than in previous years.
    • SBMs are also sharing that they expect high rates of affordability-driven voluntary and non-payment terminations throughout the first half of 2026.
    • Monitoring paid enrollments, attrition, and grace period dynamics, including retro-terminations, will be key to understanding market dynamics and 2027 pricing.

HMA and Wakley experts have considerable experience working with states, insurers, and federal policymakers with jurisdiction over the Marketplace. We work with these entities to inform, analyze, and influence federal policies and conduct impact analyses on pricing, enrollment, administration, and operations. HMA also provides strategic and project management support for the implementation of finalized policies.

Please contact Taylor Gehrke at [email protected], Michael Cohen at [email protected], or Zachary Sherman at [email protected] with questions, follow-up, or if you would like expert assistance exploring any of the issues discussed in this post.

Related Resources:

Preparing for Change: A Look at Proposed State Fiscal 2027 Budgets

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As of January 1, 2026, nine governors had released proposed budgets for state fiscal year (SFY) 2027. With the phase down of federal funding and substantial policy changes approved in the 2025 budget reconciliation act (P.L. 119-21, OBBBA), these proposals offer insights into how governors plan to manage mounting fiscal pressures, navigate new federal mandates, and position their programs for long-term sustainability. 

Today, Health Management Associates Information Services (HMAIS) published its first preliminary review of proposed SFY 2027 budget proposals. The initial installment includes budgets from Alaska, Colorado, Florida, Mississippi, New Mexico, South Dakota, Utah, Virginia, and Wyoming, with the latter two proposals covering the fiscal 2026–28 biennium. 

HMAIS will release periodic updates as additional governors publish their budget proposals—the same rolling approach we used in 2025 (here and here). Because 15 states enacted 2025–27 biennial budgets last year, HMAIS also might review substantial mid-biennium health-related adjustments or supplemental funding. 

The remainder of this article provides a snapshot of several notable themes and emerging trends detailed in the full report. 

Implementation of New Federal Requirements 

State leaders are preparing budgets for SFY 2027 at a time of heightened fiscal stress and structural uncertainty. Entering 2026, governors are facing reductions in federal funding, particularly in Medicaid and Supplemental Nutrition Assistance Program (SNAP) funding. In addition, they are preparing for new federal requirements that will begin to take effect later this year, including narrower flexibilities for financing and Medicaid community engagement policies and more frequent eligibility redeterminations. 

Against this backdrop, governors are using FY 2027 budget proposals to comply with OBBBA’s mandates and to stabilize their safety net programs and realign state operations around stricter fiscal realities. 

Medicaid Work Requirements. Virginia’s proposed budget includes funding to implement federal Medicaid community engagement requirements, including a recommendation to add nine new authorized positions in SFY 2027 and 12 more in fiscal year 2028 to meet workload demands. In addition, South Dakota’s governor proposed amending the state’s 2026 budget to secure funding to implement these requirements. 

Eligibility and Redetermination. Several governors are proposing investments to support heightened eligibility checks across Medicaid, SNAP, and Temporary Assistance for Needy Families (TANF). For example, Colorado Gov. Jared Polis’s budget proposes $19.1 million to improve the state’s eligibility system for programs such as Medicaid, SNAP, and TANF. Utah’s proposed budget includes a recommended allocation of nearly $16.5 million to the Department of Workforce Services for “H.R. 1 Medicaid Eligibility Administration,” and nearly $10 million for the “H.R. 1 SNAP Administrative Services.” 

SNAP Changes. States are backfilling lost federal funding and investing in error reduction and system modernization. New Mexico Gov. Michelle Lujan Grisham’s proposed budget, for example, includes $37 million to replace the decrease in federal funding for SNAP administration ($4 million of which will support 150 new full-time positions), as well as $8.9 million for systems improvements to reduce payment errors in SNAP. South Dakota Gov. Larry Rhoden’s proposed budget includes $5.5 million to offset a reduction in SNAP federal funding. 

Strategic Cost Containment 

Considering OBBBA implementation and the effects that it will have on their budgets, our first review of governors’ budget proposals signals that states are taking an aggressive posture toward limiting expenditure growth in 2026 and 2027. Initial proposals include targeted reductions, tighter utilization management, and restrictions on benefits. 

Since the 2025 legislative session, Colorado has taken multiple steps to prepare for declining federal revenue. For example, Governor Polis’s proposed budget accounts for multiple actions approved through an amended executive order that would reduce spending to brace for OBBBA’s impacts. Examples include: 

  • Reducing provider rates to 85 percent of the Medicare reimbursement rate 
  • Establishing limits on Community First Choice services 
  • Adjusting the home health nursing and therapy services payment methodology 
  • Introducing cost controls for Medicaid benefit categories that have shown disproportionate growth 
  • Implementing a $3,000 annual cap on adult Medicaid dental benefits and a $750 annual cap on dental benefits for individuals in the Cover All Coloradans program 
  • Changing the Cover All Coloradans behavioral health program from managed care to fee for service 
  • Reviewing provider fees in anticipation of possible State Directed Payment approval from the Centers for Medicare & Medicaid Services (CMS) 

Former Virginia Gov. Glenn Youngkin’s budget—now inherited by Abilgail Spanberger following her inauguration January 17, 2026—includes multiple cost-containment proposals, such as: 

  • Anticipated adjustments to capitation rates after a review of Medicaid managed care organizations 
  • A $2,000 annual limit on adult dental services Medicaid coverage 
  • Elimination of both automatic rate increases for psychiatric residential treatment facilities and qualifying addiction and recovery treatment services providers and automatic biennial inflation increases for medical assistance providers 
  • Restrictions on emergency maternity services to Medicaid enrollees who are ineligible for Medicaid because of their citizenship status 
  • Standardized hourly limits across home and community-based services waivers 
  • Actions related to “ensuring appropriate utilization” of services, such as applied behavioral analysis and crisis services 

States are expected to include additional cost-containment tools throughout 2026 and beyond as OBBBA’s fiscal effects become clearer over the coming months and years. 

What to Watch 

The budget proposals indicate the resources that executive agencies need and preview governors’ policy agendas for the year ahead. Stakeholders should track program reductions and rate changes, eligibility system investments, and shifts in care models. 

In addition, some of the announced budget proposals consider federal awards to states under the Rural Health Transformation Program (RHTP). For example, the Alaska Department of Health budget request addresses the state’s RHTP implementation plans, and Wyoming’s budget proposal outlines RHTP priorities. Many states are preparing RFP processes to operationalize their RHTP strategies and make progress on the goals of their initiatives. 

Connect with Us 

As federal funding uncertainties continue, states and other stakeholders will need to adapt their delivery systems, administrative structures, and financing models throughout OBBBA’s multiyear rollout. HMA offers expertise, analytics, and strategic advisory services needed to navigate this evolving landscape. For details contact Andrea Maresca and Kathleen Nolan. 

The full state of the states and governor budget report is available to HMAIS subscribers. In addition, HMAIS maintains a Rural Health Transformation Program (RHTP) Tracker that incorporates details of each initiative and the first year award.  

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