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