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HMA Insights – including our new podcast – puts the vast depth of HMA’s expertise at your fingertips, helping you stay informed about the latest healthcare trends and topics. Below, you can easily search based on your topic of interest to find useful information from our podcast, blogs, webinars, case studies, reports and more.
April is always a busy month for Medicare. It is the month when Medicare Advantage (MA) policies get finalized and the bid season moves into the final stretch. It is also the starting month for annual rule making for the next cycle of Medicare payment rules. These provide important signals about the Center for Medicare & Medicaid Services (CMS) plans for modernizing Medicare’s quality programs and commitment to value-based care.
This month, we’ve highlighted the work that HMA’s federal policy experts do to support organizations’ Medicare projects. We’ve discussed our experts’ ability to support organizations with the transition to digital quality measures. Our experts were on top of policies that made it into final MA rate notices and policy rules. We also flagged what wasn’t included and what this may mean for the future of Medicare policy. We examined the notable policy proposals in Medicare payment rules for inpatient hospitals and how these are a “canary in the coal mine” for other upcoming rules, especially related to making quality reporting and measurement more efficient and actionable. And we asked whether Medicare is ready for the next era of innovation?
We are at the start of a new season of priority setting for CMS. Early signals of what will be important to policy officials include alignment with the Make America Healthy Again (MAHA) initiative, digital health, transparency, and addressing fraud.
Impact of Recent Policy Changes
Recent policy changes have impacted the Medicare landscape in various ways. Changes announced in recent Medicare Advantage and Part D rate notices and policy include updates to payment models, quality reporting requirements, and measures to enhance transparency and accountability. The focus on digital health and the integration of digital tools into clinical models are reshaping how care is delivered and measured. Additionally, the emergent emphasis on chronic disease and program integrity is driving organizations to take a fresh look at their data, models of care, and strategies for collaborating with partners to improve patient care. Staying informed and adapting to these policy changes is crucial for organizations to remain competitive and deliver high-quality care to Medicare beneficiaries.
The Future of Medicare
Medicare will continue to play a vital role in providing healthcare to the more than 68 million beneficiaries in the program, as it is poised for significant transformation through the integration of digital tools, increased focus on quality care, and the need for cost efficiency in both Medicare Advantage and in Fee-for-Service Medicare. Organizations that stay ahead of these changes and align with policy priorities will be well-positioned to drive meaningful improvements and ensure the sustainability of the program.
Hospitals that use specially designated new technologies in the inpatient setting may receive additional reimbursement through a program offered by the Centers for Medicare & Medicaid Services (CMS) known as the new technology add-on payment (NTAP) program. CMS offers a separate NTAP payment in addition to the regular Medicare Severity-Diagnosis Related Group (MS-DRG) payment, for use of specially designated new technologies that qualify. This payment is meant to remove some of the disincentives faced by hospitals under the bundled inpatient payment system, when the costs of new technologies are not incorporated into the payment rates until two to three years after market entry. At a recent webinar, HMA Principal Clare Mamerow discussed the NTAP program, what manufacturers must do to apply for and receive NTAP designation for their new technologies, and some of the changes coming in 2025. This blog shares some of the key issues raised.
While NTAP designation can offer manufacturers of new technologies a significant advantage, the NTAP application process can be intense, arcane, and difficult to navigate without proper guidance. Most products applying for NTAP need to meet three criteria: newness, cost, and substantial clinical improvement. Certain other products – breakthrough devices and certain antibiotic and antimicrobial drugs – are deemed to have already met the newness and substantial clinical improvement criteria and therefore, only need to show that the cost criterion is met. This alternative application pathway is significantly streamlined and makes gaining NTAP designation much easier for these special products because the majority of products that fail to meet the three criteria miss substantial clinical improvement.
The newness criterion has two facets. First, the product must be newly on the market (received FDA approval recently, but prior to May 1, 2026) and must not be “substantially similar” to other available products. CMS looks to whether the product has a different mechanism of action or whether the product treats a new or different disease or patient population in making a substantially similar determination.
The cost criterion involves an analysis of Medicare claims data, where claims from two years ago are identified as cases where the new product could have been used had it been available and then repriced to account for the cost of the new technology. The average charges on those claims are compared to a DRG specific thresholds that CMS calculates. If the claim charges exceed the threshold, the cost criterion is met.
Finally, the substantial clinical improvement criterion requires that applicants show that patient outcomes are better with treatment with the new technology. Outcomes such as reduced mortality, reduced complications, and reduced health care utilization are all examples of clinical improvement. CMS takes a totality of the circumstances view of substantial clinical improvement, so applicants are encouraged to provide as much data as possible to support their application.
While NTAP can provide supplemental payments in some circumstances, it’s important to understand the program’s limits. The NTAP payment that hospitals receive is calculated on a claim-by-claim basis, with the payment at the lesser of 65% of the cost of the product, or 65% of the cost above the regular DRG payment. This means that hospitals are only made aware of the payment amount after the claim has been submitted, and that the hospital can never be made whole for the use of the new technology. In addition, the payment can be any amount less than 65% of the cost of the product—it’s even possible that the hospital will receive no payment if the cost of the case isn’t high enough to trigger the payment. Certain antibiotics and gene therapies that treat sickle cell disease receive a high payment, up to 75% of the cost of the product. Additionally, the payments are only applicable to Medicare fee-for-service claims in IPPS hospitals. Medicare Advantage, Medicaid, and commercial hospital claims are not eligible for payments. Finally, NTAP eligibility only extends for 2-3 years after market entry.
Although the NTAP application deadline for FY 2027 has not yet been announced, manufacturers of new technologies with an interest in NTAP should begin preparing their applications soon.
HMA experts in Medicare and Life Sciences can partner with your organization navigate the challenges in the NTAP program. If you are interested in learning more, contact us.
Amy Bassano is a Managing Director at Health Management Associates and a nationally recognized Medicare policy expert. In this episode of Vital Viewpoints on Healthcare, we unpack the complexities of Medicare innovation and examine where the program is headed next. Drawing on decades of experience—including her leadership at the Center for Medicare and Medicaid Innovation—Amy breaks down what makes value-based care so complex, why scaling successful models is harder than it sounds, and how Medicare Advantage continues to reshape the healthcare landscape. She also discusses how financial incentives, regulatory constraints, and the urgent need for system-wide efficiency are shaping the next chapter of Medicare policy. This conversation offers practical insights for policymakers, providers, and advocates navigating the future of one of the nation’s most essential programs.
This week, our second In Focus article addresses the transition to end the Medicare Advantage Value-Based Insurance Design (VBID) model, which launched in 2017 and subsequently has been expanded with bipartisan support. This model was designed to promote flexible benefit design, reduce cost barriers, and enhance care for targeted populations, especially dual eligibles and individuals with chronic conditions. In December 2024, however, the Centers for Medicare & Medicaid Services (CMS) announced that the model would be terminated by the end of 2025, citing unmitigable costs to the Medicare Trust Funds, totaling more than $4.5 billion across 2021 and 2022 alone.
Despite its popularity and effectiveness in improving medication adherence and addressing social determinants of health, CMS concluded that the cost trajectory was unsustainable within the parameters of the Innovation Center’s mandate.
The end of the VBID model is not the end of innovation in Medicare Advantage (MA); rather, it is a strategic inflection point. Plans that approach this transition with a proactive, data-driven lens will be best positioned to maintain competitive advantage, compliance, and member trust. This article reviews critical steps VBID plans should be taking and how Medicare Advantage Organizations (MAOs) and their partners can best prepare for future opportunities.
Pain Points and Key Strategic Decisions for MAOs
As plans prepare for a post-VBID world, they face a series of complex trade-offs—especially those with Dual Eligible Special Needs Plans (D-SNPs) that had $0 drug cost sharing under VBID. With the end of CMS’s drug cost offset in the initial coverage phase, MAOs will need to determine whether and how to absorb those costs through alternative mechanisms. In addition, plans will need to make important decisions regarding their other VBID benefits, namely, whether to discontinue or transition them to the special supplemental benefits for the chronically ill (SSBCI) program. MAOs should consider the following key strategic decisions:
Offer an Enhanced Alternative (EA) or Basic Alternative (BA) Part D Plan: To replicate $0 cost sharing, MAOs would need to use EA or BA plan designs with $0 deductibles and $0 copays across all tiers—an expensive move and potentially untenable investment for many.
Tier-Specific Buy-Downs (T1/T2): Some plans may consider buying down T1 and T2 copays to $0, a much less costly approach. Others may consider moving key T2 drugs to T1, while keeping T1 copays at $0 to protect access and using non-zero dollar T2 copays to limit costs.
Competitive Alignment Considerations: MAOs offering broader cost-sharing reductions (e.g., $0 copays on both T1 and T2 drugs) may experience undesirable shifts in enrollment patterns depending on how competitors structure their formularies and benefit designs. MAOs should consider competitive parity and attempt to maintain a balanced benefit structure that aligns with market norms.
Transferring VBID Benefits to SSBCI: Some benefits—like non-health-related transportation, healthy foods, and general supports for living—could migrate to the SSBCI program. But SSBCI has strict eligibility, documentation, and operational requirements, calling for nuanced workflows and cross-departmental coordination.
Action Plan: What MAOs Should Be Doing Now
To navigate this transition successfully, teams of experts at Wakely, a Health Management Associates, Inc. (HMA) Company, are already working with VBID stakeholders to evaluate multiple transition scenarios. Our experts recommend that MAOs take the following actions:
What to Watch: Future Innovation in Medicare Advantage
Though VBID is ending, the innovation landscape is far from static. With the new Trump Administration and the return of Abe Sutton—a VBID expansion advocate—appointed as Director of the CMS Innovation Center, our experts are closely monitoring the potential for a revised version of VBID or similar models. Stakeholder advocacy could influence how CMS prioritizes the next wave of innovation. Plans should consider engaging in dialogue now to shape what happens next.
Connect with Us
Wakely is embedded in MA strategy and policy. Wakely and HMA teams are working with clients to evaluate multiple transition scenarios, helping them optimize value, protect Star Ratings, and preserve member satisfaction during this pivotal shift, while also supporting targeted policy engagement efforts to ensure their perspectives are reflected in future CMS and Innovation Center decision making.
Our joint capabilities bring together:
Actuarial modeling expertise to quantify cost and risk impacts of design alternatives
Regulatory insight to ensure compliance with CMS requirements
Operational support to help you implement SSBCI programs efficiently
Market strategy consulting to align your plan offerings with local competition and enrollment goals
Policy advocacy to help clients engage in the conversation around what comes next after VBID
To connect on additional questions contact our featured experts below.
This week, our In Focus section reviews the policy changes that the Centers for Medicare & Medicaid Services (CMS) proposes to make in the Fiscal Year (FY) 2026 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Acute Care Hospital (LTCH) Proposed Rule (CMS-1833-P). The IPPS proposed rule, released April 11, 2025, includes several important policy changes that will alter hospital margins and change administrative procedures, beginning as soon as October 1, 2025.
Key Provisions of the FY 2026 Hospital IPPS and LTCH Proposed Rule
For FY 2026, CMS proposes to modify several hospital inpatient payment policies. We highlight and interpret six of these proposed policies that may be among the most impactful for Medicare beneficiaries, hospitals and health systems, payers, and manufacturers, as follows:
Annual inpatient market basket update
Labor share reduction
Medicare Advantage (MA) data integration in measuring hospital readmissions
New Technology Add-on Payment (NTAP) program growth
Transforming Episode Accountability Model (TEAM) modifications
Uncompensated care payment increase for disproportionate share hospitals (DSHs)
Annual Inpatient Market Basket Update
Proposed Rule: CMS’s FY 2026 Medicare IPPS Proposed Rule will increase payments to acute care hospitals overall by 2.4 percent from FY 2025, amounting to an estimated $4 billion increase in reimbursement. This update is based on a hospital market basket increase of 3.2 percent and a 0.8 percent reduction for total factor productivity.
HMA Analysis: CMS’s 2.4 percent increase results from the estimated rate of increase in the cost of a standard basket of hospital goods—the hospital market basket. For beneficiaries, this payment increase will lead to a slightly higher standard Medicare inpatient deductible and an increase in out-of-pocket costs. For hospitals and health systems, payers, and manufacturers, the proposed payment increase (2.4 percent) is consistent with economy-wide inflation over the past year (2.4 percent) and below the amount that MA plans will receive for 2026 (5 percent).[1], [2]Although the published payment update for FY 2026 is 2.4 percent, other policy changes result in the average change in inpatient payments totaling slightly more than 3 percent. We anticipate the proposed 2.4 percent increase will increase somewhat by the time CMS finalizes these rates later in the year.
Labor Share Reduction
Proposed Rule: CMS proposes to modify the hospital labor share used to reimburse hospitals for inpatient services. Using 2023 hospital cost report data CMS proposed a national labor‑related share of 66.0 percent, a decrease from the labor share of 67.6 percent.
HMA Analysis: Every five years, CMS recalculates the hospital market basket and the hospital labor share using updated cost data from the hospital cost reports. For FY 2026, CMS conducted its routine rebasing calculation using 2023 cost report data, replacing the 2018 cost data currently used. As a result, CMS calculated that the cost of labor accounts for a slightly smaller share of total hospital costs in 2023 than in 2018. The labor share is used within the IPPS to identify the proportion of payments that are affected by the hospital wage index in an effort to adjust payments for geographic variation in labor costs. The consequence of a lower hospital labor share is that a slightly smaller share of hospital inpatient payments will be adjusted by the hospital wage index. The subtle impact of this change is that hospitals with higher wage index values may experience reductions in payment. Further, this downward revision of the labor share signals that hospital wages, salaries, and employee benefits account for a smaller share of total costs in the post-pandemic environment. This change may come to a surprise to some, as hospital labor costs have been a subject of concern since the COVID-19 public health emergency.
Medicare Advantage Data Integration in Measuring Hospital Readmissions
Proposed Rule: CMS proposed to make several modifications to the Hospital Readmissions Reduction Program (HRRP), including:
Refining all six readmission measures to add MA patient data
Removing the COVID-19 patient denominator exclusion from measures
Reducing the applicable period from three years to two
Modifying the DRG payment ratios in the payment adjustment formula to include MA beneficiaries
Clarifying that CMS has the discretion to grant an extension to hospitals under the extraordinary circumstances exception (ECE)
CMS also proposed to include MA data in other measures included in the Hospital Value-Based Purchasing (VBP) program and the Inpatient Quality Reporting (IQR) program.
HMA Analysis: The inclusion of MA data in the HRRP may have significant payment implications for many hospitals because it will alter their readmission rates in unanticipated ways, particularly if hospitals’ MA patients differ substantially from traditional Medicare beneficiaries. Importantly, the inclusion of MA data in the HRRP measures, and also within the VBP program and the IQR program, signals that CMS is moving toward broader integration of MA data into Medicare fee-for-service reimbursement systems.
New Technology Add-on Payment Program Growth
Proposed Rule: CMS proposed to continue NTAP status for 26 products because they continue to meet the newness criteria required under this program. In addition, within the proposed rule CMS discusses new NTAP applications for 43 additional products. Among these applications, 29 were submitted under the alternative pathways for breakthrough devices and qualified infectious disease products (QIDP).
HMA Analysis: The overall number of products with NTAPs is on par with other recent years, but the number of NTAP applications has blossomed in FY 2026 as the result of the alternative breakthrough application pathway. This alternative pathway allows breakthrough devices and certain antibiotic and antimicrobial drugs to apply for NTAP using an abbreviated application process.
Transforming Episode Accountability Model Modifications
Proposed Rule: CMS proposed several modifications to the forthcoming CMS Innovation Center TEAM framework. Among the various methodological modifications proposed to this mandatory payment model beginning January 1, 2026, CMS proposed to take the following actions:
Limit the deferment period for certain hospitals
Replace the Area Deprivation Index (ADI) with the Community Deprivation Index (CDI)
Use a 180-day lookback period and Hierarchical Condition Categories (HCC) for risk adjustment
Remove health equity and health-related social needs data reporting
Expand use of the Skilled Nursing Facility (SNF) three-day rule waiver
HMA Analysis: The critical aspect of CMS’s TEAM provision is that the agency proposes to follow through with this Innovation Center model while cancelling other Innovation Center payment models in recent months. It also is noteworthy that the agency has proposed to remove the health equity data reporting requirements for TEAM in line with actions taken with many other CMS programs. Another proposal of note is the plan to expand the use of the waiver to circumvent the SNF three-day inpatient stay rule, which will allow hospitals to discharge patients more quickly to SNFs.
Uncompensated Care Payment Increase for Disproportionate Share Hospitals
Proposed Rule: CMS proposes to increase uncompensated care payments to DSHs by $1.5 billion in FY 2026.
HMA Analysis: CMS’s proposal will increase uncompensated care payments to hospitals by 26 percent. This increase is driven by CMS’s assumption that the rate of uninsured people will increase to 8.7 percent of the population in 2026 from 7.7 percent in 2025.
Stakeholder comments on the IPPS proposed rule are due no later than June 10, 2025.
Connect With Us
The Health Management Associates, Inc. (HMA), Medicare Practice Group monitors federal regulatory and legislative developments in the inpatient setting and assesses the impact on hospitals, life science companies, and other stakeholders. Our experts interpret and model hospital payment policies and assist clients in developing CMS comment letters and long-term strategic plans. Our team replicates CMS payment methodologies and model alternative policies using the most current Medicare fee-for-service and Medicare Advantage (100%) claims data. We also support clients with DRG reassignment requests, NTAP applications, and analyses of Innovation Center alternative payment models.
For more information about the proposed policies, please contact our expert below.
Whether you’re navigating Medicare Advantage policy changes, seeking actuarial insights, analyzing risk-based payment structures, or working to improve integration for Dual Eligibles and align D-SNPs, our team is here to provide actionable insights and answers. We had HMA professionals from across the country share their perspectives and help navigate the complexities of Medicare during this town hall style webinar.
Health Management Associates (HMA) conducted a multi-state study to examine the policy decisions influencing the operation and expansion of Programs of All-Inclusive Care for the Elderly (PACE). It explored different program structures, associated advantages and challenges, and strategies to enhance efficiency while meeting regulatory requirements.
This webinar summarized our research on 10 active PACE states (CA, FL, IL, KY, LA, MA, NJ, NY, OH, and WA) that have either implemented or expanded their PACE programs between 2020 and 2024. Using state survey responses and credible third-party, publicly available data, we showcased the outcomes of PACE program development through open and competitive RFP processes. We also outlined development timelines to demonstrate the effectiveness of each approach and highlight key insights gained during the discovery and research phase of the study.
Learning Objectives:
Comparing the Open versus Competitive RFP approach
Understanding state-level practices, challenges, and opportunities for improvement
Review state profiles highlighting: Program development outcomes; Building PACE program capacity; Program development timelines; Fostering PACE growth
The Centers for Medicare & Medicaid Services (CMS) is on the cusp of possessing the data needed to make long anticipated changes to the Medicare fee-for-service (FFS) ground ambulance payment system. It has been more than two decades since CMS revised these payment rates through a negotiated rulemaking process that was exclusive of actual cost data or inflationary considerations. Since then, the cost structure of ground ambulance entities has changed. CMS is now using the Ground Ambulance Data Collection System (GADCS) to gather ambulance cost data, as required by Congress, to offer an improved understanding of the costs of delivering ground ambulance services. Given the potential of GADCS data to improve the adequacy of Medicare FFS reimbursement rates, the American Ambulance Association developed a similar data collection device, referred to as Amber, to test these data with its membership of ground ambulance entities. Amber offers a glimpse into the current challenges of the ground ambulance industry.[i]
Health Management Associates, Inc. (HMA) assessed the Amber dataset for response rates and data quality, along with responses containing calendar year 2022 financial data. Amber response rates were low, but sample volumes were on par with prior industry surveys conducted in the past by federal agencies. The Amber sample is representative of the industry’s wide variation in entity size and geographic service area. Amber data are reliable for calculating margins, but some aspects of these data also signal that ground ambulance entities, particularly smaller entities, may have had difficulty with variable definitions or the submission process. We observe that Amber would be improved by including information on uncompensated care and more details on medication supply costs.
The 2022 financial data from Amber suggest that Medicare FFS margins, at -6 percent, had declined since GAO’s 2010 assessment and that the share of costs associated with labor has increased. Amber data also suggest that the cost structure of smaller ground ambulance entities and rural and super-rural entities differs from that of larger and more urban entities. Margins for small and rural entities are lower.
Based on our assessment of the Amber dataset and its 2022 financial, we offer several recommendations to policymakers and stakeholders. These recommendations are intended to improve future cost collection efforts that may inform payment reforms to enhance the payment accuracy of the Medicare FFS payment system for ground ambulance services.
Provide additional educational support to respondents to improve consistency of data reporting
Streamline and modify data collection devices to adhere to industry trends and challenges
Develop a standardized method for assigning ground ambulance entities to geographic service area for research purposes
Collect data on ground ambulance uncompensated care and bad debt
Collect payer level data for cases involving treatment without transport
Collect targeted data on top 10 medications by cost to accurately reflect costs in payment rates
CMS should consider collecting ground ambulance cost data on a semi-regular basis
CMS should consider phasing in the use of GADCS data to ensure that the data reflect the diversity of ambulance entities and consistent reporting of key financial variables
Our second In Focus section reviews the most recent Medicaid enrollment trends in capitated risk-based managed care programs in 29 states.[1] Health Management Associates Information Services (HMAIS) collected and analyzed monthly Medicaid enrollment data from the fourth quarter (Q4) of 2024.
The data offer a timely overview of trends in Medicaid managed care enrollment and valuable insights into state-level and managed care organization (MCO)-specific enrollment patterns. This information allows state governments, their partners, and other organizations interested in Medicaid to track enrollment shifts. Understanding the underlying drivers of enrollment shifts is critical for shaping future Medicaid policies and adjusting program strategies amid a dynamic healthcare landscape.
Overview of the Data
The 29 states included in our review have released monthly Medicaid managed care enrollment data via a public website or in response to a public records request from Health Management Associates (HMA). This report reflects the most recent data posted or obtained. HMA has made the following observations related to the enrollment data (see Table 1):
As of December 2024, across the 29 states tracked in this report, Medicaid managed care enrollment was 61.7 million, down by 3.6 million (-5.5%) year-over-year.
Though most states experienced declines in enrollment, six states saw enrollment increases as of December 2024—double the number of states from the previous year.
Figure 1. Year-Over-Year Medicaid Managed Care Enrollment Percent Change in Select States, 2020−24
Among the 22 expansion states included in this report, net Medicaid managed care enrollment has decreased by 2.1 million (-4%) to 49.5 million members at the end of Q4 2024, compared with the same period in 2023.[2]
Among the seven states included in this report that had not expanded Medicaid as of December 2024, net Medicaid managed care enrollment decreased by 1.5 million, or 1 percent, to 12.3 million members at the end of Q4 2024 compared with to the same period in 2023.
Table 1. Monthly MCO Enrollment by State—October through December 2024
Note: In Table 1 above, “+/- m/m” refers to the enrollment change from the previous month. “% y/y” refers to the percentage change in enrollment from the same month in the previous year.
It is important to note the limitations of the data presented. First, not all states report the data at the same time during the month. Some of these figures reflect beginning of the month totals, whereas others reflect an end of the month snapshot. Second, in some cases the data are comprehensive in that they cover all state-sponsored health programs that offer managed care options; in other cases, the data reflect only a subset of the broader managed Medicaid population. This limitation complicates comparison of the data described above with figures reported by publicly traded Medicaid MCOs. Hence, the data in Table 1 should be viewed as a sampling of enrollment trends across these states rather than as a comprehensive comparison, which cannot be established based solely on publicly available monthly enrollment data.
HMAIS also compiles a more detailed quarterly Medicaid managed care enrollment report representing nearly 300 health plans in 41 states. The report provides by plan enrollment plus corporate ownership, program inclusion, and for-profit vs. not-for-profit status, with breakout tabs for publicly traded plans. Table 2 shows a sampling of plans and their national market share of Medicaid managed care beneficiaries based on a total of 66.3 million enrollees. These data too should be viewed as a broader representation of enrollment trends rather than as a comprehensive comparison.
Table 2. National Medicaid Managed Care Market Share by Number of Beneficiaries for Sample of Publicly Traded Plans, 2024
What to Watch
Enrollment in Medicaid MCOs has experienced significant fluctuations recently, influenced both by policy changes and economic factors. Since April 2023, Medicaid enrollment has been on a downward trajectory as states complete eligibility redeterminations after the end of the COVID-19 public health emergency. This trend, coupled with financial and political challenges, necessitates strategic planning for stakeholders to navigate the evolving Medicaid landscape effectively.
Potential changes that may affect enrollment and require scenario and readiness planning include:
Federal requirement, or a new state option, to implement Medicaid work requirements for at least some categories of enrollees
Changes to the federal financial match policy, which may cause some states to make different decisions about their Affordable Care Act expansion program for adults
Modifications in requirements and expectations for more efficient eligibility processes to improve the accuracy of determinations and assignment to eligibility categories
Connect with Us
HMA is home to experts who know the Medicaid managed care landscape at the federal and state levels. The HMAIS subscription provides point-in-time and longitudinal Medicaid enrollment data, health plan financials, and additional actionable information about eligibility expansions, demonstration and waiver initiatives, as well as population- and service-specific information. HMAIS also includes a comprehensive public documents library containing Medicaid requests for proposals and responses, model contracts, scoring sheets, and protests.
For detail about the HMAIS enrollment report and subscription service, contact our experts below.
[1] Arizona, California, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin.
Notably, because of the timing of the draft notices and proposed rule, Trump Administration officials ultimately had more input into policies omitted from the rate notice and final policy rule than on policies that were finalized. For example, the final rule is exclusive of proposals to expand coverage for anti-obesity medications, guardrails for artificial intelligence (AI), and new requirements related to utilization management and prior authorization procedures.
In his confirmation hearing, CMS Administrator Mehmet Oz, MD, cited Medicare Advantage prior authorization practices and health risk assessments that lead to upcoding as areas that deserve further consideration and scrutiny, raising the potential for future regulatory shifts and even legislative reform. With the possibility of Medicare, including MA, facing cuts as part of broader budget negotiations in Congress, the rate notice and policy rule offer program stability counterbalancing the political and fiscal pressures that may emerge this year.
CMS has sought to stabilize MA and Part D programs into 2026, and stakeholders can benefit from understanding the impact in markets for 2026 and the signals of potential regulatory changes to come. For more in-depth analysis and insights on the rate notice, look for our policy and actuarial experts’ brief due out next week.
The remainder of this In Focus article reviews CMS’s decisions on major payment and policy proposals in the Rate Announcement and Final Rule and examines key considerations for healthcare stakeholders.
Payment Impact on Medicare Advantage Organizations
In the CY 2026 Rate Announcement, CMS projects that federal payments to MA plans will increase by 5.06 percent from 2025 to 2026, which represents a $25 billion increase in expected payments to MA plans next year. According to CMS, this represents an increase of 2.83 percentage points compared with the CY 2026 Advance Notice that is largely attributable to an increase in the effective growth rate. The increase in the effective growth rate—increasing to 9.04 percent in the Rate Announcement from 5.93 percent in the Advance Notice—is primarily the result of the inclusion of additional data on Medicare fee-for-service (FFS) expenditures, including payment data through the fourth quarter of 2024.
The Rate Announcement estimates represent the average increase in payments to MA plans and actual payments will vary from plan to plan. Below, Table 1 provides CMS estimates of the impact of finalized payment changes on net MA plan payments.
MA Risk Adjustment Changes
As expected, CMS finalized the last year of the three-year phase-in of the MA risk adjustment model, which requires calculating 100 percent of the risk scores using only the 2024 CMS-HCC (Hierarchical Condition Category) model in 2026. CMS also addressed stakeholder concerns with the planned transition toward a risk adjustment model based on MA encounter data, as previewed in the CMS CY 2026 Advance Notice. CMS pledged to engage stakeholders in this model development process while continuing to evaluate the feasibility, transparency, and timing of a future transition to an encounter-based risk adjustment model.
CMS also finalized the MA coding pattern adjustment factor of 5.9 percent for CY 2026, which is the statutory minimum adjustment factor to account for differences in coding patterns between MA plans and providers under Medicare FFS Parts A and B.
Part D Risk Adjustment
For CY 2026, CMS finalized the revised 2026 RxHCC model with adjustments for maximum fair price drugs. Importantly, CMS also finalized using separate FFS normalization factors for MA-Prescription Drug (MA-PD) plans and Prescription Drug Plans (PDPs), making 2026 the second year CMS will vary normalization for these two markets. The calculation of the factors for CY 2026 is different, however, and will have substantially greater impact than the method used previously. It also will reduce Part D risk scores significantly for MA-PD plans while increasing scores for PDPs.
MA Star Ratings
CMS continues to solicit feedback from stakeholders on ways to simplify and refocus MA Star Ratings measures to focus more on clinical care, outcomes, and patient experience of care measures. Also included in the CY 2026 Rate Announcement are non-substantive measure specification updates and a list of measures included in the Part C and Part D improvement measures and categorical adjustment index for the 2026 Star Ratings.
Separately, in the policy and technical changes rule, CMS finalized new regulatory requirements designed to enhance MA beneficiary protections in an inpatient setting, provisions related to allowable special supplemental benefits for the chronically ill (SSBCI), and the care experience for dually eligible beneficiaries enrolled in MA special needs plans.
Enhancing MA Beneficiary Appeal Rights and Notification Requirements
CMS is finalizing provisions that limit the ability of MA plans to reopen and modify a previously approved inpatient hospital decision on the basis of information gathered after the approval. Under the final rule, MA plans will be able to reopen an approved hospital admission only due to error or fraud. In addition, CMS finalized several provisions to enhance beneficiary appeal rights and new reporting and notice requirements, including:
Ensuring that MA appeals rules apply to adverse plan decisions, regardless of whether the decision was made before, during, or after the receipt of such services
Codifying existing guidance that requires plans to give a provider notice of a coverage decision
Ensuring enrollees have a right to appeal MA plan coverage denials that affect their ongoing source of treatment
Non-Allowable Special Supplemental Benefits for the Chronically Ill
The final rule establishes guardrails for SSBCI benefits by codifying a list of non-allowable examples (e.g., unhealthy food, alcohol, tobacco, life insurance). CMS did not finalize proposals that were designed to improve administration of supplemental benefits and enhance transparency of the availability of such benefits.
Improving Care Experience for Dual Eligibles
CMS finalized new requirements for dual eligible special needs plans (D-SNPS) that are applicable integrated plans (AIPs) as follows:
D-SNPs will be required to have integrated member ID cards for their Medicare and Medicaid plans
D-SNPs will be required to conduct an integrated health risk assessment for Medicare and Medicaid, rather than separate ones for each program.
These provisions affecting certain D-SNPS plans will be effective for the 2027 plan year.
Provisions Pertaining to the Medicare Part D Inflation Reduction Act
CMS is finalizing proposals to codify existing requirements related to key provisions of the Inflation Reduction Act, including no cost sharing for adult vaccines and capping monthly copayments for insulin at $35. In addition, CMS is codifying existing guidance related to the implementation of the Medicare Prescription Payment Plan, which is also part of the Inflation Reduction Act.
Key Proposals CMS Has Yet to Finalize
As noted earlier, CMS finalized a streamlined rule that excluded several regulatory changes identified in the November 2024 proposed rule. In addition to provisions related to coverage of anti-obesity medications, guardrails for AI, and mandatory analysis of the health equity impact of MA plans utilization management practices, the following proposals were not finalized. CMS notes that these proposals might be finalized in future rulemaking.
Expanding Medicare Part D Medication Therapy Management (MTM) eligibility criteria
Ensuring equitable access to behavioral health services by applying MA cost-sharing limits
Enhancing the Medicare Plan Finder to include information on plan provider directories
Promoting informed choice by enhancing CMS review of MA marketing and communication materials
Enhancing rules on MA plans’ use of internal coverage criteria
Key Considerations
The policies finalized in the CY 2026 Rate Announcement are projected to increase average Part C payments to MA plans by 5.06 percent in CY 2026—a significant uptick from the payment updates originally proposed in the CY 2026 Advance Notice. Nonetheless, the final rate increase will have varying effects across MA plans, with some experiencing larger or smaller impacts in CY 2026. MA plans should assess these outcomes as they prepare their bid submissions for 2026.
According to the CY 2026 Rate Announcement, CMS expects that the 5.06 percent increase will provide continued stability for the MA program and its beneficiaries while ensuring accurate and appropriate payments to Medicare Advantage organizations.
In the CY 2026 MA and Part D Final Rule, CMS adopted a significantly scaled-back final rule, which omitted some of the more far-reaching proposals for MA and Part D that were originally proposed in November 2024. CMS, however, could potentially revisit and finalize some of these proposals in future rulemaking. Moreover, new regulatory requirements that enhance enrollee protections in inpatient care settings and improving the care experience for dual eligibles signal CMS’s continued interest in improving program oversight and enhancing consumer protections for MA beneficiaries.
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MA stakeholders need to undertake scenario planning and be prepared to adapt to a rapidly evolving federal policy environment. From modeling and impact assessments of specific policy changes to strategy development and implementation, HMA is home to experts with diverse skill sets. Our team can help stakeholders assess and prepare for potential changes to prior authorization, looking holistically at their organization’s operations, patient care models, and reimbursement strategies. Our team also provides detailed modeling and assessments to ensure health plans are prepared for changes in risk adjustment and coding policies, supplemental benefits, and other key issues affecting capitation payment, bids, and care delivery models.
For details about the finalized payment and policy rules contact our featured experts below.
HHS is moving rapidly to implement its plans. On April 1, 2025, HHS initiated actions to reduce the federal workforce across the agencies and remake the department. In addition, the Senate is expected to vote on a budget resolution this week, which could have significant impacts on federal healthcare spending, including for the Medicaid and Medicare programs.
In the coming weeks and months, HHS intends to make additional announcements about how the department will be restructured. It will be critical that healthcare organizations and stakeholders track these developments closely. Organizations seeking to participate in the development of new federal policies and initiatives must know which offices within HHS will maintain authority over key policy areas. Further, to adapt to changes in funding and policies, it is vital that healthcare leaders remain informed.
Because many changes have already begun, the remainder of this article explains what is known to date about the HHS restructuring and other developments and actions relevant to providers, life sciences firms, insurers, safety net clinics, state and local agencies, and other interested stakeholders. This information can help stakeholders consider how best to proceed.
The Reorganization Plan
EO 14210 required agencies to develop reorganization plans and submit them to the Director of the Office of Management and Budget within 30 days and to “promptly undertake preparations to initiate large-scale reductions in force.” The broader HHS reorganization plan seeks to implement a new departmental focus on “ending America’s epidemic of chronic illness by focusing on safe, wholesome food, clean water, and the elimination of environmental toxins.”
The reorganization calls for the following:
Consolidating the 28 HHS divisions into 15
Reducing the HHS regional offices from 10 to five
Centralizing the human resources, information technology, procurement, external affairs, and policy functions of the department
Reducing the full-time staff at HHS by 10,000
When combined with other efforts, including early retirement and pre-reduction in force (RIF), HHS’s staffing levels of 82,000 full-time will be reduced to 62,000. The announcement listed specific workforce reduction plans for the Food and Drug Administration (FDA), the Centers for Disease Control and Prevention (CDC), the National Institutes of Health, and the Centers for Medicare & Medicaid Services (CMS).
Following the March 27 announcement, additional details regarding the restructuring have continued to emerge, including:
The Biomedical Advanced Research and Development Authority (BARDA) reportedly will be combined with Advanced Research Projects Agency for Health (ARPA-H) under a new Office of Healthy Futures.
The Administration for Strategic Preparedness and Response (ASPR) will be reorganized as a part of CDC.
Programs currently under the Administration for Community Living (ACL) are slated to be reassigned to other agencies; for example, programs that support older adults and people with disabilities will move to the Administration for Children and Families (ACF), Assistant Secretary for Planning and Evaluation (ASPE), and CMS.
HHS Plans for New Agencies that Mirror Policy Priorities
The reorganization includes the establishment of a new Administration for a Healthy America (AHA), which will combine the following offices and agencies:
Office of the Assistant Secretary for Health, which includes the Office of the Surgeon General, the Office of Women’s Health, and several programs focused on health promotion, chronic disease prevention, and vaccines
Health Resources and Services Administration (HRSA)
Substance Abuse and Mental Health Services Administration (SAMHSA)
Agency for Toxic Substances and Disease Registry (ATSDR)
National Institute for Occupational Safety and Health (NIOSH)
According to HHS, the changes are intended to “improve coordination of health resources for low-income Americans and will focus on areas including, Primary Care, Maternal and Child Health, Mental Health, Environmental Health, HIV/AIDS, and Workforce development.” The department also noted that transfer of SAMHSA to the new AHA will “break down artificial divisions between similar programs” and improve operational efficiency.
HHS also intends to establish a new Assistant Secretary for Enforcement position, which will be responsible for leading efforts to address waste, fraud, and abuse at the Departmental Appeals Board, Office of Medicare Hearings and Appeal, and the Office for Civil Rights.
HHS will merge the ASPE and Agency for Healthcare Research and Quality (AHRQ) to establish a new Office of Strategy. The new office will support research “that informs the Secretary’s policies and evaluates the effectiveness of federal health programs.” This office will also include some of the “critical programs that support older adults and people with disabilities” that are currently within the Administration for Community Living.
Developments on Workforce Reduction Plans
On April 1, 2025, HHS began issuing formal termination notices to a significant number of federal employees across several agencies, including the FDA, SAMHSA, and CDC. The workforce actions reportedly include a full dissolution of some offices, for example, SAMHSA’s Office of the Director for Centers for Mental Health Services, Office of Behavioral Health Equity, The Policy Lab, among others, and CMS’s Medicare Medicaid Coordination Office.
What’s Next
In the coming weeks HHS will put in place a structure for the new AHA and other planned new entities. Many questions remain about the impact on specific agencies and authorities as well as reassignment of responsibilities for programs and functions that were carried about by affected federal employees and offices.
Congressional committees are seeking additional information about the HHS restructuring. The US Senate Committee on Health, Education, Labor, and Pensions (HELP) requested that Secretary Kennedy testify at a hearing on April 10, 2025, to discuss the proposed reorganization plan. Providers, health centers, life sciences firms, insurers, health systems, state and local agencies and other healthcare stakeholders and partners should take steps to work through challenges and avail themselves of opportunities to strengthen healthcare systems and improve health. Examples include:
Identify the HHS agencies and offices that are now responsible for policies and procedures that impact your business.
Establish a plan for tracking developments—including litigation—and processes to brief key organizational leaders and act on information, when needed. Healthcare providers, insurers, community groups, and state and local governments will benefit from information as it becomes available regarding changes to agencies and their portfolios and decision makers for policies governing Medicare, Medicaid, child-specific programs, aging and disability programs, mental health and substance use programs, among many others.
Immediately assess current federal discretionary funding and reimbursement policies that may be at risk for your organization, your key partners, and collaborators. Consider potential impact of the policy changes that Congress is separately negotiating, which would significantly affect Medicare and Medicaid. Identify changes that may minimize risk for your organization and position it to engage in new initiatives.
Familiarize your organization with federal oversight and enforcement priorities and incorporate flexibility into compliance plans. Identify opportunities to mitigate vulnerabilities going forward.
Engage now—with your community, your peers, and other experts—to identify opportunities for improvement and plan to build out the strategy, infrastructure and funding to support this work. Think creatively, act decisively.
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Health Management Associates, Inc., experts know the federal landscape and have an intimate knowledge of the dynamics in states and communities. Our policy team is working with clients to help them understand what is happening within HHS and Congress that is ushering in significant policy and funding changes. Our teams are advising stakeholders on the implications for Medicare, Medicaid, and other public programs; strategies to advance their objectives in this new environment; and working with healthcare organizations and state and local government to understand immediate impacts on local financing.
For details about these federal level developments contact one of our featured federal policy experts listed below.
Medicare stakeholders are awaiting the imminent release of the Centers for Medicare & Medicaid Services (CMS) final Medicare Advantage and Part D rate notice and technical updates, as well as a final policy rule that establishes a significantly new direction for Medicare Advantage (MA) stakeholders. These final rules typically are released in April of each year.
In addition, the agency kicks off the annual cycle of payment rules for traditional fee-for-service Medicare, including the first wave of proposed rules that typically are released in April for the forthcoming payment year. These proposed rules for 2026 pertain to the following: Hospital Inpatient Prospective Payment System for Acute Care Hospitals, the Inpatient Rehabilitation Facility Payment System, the Home Health Payment System, and the Inpatient Psychiatric Facility Payment System. A second wave of 2026 proposed rules are typically released in July, including the Medicare Physician Fee Schedule and the Hospital Outpatient Prospective Payment System.
The MA rules and the first wave of Medicare Part A and Part B rules are highly anticipated regulations and now under review at the Office of Management and Budget. These rules are expected to be released in the coming days and weeks.
Why These Rules Matter
The rules set the rates for MA and reimbursement for a significant number of healthcare providers and facilities that serve Medicare beneficiaries. The rules also contain important information about CMS’s quality reporting programs and bonus payments and other changes required for Medicare stakeholders to ensure compliance.
What’s Different About 2025 Proposals
In the first year of a new presidential administration, CMS leaders have a limited window to include their policy priorities in the MA and Part D Final Rate Notice. CMS may, however, decline to finalize some or all of the prior administration’s proposals. Key issues that Health Management Associates (HMA), experts are watching for in the final rules include:
Whether CMS chooses to delay or not finalize significant policy changes proposed by the Biden Administration, including new requirements and guardrails around the use of prior authorization
Potential finalization of improvements to the Medicare plan finder
Direction on oversight of MA plan marketing activities
CMS decision and response to the proposal to expand coverage of anti-obesity medications under Medicare Part D and Medicaid
Similarly, in the first year of a presidential transition, CMS has a narrower opportunity to shape Medicare’s first set of proposed payment and policy rules. The agency may, however, begin to signal important policy direction on a global level and technical issues that can have an impact on Medicare stakeholders. HMA experts are watching in particular for requests for information and other signals of CMS’s Medicare priorities, including reforms in quality reporting, value-based contracting, pricing and contract transparency, among others.
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HMA’s expert consultants provide the advanced policy, tailored analysis, and operational skills you need to navigate today’s rapidly evolving regulatory landscape and to support implementation of final policies. Don’t let the uncertainty of future policies derail your strategic plans or burden your teams.
For details about the forthcoming Medicare Advantage and traditional Medicare regulations, contact one of our featured experts below.
