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Evolving Medicaid Work Requirement Policies: Essential State Actions to Prepare

On May 22, 2025, the US House of Representatives advanced a comprehensive legislative package that includes expansive changes to healthcare spending and tax policies. The One Big Beautiful Bill Act, H.R. 1, will be subject to further revision in the Senate – and potentially again in the House – before it can be sent to the president for his signature. If enacted, the legislation would have significant implications for the Medicaid program, including a nationwide work and community engagement requirement. The House-passed bill establishes a deadline of December 31, 2026, for implementation, but individual states could move earlier.

As state legislatures pass work requirement bills, governors consider executive actions, and Congress contemplates revisions to the Medicaid work mandate, vetting key implementation issues may significantly affect the direction of related policies. Even before implementation, states must test operations, enable systems, and establish connections to beneficiaries to reduce potential implementation missteps, inappropriate disenrollments, and litigation risks.

If the goal of Medicaid work requirement policies is to stimulate connections between health benefits and employment/workforce, building state and federal capacities to support these approaches is critical to effectuating that change. In the remainder of this article, Health Management Associates (HMA), experts focus on the operational dynamics that need to be discussed, tested, and built as states begin introducing work and community engagement initiatives.

Federal Policies and Early State Actions on Work Requirements

The House bill would require all states to implement work and community engagement requirements for adults without dependents for at least 80 hours per month.[1] Employment, work programs, education, or community service (or a combination of those activities) would satisfy the requirement.

The work requirements in the House-passed legislation would apply only to individuals between the ages of 19 and 64 without dependents, and the following groups are exempted:

Women who are pregnant or entitled to postpartum medical assistance
Members of Tribes
Individuals who are medically frail (i.e., people who are blind, disabled, with chronic substance use disorder, has serious or complex medical conditions, or others as approved by the Secretary of the US Department of Health and Human Services)
Parents of dependent children or family caregivers to individuals with disabilities
Veterans
People who are participating in a drug or alcoholic treatment and rehabilitation program
Individuals who are incarcerated or have been released from incarceration in the past 90 days

In addition, individuals who already meet work requirements through other programs, such as Temporary Assistance for Needy Families (TANF) or the Supplemental Nutrition Assistance Program (SNAP), would be exempt. However, the House-passed version would make the eligibility verification and work requirements for SNAP more stringent and shift program costs to these states, which would affect cross-functional eligibility. The legislation also includes temporary hardship waivers for natural disasters and areas with an unemployment rate greater than 8 percent (150 percent of the national average).

Though the federal budget package has received a great deal of attention, at least 14 states already have moved forward (see Table 1) in advance of the current federal debate by passing laws and submitting work requirement demonstration requests to the Centers for Medicare & Medicaid Services (CMS).

Table 1. A Review of 2025 States’ Approaches to Work Requirements in Medicaid

Status	State	Population Criteria	Requirements	Exemptions/ Notes	Public Comment
Work Requirement Request Submitted	Arizona	Ages 19−55	80 hours/month	Multiple exemptions; 5-year lifetime limit	Closed
Work Requirement Request Submitted	Arkansas	Ages 19−64; covered by a qualified health plan (QHP)	Data matching to assess whether on track/not on track	No exemptions	Closed
Work Requirement Amendment Request Submitted	Georgia	Ages 19−64; 0-100% FPL	80 hours/month	Already has approval but is requesting reporting be changed from monthly to annually and adding more qualifying activities	Federal comment period open through June 1, 2025
Work Requirement Request Submitted	Ohio	Ages 19−54; expansion adults	Unspecified hours	Limited list of exemptions	Closed
Legislation Passed	Idaho	Ages 19−64	20 hours/week required	Limited list of exemptions	—
Legislation Passed	Indiana	Ages 19−64; expansion adults	20 hours/week required	Limited list of exemptions	—
Legislation Passed	Montana	Ages 19−55	80 hours/month required	Multiple exemptions	—
Ballot Initiative Passed	South Dakota	Expansion adults	—	2024 ballot initiative asking voters for approval for state to impose work requirements for expansion adults passed	—
Legislation Pending	North Carolina	—	—	Pursue requirements that are CMS approvable	—
Work Requirement Request Draft	Iowa	Ages 19−64; expansion adults	100 hours/month required	Limited list of exemptions Separate bill would end expansion if work requirements are withdrawn/ prohibited (80 hr./mo.)	Closed
Work Requirement Request Draft	Kentucky	Ages 19−60; no dependents; enrolled more than 12 months	Connected to employment resources	Multiple exemptions	State comment period open through June 12, 2025
Work Requirement Request Draft	South Carolina	Ages 19−64; 67%−100% FPL	Specified activities (work specific is 80 hours/month)	Limiting participation to 11,400 individuals based upon available state funding	State comment period open through May 31, 2025
Work Requirement Request Draft	Utah	Expansion adults ages 19−59	Register for work, complete an employment training assessment and assigned job training, and apply to jobs with at least 48 employers within 3 months of enrollment	Several exemptions, largely aligned with federal SNAP exemptions	State comment period open through May 22, 2025
Anticipated Waiver Request	Alabama	Non-expansion population	—	Potential to resubmit previous work requirement demonstration request	—

Key Questions to Guide State Policy Decisions

Considerable research and findings from previous Medicaid work requirement initiatives can help prepare policymakers to implement a potential new phase of Medicaid work requirement policies. Some previous findings include the high cost of administration relative to potential savings, the importance of systems that support foundational items like logging an enrollee’s compliance activities and exemptions, as well as developing an efficient appeals process. The Medicaid and CHIP Payment and Access Commission (MACPAC), General Accounting Office, National Institutes for Health, and multiple researchers have published assessments regarding previous experiences that could prove useful in policy making.

HMA experts have experience identifying key issues and considerations, analyzing options, and implementing critical issues and for state leaders and stakeholders who will be responsible for implementing work requirements. Several of these issues are described below and in more detail in the HMA blog, Building State Capacities for Medicaid Work and Community Engagement Requirements.

Exemptions, particularly medical frailty definitions and assessments. The federal government and states will need to identify individuals classified as “medically frail” and make them exempt from the mandates. Medically frail individuals include those with chronic, serious, or complex medical conditions. Various methods can be employed to identify these people.
Developing and streamlining systems and processes to promote continued coverage for eligible individuals. The Medicaid unwinding from the COVID public health emergency taught policymakers lessons about the complexities of Medicaid systems, patient engagement, and reliable methods of member outreach. State Workforce Commissions and Departments of Labor are clear partners, as they manage integrated eligibility systems and data-sharing agreements across programs like SNAP and TANF, which also serve many Medicaid participants. These and other partnerships will need further exploration.
Clinical and utilization data that promote eligibility assessment. Many, but not all, individuals with chronic diseases may be exempt from the requirements. Knowing the health status and chronic conditions of the populations affected and the conditions that qualify people for exemption are variables as implementation questions, like the definition of medically frail, are addressed.
Anticipated need for effective Medicaid managed care engagement in work requirements/community engagement initiatives. Approximately 80 percent of Medicaid expansion enrollees are members of comprehensive managed care organizations (MCOs). States will need to review the scope of existing vendor contracts as well as determine the need for new services, roles, third-party reporting, oversight, and potential exemptions for emergencies. Work requirements can disrupt MCO risk pool stability and care coordination. MCOs have a financial incentive to drive down inappropriate disenrollments and are uniquely positioned to support state responsibilities, including maintenance of up-to-date contact information.
Measuring impact and adapting policies as needed. Dynamic metrics that provide actionable information to federal and state policy makers will support effective oversight and monitoring.

Connect with Us

HMA helps stakeholders—including state agencies and their partners—manage the challenges of implementing new Medicaid or CHIP initiatives, with a focus on ensuring efficient integration and improvements in outcomes. Our teams are adept at developing materials for and supporting stakeholder engagement from design to implementation, which is a critical aspect for work and community engagement initiatives and other potential new eligibility and renewal requirements.

For support tracking federal and state level developments and enhancing your organization’s strategy and preparations for new Medicaid requirements, contact our featured experts below.

[1] U.S. Congress. House. One Big Beautiful Bill Act. H.R.1. 119th Cong., 1st sess. Introduced May 20, 2025.

CMS Seeks Input on the Future of Digital Health: What the Health Technology Ecosystem RFI Means for Stakeholders

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This week, in our In Focus section, health IT experts at Leavitt Partners, an HMA Company, review the recently released Request for Information (RFI) from the Centers for Medicare & Medicaid Services (CMS) and the Assistant Secretary for Technology Policy/Office of the National Coordinator for Health (ASTP/ONC), titled Health Technology Ecosystem (CMS-0042-NC). The RFI, published May 16, 2025, signals a renewed federal focus on advancing digital health tools, improving data interoperability, and supporting patient-centered innovation.

Notably, this RFI aligns with the vision laid out in Leavitt Partners’ Kill the Clipboard policy blueprint, developed in collaboration with a broad coalition of healthcare stakeholders. The paper outlines a future in which patients and providers benefit from seamless digital experiences, real-time data exchange, and reduced administrative burden. The RFI reflects many of the same priorities—such as expanding FHIR® Application Programming Interfaces (APIs), improving provider directories, and promoting digital identity solutions—that were highlighted in the paper as essential to modernizing the healthcare system.

Why This RFI Matters

The RFI invites public input on how CMS and ASTP/ONC can strengthen the digital health ecosystem for Medicare beneficiaries. It builds on years of federal investment in interoperability. The agencies are now seeking feedback on how to reduce barriers to data access, promote innovation in digital health products, and align technology with value-based care goals.

This is a pivotal opportunity for stakeholders to shape the future of digital health policy—especially as CMS continues to explore how APIs, digital identity, and patient-facing tools can improve care delivery and outcomes.

Key Themes in the RFI

The RFI is broad in scope, but several themes stand out, including:

Addressing Patient and Caregiver Needs: The RFI asks patients which digital tools would be most helpful to them and their caregivers in managing their health needs, navigating care, and accessing all relevant health information in one place. It asks what features are most needed, what is missing from current apps, and how CMS can support adoption, especially for Medicare beneficiaries with limited digital experience. CMS is exploring how to make more data—beyond claims and clinical data—available through APIs. It also explores the role that CMS should play in reviewing and measuring the real-world impact of these tools on outcomes and costs. They also are considering how to promote the use of secure, standardized digital identity credentials (e.g., Login.gov, ID.me) to streamline patient access. Feedback also is sought on how TEFCA, FHIR APIs, and health information exchanges (HIEs) can better support seamless data exchange.
Provider Adoption of Digital Health Tools: CMS is exploring how to help providers, especially those in rural areas, adopt digital health tools by addressing barriers like workflow integration, data access, and interoperability. CMS is also looking to improve administrative functions like scheduling and intake through third-party apps. In addition, CMS is seeking to understand which FHIR APIs and capabilities are already being supported or utilized in provider systems. They are also interested in understanding how providers might accept standardized digital identity credentials from patients and any challenges that might inhibit its adoption. ASTP/ONC is also seeking information on revisions to the information blocking requirements.
Engaging Payers: The RFI invites payers to share how they can support interoperability and digital innovation, including through the use of APIs, digital identity credentials, and real-time access to clinical quality data. CMS is also interested in how payers can reduce provider burden, support value-based care (VBC), and contribute to a more connected digital health infrastructure. Feedback is requested on TEFCA participation, payer-to-payer data exchange, and the potential for a nationwide provider directory.
Advancing VBC Organizations: The RFI emphasizes the role of digital health in supporting alternative payment models (APMs) and accountable care organizations. CMS is seeking feedback on which digital capabilities are most essential for success in VBC—such as care coordination, quality measurement, and patient engagement—and how certification criteria and data standards can better align with these needs. The agencies are also exploring how to reduce complexity for APM participants while maintaining flexibility and data access.
Enabling Technology Vendors, Data Providers, and Networks: The RFI requests feedback from developers, data aggregators, and HIEs on how to unlock innovation through better access to CMS data, improved API standards, and streamlined certification processes. The RFI asks which technical and policy changes would enable more effective digital health products, recommendations to improve interoperability across networks, and means of supporting the viability of data exchange infrastructure.

Implications for Stakeholders

This RFI is more than a technical exercise; it is a strategic signal. The Trump Administration is maintaining momentum behind VBC and digital transformation. Stakeholders should consider:

Submitting comments to CMS by the June 16, 2025, deadline.
Assessing internal readiness to adopt or develop digital tools that align with CMS’s vision.
Engaging in policy discussions regarding digital identity, data standards, and patient access.
Monitoring related RFIs, including the Food and Drug Administration RFI exploring the potential use of HL7 FHIR standards to support the submission of study data derived from real-world data sources—such as electronic health records, claims, and registries—for regulatory purposes.

Next Steps

Health Management Associates, Inc. (HMA), encourages healthcare organizations to review the RFI and consider how their experiences, innovations, and challenges can inform CMS’s next steps. This is a rare opportunity to influence the infrastructure that will shape digital healthcare for years to come.

For support in drafting comments or understanding how this RFI intersects with your organization’s strategy, contact our Leavitt Partners health IT experts below.

CMS Announces New Innovation Agenda: Here’s What You Need to Know

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On May 13, 2025, the Centers for Medicare & Medicaid Services (CMS) published its new strategic direction for the CMS Innovation Center. The strategy builds on the lessons of the first 15 years of the Innovation Center, while presenting a significant pivot in policy direction, which emphasizes evidence-based prevention, consumer engagement, and tech-enabled care, while prioritizing financial performance over broad participation.

The new strategy provides high-level direction on the Trump Administration’s vision for the next phase of value-based payment reform under the leadership of CMS Administrator Dr. Mehmet Oz and Innovation Center Director Abe Sutton. They intend to “double down on our commitment to value-based care and take the learnings from the[se] previous investments to build a health system that empowers people to drive and achieve their health goals and Make America Healthy Again.” Notably, the strategy also aligns with goals central to the Trump Administration’s Make America Healthy Again initiative.

This new direction affirms the administration’s commitment to continue advancing value-based care and opens additional opportunities for organizations seeking to enhance the delivery of services that drive positive outcomes. Health Management Associates (HMA), experts will be tracking the implementation of the Innovation Center’s new strategy, including expected forthcoming models, movement toward greater levels of downside risk, and changes to existing models to align with the administration’s priorities. In this article, our experts review the strategy and provide insights on key takeaways for stakeholders.

New Strategy Overview

CMS leaders view the Innovation Center agenda as a framework for accelerating healthy behaviors, leveraging the agency’s authority to test new approaches designed to incentivize and engage stakeholders. According to CMS officials, the Innovation Center “will work expeditiously toward the future of health—building a system in which people are empowered to achieve their health goals and providers are incentivized to compete to deliver high-quality, efficient care and improve the health outcomes of their patients.”

The strategy has three interrelated, foundational pillars:

Promoting evidence-based prevention
Empowering people to achieve their health goals
Driving choice and competition.

Table 1 provides more detail on each pillar.

In addition to the new agenda, CMS released a request for information (RFI) seeking industry input on strategies that can better leverage data and technology to empower consumers. The focus of the RFI aligns with the Innovation Center’s strategic pillars to use tools, information, and processes that better connect people to their health data and allow them to make informed health decisions alongside their providers.

Table 1. CMMI’s Interrelated Strategic Pillars

Takeaways and Considerations

Critical to CMS’s approach is the belief that empowering individuals to make their health decisions—through incentives, better data access, and more flexible options—can lead to better health outcomes and lower overall costs. This shift reflects an evolution in healthcare policy that places greater emphasis on personal accountability and private sector collaboration—a key theme that is emerging across the administration’s policy initiatives.

Consumer Engagement. One of the most notable aspects of the new Innovation Center strategy is the promotion of consumer engagement; it places more focus on direct consumer engagement through education and incentives compared with earlier initiatives. This is one area in which the Innovation Center plans to collaborate with the private sector to develop consumer-facing tools (e.g., mobile apps, nudges toward healthy behaviors, etc.).

The focus on consumer engagement also presents opportunities for organizations to enhance their customer experience. By understanding the needs and preferences of their patients, organizations can tailor their services and care models to better meet those demands. This personalized approach not only improves patient satisfaction, but also drives continuity of care, ultimately contributing to long-term improvements in health.

Data and Technology. The new strategy also emphasizes the importance of data, indicating intentions to better equip organizations that participate in the model with data that can inform decisions and optimize their processes. CMS officials are examining policies and collaborations that will empower private sector organizations, including model participants, researchers, and technology vendors, to develop innovative data-driven solutions to drive efficiencies and improved health.

To that end, the May 16, 2025, Request for Information (RFI) from CMS and the Assistant Secretary for Technology Policy/Office of the National Coordinator for Health (ASTP/ONC), Health Technology Ecosystem (CMS-0042-NC), focuses on Medicare beneficiaries’ use of technology to improve health outcomes. The RFI, which HMA experts analyze here [insert bookmark or link to the other In Focus article] underscores the administration’s intentions of taking “bold steps to modernize the nation’s digital health ecosystem.”

Medicare Advantage. The Innovation Center’s new strategy indicates that stakeholders should expect more models that address Medicare Advantage (MA). The agency stated that “features of a model could include testing changes to payment for MA plans, such as testing the impact of inferred risk scores, regional benchmarks, or changes to quality measures that better align with promoting health.” Additionally, the strategy references a forthcoming specialty-focused longitudinal care model within MA and Medicaid, signaling intentions to drive multi-payer alignment.

Saving Federal Tax Dollars. Another major aspect of the strategy is “protecting federal taxpayers.” This goal reflects a continued emphasis on total cost of care accountability and indicates a more aggressive shift to downside risk. The Innovation Center says it will “require all models to have downside financial risk and require providers to assume some of the financial risk..” Additional provisions of protecting tax dollars include reducing role of state governments in rate setting, simplifying model benchmark methodology, and ensuring “proper and nondiscriminatory provision of funds for health care services.”

What to Watch

For healthcare organizations, the Innovation Center’s agenda signals a need to prioritize consumer-centric models. Hospitals, providers, and insurers should anticipate the following:

Increased focus on preventive care initiatives to align with new model designs
More robust data-sharing and technology requirements, meaning investments in patient-focused digital tools will become essential
New opportunities in MA, given potential payment model innovations affecting plan structures and risk-adjusted reimbursement

Healthcare stakeholders should monitor possible developments related to the strategy.

While details on specific strategies have yet to emerge, the Innovation Center indicated it plans to provide more information on new models, as well as changes to existing models, in the coming months.
The Innovation Center has not provided a goal akin to the previous administration’s effort to have 100 percent of Medicare beneficiaries in accountable care relationships by 2030. It is still unknown whether these goals are forthcoming or if this will remain vague.
Stakeholders are still awaiting clarity on changes to existing models, including key models set to conclude at the end of 2026 (i.e., ACO REACH and Kidney Care Choices).
Strategy language indicates that the agency may develop payment innovation in prescription drugs, medical devices, and technology.

Connect With Us

The Health Management Associates Annual Conference, Adapting for Success in a Changing Healthcare Landscape, October 14-16, 2025, in New Orleans, LA, will feature discussions on how the new strategy is reshaping the healthcare system and care delivery for patients, particularly the opportunities to revisit provider contracts with MA plans and to integrate technology to advance the prevention of chronic conditions and achieve population health goals.

For more information about the opportunities and considerations the Innovation Center agenda presents for your organization, contact HMA’s featured experts below.

President Issues Executive Order Calling for Most Favored Nation Drug Pricing

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On May 12, 2025, the President signed an Executive Order (EO), Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients.” The EO calls for or, in some cases, presumes a range of manufacturer, administrative and regulatory actions to reduce drug prices, but ultimate outcome remains unclear.

HMA experts, including Leavitt Partners, an HMA company, are closely following executive agency and stakeholder responses to the EO. In this article, our experts summarize the EO and identify key considerations for healthcare stakeholders.

Policy Overview

Since his first administration, President Trump has consistently criticized disparities in brand-name prescription drug prices between the United States and other developed countries. In 2018, the previous Trump Administration issued a preliminary proposal to institute an International Pricing Index (IPI) model targeting Medicare payments for a subset of clinician-administered drugs. The IPI model would have set a Medicare payment amount for select Part B drugs at a lower amount to align with international prices and allow for negotiation of prices, while still providing a drug add-on payment to providers consistent with historical drug costs. In November 2020, the administration issued an interim final rule (IFR) instituting an escalated version of this concept, entitled the Most Favored Nation (MFN) Model. Both the IPI proposal and the MFN final rule, the latter of which was enjoined by the courts on largely procedural grounds and later rescinded by the Biden administration, would have been implemented under the Center for Medicare and Medicaid Innovation’s (CMMI) demonstration authority.

On May 12, 2025, the President signed an EO, Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients, which reaffirms the Administration’s concerns regarding what it perceives to be American funding of pharmaceutical research and development “while foreign health systems get a free ride.” In an effort to address the Administration’s concerns, the EO notes that the Administration “will take immediate steps to end global freeloading” and that “should drug manufacturers fail to offer American consumers the most-favored-nation lowest price, my Administration will take additional aggressive action.”

The EO outlines efforts to implement this policy, including:

Trade Efforts. The US Department of Commerce and United States Trade Representative (USTR) are directed to ensure that foreign countries are not engaged in actions with the effect of forcing Americans to “pay for a disproportionate amount” of R&D costs.
Direct-to-Consumer (DTC) Sales at MFN Price. The US Department of Health and Human Services (HHS) is directed to facilitate DTC sales programs for manufacturers to offer MFN prices.
MFN Targets. The HHS Secretary is directed to provide MFN targets to manufacturers within 30 days with the expectation that manufacturers will “bring prices for American patients in line with comparably developed nations.”
If “significant progress” toward MFN pricing is not made, HHS will be directed to propose a rulemaking plan to impose it.
The order suggests that the HHS Secretary certify, on a case-by-case basis, that reimportation will pose no additional risk to public health and will result in savings, as well as to create standard mechanisms for importation. It is unclear how this direction aligns with the current statutory framework, which is focused on Canada.
Federal Trade Commission/Department of Justice Action. The EO calls for efforts “consistent with law” to undertake enforcement action against anticompetitive practices identified in the prior drug pricing EO, including use of the Sherman Antitrust Act.

Key Considerations

At this stage, the scope and practical effects of the EO remain uncertain, as the administration has not yet provided details regarding the regulatory and subregulatory actions envisioned under the document. With respect to trade policy, for instance, the EO does not outline explicitly what particular tools it expects USTR or the Commerce Department to leverage in combating “foreign freeloading.”

Similarly, the EO does not elaborate on the steps that the administration plans to take in “facilitat[ing]” voluntary MFN target pricing under DTC purchasing arrangements. Such efforts could theoretically bring waivers or other regulatory flexibilities to bear, or else they could take a more hands-off approach, simply encouraging drugmakers to take action on their own.

Without further clarifications around how the administration might define or assess “significant progress” towards MFN pricing targets on the part of manufacturers, nor the form, manner, or timeline that “aggressive action” in the absence of such progress might take, the EO serves principally as an illustration of the President’s posture, perspective, and priorities with respect to prescription drug affordability and access.

Even in the absence of immediate pricing or payment interventions, the EO could provide a preview of future executive actions aligned with the document’s focus. Such actions could include CMMI models building on the IPI or MFN initiatives from the first term, explicit trade negotiation priorities, regulatory measures related to DTC purchasing arrangements, FDA reimportation program flexibilities, or any number of other drug-related policies.

Our experts will continue to monitor these activities as they progress.

Connect With Us

For details regarding the EO and potential impact on the healthcare sector, contact our featured experts below at [email protected]

House Committees Consider Policies to Meet Budget Reconciliation Instructions

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This week, key committees in the House of Representatives released recommendations for legislative language that meets their federal savings and spending targets required in the fiscal year (FY) 2025 budget resolution. On May 11, 2025, the House Energy and Commerce Committee released legislation—and subsequently a substitute amendment—that contains several substantive Medicaid proposals designed to address eligibility and enrollment; financing; fraud waste, and abuse; and to institute mandatory work and community engagement requirements and cost sharing. The Committee completed its markup on May 14, 2025, voting to approve the provisions in the substitute amendment.

The release of text and committee markups are key steps in Congress’s budget reconciliation process; however, proposals may change during Senate proceedings.

Health Management Associates (HMA), and Leavitt Partners, an HMA company, are tracking these developments and analyzing the extensive health and health-related legislative text, including the Medicaid, Medicare, and Affordable Care Act (ACA) Marketplace proposals. Below, we review the status of congressional efforts and key policies.

Background

The budget reconciliation process is a powerful tool for enacting significant fiscal policy changes, as it allows for expedited consideration and passage of budget-related legislation. It has been used in the past to enact major tax reforms, healthcare legislation, and other important budgetary measures.

In 2025, Congress has been actively working to develop its budget bills through a series of steps. The House adopted a budget resolution on February 25, 2025, which sets the framework for federal spending, revenue, and the debt limit for fiscal year 2025 and outlines budgetary levels for the following years through 2034. The Senate passed an amended version of the budget resolution on April 5, 2025. The Senate’s amendments included reconciliation instructions that require $4 billion in gross deficit reductions and allow a $5.8 trillion net deficit increase. On April 10, 2025, the House agreed to the Senate’s amendments with a vote of 216−214. This agreement set the stage for the development of a reconciliation bill.

House Energy and Commerce Markup

On May 14, 2025, the House Committee on Energy and Commerce completed its second day of marking up legislative language to comply with the Concurrent Resolution on the Budget for Fiscal Year 2025, voting to advance the proposals out of committee. The committee’s proposal excluded certain significant structural reforms that had generated concern among some members and stakeholders, such as broad reductions in the federal matching rate (enhanced federal matching assistance percentage (FMAP)) for Medicaid expansion populations, per-capita caps on federal Medicaid cost growth, or reductions in the safe harbor threshold for state Medicaid provider taxes. The proposal does, however, contain more than a dozen provisions that would reduce federal health care spending by $715 billion with the funding reductions mostly focused on Medicaid, which the Congressional Budget Office projects will reduce the federal share of Medicaid spending, including:

Adding mandatory work and community engagement requirements for individuals ages 19−64 without dependents, subject to exceptions for pregnant women, people who are medically frail, people with disabilities, people in compliance with other government program work requirements, people living in areas experiencing a temporary hardship, and other individuals
Adding cost sharing for beneficiaries in the expansion population who earn more than 100 percent of the Federal Poverty Level, not to exceed $35 per item or service
Pausing implementation of several final rules published during the Biden Administration, including: the final rule published September 21, 2023, “Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment”; the April 2, 2024 rule, “Streamlining the Medicaid, Children’s Health Insurance Program, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes”; and the May 10, 2024, final rule, “Minimum Staffing Standards for Long Term Care Facilities and Medicaid Institutional Payment Transparency Reporting”
Adding provider screening requirements
Increasing frequency of eligibility redeterminations for certain individuals and adding enrollee address verification policies
Reducing expansion FMAP for certain states that provide Medicaid coverage to undocumented individuals and families, regardless of the source of funding
Preventing certain spread pricing arrangements in Medicaid between states and pharmacy benefit managers
Restricting funding for certain essential community providers that furnish family planning services, reproductive health, and related healthcare services
Ending a temporary increased FMAP to new states adopting Medicaid expansion, revising policies governing the use of Medicaid provider taxes, and payment limits for state directed payments

Committee Markups

Various other House committees have begun holding markups for the reconciliation package. The Committee on Ways and Means conducted its markup on May 13, 2025, to discuss its portion of the reconciliation bill, which involves $4.5 trillion in deficit increases. The initial Ways and Means proposal did not include many significant healthcare proposals, but on May 12, 2025, the committee released a substitute amendment that includes several changes that would affect private insurance coverage and Medicare. Key provisions include:

Changes to Medicare and ACA premium tax credit (PTC) eligibility requirements related to immigration status
Improvements to ACA PTC eligibility verification checks
Changes to Health Savings Account flexibilities
Codification and renaming of individual coverage health reimbursement accounts, which serve as a defined contribution that employees can use to purchase insurance in the individual market

Other committees, such as the Education and Workforce, Judiciary, Armed Services, and Homeland Security Committees, also have conducted markups and approved their respective portions of the reconciliation bill.

Connect With Us

These steps are part of the ongoing process to finalize the budget and reconciliation legislation for FY 2025. Our federal policy experts with Leavitt Partners and across HMA are monitoring the legislative policies and ongoing negotiations in Congress and with the administration. They work with healthcare organizations and industry to plan for the range of scenarios and policies Congress is debating.

For more information about the impact of these policies, contact our featured federal policy experts below.

HHS Begins Reorganization: Actions Focus on Efficiency, Establishment of Administration for a Healthy America

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On March 27, 2025, the US Department of Health and Human Services (HHS) Secretary Robert F. Kennedy, Jr. announced significant changes in the department with respect to staffing and organizational restructuring. This reorganization is consistent with President Trump’s February 11, 2025, Executive Order (EO) 14210, “Implementing the President’s Department of Government Efficiency Workforce Optimization Initiative.”

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.

Spotlight on Development of President Trump’s Children’s Health Strategy

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This week, our In Focus section highlights President Trump’s Make America Healthy Again (MAHA) executive order, which is designed to address the challenges driving chronic diseases in the United States. Our article delves into the key components of the order, presents a data snapshot about the state of children’s health, and discusses implications for stakeholders seeking to prepare for and inform the transitions impacting the future of children’s health.

Presidents can use executive orders to communicate their priorities and set a framework and timelines for federal agency actions. Historically, these orders have provided strong signals for the initiatives and policy direction that federal departments and agencies will pursue. Health Management Associates (HMA), experts are monitoring the MAHA directive and several other executive orders, alongside other Trump Administration actions.

Executive Order: Making Children Healthy

On February 13, 2025, President Trump signed an executive order establishing the Make America Healthy Again Commission, chaired by US Department of Health & Human Services (HHS) Secretary Robert F. Kennedy, Jr. The commission, which builds on the Secretary’s prior work, is charged with combating “critical health challenges facing citizens, including the rising rates of mental health disorders, obesity, diabetes, and other chronic diseases.”

Initially, the commission will focus on studying and addressing childhood chronic diseases. The order directs the commission to release within 30 days an assessment that summarizes what is known about the childhood chronic disease crisis, identifies gaps in knowledge, and includes international comparisons. This report will serve as the foundation for developing a strategy to improve the health of children, which is due within 180 days of the order.

Data Snapshot: Childhood Chronic Conditions

Evaluating existing data and identifying gaps in data for children are critical initial steps toward developing a comprehensive and evidence-driven federal policy agenda. At present, 90 percent of the $4.5 trillion in annual US healthcare expenditures are used to provide services to people with chronic and mental health conditions. Many of the risk factors for developing these conditions begin in childhood and some are preventable. For example:

Obesity affects 20 percent of children and 42 percent of adults, putting them at risk of chronic diseases such as type 2 diabetes, heart disease, and some cancers. More than one in three young adults ages 17−24 are too heavy to join the US military. The youth obesity rate from 2017−2020 was 19.7 percent, a 42 percent increase from the rate in 1999−2000. Lifestyle choices, combined with social and environmental factors like access to healthy foods and neighborhood walkability and safety can significantly reduce the risk of developing obesity.
In 2022, diabetes and the complications associated with it accounted for $413 billion in total medical costs and lost wages in the United States. While few children have type 2 diabetes, nearly one in five adolescents (12−18 years old) have prediabetes and may develop diabetes in adulthood. Like obesity, both personal choices and adverse social and environmental factors can increase the lifetime risk of developing diabetes.
Approximately 4.9 million children in the United States have asthma, which is incurable but can be managed. Asthma is one of the main causes for missed school days among children. Many US schools have poor indoor air quality, which can expose children to allergens, irritants, and triggers such as mold, dust, and pests. Conditions in children’s homes also can exacerbate asthma.

How Federal Programs Impact Children’s Health

Numerous federal programs directly and indirectly affect children’s health. Examples include:

Nationally, more than 38 percent of children have Medicaid coverage, with rates exceeding 50 percent in some states and territories (e.g., Louisiana, New Mexico, Puerto Rico). Medicaid’s requirement to cover Early Periodic Screening, Diagnostic and Treatment (EPSDT) has long been the vehicle for addressing the chronic healthcare needs of children on Medicaid. For example, for children with asthma, in addition to covering medications to prevent and treat exacerbations, some states will reimburse providers for conducting home health assessments to identify and remediate triggers in the home. In addition, federal funding through both Medicaid and US Department of Education supports school nurses and school-based health centers, which can be critical resources in addressing the chronic healthcare needs of students, such as the administration of Insulin or providing inhalers to children experiencing asthma.
To receive funding through the National School Lunch and School Breakfast programs, schools must provide meals aligned with the “meal pattern” established by US Department of Agriculture, which specifies the amount of food among various groups and an age-based maximum for calories, saturated fat, and sodium. Under current guidelines, by 2027, school meals also will be expected to comply with limits on added sugars.
Participants in the Special Supplemental Nutrition Assistance Program for Women, Infants, and Children (WIC), which provides participants with certain foods to meet their nutritional needs, have a lower risk for preterm birth, low birthweight infants, and infant mortality.

Federal programs affect children’s home and school environment in other ways, and the health implications of those funding choices may not be explicitly recognized or prioritized. For example:

Housing assistance programs in some cases prevent families from experiencing homelessness but may place them in living situations where exposure to environmental hazards such as mold, pests, or pollution and neighborhood factors like crime and lack of walkability may adversely affect their health.
Some federal agriculture programs are specifically designed to make nutritious foods available (e.g., Gus Schumacher Nutrition Incentive Program, or GusNIP), while others support agriculture without specifically bringing a health lens to those programs.

Implications for Stakeholders

The President has directed that the strategy address “appropriately restructuring the Federal Government’s response to the childhood chronic disease crisis, including by ending Federal practices that exacerbate the health crisis or unsuccessfully attempt to address it, and by adding powerful new solutions that will end childhood chronic disease.” Though we do not know what the Make our Children Healthy Again Assessment and Strategy will recommend, we anticipate it will present both opportunities and risks for organizations focused on children’s health. As the commission begins its work, organizations can take the following actions:

Consider policy opportunities: Review your organization’s strategic plan as well as your operational and policy priorities and consider how they may fit into this framework. This could be the time to suggest changes to federal grants you receive or federal regulations or requirements that negatively affect your ability to keep children healthy.
Prepare for potential funding disruptions: It is possible that programs you rely on will have changes in scope or funding levels. Review your offerings for children with chronic conditions and identify substitutes or complements to your main priorities. Consider partners you might work with to keep work going that may not have the same level of federal support in the future.
Be prepared to share the real-world impacts of policy changes: Begin gathering data, stories, and compelling information to share about chronic conditions affecting children that can be used in future public comment opportunities, shared with the media, and discussed with your federal, state, and local representatives. Think about how to talk about these issues in a clear and compelling way that will resonate with each of those audiences.
Find partners and allies: As you consider the policy opportunities and risks, think about other organizations that share your interests and how you can work with them in complementary ways. It can be compelling to policymakers when stakeholders who might not naturally be aligned on other issues can unite around a specific policy area.

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Healthcare stakeholders with a commitment to healthy children and healthy adults have an opportunity to support the specific policies and funding opportunities that may emerge from the MAHA order. To learn more about these policy changes, the impact on your organization, and actions your organization can take, contact our one of our featured experts below.

Executive Actions and Congressional Budget Reconciliation: Trump Administration’s 2025 Healthcare Overhaul

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This week, our In Focus section highlights how the new Administration and Congress are poised to significantly change healthcare policies, ranging from health equity and Affordable Care Act (ACA) Marketplace subsidies to Medicaid services and prescription drug costs. Stakeholders seeking to influence these potential changes should plan to engage quickly. Today’s section covers important developments that occurred through 2 pm January 29, and healthcare stakeholders will need to remain attune to future developments impacting federal healthcare programs.

Executive Action

Over the first week of his second term, President Donald J. Trump has issued several executive orders (EOs) and presidential directives affecting healthcare stakeholders. Presidents have increasingly used EOs at the beginning of their administration to rescind policies of their predecessors and direct the federal departments and agencies to exercise their authorities in line with the president’s directives.

Though some EOs require no further action, many are just the beginning of the policymaking process, with agencies tasked with implementing the directives. This timeline can provide stakeholders with opportunities to work with to policymakers to inform how they shape the rules for compliance with these directives.

Initial EOs issued so far by President Trump include policies that:

Rescind several of former President Biden’s Executive Orders, including:
- Executive Order 13985 of January 20, 2021, Advancing Racial Equity and Support for Underserved Communities Through the Federal Government
- Executive Order 13988 of January 20, 2021, Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation
- Executive Order 13990 of January 20, 2021, Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis
- Executive Order 14009 of January 28, 2021, Strengthening Medicaid and the Affordable Care Act
- Executive Order 14070 of April 5, 2022, Continuing to Strengthen Americans’ Access to Affordable, Quality Health Coverage
- Executive Order 14075 of June 15, 2022, Advancing Equality for Lesbian, Gay, Bisexual, Transgender, Queer, and Intersex Individuals
- Executive Order 14087, of October 19, 2022, Lowering Prescription Drug Costs for Americans

Direct the Office of Management and Budget (OMB), the Attorney General, and Office of Personnel Management (OPM) to “coordinate the termination of all discriminatory programs,” including diversity, equity, and inclusion (DEI) programs, policies, and activities in the federal government.
Combat “illegal private-sector diversity, equity, and inclusion (DEI) preferences, mandates, policies, programs, and activities.”
Freeze federal rulemaking until department heads appointed or designated by the president can review and approve the rules and withdraw rules that have been sent to but not yet published in the Federal Register so they can be reviewed.
Establish and implement the Department of Government Efficiency (DOGE) as a temporary organization within the Executive Office of the President that reports to the White House Chief of Staff. Executive agencies are directed to establish DOGE teams of at least four employees. DOGE is intended to modernize Federal technology and software to maximize governmental efficiency and productivity.
Require OMB, OPM, and DOGE to submit a plan within 90 days to reduce the size of the federal government’s workforce through efficiency improvements and attrition.

Developments on the Federal Funding Pause

Notably, the White House OMB issued a memo (Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs) on January 27, 2025, to all agencies with instructions to temporarily pause and provide a comprehensive analysis of all activities related to obligation or disbursement of federal financial assistance programs that EOs may affect. On January 29, 2025, the administration retracted the directive for a temporary pause on federal payments, though reiterated it will continue to review federal funding.

Though it is customary for a new administration to pause communications, regulatory activity, and new funding opportunities as incoming political appointees are confirmed and policy agendas are solidified, the breadth of the federal funding pause exceeds prior orders. The first lawsuit was filed on January 28, and a federal judge for the US District Court for the District of Columbia quickly issued a temporary stay on the federal funding pause until at least February 3, 2025, while she considers arguments in the case.

The now-rescinded January 27 memo was scheduled to take effect at 5:00 pm ET on January 28, 2025, to give the Trump Administration “time to review agency programs and determine the best uses of the funding for those programs consistent with the law and the President’s priorities.” According to the memo, the pause did not apply to Medicare or Social Security payments. In a subsequent document, OMB further clarified that “mandatory programs like Medicaid and SNAP [the Supplemental Nutrition Assistance Program] will continue without pause.”

What to Watch: Executive Actions and Budget Reconciliation

The Trump Administration has indicated that federal programs and funding should be aligned with his administration’s priorities. Healthcare stakeholders should be prepared for additional scrutiny of future funding awards.

Meanwhile, congressional Republicans are preparing to quickly leverage the budget reconciliation process to pass legislation related to several priority areas, including taxes, immigration, and domestic energy production (see Spotlight on Congress: Budget Reconciliation Update). Budget reconciliation provides a rare opportunity to pass significant healthcare legislative changes on a party-line basis. House Republicans have begun to develop their menu of healthcare options, which range from changes to the ACA premium tax credit structure, expanding Health Savings Accounts, and changes in Medicaid financing and eligibility.

In a January 2025 webinar, experts from Leavitt Partners, an HMA company, Liz Wroe, Sara Singleton, and Laura Pence discussed the potential health policy priorities of the Trump Administration, the implications of reconciliation for healthcare stakeholders, and the challenges and opportunities presented while navigating this expedited process.

Navigating Change

HMA experts are working with federally funded entities to quickly analyze their federal awards and plan for the next phase of federal agency actions and oversight. HMA companies also help healthcare stakeholders seeking to inform, shape, prepare for, and implement federal policy changes. Organizations seeking to influence the outcome of these policy debates and to thrive in a dynamic legislative and regulatory environment must have the most up-to-date information, informed by partners that understand the processes and the underlying policies under consideration.

HMA experts provide additional complementary services, including analyses to predict how the Congressional Budget Office will score the costs or savings of specific policies. Especially in the reconciliation environment, the budgetary impact of particular policies can significantly influence their likelihood of passage.

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To learn more about the these policy changes and the impact on your organization, watch our January 2025 policy webinar and contact one of our featured experts below.

Spotlight on Congress: Budget Reconciliation Update

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With full Republican control, expect Congressional Republicans and the Trump Administration to quickly leverage the budget reconciliation process to pass legislation in several priority areas, including taxes, immigration, and domestic energy production. While expiring tax provisions may be the driving force of this year’s reconciliation efforts, Republicans are also likely to include other priorities, potentially including raising the debt ceiling, which will increase the need for reductions in mandatory health programs or changes to health care revenue to be used as offsets.

Budget reconciliation provides a rare opportunity to pass significant health care legislative changes on a party-line basis. However, while budget reconciliation has certain procedural advantages, it is also fraught with complex rules and procedures that can make it very difficult to pass large pieces of policy legislation intact.

Experts from Leavitt Partners, an HMA company, recently held a webinar reviewing the budget reconciliation process, opportunities and legislative strategies to navigate this process, and potential policies that could be considered. Access the webinar replay. Contact experts Elizabeth Wroe, Josh Trent, and Sara Singleton if you’re interested in learning more about the specialized services our team can offer your organization to navigate the Congressional budget reconciliation process and its outcomes.

CMS Stays the Course with Proposed Payment Updates for Medicare Advantage and Part D Services in 2026

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Trump Administration will Issue Final Policies

This week, our In Focus section examines the Centers for Medicare & Medicaid Services (CMS) calendar year (CY) 2026 Advance Notice for the Medicare Advantage (MA) and Medicare Part D programs, published January 10, 2025. That same day, CMS also released draft CY 2026 Part D Redesign Program Instructions. This regulatory guidance includes CY 2026 payment updates as well as additional technical and methodological changes to MA and Part D for the coming plan year.

The release of the CY 2026 Advance Notice—along with the complementary CMS policy and technical proposed rule released in November 2024—represent the last major Medicare regulations of the Biden Administration, and these annual payment and policy updates will be finalized under the incoming Trump Administration. As a result, the proposed MA and Part D payment policies could be modified before finalization in April 2025.

Comments on the Advance Notice are due by February 10, 2025, leaving a tight timeline for MA plans and other stakeholders to provide formal feedback and written comments to CMS. Following are brief summaries of the major proposals in the Advance Notice and key considerations for stakeholders as they analyze the proposals.

Payment Impact on Medicare Advantage Organizations

In the Advance Notice, CMS projects that federal payments to MA plans will increase by 4.33 percent from 2025 to 2026—which represents a $21 billion increase in expected payments to MA plans next year. CMS estimates that federal payments to MA plans in 2026 will total $590.9 billion.

The proposed increase in payments accounts for several factors, including growth rates in underlying costs, changes to MA Star Ratings, continued implementation of the new risk adjustment model, and MA risk score trends. The estimated growth rate considers demographic changes in MA enrollment, including projected increases in the number of enrollees.

The Advance Notice estimates represent the average increase in payments to MA plans and actual payments will vary from plan to plan. Below, Table 1 provides estimates of the impact of proposed policy changes on net MA plan payments.

MA Risk Adjustment Changes

CMS intends to complete the three-year phase-in of the MA risk adjustment model that was first published in the CY 2024 Rate Announcement. Specifically, CMS proposes to calculate 100 percent of the risk scores using the new MA risk adjustment model, referred to as the 2024 hierarchical condition categories (CMS-HCC) framework. CMS maintains that the changes to the methodology for calculating risk have improved the predictive accuracy of the model while ensuring risk-adjusted payments to MA plans are accurate.

In addition, CMS has been working to calibrate the risk adjustment model based on MA encounter data, and CMS proposes to begin phasing in an encounter-based MA risk adjustment model as soon as CY 2027.

CMS also proposes to apply the statutory minimum MA coding pattern difference adjustment factor of 5.90 percent for CY 2026.

Technical Adjustment to Cost Calculations Related to Medical Education Costs

Similar to changes in the MA risk adjustment model, CMS plans to complete the three-year phase-in of technical adjustments to the per capita cost calculations related to indirect and direct medical education costs associated with services delivered to MA beneficiaries. This technical adjustment—finalized in the CY 2024 Rate Announcement—has reduced growth rates for MA plans because of the removal of MA-related medical education costs from the benchmarks.

MA Star Ratings

CMS reiterates its continued focus on moving toward a “Universal Foundation” of measures with the goal of creating metrics that center on clinical care, patient outcomes, and improved patient experiences and are aligned across CMS programs. In addition, CMS is soliciting initial feedback on both substantive measure specification updates as well as comments on new measure concepts. CMS also is seeking stakeholder feedback on modifications to the Health Equity Index, including adding social risk factors and geography (urban or rural) to the reward factor. Any specific changes to MA Star Ratings measures, including modifications to the Health Equity Index, would occur through the formal rulemaking process.

Medicare Part D Provisions

The CY 2026 Advance Notice and the CY 2026 Draft Part D Redesign Program Instructions include several payment and benefit updates as required in the Inflation Reduction Act (IRA) of 2022. The CY 2026 updates include:

The CY 2026 annual out-of-pocket cost threshold for Part D covered drugs is $2,100, which is the original out-of-pocket cap of $2,000 adjusted for the annual percentage increase in average expenditures for Part D covered drugs
Establishment of the selected drug subsidy program
Changes to the liability of enrollees, plan sponsors, drug manufacturers, and CMS in the standard Part D benefit design, specifically to account for the start of the Medicare Drug Price Negotiation Program in 2026
Guidance on the successor regulation exception to the IRA’s formulary inclusion requirement for selected drugs under the Medicare Drug Price Negotiation Program

Other previously implemented IRA reforms will continue in CY 2026, including no cost sharing for Medicare beneficiaries for Part D covered drugs in the catastrophic phase, which begins after the annual out-of-pocket threshold of $2,100 is reached; a $35 monthly cap on enrollee cost sharing for insulin; no cost sharing for adult vaccines recommended by the Centers for Disease Control and Prevention’s (CDC’s) Advisory Commission on Immunization Practices and covered under Part D; and the requirement for Part D plans to offer the Medicare Prescription Payment Plan to beneficiaries.

What to Expect

The CY 2026 Advance Notice includes important technical, programmatic changes and payment updates for MA and Part D plans, which will be finalized when CMS publishes the final CY 2026 Rate Announcement on or before April 7, 2025. MA plans and other stakeholders have a rigid timeframe to provide formal input and written comments to CMS before the February 10 deadline.

Like the policy and technical changes included in the MA proposed rule, the CMS Advance Notice payment updates will be finalized under the incoming Trump Administration. MA plans and other stakeholder can anticipate that the new leadership at the US Department of Health and Human Services and CMS will closely examine and take a fresh look at the proposed payment and policy changes. Though the current CMS leadership maintains that payment updates included in the Advance Notice are sufficient to support stability in MA premiums and benefits, proposed payment policies can be modified or delayed as the new leadership takes shape.

For example, officials in the Trump Administration could seek to delay the phase in of the risk adjustment changes as well as the technical adjustment regarding medical education costs, which CMS estimates would result in an additional $10.4 billion in payments to MA plans.

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Medicare experts at Health Management Associates, will continue to assess and analyze the policy and political landscape, which will determine the final policies included in the CY 2026 Rate Announcement. HMA experts have the depth of knowledge, experience, and subject matter expertise to assist organizations that engage in the rulemaking process and to support implementation of final policies, including policy development, tailored analysis, and modeling capabilities.

For details about the CY 2026 MA Advance Notice and its impact on MA and Part D plans, providers, and beneficiaries, contact our featured experts below.

CMS Announces 15 States Participating in the Transforming Maternal Health Model

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The Centers for Medicare & Medicaid Services (CMS) on January 6, 2025, announced that 15 states have been selected to participate in the agency’s new Transforming Maternal Health (TMaH) Model. They are: Alabama, Arkansas, California, the District of Columbia, Illinois, Kansas, Louisiana, Maine, Minnesota, Mississippi, New Jersey, Oklahoma, South Carolina, West Virginia, and Wisconsin. This week, our In Focus section reviews this initiative and the need for improved maternal healthcare for Medicaid and Children’s Health Insurance Plan (CHIP) enrollees.

Adverse Maternal Health Outcomes Among Medicaid and CHIP Enrollees

Medicaid and CHIP programs cover a large portion of all births in the United States. According to a CMS data brief published in December 2024, Prematurity and Severe Maternal Morbidity Among Medicaid- and CHIP-covered Live Births in 2021, the public health programs covered 41 percent of all births that year. In some states, Medicaid and CHIP-covered healthcare accounted for up to 67 percent of births.

The data brief examines the trends of premature births and severe maternal morbidity (SMM) events—including blood transfusion, acute respiratory distress syndrome, sepsis, acute renal failure, ventilation, and other conditions—in Medicaid and CHIP-covered births for people ages 15 to 49 between 2019 and 2021. During this period, the percentage of preterm live births increased from 10.5 percent to 10.8 percent, and SMM rates increased from 209.6 per 10,000 live births to 252.7 per 10,000 live births.

Some demographic groups had higher rates of preterm births and SMM than others. Enrollees who were Medicaid-eligible because of disability had more than 1.5 times the percentage of preterm births, and nearly double the rate of SMM than enrollees in other eligibility categories. In addition, non-Hispanic Black enrollees and non-Hispanic Native American enrollees had the highest rates of preterm births and SMM compared with all other racial and ethnic groups.

With the increasing adverse maternal health outcomes facing Medicaid and CHIP enrollees, as well as people with private insurance, state leaders and their partners are looking toward different initiatives to help improve outcomes. As governors prepare for their 2025 State of the State Addresses, several are expected to identify maternal health as a key priority. Their priorities will initiate and build on policy changes and other actions in development since 2022, such as expanding Medicaid coverage to 12 months postpartum, collecting and publishing actionable data on pregnancy-associated and pregnancy-related mortality and causes, and directing funding to expand targeted high-quality care provided by doulas and community health workers (CHWs), for example.

TMaH Model

The TMaH Model, which CMS introduced in December 2023, is designed to improve maternal healthcare, improve health outcomes for Medicaid and CHIP-covered births, and lower healthcare expenditures. The model centers on three main pillars described in Table 1.

Notably, the model is intended to facilitate design and implementation of a value-based alternative payment model for maternity care services. It also includes a health equity strategy to address disparities among racial and ethnic minorities, as well as people who live in rural and underserved areas.

The 10-year TMaH Model has an initial three-year implementation period that began January 1, 2025. During that time, states will receive targeted technical assistance to develop and implement elements of the model while achieving pre-implementation milestones. Moreover, participating states will receive up to $17 million in cooperative agreement funding to support planning and implementation over 10 years.

Obstetrical Quality Measures and Standards

To further support the goals of the TMaH Model, CMS has finalized new national health and safety standards, known as conditions of participation (CoPs), for hospitals and critical access hospitals that offer obstetrical services. These CoPs represent a significant step in advancing maternal health outcomes by requiring maternal quality assessment and performance improvement programs, setting baseline standards for the organization, staffing, and delivery of obstetrical care, and mandating staff training in evidence-based maternal health practices.

By establishing a consistent standard of high-quality maternity care for all Medicaid participating facilities, the CoPs complement the TMaH Model’s pillars of quality improvement and safety, as well as whole-person care. Together, these initiatives are intended to produce a unified framework for reducing maternal morbidity and mortality, addressing health disparities, and fostering equitable, patient-centered care across participating states.

Key Considerations

The new TMaH Model provides participating state Medicaid agencies (SMA) with an opportunity to accelerate their efforts to improve maternal health outcomes for a large percentage of their maternal population. State TMaH planning initiatives will need to consider the model requirements and include:

Strengthening partnerships. The model provides states with an opportunity to strengthen collaboration with and build capacity among key partners, including Perinatal Quality Collaboratives, hospitals, birth centers, healthcare centers and rural health clinics, maternity care providers, and CBOs, to successfully implement the model. Specifically, states can work with providers to use provider infrastructure payments to support their engagement with CBOs that can address the HRSNs and behavioral health needs of beneficiaries and integrate them into screening, referral, and follow-up activities.

Defining the role for managed care organizations (MCOs). Agencies will need to work with MCOs and stakeholder groups to support the model. SMAs may designate some of their Cooperative Agreement funding to MCOs to support infrastructure and capacity building for the TMaH Model.

Integrating TMaH with existing and other planned initiatives. Optimizing the TMaH Model requires states and their partners to consider how the framework complements and may be incorporated into other state initiatives. Specifically, the TMaH Model will require reporting on screening for three domains of HRSNs: food insecurity, housing instability, and transportation. The TMaH Model will require use of a validated health IT-encoded HRSN screening instrument, such as the Accountable Health Communities HRSN screening tool. States and their partners can integrate existing HRSN tools and Medicaid section 1115 demonstration initiatives with efforts carried out using the TMaH Model.

Connect With Us

Join Health Management Associates (HMA) experts Michelle Hurst, Marilyn Johnson, and Zipatly V. Mendoza for the Improving Maternal Health Outcomes: Navigating CMS Guidance for Better Care webinar on January 28, 2025. They will dive deeper into recent CMS regulations and other federal developments that affect maternal health, actionable strategies to implement regulations, and approaches to reduce maternal health disparities and ensure equitable care.

Congress Continues Negotiations on 2025 Spending and End-of-Year Package

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This week, our In Focus section reviews the year-end legislative package congressional leaders announced as part of the stopgap funding to prevent a government shutdown. The package, which was unveiled December 18, 2024, would extend expiring Medicaid and Medicare policies, reauthorize health and human services programs, and extend federal funding for discretionary programs through March 14, 2025. The existing temporary funding measure expires December 20, 2024.

Following is a summary of several major healthcare policies that, if approved, will inform the shifting federal policy landscape and state and local programs in 2025.

Pharmacy Benefit Managers

The healthcare package includes policies that reflect several years of increased scrutiny on pharmacy benefit managers (PBMs), including:

Prohibiting PBMs from charging a Medicaid managed care organization more for a drug than the amount that a PBM pays a pharmacy (i.e., spread pricing)
Requiring consistency and additional transparency in contracts between Part D plans and PBMs
Prohibiting Medicare Part D plans from linking payments to drug list prices
Adding report requirements for PBMs

Medicaid Policies and Programs

The legislative text includes 13 separate sections that address Medicaid policies, including extensions on expiring policies, establishment of new programs, and plans to codify certain other policies related to Medicaid eligibility and renewals. These policy changes include:

Medicaid Disproportionate Share Hospital (DSH) allotment: Eliminates reductions for fiscal year (FY) 2025; delays the effective date of the two remaining years of Medicaid DSH allotment reductions until January 1, 2027; and changes the definition of the Medicaid shortfall component of the Medicaid DSH cap to include costs and payments for patients who have Medicaid as their primary source of coverage and for patients who are dually eligible for Medicare and Medicaid.
Home and community-based services (HCBS) waiver: Establishes a three-year, five-state Medicaid HCBS waiver program, which would allow states to cover these services for individuals who need them but do not meet the current statutory requirement of needing “institutional level of care.” States will have an opportunity to apply for planning grants.
Services for juveniles leaving public institutions: Delays by 12 months the requirement that state Medicaid programs provide screenings, diagnostic services, and targeted case management services for eligible juveniles within 30 days of their scheduled date of release from a public institution following adjudication.

Medicare Payments

The compromise package also increases the Medicare Physician Fee Schedule conversion factor by 2.5 percent in 2025 to partially offset a 2.83 percent cut that the Centers for Medicare & Medicaid Services (CMS) finalized in November. Providers consider this a short-term fix, however, and Congress, provider advocates, and other interested parties are engaged in discussions about making broader changes to Medicare physician pay in 2025.

Notably, the agreement includes a payment policy consistent with a bill that the House of Representatives passed earlier this year—the Lower Cost More Transparency Act—to provide enhanced information about payment differentials between off‐campus outpatient departments and other outpatient facilities. The provision requires each off-campus outpatient department to obtain and bill for services under a unique national provider identifier.

Other notable Medicare policies include:

Telehealth: Extends Medicare telehealth flexibilities through December 31, 2026; establishes special rules for telehealth services provided by Federally Qualified Health Centers and Rural Health Clinics for prospective payment and all-inclusive rates; adds modifiers for telehealth services provided incident-to other services and those offered via contracts with virtual platform vendors; expands services that can be provided via telehealth; and enhances tracking of telehealth use
Payment extensions: Extends the Medicare low-volume hospital payment adjustment and Medicare-dependent hospital program through December 31, 2025; Medicare ground ambulance add-on payments through December 31, 2026; incentive payments for advanced alternative payment models through payment year 2027 at an adjusted amount of 3.53 percent; and Qualifying Participant eligibility thresholds in effect for performance year 2023 through payment year 2027
Hospital at-home program: Extends the Acute Hospital Care at Home initiative through December 31, 2029
Part D: Prohibits cost sharing for generic drugs for Part D beneficiaries who are eligible for the low-income subsidy
Provider directories: Requires Medicare Advantage plans to maintain accurate provider directories on a public website beginning in plan year 2027
Screening: Adds multi-cancer early detection screening tests as a covered benefit beginning in 2029
Home infusion: Allows coverage of home infusion treatments by classifying certain approved infusion treatments as Durable Medical Equipment (DME)

Other Notable Provisions

Reauthorizes and revises the Second Chance Reauthorization Act of 2024, including allowing substance use disorder (SUD) services to be provided through the State and Local Reentry Demonstration Projects program
Reauthorizes and modernizes several aspects of child welfare programs
Provides mandatory funding for community health centers and the National Health Service Corps through FY2026, the Teaching Health Center Graduate Medical Education Program through FY2029, and the Special Diabetes Programs (SDP) for Type I diabetes and the SDP for Indians through FY2026
Reauthorizes through FY 2029 the SUPPORT for Patients and Communities Act, which includes a range of mental health and SUD prevention, treatment, and recovery programs
Reauthorizes Older Americans Act programs
Reauthorizes several programs and authorities related to preparedness and response through FY2026, including the Public Health Emergency Preparedness Program and the Hospital Preparedness Program

What’s Next

Funding for the federal government expires December 20, 2024. Congress will need to approve another temporary measure to avert a government shutdown. The length and scope of such an extension remains under discussion, though the current continuing resolution would push the funding deadline into the first few months of the incoming Trump Administration and new Congress. Healthcare stakeholders, including payers, state and local governments, providers, and community organizations, should continue to monitor the congressional negotiations and be prepared to analyze the impact of legislation that Congress ultimately approves.

Connect with Us

Health Management Associates, Inc. (HMA) experts will continue analyzing the implications of the funding and policy updates in the December 18 package and ongoing congressional discussions to reach an agreement. HMA’s experts have the depth of knowledge, experience, and subject matter expertise to assist organizations with navigating these changes and the impact for health and health adjacent sectors. Please contact Laura Pence and Andrea Maresca to connect with our experts.

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