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2027 NBPP Proposed Rule Signals Further Marketplace Changes

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

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

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

颁惭厂鈥檚&苍产蝉辫;笔谤辞辫辞蝉补濒蝉&苍产蝉辫;

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

Expanded Plan Design Flexibility

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

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

Certification of Non-Network QHPs

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

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

Changes in Catastrophic and Bronze Cost Sharing

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

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

Network Adequacy and Essential Community Providers

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

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

Essential Health Benefits and State Mandates

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

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

Program Integrity and Increased Eligibility Verification

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

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

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

Preparing for Policy Driven Changes in ACA Marketplaces

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

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

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

Outlook 2026: Medicare Advantage Advance Notice鈥擶hat It Means for the 2027 Market

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In this conversation, Andrea Maresca, Senior Principal at 红领巾瓜报 (红领巾瓜报), caught up with , Director, Wakely, and , Co-Founder & Managing Partner at Health Transformation Strategies, LLC, to unpack the biggest questions emerging from the Calendar Year (CY) 2027 Medicare Advantage (MA) and Part D Advance Notice. Of particular interest was the Centers for Medicare & Medicaid Services鈥檚 (CMS鈥檚) proposed risk adjustment and diagnosis source changes, which are drawing significant attention across the industry.

Q: The headline is 鈥渇lat鈥� payments. How should the market interpret CMS鈥檚 projected rate change?

Tim Courtney: CMS a net average payment change of just +0.09 percent for CY 2027鈥攁bout $700 million (M). The effective growth rate is about 4.97 percent, but it鈥檚 largely offset by risk model and normalization changes and the proposed diagnosis source policy.

Jon Blum: Exactly. It鈥檚 important to note that CMS鈥檚 impact projections are based on the change in its average payments. Its proposed policies will have much more far-reaching distributional impacts, depending on the diagnoses of their enrolled members. At the same time CMS recently proposed changes to its Star Ratings methodologies. Over time, we could see quite significant changes to the balance of Medicare Advantage payments distributed across the country that could significantly affect benefit offerings and premium amounts.

Q: What鈥檚 most surprising in the Advance Notice for 2027?

Blum: The diagnosis source tightening is the big one. CMS proposes excluding diagnoses from 鈥渦nlinked Chart Review Records鈥� from risk score calculation starting in CY 2027. That signals a continued progression by the agency toward encounter-anchored data integrity. Assuming this policy is finalized, Medicare Advantage plans must continue to invest in systems to respond to CMS鈥檚 program integrity focus.

Courtney: And it鈥檚 not only chart review. CMS also proposes excluding diagnoses from audio-only services for Part C and similarly for Part D. Operationally, that鈥檚 a big deal. Plans need to understand where diagnoses originate, how they鈥檙e supported, and what the downstream risk adjustment factor (RAF) impact looks like by segment and provider channel.

Q: The Wakely team estimates a different 鈥渇eel鈥� than CMS鈥檚 topline. What does Wakely鈥檚 analysis add?

Courtney: helps translate CMS components into both benchmark and plan payment change.

Blum: This point is really key. Wakely鈥檚 analysis flags that rebasing/repricing impacts aren鈥檛 fully reflected yet, which means county-level outcomes can diverge materially once the final Rate Announcement is released. The rebasing could be particularly volatile this year as CMS adjusts for rural emergency hospital payments and the removal of anomalous and suspect DME claims. Both adjustments vary by geographic area.

Q: How should plans think about bid strategy and benefit pressure for 2027?

Courtney:听The tighter risk adjustment environment could squeeze rebates and supplemental benefit richness鈥攅specially if bids听don鈥檛听adjust quickly. Wakely estimates risk-adjusted bid and rebate revenue is down roughly听0.35听percent听under a set of simplifying assumptions, underscoring the margin sensitivity.听

Practically this means plans should run a few scenarios: 1) RAF compression from diagnosis source changes, 2) normalization updates, and 3) Star-related shifts鈥攅ven if the Star change is estimated to be small nationally.

Blum: I鈥檇 add provider contracting and clinical program return on investment (ROI) will likely be an even greater focus for Medicare Advantage plans. When risk score lift is constrained, the value of medical cost management and quality performance becomes more important. We have seen tremendous pushback by healthcare providers over the greater use of prior authorization, with some major health systems dropping their contracts with Medicare Advantage plans altogether. Medicare Advantage plans will have to carefully balance the need to reduce medical expenditures and maintain their provider networks to attract enrollment. Establishing strong partnerships with provider systems will be more important than ever.

Q: What do plans need most right now?

Courtney: This is where integrated strategy and actuarial and policy expertise really matter. 红领巾瓜报 is supporting stakeholders with payment impact modeling, scenario analysis, and advisory services tied to benchmark rebasing, risk adjustment, Star Ratings, product strategy, and Part D payment policy, so clients can translate the Notice into concrete bid and operating decisions.

From Wakely鈥檚 side, the detailed benchmarking and methodology interpretation helps clients quantify what CMS鈥檚 technical updates mean in dollar terms and across geographies.

The CY 2027 Advance Notice is also a reminder that average impacts hide portfolio impacts. The plans that model 鈥渨here the change hits鈥� (diagnosis sources, provider channels, county mix, Stars trajectory) will be best positioned heading into April鈥檚 final Rate Announcement.

Blum: And from a policy lens, plans need to connect the dots. CMS鈥檚 proposed rate notice is both an articulation of its current priorities and continued progression toward more payment accuracy, encounter-linked data, and program integrity. Medicare Advantage plans should be both prepared to operationalize these policies and to work with the agency to ensure its policies better serve Medicare beneficiaries.

Medicare Advantage plan leaders will be those organizations that operationalize these policy directions early, constructively engage in the policy process, and form far stronger partnerships with health care providers.

You can find more insights on the important proposed changes in plan payments, risk adjustment, and other financial and regulatory requirements for 2027 in Wakely鈥檚 summary analysis, .

Tending the Embers: Staying Ready for Medicare Advantage RADV Audits

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The Centers for Medicare & Medicaid Services (CMS)鈥痠ssued a memo January 27, 2026, with updates on the agency鈥檚 approach to checking whether Medicare Advantage (MA) plans are being paid correctly. These reviews are conducted through which help CMS confirm that the diagnoses MA plans report are supported by medical records.

The January 2026 memo signals that CMS intends to honor its commitment to strengthen oversight of MA payments, including accelerating and expanding the use of RADV audits and using AI (artificial intelligence) to streamline human coding reviews. MA organizations must now prepare to respond to the RADV audit notice within the required five-month window, while balancing their other risk-adjustment programs.

In this article, we explain the rapidly evolving landscape affecting RADV audits. Wakely, an 红领巾瓜报 company, addresses what these changes mean for MA organizations and key considerations to ensure they are prepared for the upcoming enhancements to federal program integrity initiatives.

Overview of CMS鈥� RADV Refresh

CMS a major shift in May 2025: All MA plans will undergo RADV audits鈥攏ot just a small sample as before. These audits look for cases in which diagnosis information submitted by a plan does not match the documentation in the patient鈥檚 medical record. When this happens, CMS may decide the plan was overpaid and require repayment. Historically, CMS audits have identified widespread diagnosis-code documentation errors, resulting in significant revenue recoupment from MA plans.

The 2025 announcement creates a framework for additional risk for MA plans, which could shift to risk-bearing provider groups. As we explained in an , key components of that announcement include:

All MA plans will be audited starting听with听Payment Year听(PY)听2018.听
CMS committed to accelerating audits by听adding more staff and using听new听technology.听
CMS听planned to听use 鈥渆xtrapolation鈥濃€攎eaning听if errors were found in a small sample of records, the error rate could be applied to the full population, which could lead to much larger repayment amounts.听
CMS also planned to听eliminate听the fee-for-service听(FFS)听adjuster鈥攁听policy that previously helped reduce the amount a plan would have to repay. This听proposal听would increase financial risk for plans.听

Both the use of extrapolation and the removal of the FFS adjuster were later challenged in court.

Legal Challenge

In September 2023, Humana CMS in federal court, arguing that the 2023 RADV final rule, which allowed extrapolation and removed the FFS adjuster, was put into place without following proper federal rulemaking procedures. On September 25, 2025, the court agreed with Humana and vacated certain parts of this final rule, meaning certain parts of the rule are no longer in effect.

CMS appealed the ruling on November 1, 2025, which has created uncertainty about how RADV audits will work in future years.

Navigating the Legal and Regulatory Changes in Early 2026

The court did not say that extrapolation or elimination of the FFS adjuster is illegal鈥攐nly that CMS did not follow the required process for changing the rules. Hence, the 2023 RADV final rule cannot take effect unless CMS wins its appeal or reissues the policy using the proper steps.

In its January 2026 Health Plan Management System (HPMS) memo, CMS stated that it will comply with the order while it is in effect.

The pending litigation does not diminish CMS鈥檚 broader commitment to increased audit activity and heightened scrutiny of MA risk-adjustment practices.

Effect of the Ruling. During RADV audits, CMS selects a sample of enrollees and requests corresponding medical records from the MA plan. These records are reviewed to confirm that the documented diagnoses meet CMS requirements. If unsupported diagnoses are found, CMS may recalculate payments and recover overpayments from the health plan. This audit process maintains program integrity and ensures accurate payments.

Plans that submit incomplete records could owe significant repayments to CMS.

CMS鈥檚 January 2026 memo clarifies how the agency plans to roll out additional RADV audits starting with PY 2020. CMS also addresses the agency鈥檚 plans to:

Reduce burden on plans and providers,听for example by extending the submission window听听
Balance the volume of medical record submissions needing review听by using smaller sample sizes听where appropriate听
Use AI听to further accelerate the review process听

Preparing for What鈥檚 Next

Given CMS鈥檚 stated direction and the still unsettled litigation environment, MA plans should remain vigilant and audit ready.

Key steps include:

Prioritizing听timely听and complete chart submission processes听
Strengthening internal criteria to听identify听补苍诲听prioritize听charts most likely to support diagnoses听
Improving documentation and coding accuracy through provider engagement听
Conducting proactive self鈥慳udits to听identify听potential vulnerabilities听
Partnering with expert RADV consultants to navigate audit strategy, documentation, and submission readiness听

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Wakely assists plans with their RADV initiatives and development of robust RADV playbooks. For more information about Wakely鈥檚 RADV playbooks, contact .

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

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

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

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

HHS Funding Levels and Direction

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

Table 1. HHS Agency Funding Highlights, FY 2026

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

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

PBM Reforms in the Package

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

The legislation contains the following PBM reforms:

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

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

Healthcare Extenders and Program Reauthorizations

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

Medicaid

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

Medicare

Congress extends several key programs and payment provisions, including:

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

Behavioral Health Policy

The appropriations bill听was听finalized听as the听administration听听new funding and policy initiatives听to听support behavioral health, crisis services, workforce expansion, and youth mental health鈥攅fforts mirrored in SAMHSA鈥檚 increased appropriations.听

SAMHSA鈥檚 $7.4 billion budget includes:

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

Considerations for Stakeholders

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

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

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

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If you would like deeper analysis or state and stakeholder-specific effects, 红领巾瓜报鈥檚 policy experts are available to assist.

红领巾瓜报鈥檚 Take on 2026 ACA Marketplace Open Enrollment Snapshot

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On January 28, 2026, the Centers for Medicaid & Medicare Services (CMS) released its second 鈥痮f 2026 Affordable Care Act (ACA) Marketplace Open Enrollment (OE) activity. While this update is not a final accounting of enrollment activity, it is likely to be the last OE federal data release for some time and offers an early look at how enrollment trends are shifting in the wake of expired enhanced premium tax credits and new eligibility standards under the 2025 budget reconciliation act (P.L. 119-21, OBBBA).

In this article, 红领巾瓜报 (红领巾瓜报) and Wakely, an 红领巾瓜报 company, highlight findings from their analysis of the 2026 OE activity and compare this activity with 2025 data. This analysis builds on the findings in their January 2026 analysis () and will provide important context for the 2027 plan year.

Overall Enrollment Trends

CMS reports that 2026 plan selections decreased by 5 percent from 2025, with enrollment declining across both new and returning consumers. New sign-ups dropped by 14 percent and renewals fell by 3 percent (Table 1). State-based Marketplace (SBM) enrollment dipped modestly, though many SBMs were still enrolling consumers in late January.

Table 1. Comparison of 2026 and 2025 Open Enrollment

	2026	2025	Net Change
Total	22,973,219	24,166,491	(1,193,272)
New Consumers	3,382,189	3,938,907	(556,718)
Returning Consumers	19,591,030	20,227,584	(636,554)

Variation Across State-Based and Federally Facilitated Marketplaces

Enrollment patterns varied substantially across states.

SBMs:

New Mexico听saw the听largest听year-over-year听increase听(14%), attributed to听state-funded subsidies听designed to听offset the loss of听enhanced premium tax credits (ePTCs).听
Georgia听experienced a听14听percent decline,听the听steepest drop among听SBMs.听

Federally Facilitated Marketplace (FFM) States:

Overall, FFM enrollment fell听5听percent.听
Texas led听FFM states听with a听5听percent increase in听plan selections.听
Ohio and North Carolina experienced听substantial enrollment declines,听20听percent听补苍诲听22听percent听respectively.听

What This Tells Us鈥攁nd What It Doesn鈥檛 Tell Us Yet

FFM data are as of January 15, 2026, and measure plan selections after the OE period ended. Within the FFM, state-by-state enrollment activity varied significantly. Some of this variation is surprising and not readily explainable from the available data and will be a focus of future 红领巾瓜报 and Wakely analyses.

The data include neither effectuated enrollment nor paid enrollment鈥攄ata which will be key to fully understanding 2026 enrollment trends and the impact of changing federal policies, including the ePTC expiration and changing eligibility standards introduced in 2026 as the result of OBBBA.

suggest significantly higher cancellation and disenrollment rates than in previous years.

SBMs are sharing that they expect substantial affordability-driven voluntary and nonpayment terminations over the first half of 2026.

Monitoring paid enrollments, attrition, and grace period dynamics, including retro-terminations, will be key to understanding market dynamics and 2027 pricing.

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

Please contact Michael Cohen, Taylor Gehrke, or Zachary Sherman鈥痺ith questions, follow-up, or if you would like expert assistance exploring any of the issues discussed in this post.

2026 Marketplace Open Enrollment: Where the Numbers Currently Stand

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

Table 1. Comparison of 2026 and 2025 Open Enrollment

	2026	2025	Net Change
Total	22,973,219	24,166,491	(1,193,272)
New Consumers	3,382,189	3,938,907	(556,718)
Returning Consumers	19,591,030	20,227,584	(636,554)

A summary of our analysis on these 2026 OE results and how they compare with 2025 data can be found below. This analysis builds on the findings in Wakely鈥檚 from January 2026.

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

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

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

Related Resources:

Upcoming Webinar February 4, 2026 at 12pm ET: 2027 ACA Considerations: Proposed NBPP and Other Key Changes and Trends

CMS ACCESS Model: A New On-Ramp to Outcomes-Based, Tech-Enabled Care in Traditional Medicare

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The Centers for Medicare & Medicaid Services (CMS) Innovation Center recently published applications for its new (Advancing Chronic Care with Effective, Scalable Solutions), a 10-year voluntary initiative beginning July 2026. The model is designed to advance outcomes-based, technology-enabled care delivery in Original Medicare and aligns with the Innovation Center鈥檚 priorities of strengthening prevention, empowering beneficiaries, and promoting performance-based competition. ACCESS is particularly suited to organizations with mature clinical operations and data infrastructure, offering a new pathway for tech-supported services.

This article summarizes the model鈥檚 design, highlights key considerations for prospective applicants, and addresses common questions our Medicare and technology experts fielded during a recent Health Management Associates (红领巾瓜报)/Leavitt Partners webinar.

What the ACCESS Model Is Testing

ACCESS evaluates whether Outcome-Aligned Payments (OAPs)鈥攔ecurring payments contingent on measurable clinical improvement鈥攃an reduce spending while maintaining or improving quality for beneficiaries with chronic conditions. The model tests whether incentivizing technology supported care can produce reliable clinical outcomes while complementing traditional care delivery.

Who may participate? Organizations must be Medicare Part B鈥揺nrolled providers or suppliers (excluding DMEPOS [Durable Medical Equipment, Prosthetics, Orthotics, and Supplies] and labs). Participants may enroll beneficiaries directly, operate across multiple clinical tracks, and manage all qualifying conditions within each selected track. Beneficiary participation is voluntary, and individuals may switch ACCESS participants every 90 days.

Clinical tracks. At launch, the four clinical tracks reflect high-prevalence chronic conditions with established care pathways and strong evidence for technology-supported interventions:

Early Cardio-Kidney-Metabolic (eCKM)听
Cardio-Kidney-Metabolic (CKM)听
Musculoskeletal (MSK)听
Behavioral Health (BH)听

Payment. OAPs vary by track and performance period. CMS pays a portion prospectively each quarter and withholds 50 percent pending reconciliation based on:

Clinical outcomes attainment: The percentage of aligned beneficiaries who complete the 12鈥憁onth performance period and achieve track鈥憇pecific clinical targets relative to their baseline.听
Substitute鈥憇pend test: Ensures beneficiaries do not receive duplicative听fee-for-service (FFS)听services for conditions managed under ACCESS.听

Technology and data exchange. ACCESS takes a tech-forward approach. Key expectations include use of Fast Healthcare Interoperability Resources (FHIR庐) based Application Programming Interfaces (APIs)鈥痜or eligibility, consent, claims sharing, and care coordination鈥攑art of the broader federal push to modernize the health data ecosystem. CMS also plans to publish a public directory that lists participants, tracks, cost-sharing policies, and risk-adjusted outcomes to enable consumer and clinician choice.

Regulatory coordination. To complement ACCESS and expand the pipeline of technology-supported interventions, the US Food and Drug Administration鈥檚 (FDA) (Technology-Enabled Meaningful Patient Outcomes) allows selected US-based digital health device manufacturers to participate while generating real-world evidence. Up to 40 device manufacturers may participate across clinical areas.

This coordinated CMSFDA effort is intended to reduce barriers to innovation and accelerate access to safe, effective digital tools that can support chronic disease management.

Key Considerations for Applicants

Program integrity and fraud/abuse. CMS has emphasized program integrity across Medicare and Medicaid, and ACCESS reflects that emphasis. Applicants and their parent organizations should expect rigorous screening. Participants must also operationalize controls to pass the substitute spend test and maintain auditable evidence of outcomes and beneficiary consent.

Overlap with Accountable Care Organizations (ACOs) and other models. Patients may participate in ACCESS and be aligned with an ACO simultaneously; however, 鈥減articipant overlap鈥� raises important operational and financial issues. ACCESS includes an FFS exclusion policy that prohibits participants or affiliated entities from billing Medicare FFS for any services delivered to the same beneficiaries for the duration of their ACCESS episode. As a result, traditional providers, ACO-aligned clinicians, and integrated delivery systems must assess whether they can segment patient populations or if partnering is more feasible.

Eligibility and clinical scope. ACCESS is focused on relatively stable, chronically ill beneficiaries and excludes those with more acute/severe conditions. Participants must accept responsibility for all qualifying conditions a beneficiary has within a track.

翱耻迟肠辞尘别蝉听辫别谤蹿辞谤尘补苍肠别.听The听ACCESS Model places substantial听emphasis on clinical听performance听and care coordination. Participants听are paid in full only if enough patients hit outcomes targets.听Early cohorts will听likely skew听toward organizations with mature clinical protocols, robust engagement models, and demonstrated outcomes.听Applicants should听be听financially听prepared听to听tolerate withholds, beneficiary switching, and听follow-on听period payment reductions after year one.听

Digital infrastructure and interoperability. ACCESS presumes API-driven data exchange, including consent capture, eligibility checks, claims/clinical data integration, and bidirectional information sharing with the patient鈥檚 broader care team. Applicants should ensure they have a FHIR API server and meet the requirements described in the CMS .

Go-to-market and referral strategy. Beneficiary alignment is voluntary and will be facilitated by CMS鈥檚 planned public directory with risk-adjusted outcomes. Access participants will benefit from strong referral relationships鈥攅specially with ACOs and primary care providers鈥攂oth to enroll eligible beneficiaries and to minimize substitute services. A field strategy grounded in evidence, patient engagement, and interoperability with local providers is critical to success.

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for the first ACCESS Model performance period are due April 1, 2026, with model launch in July 2026; applications submitted later would start January 1, 2027. Because ACCESS is a rolling, decade-long model, some organizations may choose to stage entry.

ACCESS is the most explicit Innovation Center opportunity to date on outcomes-based, tech-enabled chronic care in Traditional Medicare. It offers digital health and advanced care organizations a direct line to FFS beneficiaries with payment tied to results, not activities. Success will favor teams that combine clinical excellence, consumer-grade engagement, and API-level interoperability, as well as manage program integrity, ACO overlap, and beneficiary churn.

For questions or support assessing readiness, developing an application, or operationalizing the model, contact Amy Bassano, , or Kate de Lisle.

CMS Releases 2027 Advance Notice with Medicare Advantage and Part D Rates

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The Centers for Medicare & Medicaid Services (CMS) released the on January 26, 2026. The Advance Notice begins CMS鈥檚 annual rate-setting cycle and describes proposed updates to Medicare Advantage (MA) growth rates, benchmark rebasing, risk adjustment, Star Ratings, and Part D payment parameters. CMS previously released a鈥€痠n November 2025 that included policy changes to the Star Ratings system and enrollment policies for MA and Part D starting in contract year 2027. (Read the 红领巾瓜报 (红领巾瓜报) summary here.)

Comments on听the Advance Notice are due February 25, 2026, and听CMS will publish the final CY 2027 rate announcement no later than April 6, 2026.听听

This article provides an early look at the proposed methodological updates and draft capitation rates. Wakely, an 红领巾瓜报 Company, will publish a detailed analysis of the Advance Notice in early February.

Payment Impact on Medicare Advantage Organizations

CMS estimates a national per capita MA growth rate of 5.10 percent from 2026 to 2027, with fee-for-service (FFS) non-end-stage renal disease (non-ESRD) growth of 5.10 percent and FFS dialysis end-stage renal disease (ESRD) growth of 6.17 percent.

The听5.10听percent growth rate reflects projected increases in per听capita听FFS听Medicare spending for beneficiaries who are听aged/have听disabilities听and serves as the primary driver of 2027 benchmark updates, interacting with rebasing and risk adjustment changes to听determine听final capitation payments.听The growth rate听reflects听updates听to听how CMS pays for skin substitutes听in the 2026 Medicare Physician听Fee听Schedule. These updates resulted in significantly lower projected costs听and materially reduced听the growth听rate.听

These preliminary estimates inform the development of MA benchmarks and may change in the final rate announcement.听

Table 1. Estimated Impact of Proposed Payment Changes on Medicare Advantage Plan Payments, CY 2027

听听听听听听听听听听听听听听听听听听听听 Year-to-Year Percentage Change听
Impact	CY 2027 Advance Notice
Effective Growth Rate	4.97%
Rebasing/Re-pricing	TBD
Change in Star Ratings	-0.03%
MA Coding Pattern Adjustment	0%
Risk Model Revision and Normalization	-3.32%
Sources of Diagnoses	-1.53%
*Expected Average Change*	*0.09%*
Source: Centers for Medicare & Medicaid Services. 2027 Medicare Advantage and Part D Advance Notice. January 26, 2026. Available at: https://www.cms.gov/newsroom/fact-sheets/2027-medicare-advantage-part-d-advance-notice.

Medicare Advantage Benchmarks, Rebasing, and Risk Adjustment

The Advance Notice describes CMS鈥檚 approach and changes that will affect payment to plans, including:

Excluding from the risk adjustment process diagnoses submitted from chart reviews with unlinked claim records. In the Fact Sheet, CMS estimates this change will reduce Part C payments by 1.53 percent.听
Rebasing听county听FFS听rates for 2027 using 2020鈥�2024 claims data, continuing听CMS鈥檚听practice of updating benchmarks annually to reflect the most current FFS experience. The Advance Notice also reiterates the statutory framework for calculating benchmarks, including applicable and specified amounts, benchmark caps, and quality bonus payments.听
Updating听the CMS Hierarchical Condition Category (CMS-HCC) and Prescription Drug Hierarchical Condition Category (RxHCC) risk adjustment models and associated normalization factors for CY 2027 and听continuing听to apply the statutory MA coding pattern difference adjustment to account for systematic differences in diagnosis coding between MA and FFS.听

Quality Bonus Payments, Star Ratings, and Part D Updates

CMS states that contracts with 4 or more Stars receive a 5 percentage-point quality bonus, while new and low-enrollment contracts receive a 3.5percentage-point bonus. The Advance Notice also includes updates related to Part C and Part D Star Ratings measures and methodological refinements.

For Part D, CMS outlines proposed updates to the defined standard benefit parameters for CY 2027, as well as changes to Part D risk adjustment, normalization, premium stabilization, reinsurance, and risk-sharing, with additional policy context provided in the Contract Year 2027 Medicare Advantage and Part D proposed rule.

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The CY 2027 Advance Notice provides early signals on benchmark growth, rebasing, and payment methodology changes that will shape MA and Part D payments听in听2027. Stakeholders should begin evaluating the potential implications for bid development, benefit design, and financial performance as CMS moves toward听finalizing听rates in April.听

红领巾瓜报 supports Medicare Advantage and Part D stakeholders with payment impact modeling, scenario analysis, and strategic advisory services related to benchmark rebasing, risk adjustment, Star Ratings, and Part D payment policy to help organizations prepare for the CY 2027 rate announcement.

For details about the finalized payment and policy rules,听contact our featured experts,鈥� and听.听

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

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

Today, 红领巾瓜报 Information Services (红领巾瓜报IS) published its first preliminary review of proposed SFY 2027 budget proposals. The initial installment includes budgets from Alaska, Colorado, Florida, Mississippi, New Mexico, South Dakota, Utah, Virginia, and Wyoming, with the latter two proposals covering the fiscal 2026鈥�28 biennium.

红领巾瓜报IS will release periodic updates as additional governors publish their budget proposals鈥攖he same rolling approach we used in 2025 (here and here). Because 15 states enacted 2025鈥�27 biennial budgets last year, 红领巾瓜报IS also might review substantial mid-biennium health-related adjustments or supplemental funding.

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

Implementation of New Federal Requirements

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

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

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

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

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

Strategic Cost Containment

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

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

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

Former Virginia Gov. Glenn Youngkin鈥檚 budget鈥攏ow inherited by Abilgail Spanberger following her inauguration January 17, 2026鈥攊ncludes multiple cost-containment proposals, such as:

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

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

What to Watch

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

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

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

The full state of the states and governor budget report is available to 红领巾瓜报IS subscribers. In addition, 红领巾瓜报IS maintains a that incorporates details of each initiative and the first year award.

Outlook 2026: ACA Marketplace Trends鈥揂 Conversation with Michael Cohen and Zach Sherman

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As the 2026 Affordable Care Act (ACA) Marketplace open enrollment period nears its close鈥攁nd with enhanced subsidies expiring, rates shifting, and consumer behavior evolving鈥攓uestions about enrollment stability, affordability, and operational readiness have rapidly moved to the forefront. Andrea Maresca, Senior Principal, at 红领巾瓜报, caught up with Zach Sherman, Managing Director for Coverage Policy and Program Design at 红领巾瓜报, and , PhD, who leads much of the federal policy analysis advanced by Wakely, an 红领巾瓜报 company, to unpack what they鈥檙e seeing so far.

Q: This year鈥檚 open enrollment period has been unusually complex. At the federal level, what stands out most so far?

Michael: The headline is that new enrollment is down sharply, while returning consumers have held steadier than expected. That reflects the reality that the enhanced subsidies are gone, premiums have risen, and consumers are facing higher net costs across nearly every market.

But nuance matters: The real question now is how many of these plan selections will effectuate鈥攎eaning consumers pay their first month premium, and how many will stay enrolled the entire year? Average effectuated enrollment throughout the year is what truly determines 2026 risk mix and market stability.

Q: Enrollment appears to vary considerably from state to state. What are you hearing from state partners?

Zach: It鈥檚 a tale of two markets. StateBased Exchanges (SBEs) are generally seeing less attrition and, in some cases, even modest increases in plan selections. The reason is simple: Many states are doing a lot of heavy lifting to offset the loss of federal support.

For example, SBEs perform earlier and have more customized outreach. We鈥檝e also seen some states step in and offer state-funded subsidies, which are cushioning the affordability loss in places like New Mexico, Maryland, and California.

While still early, the data suggest that states with heavy investment in awareness and enrollment assistance, operational support, and affordability are weathering the transition better because they have more tools to stabilize the consumer experience.

Q: There鈥檚 been a lot of speculation about how consumers are responding to the end of enhanced subsidies. What are the early signs?

Michael: Consumers appear to be buying leaner benefits or different metal tiers to manage premium increases.

Another underrecognized but incredibly important dynamic is that autoreenrolled consumers may not effectuate coverage once they see the final outofpocket premium. That dynamic won鈥檛 be fully understood until March, April, and even May.

Q: Idaho is a particularly interesting early case study. What are you learning from the first state to complete enrollment?

Zach: Your Health Idaho鈥檚 open enrollment finished on December 15, and while they saw a slight increase in plan selections, state officials are not celebrating as they expect a large wave of cancellations鈥攗p to 20,000鈥攄ue to the expiring subsidies.

That鈥檚 the clearest early indication that affordability is the defining issue of 2026. States are preparing for higher-than-usual enrollment attrition in quarters one and two (Q1 and Q2), and they鈥檙e thinking hard about customer service capacity as consumers navigate changing net premiums, increased deductibles and out-of-pocket costs, and nonpayment grace periods.

Q: Are there policy levers states can still pull to mitigate affordability challenges going forward?

Zach: We鈥檙e seeing states explore options for mitigating affordability gaps and enrollment losses, including through state subsidy programs and increased investment in existing reinsurance programs. SBEs are also leaning on their core competencies鈥攖ailored and specific education campaigns and enrollment and plan comparison tools鈥攖o help their customers cut through the noise and navigate to the best option within their budget.

These aren鈥檛 perfect or quick fixes and most states don鈥檛 have the resources necessary to backstop the expiring subsidies, but state leaders increasingly view doing something as necessary to stabilize their markets.

Q: What should health plans, exchanges, and policymakers watch most closely over the next three months?

Michael: Effectuation, effectuation, effectuation. The composition of the effectuated population will define 2026 risk.

Zach: Agree. In addition, future regulatory action on affordability, eligibility and enrollment processes, and program integrity. The federal government is expected to issue its annual payment notice, the proposed 2027 Notice of Benefits and Payment Parameters, in the near future.

You can find more insights on the initial enrollment patterns to date in this 红领巾瓜报-Wakely paper, and register for the 2027 ACA Considerations: Proposed NBPP and Other Key Changes and Trends.

Outlook 2026: Rural Health Transformation Program

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As we kick off the new year,听红领巾瓜报听(红领巾瓜报)听is launching a new series of brief,听insightful听interviews听with our policy experts听on issues听that will define听2026鈥攚hat鈥檚 changing, why it matters, and how federal, state, and industry decisions will shape what happens next.听Building on听our earlier analysis of听the Rural Health Transformation Program听((RHTP),听here听补苍诲听here), this week, we听start听with a听pointed听look at听the Centers for Medicare & Medicaid听Services鈥檚听(CMS)听first year of RHTP awards.听

Rural Health, Ready or Not: CMS Wants Results in 2026

An interview with Kathleen Nolan, Senior Advisor, 红领巾瓜报, and , Principal, Leavitt Partners, an 红领巾瓜报 Company.

Q: What do the new Rural Health Transformation Program awards tell us about US Department of Health and Human Services (HHS) and CMS priorities heading into 2026?

Kathleen Nolan: One of the clearest signals is that CMS expects visible progress in 2026. This is not a program that gives states months of planning runway. The application made it clear that CMS wants states to start doing the activities they proposed right away鈥攏ot just planning or propping up existing systems. CMS wants to see meaningful movement on implementation in 2026, especially in the areas of workforce, infrastructure, technology modernization, and care delivery redesign.

Sara Singleton: Exactly, and CMS is using this investment to reinforce some of the administration鈥檚 broader policy goals. Many state proposals leaned heavily into chronic disease prevention, chronic care management, and expanding supports that promote healthier lifestyles. That alignment isn鈥檛 accidental. The Administration is looking for real traction on these priorities, and RHTP gives states both the resources and the accountability framework to make progress. So, the message from CMS is clear: Move quickly, implement strategically, and show early gains in the areas that matter for long-term population health.

Q: Was anything in the awards themselves surprising?

Singleton: There was a lot of speculation about how wide the spread in funding levels might be, particularly for states鈥� discretionary initiatives. But the distribution was relatively tight; 32 states fell in the 鈥渁verage鈥� range of $190鈥�$230 million, with only four states above $230 million and 13 below $190 million. That suggests CMS isn鈥檛 signaling dramatic differences in expected performance or ambition.

Nolan: It reinforces that CMS is looking for consistent, measurable progress from every state. States that struggle to implement their plans could see less funding in about years.

Q: What should states keep top of mind heading into year one?

Nolan: Accountability. CMS has made it clear they will adjust budgets in later years if states don鈥檛 meet expectations on reporting and evaluation. That also means states need to know where the dollars are going and what they are getting for the investment. Year one performance really matters.

Singleton: And it鈥檚 not just CMS. Congress and the Office of Inspector General for HHS will also be watching how states use these funds.

Q: What rural health policy developments are you watching in early 2026?

Nolan: Decisions about the leadership for these initiatives and state legislatures. Federal investment can only go so far. States will need strong leaders and supportive policies to accelerate and sustain RHTP efforts in year one. What legislatures choose to prioritize will shape the impact of RHTP far beyond year one.

Tracking Medicaid鈥檚 Growth: FFY 2025 Spending and T-MSIS Data Provide Insights on Managed Care Spending

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This week, our鈥�In Focus鈥痵ection highlights findings from a 红领巾瓜报 Information Services (红领巾瓜报IS) analysis of the Centers for Medicare & Medicaid Services (CMS) preliminary CMS-64 Medicaid expenditure report for federal fiscal year (FFY) 2025. The data show total medical services expenditures reached $971.4 billion across all states and territories, up 6.9 percent from FFY 2024.

This CMS-64 spending detail provides important context as states prepare for their upcoming legislative sessions and begin implementing changes required under the 2025 budget reconciliation act (P.L. 119-21, OBBBA). Early fiscal and operational pressures will stem from changes to the Supplemental Nutrition Assistance Program (SNAP) and preparations for community engagement requirements for Affordable Care Act (ACA) Medicaid expansion enrollees. In subsequent years, pressures will intensify because of major changes to provider tax financing and new federal limits on state directed payments in 2027 and early 2028.

In this article, we provide a deeper review of Medicaid spending, including the federal-state financing split. As Medicaid agencies prepare for upcoming spring sessions and anticipate potential program changes under OBBBA, it is notable that report an at least fifty percent likelihood of a Medicaid budget shortfall in FFY 2026.

Growth and Drivers in Medicaid Managed Care Spending

The 红领巾瓜报IS analysis looks at CMS-64 preliminary estimates of Medicaid spending by state for FFY 2025. CMS state expenditures through the automated Medicaid Budget and Expenditure System/State Children鈥檚 Health Insurance Budget and Expenditure System (MBES/CBES).

While enrollment decreased for most states following the COVID-19 public health emergency unwinding, states saw an uptick in expenditures due to increased state directed payments, greater utilization and sicker populations, higher drug costs, increased provider rates, and greater use of long-term services and supports and behavioral health.

Key findings from 红领巾瓜报IS鈥� analysis (see Table 1), include:

Total Medicaid managed care spending (federal and state share听combined)听reached听$550.5听billion听in听FFY 2025,听up from听$517.5听billion听in听FFY 2024.听
This听amount听represents听a听6.4听percent听year-over-year increase from听FFY 2024听to听FFY 2025.听
Managed听care听accounted for 56.7听percent听of total Medicaid spending in听FFY 2025, down听0.3听percentage points听from the previous听year.听
The听$33 billion听increase from FFY 2024 to FFY 2025 exceeds the听$9.4 billion听increase seen the year prior, reflecting renewed growth following the unwinding transition period.听

These figures include spending on comprehensive risk-based managed care organizations (MCOs), prepaid inpatient health plans (PIHPs), and prepaid ambulatory health plans (PAHPs). PIHPs and PAHPs refer to prepaid health plans that provide a subset of services, such as dental or behavioral health care. This total is exclusive of fee-based programs such as primary care case management models.

Table 1. Medicaid MCO Expenditures as a Percentage of Total Medicaid Expenditures, FFY 2020鈥�2025 (in millions)

Annual Medicaid managed care expenditures have grown consistently with total Medicaid expenditures. After slower growth in FFY 2024鈥攚hich aligned with the post-COVID-19 policy unwinding period when many states completed eligibility redeterminations鈥擣FY 2025 again experienced an uptick in managed care growth (see Figure 1).

Figure 1. Total and MCO Medicaid Expenditures, FFY 2020鈥�2025 ($M)

Federal versus State Share Spending

The preliminary FFY 2025 expenditure data provides a baseline before OBBBA鈥檚 changes are scheduled for implementation and as states continue to face Medicaid funding challenges. In FFY 2025, federal funding accounted for 64.2 percent of FFY 2025 spending, and non-federal matching funds accounted for 35.8 percent (see Table 2). Particularly later in 2027, 2028, and subsequent years, Medicaid expansion states stand to see disproportionally larger increases in their share of spending.

Table 2. Federal versus State Share of Medicaid Expenditures, FFY 2020鈥�2025 (in millions)

T-MSIS Data Adds Detail to CMS-64 MCO Spending

To complement CMS-64 macro-spending trends, 红领巾瓜报 developed a methodology allowing us to use Transformed Medicaid Statistical Information System (T-MSIS) data to approximate managed care spending by service category. Although T-MSIS enables more granular views (e.g., professional services, inpatient/outpatient hospital services, skilled nursing facilities (SNFs), HCBS, clinics, pharmaceuticals), the most recent dataset typically lags one to two years behind CMS-64 totals.

红领巾瓜报鈥檚 analysis of the T-MSIS data shows that while managed care remains the dominant delivery system model for Medicaid, spending by provider types helps contextualize the CMS-64 report. Notably, the CMS-64 reports FFY25 data and our report below on T-MSIS disaggregation uses 2023 data. Although the T-MSIS and CMS-64 data are for different years, it still highlights the main components of the largest spending component of the CMS-64 with more recent data.

The 2023 T-MSIS analysis shows the following:

Professional fees are the lead spending category, with听nearly听30听percent听of spending directed听toward听payments to physicians and other practitioners (e.g., physician assistants, nurse practitioners). Given that T-MSIS data are built around billing codes, services that traditionally may be considered part of a bundled rate (i.e.,听a large portion听of physician services delivered in hospitals and clinics) are听essentially unbundled听and considered professional fees.听
Hospital spending听(inpatient plus outpatient), SNF听costs, and professional fees听together听account for close to 75听percent of spending in听CY 2023.听

Figure 2. T-MSIS Medicaid Spending by Service Category 2023 (MCO disaggregated plus FFS)

What to Watch

Because Medicaid is such a big part of state government spending, outlays for Medicaid will always be a focus and challenge for states. Upcoming state legislative sessions and OBBBA driven changes will begin in 2026 with SNAP pressures and major operational preparations for community engagement requirements for expansion states. Preparations for new limits on provider taxes and state directed payments will likely begin immediately, but the true impacts will occur in 2027 and early 2028. States will need to tailor their programs under funding constraints.

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红领巾瓜报IS, a subscription-based tool that 红领巾瓜报 offers, provides state-by-state analysis of the CMS-64 data, Medicaid managed care enrollment trends, and state budget reporting. For more information about an 红领巾瓜报IS subscription, contact Andrea Maresca and Alona Nenko. For details on T-MSIS data, contact Matt Powers and Shreyas Ramani.

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