This week, our second In Focus article addresses the transition to end the Medicare Advantage Value-Based Insurance Design (VBID) model, which launched in 2017 and subsequently has been expanded with bipartisan support. This model was designed to promote flexible benefit design, reduce cost barriers, and enhance care for targeted populations, especially dual eligibles and individuals with chronic conditions. In December 2024, however, the that the model would be terminated by the end of 2025, citing unmitigable costs to the Medicare Trust Funds, totaling more than $4.5 billion across 2021 and 2022 alone鈥�.
Despite its popularity and effectiveness in improving medication adherence and addressing social determinants of health, CMS concluded that the cost trajectory was unsustainable within the parameters of the Innovation Center鈥檚 mandate.
The end of the VBID model is not the end of innovation in Medicare Advantage (MA); rather, it is a strategic inflection point. Plans that approach this transition with a proactive, data-driven lens will be best positioned to maintain competitive advantage, compliance, and member trust. This article reviews critical steps VBID plans should be taking and how Medicare Advantage Organizations (MAOs) and their partners can best prepare for future opportunities.
Pain Points and Key Strategic Decisions for MAOs
As plans prepare for a post-VBID world, they face a series of complex trade-offs鈥攅specially those with Dual Eligible Special Needs Plans (D-SNPs) that had $0 drug cost sharing under VBID. With the end of CMS鈥檚 drug cost offset in the initial coverage phase, MAOs will need to determine whether and how to absorb those costs through alternative mechanisms. In addition, plans will need to make important decisions regarding their other VBID benefits, namely, whether to discontinue or transition them to the special supplemental benefits for the chronically ill (SSBCI) program. MAOs should consider the following key strategic decisions:
Offer an Enhanced Alternative (EA) or Basic Alternative (BA) Part D Plan:听To replicate $0 cost sharing, MAOs would need to use EA or BA plan designs with $0 deductibles and $0 copays across all tiers鈥攁n expensive move and potentially untenable investment for many.
Tier-Specific Buy-Downs (T1/T2):听Some plans may consider buying down T1 and T2 copays to $0, a much less costly approach. Others may consider moving key T2 drugs to T1, while keeping T1 copays at $0 to protect access and using non-zero dollar T2 copays to limit costs.
Competitive Alignment Considerations:听MAOs offering broader cost-sharing reductions (e.g., $0 copays on both T1 and T2 drugs) may experience undesirable shifts in enrollment patterns depending on how competitors structure their formularies and benefit designs. MAOs should consider competitive parity and attempt to maintain a balanced benefit structure that aligns with market norms.
Transferring VBID Benefits to SSBCI:听Some benefits鈥攍ike non-health-related transportation, healthy foods, and general supports for living鈥攃ould migrate to the SSBCI program. But SSBCI has strict eligibility, documentation, and operational requirements, calling for nuanced workflows and cross-departmental coordination.
Action Plan: What MAOs Should Be Doing Now
To navigate this transition successfully, teams of experts at Wakely, a 红领巾瓜报, Inc. (红领巾瓜报) Company, are already working with VBID stakeholders to evaluate multiple transition scenarios. Our experts recommend that MAOs take the following actions:
What to Watch: Future Innovation in Medicare Advantage
Though VBID is ending, the innovation landscape is far from static. With the new Trump Administration and the return of Abe Sutton鈥攁 VBID expansion advocate鈥攁ppointed as Director of the CMS Innovation Center, our experts are closely monitoring the potential for a revised version of VBID or similar models. Stakeholder advocacy could influence how CMS prioritizes the next wave of innovation. Plans should consider engaging in dialogue now to shape what happens next.
Connect with Us
Wakely is embedded in MA strategy and policy. Wakely and 红领巾瓜报 teams are working with clients to evaluate multiple transition scenarios, helping them optimize value, protect Star Ratings, and preserve member satisfaction during this pivotal shift, while also supporting targeted policy engagement efforts to ensure their perspectives are reflected in future CMS and Innovation Center decision making.
Our joint capabilities bring together:
Actuarial modeling expertise听to quantify cost and risk impacts of design alternatives
Regulatory insight听to ensure compliance with CMS requirements
Operational support听to help you implement SSBCI programs efficiently
Market strategy consulting听to align your plan offerings with local competition and enrollment goals
Policy advocacy听to help clients engage in the conversation around what comes next after VBID
To connect on additional questions contact our featured experts听below.
This week, our In Focus section reviews the policy changes that the Centers for Medicare & Medicaid Services (CMS) proposes to make in the Fiscal Year (FY) 2026 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Acute Care Hospital (LTCH) Proposed Rule (). The IPPS proposed rule, released April 11, 2025, includes several important policy changes that will alter hospital margins and change administrative procedures, beginning as soon as October 1, 2025.
Key Provisions of the FY 2026 Hospital IPPS and LTCH Proposed Rule
For FY 2026, CMS proposes to modify several hospital inpatient payment policies. We highlight and interpret six of these proposed policies that may be among the most impactful for Medicare beneficiaries, hospitals and health systems, payers, and manufacturers, as follows:
Annual inpatient market basket update
Labor share reduction
Medicare Advantage (MA) data integration in measuring hospital readmissions
New Technology Add-on Payment (NTAP) program growth
Transforming Episode Accountability Model (TEAM) modifications
Uncompensated care payment increase for disproportionate share hospitals (DSHs)
Annual Inpatient Market Basket Update
Proposed Rule: CMS鈥檚 FY 2026 Medicare IPPS Proposed Rule will increase payments to acute care hospitals overall by 2.4 percent from FY 2025, amounting to an estimated $4 billion increase in reimbursement. This update is based on a hospital market basket increase of 3.2 percent and a 0.8 percent reduction for total factor productivity.
红领巾瓜报 Analysis: CMS鈥檚 2.4 percent increase results from the estimated rate of increase in the cost of a standard basket of hospital goods鈥攖he hospital market basket. For beneficiaries, this payment increase will lead to a slightly higher standard Medicare inpatient deductible and an increase in out-of-pocket costs. For hospitals and health systems, payers, and manufacturers, the proposed payment increase (2.4 percent) is consistent with economy-wide inflation over the past year (2.4 percent) and below the amount that MA plans will receive for 2026 (5 percent).[1], [2]Although the published payment update for FY 2026 is 2.4 percent, other policy changes result in the average change in inpatient payments totaling slightly more than 3 percent. We anticipate the proposed 2.4 percent increase will increase somewhat by the time CMS finalizes these rates later in the year.
Labor Share Reduction
Proposed Rule: CMS proposes to modify the hospital labor share used to reimburse hospitals for inpatient services. Using 2023 hospital cost report data CMS proposed a national labor鈥憆elated share of 66.0 percent, a decrease from the labor share of 67.6 percent.
红领巾瓜报 Analysis: Every five years, CMS recalculates the hospital market basket and the hospital labor share using updated cost data from the hospital cost reports. For FY 2026, CMS conducted its routine rebasing calculation using 2023 cost report data, replacing the 2018 cost data currently used. As a result, CMS calculated that the cost of labor accounts for a slightly smaller share of total hospital costs in 2023 than in 2018. The labor share is used within the IPPS to identify the proportion of payments that are affected by the hospital wage index in an effort to adjust payments for geographic variation in labor costs. The consequence of a lower hospital labor share is that a slightly smaller share of hospital inpatient payments will be adjusted by the hospital wage index. The subtle impact of this change is that hospitals with higher wage index values may experience reductions in payment. Further, this downward revision of the labor share signals that hospital wages, salaries, and employee benefits account for a smaller share of total costs in the post-pandemic environment. This change may come to a surprise to some, as hospital labor costs have been a subject of concern since the COVID-19 public health emergency.
Medicare Advantage Data Integration in Measuring Hospital Readmissions
Proposed Rule: CMS proposed to make several modifications to the Hospital Readmissions Reduction Program (HRRP), including:
Refining all six readmission measures to add MA patient data
Removing the COVID-19 patient denominator exclusion from measures
Reducing the applicable period from three years to two
Modifying the DRG payment ratios in the payment adjustment formula to include MA beneficiaries
Clarifying that CMS has the discretion to grant an extension to hospitals under the extraordinary circumstances exception (ECE)
CMS also proposed to include MA data in other measures included in the Hospital Value-Based Purchasing (VBP) program and the Inpatient Quality Reporting (IQR) program.
红领巾瓜报 Analysis: The inclusion of MA data in the HRRP may have significant payment implications for many hospitals because it will alter their readmission rates in unanticipated ways, particularly if hospitals鈥� MA patients differ substantially from traditional Medicare beneficiaries. Importantly, the inclusion of MA data in the HRRP measures, and also within the VBP program and the IQR program, signals that CMS is moving toward broader integration of MA data into Medicare fee-for-service reimbursement systems.
New Technology Add-on Payment Program Growth
Proposed Rule: CMS proposed to continue NTAP status for 26 products because they continue to meet the newness criteria required under this program. In addition, within the proposed rule CMS discusses new NTAP applications for 43 additional products. Among these applications, 29 were submitted under the alternative pathways for breakthrough devices and qualified infectious disease products (QIDP).
红领巾瓜报 Analysis: The overall number of products with NTAPs is on par with other recent years, but the number of NTAP applications has blossomed in FY 2026 as the result of the alternative breakthrough application pathway. This alternative pathway allows breakthrough devices and certain antibiotic and antimicrobial drugs to apply for NTAP using an abbreviated application process.
Transforming Episode Accountability Model Modifications
Proposed Rule: CMS proposed several modifications to the forthcoming CMS Innovation Center TEAM framework. Among the various methodological modifications proposed to this mandatory payment model beginning January 1, 2026, CMS proposed to take the following actions:
Limit the deferment period for certain hospitals
Replace the Area Deprivation Index (ADI) with the Community Deprivation Index (CDI)
Use a 180-day lookback period and Hierarchical Condition Categories (HCC) for risk adjustment
Remove health equity and health-related social needs data reporting
Expand use of the Skilled Nursing Facility (SNF) three-day rule waiver
红领巾瓜报 Analysis: The critical aspect of CMS鈥檚 TEAM provision is that the agency proposes to follow through with this Innovation Center model while cancelling other Innovation Center payment models in recent months. It also is noteworthy that the agency has proposed to remove the health equity data reporting requirements for TEAM in line with actions taken with many other CMS programs. Another proposal of note is the plan to expand the use of the waiver to circumvent the SNF three-day inpatient stay rule, which will allow hospitals to discharge patients more quickly to SNFs.
Uncompensated Care Payment Increase for Disproportionate Share Hospitals
Proposed Rule: CMS proposes to increase uncompensated care payments to DSHs by $1.5 billion in FY 2026.
红领巾瓜报 Analysis: CMS鈥檚 proposal will increase uncompensated care payments to hospitals by 26 percent. This increase is driven by CMS鈥檚 assumption that the rate of uninsured people will increase to 8.7 percent of the population in 2026 from 7.7 percent in 2025.
Stakeholder comments on the IPPS proposed rule are due no later than June 10, 2025.
Connect With Us
The 红领巾瓜报, Inc. (红领巾瓜报), Medicare Practice Group monitors federal regulatory and legislative developments in the inpatient setting and assesses the impact on hospitals, life science companies, and other stakeholders. Our experts interpret and model hospital payment policies and assist clients in developing CMS comment letters and long-term strategic plans. Our team replicates CMS payment methodologies and model alternative policies using the most current Medicare fee-for-service and Medicare Advantage (100%) claims data. We also support clients with DRG reassignment requests, NTAP applications, and analyses of Innovation Center alternative payment models.
For more information about the proposed policies, please contact our expert below.
[1] U.S. Bureau of Labor Statistics. Table 1. Consumer Price Index for All Urban Consumers (CPI-U): U.S. City Average, by Expenditure Category. Modified April 10, 2025. Available at: .
[2] Centers for Medicare & Medicaid Services. 2026 Medicare Advantage and Part D Rate Announcement. April 7, 2025. Available at: .
Digital quality measures (dQM) are quickly emerging as a cornerstone of healthcare operations, propelled by federal efforts to enhance efficiency, interoperability, transparency, and real-time data sharing. New bipartisan proposals like the Healthcare Efficiency Through Flexibility Act (H.R. 483) highlight just how quickly the legislative landscape can change.
Healthcare organizations face mounting pressure to do more with less. As legislation continues to evolve at both federal and state levels, digital innovation remains a critical, key strategy for driving efficiency and reducing administrative burden.
National mandates, emerging legislative proposals, and regulations continue to set the 鈥渞ules of the road鈥� for healthcare, including digital quality transformation. New bills can significantly reshape reporting requirements, data standards, and reimbursement models, often on accelerated timelines. Organizations that proactively adapt to these shifting mandates will be better positioned to improve patient outcomes, streamline operations, and remain leaders in this evolving market.
Foundational Legislation
21st Century Cures Act (2016): Enacted by the U.S. Congress, this laid the groundwork for modernizing the healthcare data ecosystem using application programming interfaces (APIs). Healthcare related provisions focused on interoperability & usability of electronic health data by preventing information blocking (unreasonable interference with access/ exchange of electronic health information); required certified electronic health records (EHRs) to utilize Fast Healthcare Interoperability Resources (FHIR)-based APIs to promote patient access to their health data.
The Centers for Medicare & Medicaid Services (CMS) Interoperability & Patient Access Final Rule(CMS-9115-F) (2020): Required CMS-regulated payers (Medicare Advantage, Medicaid, Children鈥檚 Health Insurance Program (CHIP), Qualified Health Plan (QHP), and Federally-facilitated Exchanges (FFEs) beginning on or after January 1, 2022, to offer FHIR-based APIs for Patient Access and Provider Directories.
Mandated Payer to Payer Data Exchange for patients to take their data with them if they change payers.
Promoted data exchange by requiring hospital participation in sending patient event notifications through an ADT (Admissions, Discharge and Transfer) feed.
Publicly reporting providers who do not list their digital contact information in the National Plan and Provider Enumeration System (NPPES).
Further curtailed information blocking by publicly reporting eligible clinicians and hospitals who may be blocking information. 听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听 听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听
Subsequent federal communication in December 2021 formalized CMS鈥檚 decision not to enforce certain provisions of this rule to give payers additional time to comply.
Health Data, Technology, and Interoperability (HTI-1): Certification Program Updates, Algorithm Transparency, and Information Sharing-Final Rule (2024): This rule, which was issued by the Office of the National Coordinator (ASTP/ONC)[1] introduces significant changes to software supporting care. It implements the Cures Act鈥檚 EHR Reporting Program, requiring transparent reporting on certified health IT metrics. It also updated information blocking regulations to make data easier to share. In addition, it established a new standard data model for all 鈥渃ertified鈥� Health IT products: the United States Core Data for Interoperability (USCDI) version 3, starting January 1, 2026. In addition, the voluntary certification program (which has been adopted by 96% of all EHRs) has updated its standards, criteria, and requirements, including standardized FHIR APIs, electronic case reporting using Health Level Seven International Clinical Document Architecture (HL7 CDA) and FHIR-based specifications, revised decision support intervention criteria, and new functionality for patient Electronic Health Information (EHI) restriction requests.
CMS Interoperability & Prior Authorization Final Rule (CMS-0057-F) (2024): Builds on previous CMS efforts and the 2020 CMS Interoperability & Patient Access Final Rule to improve access to and exchange of health records among patients, providers, and payers. It also focuses on simplifying and modernizing prior authorization processes while expanding data-sharing requirements to reduce administrative burdens. Impacted payers must begin implementing certain measures by January 1, 2026, while most API-related requirements are extended until January 1, 2027, based on stakeholder feedback provided to CMS.
Beyond federal legislation, other influential entities like CMS, National Committee for Quality Assurance (NCQA), and ASTP/ONC, are adopting new frameworks that accelerate the shift to digital quality measurement.
Rapidly Evolving National Healthcare Frameworks & Healthcare Quality Landscape Changes
CMS National Quality Strategy/Meaningful Measures 2.0 and CMS Digital Quality Measurement Strategic Roadmap (Published in 2022)
These frameworks map out a future in which interoperability and digital measures play a pivotal role in improving care quality and outcomes.
NCQA鈥檚 Shift to Digital Healthcare Effectiveness Data and Information Set (HEDIS)庐 Measures: NCQA has taken a significant step in its quality measurement strategy for health plans. Specifically, HEDIS measures are moving to fully digital by 2030, signaling an industry-wide move toward automated data capture and reporting (published in 2024). In addition, they have also launched their Digital Content Services (DCS) product which allows organizations to submit their quality measures digitally for the 2024 measure year.
Digital Quality Implementers Community:
In 2024, a is a collaborative consensus-based effort was initiated to develop, advance, and standardize tools and platforms that make digital quality measurement possible using open standards instead of proprietary tools. This group is actively working to advance a quality enablement layer including tools, guidance, and standards changes. Leavitt Partners, an 红领巾瓜报 company, facilitates this community.
Signals from the Trump Administration Related to Digital Quality
There is ongoing speculation about how the Trump Administration and Congress will approach digital healthcare transformation鈥攑articularly in areas like digital quality measurement. Yet multiple indicators suggest they will stay on this course, and perhaps even accelerate the adoption of digital quality measures.
One key signal is that Ryan Howells, a Principal with Leavitt Partners, an 红领巾瓜报 Company, is reportedly one of two finalists under consideration for the position of Assistant Secretary for Technology Policy (ASTP). Known as a champion for digital healthcare data, Howells leads the CARIN Alliance, a national group focused on improving health data access. The ASTP/ONC has significant influence in shaping federal regulations for electronic health records and broader data, technology, and artificial intelligence strategies within the Department of Health and Human Services (HHS).
Additionally, recent bipartisan legislation introduced in January 2025 further underscores a commitment to pursuing digital quality transformation as a linchpin for success in a 鈥渄igital-first鈥� environment, one that prioritizes efficiency and enhanced patient outcomes.
H.R. 483: Healthcare Efficiency Through Flexibility Act
Proposes delaying electronic clinical quality measures (eCQM) adoption until 2030, citing the need to reduce provider burden and pilot more advanced, interoperable reporting tools, including digital quality measurement.
Meanwhile, the national shift toward dQM continues to gain momentum. With eCQM mandates set to begin in reporting year 2025 for Medicare Shared Savings Program Accountable Care Organizations (MSSP ACOs), many organizations view these requirements as redundant and burdensome, given the industry鈥檚 rapid move toward fully digital quality. Unlike eCQMs, dQMs leverage more robust structure and standardization, especially through FHIR-based APIs, to enable broader, more timely, and more efficient data capture. The result is a faster path toward high-impact quality measurement and improvement in our increasingly digital healthcare environment.
Major Implications for Healthcare Organizations
Compliance Deadlines: Evolving Administration rules can quickly shift timelines, significantly impacting prior authorizations, data exchange, and quality measurement.
Financial & Legal Risks: Non-compliance may lead to financial penalties, legal actions, or even program exclusion.
[1] ONC was renamed to the 鈥淎ssistant Secretary for Technology Policy/Office of the National Coordinator (ASTP/ONC) in 2024, but in the current administration, may be folded back into CMS.
Our second In Focus section reviews the most recent Medicaid enrollment trends in capitated risk-based managed care programs in 29 states.[1] 红领巾瓜报 Information Services (红领巾瓜报IS) collected and analyzed monthly Medicaid enrollment data from the fourth quarter (Q4) of 2024.
The data offer a timely overview of trends in Medicaid managed care enrollment and valuable insights into state-level and managed care organization (MCO)-specific enrollment patterns. This information allows state governments, their partners, and other organizations interested in Medicaid to track enrollment shifts. Understanding the underlying drivers of enrollment shifts is critical for shaping future Medicaid policies and adjusting program strategies amid a dynamic healthcare landscape.
Overview of the Data
The 29 states included in our review have released monthly Medicaid managed care enrollment data via a public website or in response to a public records request from 红领巾瓜报 (红领巾瓜报). This report reflects the most recent data posted or obtained. 红领巾瓜报 has made the following observations related to the enrollment data (see Table 1):
As of December 2024, across the 29 states tracked in this report, Medicaid managed care enrollment was 61.7 million, down by 3.6 million (-5.5%) year-over-year.
Though most states experienced declines in enrollment, six states saw enrollment increases as of December 2024鈥攄ouble the number of states from the previous year.
Figure 1. Year-Over-Year Medicaid Managed Care Enrollment Percent Change in Select States, 2020鈭�24
Among the 22 expansion states included in this report, net Medicaid managed care enrollment has decreased by 2.1 million (-4%) to 49.5 million members at the end of Q4 2024, compared with the same period in 2023.[2]
Among the seven states included in this report that had not expanded Medicaid as of December 2024, net Medicaid managed care enrollment decreased by 1.5 million, or 1 percent, to 12.3 million members at the end of Q4 2024 compared with to the same period in 2023.
Table 1. Monthly MCO Enrollment by State鈥擮ctober through December 2024
Note: In Table 1 above, 鈥�+/- m/m鈥� refers to the enrollment change from the previous month. 鈥�% y/y鈥� refers to the percentage change in enrollment from the same month in the previous year.
It is important to note the limitations of the data presented. First, not all states report the data at the same time during the month. Some of these figures reflect beginning of the month totals, whereas others reflect an end of the month snapshot. Second, in some cases the data are comprehensive in that they cover all state-sponsored health programs that offer managed care options; in other cases, the data reflect only a subset of the broader managed Medicaid population. This limitation complicates comparison of the data described above with figures reported by publicly traded Medicaid MCOs. Hence, the data in Table 1 should be viewed as a sampling of enrollment trends across these states rather than as a comprehensive comparison, which cannot be established based solely on publicly available monthly enrollment data.
红领巾瓜报IS also compiles a more detailed quarterly Medicaid managed care enrollment report representing nearly 300 health plans in 41 states. The report provides by plan enrollment plus corporate ownership, program inclusion, and for-profit vs. not-for-profit status, with breakout tabs for publicly traded plans. Table 2 shows a sampling of plans and their national market share of Medicaid managed care beneficiaries based on a total of 66.3 million enrollees. These data too should be viewed as a broader representation of enrollment trends rather than as a comprehensive comparison.
Table 2. National Medicaid Managed Care Market Share by Number of Beneficiaries for Sample of Publicly Traded Plans, 2024
What to Watch
Enrollment in Medicaid MCOs has experienced significant fluctuations recently, influenced both by policy changes and economic factors. Since April 2023, Medicaid enrollment has been on a downward trajectory as states complete eligibility redeterminations after the end of the COVID-19 public health emergency. This trend, coupled with financial and political challenges, necessitates strategic planning for stakeholders to navigate the evolving Medicaid landscape effectively.鈥�
Potential changes that may affect enrollment and require scenario and readiness planning include:
Federal requirement, or a new state option, to implement Medicaid work requirements for at least some categories of enrollees
Changes to the federal financial match policy, which may cause some states to make different decisions about their Affordable Care Act expansion program for adults
Modifications in requirements and expectations for more efficient eligibility processes to improve the accuracy of determinations and assignment to eligibility categories
Connect with Us
红领巾瓜报 is home to experts who know the Medicaid managed care landscape at the federal and state levels. The 红领巾瓜报IS subscription provides point-in-time and longitudinal Medicaid enrollment data, health plan financials, and additional actionable information about eligibility expansions, demonstration and waiver initiatives, as well as population- and service-specific information. 红领巾瓜报IS also includes a comprehensive public documents library containing Medicaid requests for proposals and responses, model contracts, scoring sheets, and protests.
For detail about the 红领巾瓜报IS enrollment report and subscription service, contact听our experts below.
[1] Arizona, California, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin.
CMS approves average increase of 5.06 percent for MA plans while deferring major policy changes in MA and Part D programs
The Centers for Medicare & Medicaid Services (CMS) released the听听on April 7, 2025, finalizing payment updates for calendar year (CY) 2026. This announcement came shortly after the release of the听on April 4, 2025.听Together, these updates mark the conclusion of CMS鈥檚 annual rulemaking cycle for Medicare Advantage, ahead of the June 2, 2025, deadline for 2026 MA plan bids.
Notably, because of the timing of the draft notices and proposed rule, Trump Administration officials ultimately had more input into policies omitted from the rate notice and final policy rule than on policies that were finalized. For example, the final rule is exclusive of proposals to expand coverage for anti-obesity medications, guardrails for artificial intelligence (AI), and new requirements related to utilization management and prior authorization procedures.
In his confirmation , CMS Administrator Mehmet Oz, MD, cited Medicare Advantage prior authorization practices and health risk assessments that lead to upcoding as areas that deserve further consideration and scrutiny, raising the potential for future regulatory shifts and even legislative reform. With the possibility of Medicare, including MA, facing cuts as part of broader budget negotiations in Congress, the rate notice and policy rule offer program stability counterbalancing the political and fiscal pressures that may emerge this year.
CMS has sought to stabilize MA and Part D programs into 2026, and stakeholders can benefit from understanding the impact in markets for 2026 and the signals of potential regulatory changes to come. For more in-depth analysis and insights on the rate notice, look for our policy and actuarial experts鈥� brief due out next week.
The remainder of this In Focus article reviews CMS鈥檚 decisions on major payment and policy proposals in the Rate Announcement and Final Rule and examines key considerations for healthcare stakeholders.
Payment Impact on Medicare Advantage Organizations
In the CY 2026 Rate Announcement, CMS projects that federal payments to MA plans will increase by 5.06 percent from 2025 to 2026, which represents a $25 billion increase in expected payments to MA plans next year. According to CMS, this represents an increase of 2.83 percentage points compared with the CY 2026 Advance Notice that is largely attributable to an increase in the effective growth rate. The increase in the effective growth rate鈥攊ncreasing to 9.04 percent in the Rate Announcement from 5.93 percent in the Advance Notice鈥攊s primarily the result of the inclusion of additional data on Medicare fee-for-service (FFS) expenditures, including payment data through the fourth quarter of 2024.
The Rate Announcement estimates represent the average increase in payments to MA plans and actual payments will vary from plan to plan. Below, Table 1 provides CMS estimates of the impact of finalized payment changes on net MA plan payments.
MA Risk Adjustment Changes
As expected, CMS finalized the last year of the three-year phase-in of the MA risk adjustment model, which requires calculating 100 percent of the risk scores using only the 2024 CMS-HCC (Hierarchical Condition Category) model in 2026. CMS also addressed stakeholder concerns with the planned transition toward a risk adjustment model based on MA encounter data, as previewed in the CMS CY 2026 Advance Notice. CMS pledged to engage stakeholders in this model development process while continuing to evaluate the feasibility, transparency, and timing of a future transition to an encounter-based risk adjustment model.
CMS also finalized the MA coding pattern adjustment factor of 5.9 percent for CY 2026, which is the statutory minimum adjustment factor to account for differences in coding patterns between MA plans and providers under Medicare FFS Parts A and B.
Part D Risk Adjustment
For CY 2026, CMS finalized the revised 2026 RxHCC model with adjustments for maximum fair price drugs. Importantly, CMS also finalized using separate FFS normalization factors for MA-Prescription Drug (MA-PD) plans and Prescription Drug Plans (PDPs), making 2026 the second year CMS will vary normalization for these two markets. The calculation of the factors for CY 2026 is different, however, and will have substantially greater impact than the method used previously. It also will reduce Part D risk scores significantly for MA-PD plans while increasing scores for PDPs.
MA Star Ratings
CMS continues to solicit feedback from stakeholders on ways to simplify and refocus MA Star Ratings measures to focus more on clinical care, outcomes, and patient experience of care measures. Also included in the CY 2026 Rate Announcement are non-substantive measure specification updates and a list of measures included in the Part C and Part D improvement measures and categorical adjustment index for the 2026 Star Ratings.
Separately, in the policy and technical changes rule, CMS finalized new regulatory requirements designed to enhance MA beneficiary protections in an inpatient setting, provisions related to allowable special supplemental benefits for the chronically ill (SSBCI), and the care experience for dually eligible beneficiaries enrolled in MA special needs plans.
Enhancing MA Beneficiary Appeal Rights and Notification Requirements
CMS is finalizing provisions that limit the ability of MA plans to reopen and modify a previously approved inpatient hospital decision on the basis of information gathered after the approval. Under the final rule, MA plans will be able to reopen an approved hospital admission only due to error or fraud. In addition, CMS finalized several provisions to enhance beneficiary appeal rights and new reporting and notice requirements, including:
Ensuring that MA appeals rules apply to adverse plan decisions, regardless of whether the decision was made before, during, or after the receipt of such services
Codifying existing guidance that requires plans to give a provider notice of a coverage decision
Ensuring enrollees have a right to appeal MA plan coverage denials that affect their ongoing source of treatment
Non-Allowable Special Supplemental Benefits for the Chronically Ill
The final rule establishes guardrails for SSBCI benefits by codifying a list of non-allowable examples (e.g., unhealthy food, alcohol, tobacco, life insurance). CMS did not finalize proposals that were designed to improve administration of supplemental benefits and enhance transparency of the availability of such benefits.
Improving Care Experience for Dual Eligibles
CMS finalized new requirements for dual eligible special needs plans (D-SNPS) that are applicable integrated plans (AIPs) as follows:
D-SNPs will be required to have integrated member ID cards for their Medicare and Medicaid plans
D-SNPs will be required to conduct an integrated health risk assessment for Medicare and Medicaid, rather than separate ones for each program.
These provisions affecting certain D-SNPS plans will be effective for the 2027 plan year.
Provisions Pertaining to the Medicare Part D Inflation Reduction Act
CMS is finalizing proposals to codify existing requirements related to key provisions of the Inflation Reduction Act, including no cost sharing for adult vaccines and capping monthly copayments for insulin at $35. In addition, CMS is codifying existing guidance related to the implementation of the Medicare Prescription Payment Plan, which is also part of the Inflation Reduction Act.
Key Proposals CMS Has Yet to Finalize
As noted earlier, CMS finalized a streamlined rule that excluded several regulatory changes identified in the November 2024 proposed rule. In addition to provisions related to coverage of anti-obesity medications, guardrails for AI, and mandatory analysis of the health equity impact of MA plans utilization management practices, the following proposals were not finalized. CMS notes that these proposals might be finalized in future rulemaking.
Expanding Medicare Part D Medication Therapy Management (MTM) eligibility criteria
Ensuring equitable access to behavioral health services by applying MA cost-sharing limits
Enhancing the Medicare Plan Finder to include information on plan provider directories
Promoting informed choice by enhancing CMS review of MA marketing and communication materials
Enhancing rules on MA plans鈥� use of internal coverage criteria
Key Considerations
The policies finalized in the CY 2026 Rate Announcement are projected to increase average Part C payments to MA plans by 5.06 percent in CY 2026鈥攁 significant uptick from the payment updates originally proposed in the CY 2026 Advance Notice. Nonetheless, the final rate increase will have varying effects across MA plans, with some experiencing larger or smaller impacts in CY 2026. MA plans should assess these outcomes as they prepare their bid submissions for 2026.
According to the CY 2026 Rate Announcement, CMS expects that the 5.06 percent increase will provide continued stability for the MA program and its beneficiaries while ensuring accurate and appropriate payments to Medicare Advantage organizations.
In the CY 2026 MA and Part D Final Rule, CMS adopted a significantly scaled-back final rule, which omitted some of the more far-reaching proposals for MA and Part D that were originally proposed in November 2024. CMS, however, could potentially revisit and finalize some of these proposals in future rulemaking. Moreover, new regulatory requirements that enhance enrollee protections in inpatient care settings and improving the care experience for dual eligibles signal CMS鈥檚 continued interest in improving program oversight and enhancing consumer protections for MA beneficiaries.
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MA stakeholders need to undertake scenario planning and be prepared to adapt to a rapidly evolving federal policy environment. From modeling and impact assessments of specific policy changes to strategy development and implementation, 红领巾瓜报 is home to experts with diverse skill sets. Our team can help stakeholders assess and prepare for potential changes to prior authorization, looking holistically at their organization鈥檚 operations, patient care models, and reimbursement strategies. Our team also provides detailed modeling and assessments to ensure health plans are prepared for changes in risk adjustment and coding policies, supplemental benefits, and other key issues affecting capitation payment, bids, and care delivery models.
For details about the finalized payment and policy rules contact our featured experts below.
With ongoing debates about Medicaid funding, healthcare costs, and the need for mental health integration, state policymakers are looking to shape the health policy landscape that will impact millions of residents. The recent legislative session brought these issues to the forefront, with lawmakers discussing the future of Medicaid expansion, the affordability of prescription drugs, and how to address the state鈥檚 provider shortages.
For healthcare providers, patients, and industry stakeholders, these discussions are more than just policy debates鈥攖hey shape access to care, financial stability, and long-term health outcomes. If Utah wants to maintain its reputation for high-quality, low-cost healthcare, it must navigate these challenges strategically.
Legislative Leaders Take the Stage
At the annual Utah State of Reform Health Policy Conference held in late March, a panel of Utah鈥檚 top healthcare policymakers鈥攎oderated by Francis Gibson, president of the Utah Hospital Association鈥攃ame together for a dynamic discussion on these pressing issues.
Panelists:
Sen. J. Stuart Adams: President, Health & Human Services Committee, Utah State Senate
Rep. Steve Eliason: Member, Health & Human Services Committee, Utah State House of Representatives
Sen. Luz Escamilla: Minority Leader, Health & Human Services Committee, Utah State Senate
Sen. Jen Plumb: Minority Assistant Whip, Health & Human Services Committee, Utah State Senate
Major Healthcare Issues Addressed
Medicaid & State Budget Considerations
With federal Medicaid funding facing potential impact, Utah lawmakers discussed strategies to prepare for possible financial shortfalls. While Utah has a year to plan for any changes made to the Federal Medical Assistance Percentage (FMAP) that would trigger updates to Utah鈥檚 Medicaid program (particularly for the expansion population), the impact could be significant, particularly for vulnerable populations. President Adams emphasized that the goal would be to maintain coverage as much as possible, and the state would have time to look at adjustments and consider using state reserves in the short term to mitigate disruptions.
Drug Pricing & the 340B Program
Lawmakers discussed the passage of , which set some parameters for how pharmaceutical manufacturers provide discounts to covered entities through the 340B program. Pharmaceutical manufacturers argue that the 340B program has expanded beyond its original intent, claiming that it allows hospitals and healthcare entities to profit from drug discounts without necessarily passing savings on to patients. They contend that increased transparency and tighter regulations are needed to prevent unintended financial benefits for large health systems while ensuring that the program continues to serve its intended purpose of aiding vulnerable populations.
Lawmakers emphasized that ensuring the savings from 340B pricing actually reach the intended patients and healthcare facilities is crucial. The state must now focus on assessing the impact of the bill, monitoring how savings are allocated, and ensuring that these resources directly benefit underserved communities. The program鈥檚 long-term success will depend on transparent oversight and continued evaluation to confirm that cost reductions lead to improved patient care and access to essential medications.
Protecting Healthcare Providers from Malpractice Burdens
Sen. Adams then talked about House Bill 503, which aimed to attract more healthcare providers to Utah by mitigating excessive malpractice insurance costs. Sen. Plumb鈥攈erself a practicing physician鈥攑osited that mounting malpractice costs discourage independent physicians, which is especially a problem in rural areas. Many small clinics and independent providers struggle to keep up with the rising costs of malpractice insurance, leading to increased financial strain and, in some cases, forcing them out of practice. This, in turn, limits healthcare access, especially in underserved areas where provider shortages are already a pressing issue.
The legislation aimed to ensure that malpractice claims do not impose an undue burden on healthcare providers while still maintaining patient protections. By stabilizing liability costs and creating a more predictable legal environment, these Utah legislators hope to retain and attract medical professionals, ultimately strengthening its healthcare workforce and ensuring broader access to care across the state.
Mental Health & Early Intervention
The legislative panelists were united regarding the urgency of improving mental healthcare, particularly for children. Expanding early intervention programs, integrating mental health screenings in schools, and increasing access to care were all identified as priorities. Utah has seen a growing demand for mental health services, with rising rates of anxiety, depression, and suicide among both youth and adults. However, access to timely and effective treatment remains a challenge, with long wait times and a shortage of mental health professionals exacerbating the crisis.
The discussion underscored that addressing mental health proactively could reduce long-term healthcare costs and improve overall public health outcomes. Legislators highlighted the importance of integrating mental health with primary care, increasing funding for community-based mental health initiatives, and enhancing telehealth services to bridge gaps in access. Additionally, ensuring insurance coverage for mental health services on par with physical health care was recognized as a necessary step to improve treatment equity and effectiveness.
What Wasn鈥檛 Said
One bill that sparked intense debate but was not discussed by the panel was Utah鈥檚 recent ban on fluoridation in public water systems. The legislation, which earned a visit to Utah from Robert F. Kennedy Jr., has drawn national attention. Supporters of the ban argue that fluoridation poses potential health risks, while major medical organizations maintain that it is a safe and effective way to prevent cavities. Critics of the bill worry that removing fluoride could lead to worse dental health outcomes, particularly for children in low-income communities.听
This decision comes at a time when an estimated 120,000 adult Utahns enrolled in Medicaid will now have access to expanded dental services. These services may include check-ups, X-rays, cleanings, fillings, root canals, extractions, dentures, emergency exams for severe pain, and crowns, according to state health officials. With broader dental coverage now available for low-income residents, the fluoride ban raises questions about how the state plans to balance preventive care with access to treatment. Similar legislation is emerging in other states, signaling a potential nationwide shift in water fluoridation policies.
What This Means for Utah鈥檚 Healthcare Future
These legislative discussions make it clear that healthcare in Utah is at a pivotal moment. Healthcare stakeholders must stay engaged, advocating for policies that support sustainable, high-quality care. Utah has long been a leader in healthcare innovation鈥攏ow is the time to reinforce that leadership by making smart, forward-thinking policy decisions.
Now more than ever, healthcare providers, policymakers, and industry leaders must collaborate to ensure a stable and effective healthcare system in Utah. For organizations looking to navigate these evolving policies, engage with legislators, or explore strategic solutions, the Utah 红领巾瓜报 office鈥攊ncluding consultants from the local Leavitt Partners team鈥攊s here to help. Let鈥檚 work together to create a healthcare system that serves all Utahns鈥攂oth now and in the future.
On March 27, 2025, the US Department of Health and Human Services (HHS) Secretary Robert F. Kennedy, Jr. significant changes in the department with respect to staffing and organizational restructuring. This reorganization is consistent with President Trump鈥檚 February 11, 2025, Executive Order (EO) 14210, 鈥�.鈥�
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 鈥減romptly undertake preparations to initiate large-scale reductions in force.鈥� The broader HHS reorganization plan seeks to implement a new departmental focus on 鈥渆nding America鈥檚 epidemic of chronic illness by focusing on safe, wholesome food, clean water, and the elimination of environmental toxins.鈥�
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鈥檚 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鈥檚 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 鈥渋mprove 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.鈥� The department also noted that transfer of SAMHSA to the new AHA will 鈥渂reak down artificial divisions between similar programs鈥� 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 鈥渢hat informs the Secretary鈥檚 policies and evaluates the effectiveness of federal health programs.鈥� This office will also include some of the 鈥渃ritical programs that support older adults and people with disabilities鈥� 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鈥檚 Office of the Director for Centers for Mental Health Services, Office of Behavioral Health Equity, The Policy Lab, among others, and CMS鈥檚 Medicare Medicaid Coordination Office.
What鈥檚 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) 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鈥攊ncluding litigation鈥攁nd 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鈥攚ith your community, your peers, and other experts鈥攖o 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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红领巾瓜报, Inc., experts know the federal landscape and have an intimate knowledge of the dynamics in states and communities. Our policy team is working with clients to help them understand what is happening within HHS and Congress that is ushering in significant policy and funding changes. Our teams are advising stakeholders on the implications for Medicare, Medicaid, and other public programs; strategies to advance their objectives in this new environment; and working with healthcare organizations and state and local government to understand immediate impacts on local financing.
For details about these federal level developments contact one of our featured federal policy experts listed below.
Medicare stakeholders are awaiting the imminent release of the Centers for Medicare & Medicaid Services (CMS) final Medicare Advantage and Part D rate notice and technical updates, as well as a final policy rule that establishes a significantly new direction for Medicare Advantage (MA) stakeholders. These final rules typically are released in April of each year.
In addition, the agency kicks off the annual cycle of payment rules for traditional fee-for-service Medicare, including the first wave of proposed rules that typically are released in April for the forthcoming payment year. These proposed rules for 2026 pertain to the following: Hospital Inpatient Prospective Payment System for Acute Care Hospitals, the Inpatient Rehabilitation Facility Payment System, the Home Health Payment System, and the Inpatient Psychiatric Facility Payment System. A second wave of 2026 proposed rules are typically released in July, including the Medicare Physician Fee Schedule and the Hospital Outpatient Prospective Payment System.
The MA rules and the first wave of Medicare Part A and Part B rules are highly anticipated regulations and now under review at the Office of Management and Budget. These rules are expected to be released in the coming days and weeks.
Why These Rules Matter
The rules set the rates for MA and reimbursement for a significant number of healthcare providers and facilities that serve Medicare beneficiaries. The rules also contain important information about CMS鈥檚 quality reporting programs and bonus payments and other changes required for Medicare stakeholders to ensure compliance.
What鈥檚 Different About 2025 Proposals
In the first year of a new presidential administration, CMS leaders have a limited window to include their policy priorities in the MA and Part D Final Rate Notice. CMS may, however, decline to finalize some or all of the prior administration鈥檚 proposals. Key issues that 红领巾瓜报 (红领巾瓜报), experts are watching for in the final rules include:
Whether CMS chooses to delay or not finalize significant policy changes proposed by the Biden Administration, including new requirements and guardrails around the use of prior authorization
Potential finalization of improvements to the Medicare plan finder
Direction on oversight of MA plan marketing activities
CMS decision and response to the proposal to expand coverage of anti-obesity medications under Medicare Part D and Medicaid
Stakeholders can access 红领巾瓜报鈥檚 review of the contract year (CY) 2026 MA and Part D proposed rule and key considerations here and our review of the 2026 Advance Notice for the Medicare Advantage and Medicare Part D programs here.
Similarly, in the first year of a presidential transition, CMS has a narrower opportunity to shape Medicare鈥檚 first set of proposed payment and policy rules. The agency may, however, begin to signal important policy direction on a global level and technical issues that can have an impact on Medicare stakeholders. 红领巾瓜报 experts are watching in particular for requests for information and other signals of CMS鈥檚 Medicare priorities, including reforms in quality reporting, value-based contracting, pricing and contract transparency, among others.
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红领巾瓜报鈥檚 expert consultants provide the advanced policy, tailored analysis, and operational skills you need to navigate today鈥檚 rapidly evolving regulatory landscape and to support implementation of final policies. Don鈥檛 let the uncertainty of future policies derail your strategic plans or burden your teams.
For details about the forthcoming Medicare Advantage and traditional Medicare regulations, contact one of our featured experts below.
As we approach Medicare鈥檚 60th Anniversary this July, the program again finds itself at a critical crossroads, facing demands听for higher quality care, expanded access to transformative treatments, and streamlined patient access to their medical information. 听Decision makers also must integrate digital tools into clinical models, address mounting scrutiny of costs, and ensure accountability for outcomes influenced by social determinants of health.
This period of transition at the Federal level is bringing new scrutiny and pressure for efficiency. With nearly half of whom are enrolled in Medicare Advantage, the Medicare program is continually evolving to respond to shifting policies and priorities. Organizations that stay ahead of policy changes will be best positioned for success and drive meaningful improvements for Medicare beneficiaries.
When you work with , you get access to former CMS officials and plan executives, payment system and coding experts, and policy analysts to support your efforts. 红领巾瓜报鈥檚 Medicare team includes experts specializing in , dual eligibles, Medicare stars, value-based care, rural health, PACE, actuarial support, and data and quality. We draw on the resources of experts from our 红领巾瓜报 companies to provide comprehensive and end-to-end solutions. Read some of our insights in the links below.
Here鈥檚 how 红领巾瓜报 is helping clients navigate this dynamic landscape:
Our policy team is working with clients to understand what is happening right now in Congress and in the US Department of Health and Human Services that will usher in significant policy and funding changes. Our teams are advising stakeholders on the short- and long-term implications, strategies to advance their objectives in this new environment, and working with states to understand immediate impacts on local financing.
Our clinicians are working closely with insurers, providers, and health systems to strengthen models of care that address complex conditions, behavioral health issues, long-term services and supports and unique needs of special Medicare populations.
Our actuaries are conducting financial modeling and analysis to forecast costs, revenues, and potential outcomes to help navigate financial uncertainties in Medicare Advantage bids, Medicare payment models, and emerging environmental and regulatory issues, including digital quality measure collection, increased focused on dual integration, supplemental benefits, and drug price negotiations.
Our digital quality experts are working with healthcare organizations to prepare for rapid changes that digital health quality measurement will bring to reimbursement models. Our teams are advising on the influx of newly accessible clinical data to ensure it is properly validated and interpreted and working with insurers and providers to develop strategies allowing them to be more agile in contract negotiations.
To talk to an expert to help support and improve your Medicare programs, contact Greg Gierer with the 红领巾瓜报 DC office ([email protected]) or Josh Trent with the Leavitt Partners DC office ([email protected]).
For more cutting-edge information check out some of our recent insights:
Policy & Regulatory Strategies: Legislative, regulatory, reimbursement, and budget analysis from experienced former staffers from CMS and various legislative committees. The 红领巾瓜报 policy team includes past HHS officials like Amy Bassano and Monica Johnson, as well as the team at .
Actuarial & Financial Analytics: Leading actuaries with deep MA experience and robust tools to support innovative benefit and pricing strategies. Encounter data audits to improve risk scores. The 红领巾瓜报 Actuarial team includes and .
Communications & Engagement: Creative campaigns to inform, persuade, and engage providers and payers. The 红领巾瓜报 team includes and .
Strategy & Transformation: Strategy & analytic fundamentals informed by variety of experts in Medicare, health insurance, care delivery for older and vulnerable populations, and value-based payment and delivery innovations.
Operations & Implementation: Clinical and administrative operations building care models, implementing value-based payment incentives, technology, and compliance. The 红领巾瓜报 Managed Care team is led by Holly Michaels Fisher.
Quality Outcomes & Research: Integrated approach to STARS ratings, building digital quality management tools and strategies for compliance and accreditation. The 红领巾瓜报 team includes Caprice Knapp and .
This week, our In Focus section focuses on a March 12, 2025, from the Centers for Medicare & Medicaid Services (CMS) regarding CMS Innovation Center programs under the new Administration. After reviewing the Innovation Center鈥檚 model portfolio, CMS has elected to discontinue four models ahead of their original end dates: (TCOC), (PCF), (ETC), and (MCP). The agency also intends to downsize the Integrated Care for Kids Model (InCK) and forgo the launch of two drug pricing initiatives. According to the announcement, CMS appears to be moving forward with other Innovation Center models, but signaled upcoming modifications to models to align with Administration priorities as well as new model announcements.
The following is a discussion of CMS鈥檚 announcement and what it may signal about the agency鈥檚 commitment to value-based care, key takeaways regarding the four terminated models, and how stakeholders should be preparing to engage with the Innovation Center on current or future models while we await additional details.
颁惭厂鈥檚&苍产蝉辫;Strategic Decision
As part of CMS鈥檚 recent announcement about the model terminations, the agency reaffirmed its support for testing models that reduce program spending while maintaining or improving quality of care. Furthermore, the Innovation Center 鈥減lans to announce a new strategy based on guiding principles to make Americans healthier by preventing disease through evidence-based practices, empowering people with information to make better decisions, and driving choice and competition.鈥� These statements should be seen as a commitment to using the Innovation Center to test new approaches to delivering care but with an expectation that the models will need to demonstrate significant cost and quality improvements as outlined in its statutory authority. According to CMS, the cancellation of these models is projected to save an estimated $750 million.
Because CMS said it may modify additional models in the future, it is reasonable to expect those changes will focus on achieving a higher level of savings or to see savings earlier in the demonstration, as well as aligning model design with the priorities of this Administration. The potential modifications could have an impact on the number of model participants, length of model testing, and financial arrangements, especially with regard to risk and quality improvement approaches.
Models Ending
CMS Innovation Center models are time-limited pilots meant to help the agency test which types of interventions lead to cost savings and improved quality and, if successful, can be scaled on a nationwide basis. These models are evaluated regularly, and CMS has the authority to modify or terminate models if they fall short of the statutory criteria.
The four models the agency plans to terminate are ending for various reasons (e.g., underwhelming performance, forthcoming replacement by successor model, etc.) and, as stated above, the decision should not be seen as a retreat from value-based care, but rather as a signal regarding Administration priorities for Innovation Center models. For example, despite terminating PCF and MCP prior to their original end dates, CMS reaffirmed its support for primary care as a 鈥渇oundational component of the Center鈥檚 strategy鈥� and that future primary care payment reforms will focus on approaches that produce savings. CMS also noted that ending these models early offers an opportunity to move beneficiaries into more permanent programs, such as the 鈥擟MS鈥� flagship accountable care initiative鈥攅ven going so far as to direct readers to the MSSP鈥檚 calendar year 2026 .
CMS plans to advise current model participants of other options for advanced primary care payment before the models conclude by December 31, 2025. Table 1 presents information on the models scheduled for early termination.
Table 1: Models Ending by December 31, 2025
In addition, the agency is considering options to reduce the size of the model and will no longer pursue the and Accelerating Clinical Evidence models. The latter two initiatives were included in a Biden Executive Order on drug pricing and were not implemented. Notably, CMS did not end another drug pricing Innovation Center model, ) Model.
Innovation Center鈥檚 New Strategic Plan
CMS also announced that it will soon release its new vision for the Innovation Center, based on principles designed to improve Americans鈥� health through evidence-based practices, empower individuals with decision-making information, and drive competition.
This vision will set the direction for future value-based care initiatives and reflect the leadership changes within CMS, including the anticipated confirmation of Mehmet Oz, MD, as CMS Administrator and the appointment of , as the new Director of the Innovation Center. Mr. Sutton鈥檚 experience with value-based care鈥攅specially during his time as an advisor to then Department of Health and Services Secretary Alex Azar under the first Trump Administration and his subsequent private sector leadership of value-based companies鈥攑ositions him to play a key role in shaping CMS鈥檚 future efforts.
Stakeholder Considerations
Stakeholders have several critical operational decisions and strategic considerations to address, including:
Transition Support. Participants in the models scheduled to end must assess their options for sustaining certain components of the payment models without Innovation Center support. This effort will require strategic, operational, and financial analyses to make informed decisions.
Evaluation of Other Programs. While the Innovation Center has signaled its intentions of announcing new models, participants should not wait to evaluate options. The Administration plans to prioritize permanent payment programs and will continue to support the MSSP as CMS鈥檚 permanent model for accountable care organizations (ACOs). Stakeholders interested in participating in the MSSP in 2026 must act quickly to assess their organizational readiness, conduct financial modeling of their potential benchmark and performance, evaluate potential partners, and prepare for the application process. Both existing and new ACOs should be exploring their strategies and infrastructures to optimize performance.
Adapting to Changes in Existing Models.听While CMS discontinued select models, it is likely the agency will make additional changes to the Center鈥檚 continuing models. These revisions likely will reflect President Trump鈥檚 executive actions and policy priorities. With the increased focus on cost savings, CMS may choose to spend fewer resources on model implementation, including participant support and model engagement.
Policy and Market Intelligence.听Monitoring the dynamic federal policy landscape and seeking strategic advisory support can help stakeholders navigate and inform potential future federal and state alternative payment model opportunities. Stakeholders should expect that existing and potential new models may have stricter requirements and higher expectations for financial risk. Providers, states, insurers, and other interested stakeholders should monitor public and private sector developments to understand the landscape and evolving opportunities.
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红领巾瓜报, Inc. (红领巾瓜报), is home to alternative payment model experts that can assist stakeholders in responding to changes in Innovation Center models and the agency鈥檚 approaches and to help prepare for participation in future model opportunities. Additionally, 红领巾瓜报 produces a weekly briefing focused on public and private sector VBP-related news. To learn more about how 红领巾瓜报 can support your organization鈥檚 federal engagement and innovation strategy, contact听our experts below.
This week, our In Focus section also reviews the , released by the Centers for Medicare & Medicaid Services (CMS) on March 10, 2025. The proposed rule calls for enhancing program integrity protections in the Affordable Care Act (ACA) marketplaces through targeted changes to eligibility and enrollment policies and procedures.
This proposed rule aligns with the overarching policy priorities President Trump has identified, including reducing federal costs and reforming policies related to immigrants. It also takes aim at fraud, waste, and abuse practices in the ACA Marketplaces, which is the cornerstone from which the US Department of Health and Human Services explains and justifies its proposed initiatives.
Notably, the proposed changes will occur alongside other potential federal policy revisions, including the December 31, 2025, expiration of the ACA enhanced subsides for consumers, which led to historically high coverage levels鈥� as of January 2025. The combined changes will have a varied but significant effect on all state health insurance markets, creating a need for scenario planning and preparation to start immediately.
CMS is providing the public 30 days to submit comments on the proposed rule. An overview of the proposed changes and key considerations follow.
Rule Components
Enrollment Timeline: CMS proposes shortening the open enrollment period for all individual market coverage, including for state-based marketplaces (SBMs), which traditionally have had flexibility to set later enrollment deadlines. If finalized, open enrollment will begin November 1 and end December 15, a month earlier than the current deadline of the following January 15.
Income Verification: The rule would require marketplaces to bolster their income verification processes to protect against manipulation of the authorization and calculation of advance premium tax credit (APTC) values. CMS policymakers believe these changes will be useful in addressing broker and consumer fraud and abuse of the APTC eligibility process. Proposed income verification changes include requirements that people provide the documentation of their income if they meet the following criteria:
The income on their application is between 100 percent and 400 percent of the federal poverty level (FPL), but the income returned from external data sources show they make less than 100 percent of the FPL
No tax data are available from external data sources to confirm the applicant鈥檚 self-attested income
Applicants who do not verify their income will have it adjusted to align with the income returned from external data sources, and their APTC eligibility will be updated accordingly. In some cases, such as when no returned income data are available, these individuals will become ineligible for the APTC.
CMS also plans to reinstate a 2015 policy that requires marketplaces to designate applicants or enrollees as ineligible for APTCs if they fail to file and reconcile their APTC on their federal income taxes. This requirement is known as the failure to file and reconcile (FTR). The Biden Administration changed the FTR requirements to find enrollees ineligible for APTCs if they fail to file and reconcile for two consecutive tax years.
Lastly, CMS proposes eliminating the additional 60 days consumers are granted to resolve income inconsistencies. Today, most marketplace consumers have up to 150 days to resolve income inconsistences. This proposal would return to the 90-day verification period that was in place prior to the Biden Administration.
CMS also requests input on alternative redetermination and re-enrollment policies for fully subsidized consumers, including whether $5 is the appropriate premium amount or should be higher or if fully subsidized consumers should be required to actively confirm their eligibility and reenroll every year.
Another proposal would remove the ability for marketplaces to automatically reenroll Bronze members who are eligible for a cost-sharing reduction (CSR) in a Silver plan if the Silver plan has the same provider network, is in the same product, and has a lower or equivalent net premium as the consumer鈥檚 Bronze plan.
Special Enrollment Period Changes: CMS is proposing multiple changes to special enrollment periods (SEPs), including the removal of monthly SEPs for individuals with household incomes that are projected to be at or below 150 percent of the FPL and a requirement that marketplaces verify eligibility for at least 75 percent of new enrollments during SEPs. CMS also proposes adopting a pre-enrollment income verification model for SEPs.
Bar Deferred Action for Childhood Arrivals (DACA) recipients from QHPs in the Marketplace and basic health programs, making them ineligible for APTCs and CSRs and returning to pre-Biden era DACA eligibility rules
Remove gender-affirming care as an essential health benefit
Allow insurers to require payment of past due premiums before effectuating new coverage, if state law permits
Increase cost sharing/lower premiums by increasing the maximum out-of-pocket limit and widening de minimis ranges
Implications
CMS is reverting to several policies that were put in place during President Trump鈥檚 first term, increasing the likelihood that CMS will finalize many of the changes as proposed or with minimal modification.
Insurers, SBMs, insurance departments and other stakeholders should engage in the federal policymaking process and begin planning immediately for the financial and operational changes that will be required to comply, as several of the requirements will take effect as soon as the rule is finalized. Stakeholders will also want to consider the direct impact on consumers.
红领巾瓜报 (红领巾瓜报) Marketplace experts identified the six key considerations for stakeholders:
Market share and risk.听The proposed changes are projected to decrease Marketplace enrollment and听Insurers and states need to plan for shifts in their market and consider approaches to manage these changes.
Administrative operations.听A shorter enrollment period and additional eligibility and enrollment requirements may increase administrative actions for enrollees, insurers, and marketplaces. Examples include:
Marketplaces will need to make system and operational changes to comply with the new income verification, SEP, and open enrollment period requirements.
Departments of Insurance may need to adjust their rate and form filing instructions and timelines to give insurers the clarity and time they need to comply with new requirements.
Consumer education.听Insurers and marketplaces will need to consider the effectiveness of their marketing and outreach and education strategies, given the shorter open enrollment period.
Interactions with the expiration of the enhanced subsidies in 2026.听The Congressional Budget Office听听that the uninsured population will increase by 2.2 million in 2026 and up to 3.8 million by 2028 if the enhanced ACA subsidies expire. While it is too early to project or measure the impact of this proposed rule and the expiring subsidies, together they undoubtedly will have direct impacts on eligibility, enrollment levels, market dynamics including pricing and risk mix, and the overall stability of the Marketplaces in the long term. Congress may also take action on other policies related to Marketplace stability for which stakeholders should prepare.
State-level mitigation. States interested in mitigating the impacts of this proposed rule, as well as the expiring subsidies, will need to consider legislation to address the resulting affordability gaps and coverage losses. For example, states may look to state-funded subsidy wraps or reinsurance programs to minimize the net premium rate increases that most Marketplace plan members will experience when the enhanced subsidies expire in 2026.
Federal engagement. CMS is providing the public 30 days to comment on the proposed rule. This provides stakeholders the opportunity to voice their positions on the impact of this and future Marketplace policies. Comments on the proposed rule may also be shared with congressional policymakers and staff to help shape future legislative proposals.
红领巾瓜报 experts have considerable experience working with marketplaces, Departments of Insurance, insurers, and federal policymakers with jurisdiction over the Marketplace. They 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.
To learn more about how the proposed rule and the scheduled sunsetting of enhanced subsidies may affect your organization contact 红领巾瓜报 Marketplace experts听below.
This week, our In Focus section highlights insights from a new 红领巾瓜报 (红领巾瓜报), issue brief, 鈥�New Insights on Medicaid Spending: An Analysis of Disaggregated Managed Care Spending.鈥�&苍产蝉辫;Until now, most Medicaid cost data have focused on enrollees in fee-for-service (FFS) programs. 红领巾瓜报 used the Centers for Medicare & Medicaid Services (CMS) Transformed Medicaid Statistical Information System (T-MSIS) database to analyze Medicaid managed care organization (MCO) spending in major categories of healthcare, including inpatient and outpatient hospital care, physician and other professional services, skilled nursing facilities (SNFs) and home and community-based services (HCBS), clinics, pharmaceuticals, and other services. 红领巾瓜报鈥檚 methodology can be applied to all 50 states and allows us to determine prices for these services, which, combined with data on the number of encounters, yields reliable cost figures.
Findings
Medicaid managed care accounted for $420 billion of the total $717 billion in Medicaid spending for federal fiscal year 2021. Professional claims accounted for the largest portion of Medicaid spending, totaling 25.1 percent, followed by SNFs at 19.7 percent, and inpatient claims at 15.4 percent.
Figure 1. T-MSIS Medicaid Spending by Service Category 2021 (MCO Disaggregated plus FFS)
What鈥檚 Next
This analysis can be replicated for subsequent years and will provide important information on Medicaid spending trends. This work also sets the stage for analyses and comparisons of cost categories by variables such as eligibility category (e.g., dual eligibles, children, parents, adults without children, the Medicaid expansion population, and designated as aged/frail/disabled); race and ethnicity; frequent users of hospital services; and people with multiple chronic illnesses. This type of analysis allows us to answer fundamental questions about the Medicaid program and can pinpoint areas of high need within the Medicaid population, such as:
How much do we spend on services for people with diabetes?
How much do we spend during childbirth/first year of life and in the last year of life?
How much do we spend for Medicare-Medicaid dual eligibles?
Data-informed discussions on these and other topics can help identify opportunities for efficiencies and timely care management to slow the growth in total healthcare spending. This information will provide important context for the policy debate, offering a full view of the relative magnitude of the major categories of Medicaid spending.
Connect with Us
Medicaid providers, MCOs, states, and policymakers all have an interest in identifying high-cost drivers of Medicaid managed care. The methodology applied in the analysis for the 红领巾瓜报 issue brief can be applied and adapted for future analysis.
For details about this analysis, its implications for state and local policies, and additional research using T-MSIS, contact听our experts below.
