Last month, the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services released their Presidential Budget Requests for Fiscal Year 2026. Here’s a breakdown of those CMS and HHS 2026 budget requests and their potential impact on health plans:
What is the budgeting process?
The process begins with the White House, where the President’s administration releases a detailed budget request, such as the 51-page HHS FY 2026 Budget proposal.
This budget request outlines the administration’s current priorities and serves as a starting point for congressional negotiations, signaling the administration’s policy goals. For example, the Trump Administration’s FY 2026 budget proposal for HHS seeks approximately $95 billion in discretionary funding to “Make America Healthy Again.”
Congress ultimately holds the final authority to approve or reject annual funding decisions, including reorganizations of federal agencies, through the appropriations process. The Senate begins its formal review, known as markup. During this stage, members of the Senate Appropriations Committee examine the details of the President’s budget proposal. Each federal agency’s funding and structure are debated separately within dedicated subcommittees. After the markup, the full committee may revise and vote on the proposal.
If passed by the full committee, the proposal moves to the Senate floor for further debate and amendments. Appropriations must pass the U.S. Senate by 60 votes.
The House of Representatives follows the same process of review, debate, and voting.
For any changes to take effect and for the budget to become law, both the U.S. Senate (requiring 60 votes) and the U.S. House (requiring a simple majority) must agree on a final version. Often, negotiations require bipartisan compromise in a conference committee.
What significant changes does CMS include in its budget that may impact health insurers?
The CMS FY 2026 budget proposal includes several significant changes that could impact health insurers. These changes are part of a broader Make America Healthy Again (MAHA) agenda that emphasizes efficiency, cost reduction, and refocusing public health priorities within HHS.
Here are the significant changes in CMS’s proposed budget that may impact health insurers:
Shift of the 340B Drug Pricing Program
CMS proposes to take over the 340B Drug Pricing Program from the Health Resources and Services Administration (HRSA). This transfer intends to streamline processes and leverage CMS’s existing expertise in drug pricing. This change is significant for health insurers because CMS has previously supported policy shifts that could reduce reimbursements for 340B drugs and have even “floated changes such as converting the program into a rebate model.” The proposed budget allocates $12.2 million to CMS for managing this program.
Intensified Focus on Fraud, Waste, and Abuse (FWA)
CMS aims to be a driving force in “crushing fraud, waste, and abuse head-on.” The budget includes $699 million for FWA prevention efforts within CMS’s program management. CMS plans to enhance provider screening, medical review, and data analytics capabilities while expanding investigation efforts across Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and the Federal Exchanges. CMS plans to leverage Artificial Intelligence (AI) and machine learning for real-time fraud detection and analysis, streamlining investigative workflows and improving prepayment detection. Such efforts could lead to stricter oversight and potential financial recoveries from health plans and providers identified in FWA schemes.
Changes to Federal Exchange Operations and Policy
The budget proposes eliminating the use of discretionary CMS Program Management Budget Authority to finance the Federal Exchange, instead relying on user fees to make the program self-sustainable.
Proposed rule changes aim to strengthen income eligibility verifications for premium tax credits and cost-sharing reductions, amend annual eligibility redeterminations, and tighten special enrollment periods. These changes could impact who is eligible for subsidies and when they can enroll, affecting the covered population and financial stability of plans offered on the Exchanges.
The budget also announced a reduction in funding for the Navigator program, aiming to save $360 million over four years, which could affect consumer assistance with enrollment.
Increased investigation into unauthorized enrollments and plan switches performed by agents and brokers is also a priority for Exchanges.
Emphasis on Value-Based Care and Outcomes
CMS plans to transform healthcare from a “sick care” system to one that fosters prevention, wellness, and chronic disease management and incentivizes healthcare providers to optimize care based on outcomes rather than unnecessary paperwork. CMS will continue to support programs such as the Medicare Shared Savings Program (MSSP) and Quality Payment Program (QPP). Insurers, particularly those offering Medicare Advantage (MA) plans, will face ongoing pressure to align their models with these value-based initiatives.
Enhanced Oversight of Medicare Advantage (Part C) and Part D Plans
CMS is taking steps to reduce costs and streamline operations in Part C and D programs, including reduced operational funding by terminating work supporting rescinded Executive Orders and descoping unmandated workloads. The agency will continue to focus on ensuring the accuracy and integrity of MA risk adjustment data through programs like the Risk Adjustment Data Validation (RADV) program, which aims to recover overpayments made to MA organizations. Heightened scrutiny directly impacts the financial arrangements between CMS and MA health plans.
Streamlining Medicaid Managed Care Oversight
CMS plans to increase investments in tools and systems for Medicaid and CHIP program administration, including the Medicaid and CHIP Financial (MACFin) System and MACPro Portal. CMS will develop reporting templates and platforms to standardize Managed Care data submission, improve transparency, and enhance accountability. The result: more rigorous oversight of Medicaid Managed Care Organizations (MCOs).
Cuts to Health Equity and Community Outreach
The budget proposes eliminating discretionary funding for health equity and certain community outreach activities. This may shift responsibility or reduce support for initiatives that health insurers might have previously participated in or leveraged.
Overall Drive for Efficiency and Cost Containment
CMS is undertaking internal cost-cutting initiatives, such as the Spending Optimization Subcommittee (SOS), and recalibrating its contracting strategy to increase the insourcing of expertise. While this is primarily an internal CMS change, it signals a broader shift toward more rigorous financial management. The shift could indirectly pressure health insurers to demonstrate similar savings.
Transparency Initiatives
CMS continues to promote transparency in healthcare through initiatives like Executive Order 14221 on Pricing Transparency and the Open Payments program. These efforts aim to provide consumers with more information about healthcare costs and financial relationships, which could increase competitive pressure and demand for transparency from health insurers.
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