This week, the Supreme Court struck down the Trump Administration’s tariffs, ruling that the International Emergency Economic Powers Act (IEEPA) does not grant the executive branch authority to impose broad tariffs, and Dr. Jay Bhattacharya was appointed as Acting CDC Director in addition to his current role as NIH Director. Read more about these actions and other news in this issue of Health Care Week in Review.

CMS is improving the quality of care for Medicare beneficiaries while significantly reducing unnecessary spending and improving choices and hospital price transparency for Medicare beneficiaries. The CY 2026 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System final rule (CMS-1834-FC) advances a series of patient-focused reforms that will modernize payments, expand access to care, enhance hospital accountability, and safeguard the Medicare Trust Funds from fraud, waste, and abuse.

More information:

• Full press release
• Final rule
• Fact sheet
• Hospital Price Transparency Policy Changes fact sheet

The Centers for Medicare & Medicaid Services (CMS) is increasing quality of care for Medicare beneficiaries while significantly reducing unnecessary spending and promoting payment accuracy. The calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) final rule advances primary care management through improved quality measures, reduces waste and unnecessary use of skin substitutes, and introduces a new payment model focused on improving care for chronic disease management.

“The new Medicare fee schedule delivers a major win for seniors, protects hometown doctors, and safeguards American taxpayers,” said Health and Human Services Secretary Robert F. Kennedy, Jr. “It realigns doctor incentives and helps move our country from a sick-care system to a true health care system.”

“CMS is working to strengthen and transform Medicare for the current and future generations while cracking down on waste and abuse that drives up costs,” said CMS Administrator Dr. Mehmet Oz. “The actions we are taking will improve seniors’ access to high-quality, preventive care that will help them to live longer, healthier lives.”

Modernizing Payment Accuracy

In the CY 2026 Physician Fee Schedule (PFS) final rule, CMS is finalizing a modest -2.5% efficiency adjustment to select services to better recognize that some services are likely to become more efficient over time, as compared to time-based services like office visits or behavioral health therapy. The efficiency adjustment targets services that have likely become able to be furnished more efficiently over time but still retain valuations based on outdated assumptions. Examples include surgical procedures, diagnostic imaging interpretation, outpatient interventions, interventional pain management, and orthopedic services. These tend to benefit from technological advancements or standardized workflows that reduce time and resource use, without corresponding payment adjustments. This action does not eliminate the use of American Medical Association surveys to value services altogether but rebalances the approach.

Additionally, CMS is finalizing policies to utilize better data sources (e.g., data from the Hospital Outpatient Prospective Payment System) to establish relative values for certain technical services in order improve payment accuracy, promote payment predictability and make it easier to compare rates across settings of care. These steps will further modernize Medicare’s payment systems and promote greater transparency.

“CMS is reinforcing primary care as the foundation of a better healthcare system while ensuring Medicare dollars support real value for patients, and not the kind of waste or abuse that erodes trust in the system,” said Chris Klomp, CMS Deputy Administrator and Director of the Center for Medicare. “Our goal is simple: deliver better outcomes for patients and be wise stewards of the taxpayer resources that make Medicare possible.”

Reducing Medicare Spending Waste for Skin Substitutes

Medicare spending on wound care products known as “skin substitutes” has had unprecedented growth, rising from $256 million in 2019 to over $10 billion in 2024, according to Medicare Part B claims data. This dramatic spending increase is largely attributed to abusive pricing practices in the sector, including the use of products with limited evidence of clinical value. Current prices can reach more than $2,000 per square centimeter.

In 2025, the CMS Fraud Defense Operations Center (FDOC) stopped nearly $185 million in improper payments to suspect providers billing for skin substitutes. In one notable case identified in September 2025, the FDOC stopped more than $4.3 million in suspected improper payments submitted by a medical group practice. Virtually all of the $4.3 million was for wound care services purportedly provided to a single beneficiary who lacked evidence of prior wound treatment. 

CMS currently treats skin substitutes as biologicals for the purposes of Medicare payment. In the CY 2026 PFS final rule, CMS will pay for skin substitutes under the PFS as incident-to supplies, a change expected to reduce Medicare spending on these products by nearly 90% without compromising patient access or quality of care. We estimate this action will reduce gross fee-for-service program spending for skin substitute services by $19.6 billion in 2026, while incentivizing the use of products with the most clinical evidence of success.

Shifting the Healthcare Paradigm to Prevention and Wellness

CMS is aligning with Health and Human Services Secretary Robert F. Kennedy Jr.’s Make America Healthy Again agenda by repurposing a previous risk assessment code to focus on essential patient behaviors to reduce chronic disease and improve health – physical activity and nutrition. CMS is also improving the care of chronic diseases by ensuring advanced primary care management services are able to integrate behavioral health. Finally, we are shifting our focus in quality measurement towards prevention-focused measures by introducing five new outcomes measures focused on the prevention of chronic disease – while simultaneously working to reduce unnecessary burden in quality reporting by removing ten quality measures that did not directly improve patient health outcomes.

CMS is also finalizing changes to the Medicare Diabetes Prevention Program which will allow more people with Medicare to access coaching, peer support, and practical training in dietary change, physical activity, and behavior change strategies to delay or prevent the onset of Type 2 diabetes for people with prediabetes, at no cost to the beneficiary.

New Payment Model to Improve the Upstream Management of High-Cost Chronic Conditions

CMS is finalizing the new Ambulatory Specialty Model, a mandatory payment model focused on specialty care for beneficiaries with heart failure and low back pain – significant areas of Medicare spending. The model aims to enhance the quality of care and reduce low-value care by improving beneficiary and provider engagement, incentivizing preventive care, and increasing financial accountability for specialists. This model rewards specialists who detect signs of worsening chronic conditions early, enhance patients’ function, reduce avoidable hospitalizations, and use technology that allows them to communicate and share data electronically with patients and their primary care providers. The model will begin in January 2027 and run for five performance years through December 2031.

Click to view a fact sheet on the CY 2026 Physician Fee Schedule final rule.

Click to view a fact sheet on the Medicare Shared Savings Program changes in the CY 2026 PFS final rule.  

Click to view the Ambulatory Specialty Model (ASM).

Click to view the CY 2026 PFS final rule. 

Today, the Centers for Medicare & Medicaid Services (CMS) unveiled details on how states can apply to receive funding from the $50 billion Rural Health Transformation Program created under the Working Families Tax Cuts Act to strengthen health care across rural America. This unprecedented investment is designed to empower states to transform the existing rural health care infrastructure and build sustainable health care systems that expand access, enhance quality of care, and improve outcomes for patients. 

“Rural communities are the bedrock of America. They have waited too long for Washington to act. Now, at last, we are acting with the largest investment ever made to improve health care for rural Americans,” said U.S. Health and Human Services Secretary Robert F. Kennedy, Jr. “This $50 billion program is about delivering dignity and dependable care to rural communities, making sure every American has access to affordable, high-quality treatment.”

“This program is a historic investment that will catalyze needed change in rural health systems and improve lives for generations to come,” said CMS Administrator Dr. Mehmet Oz. “For too long, when it comes to health care access and infrastructure, we've left behind the backbone of America. That stops now with this program that will spark real change for rural health care. ”

The Rural Health Transformation Program invites all 50 states to apply for funding to address each state’s specific rural health challenges. The Program enables states to reimagine care delivery and develop innovative, enduring, state-driven solutions to tackle the root causes of poor health outcomes specific to rural America.

The Program has five strategic goals, grounded in the statutorily approved uses of funds:

• Make rural America healthy again: Support rural health innovations and new access points to promote preventative health and address root causes of diseases.
• Sustainable access: Help rural providers become long-term access points for care by improving efficiency and sustainability.
• Workforce development: Attract and retain a highly skilled health care workforce by strengthening recruitment and retention of health care providers in rural communities.
• Innovative care: Spark the growth of innovative care models to improve health outcomes, coordinate care, and promote flexible care arrangements.
• Tech innovation: Foster use of innovative technologies that promote efficient care delivery, data security, and access to digital health tools by rural facilities, providers, and patients.

The $50 billion program funding will be allocated to approved states over five years, with $10 billion available each year beginning in federal fiscal year 2026. Half of the funding will be evenly distributed to all states with an approved application. The other half will be awarded to approved states based on individual state metrics and applications that reflect the greatest potential for and scale of impact on the health of rural communities. 

The deadline for states to apply is November 5, 2025. There is only one opportunity to apply for funding and one application period for this program. CMS will announce awardees by December 31, 2025, and will partner with states over the program period to ensure strong oversight and successful implementation of initiatives with lasting impact. 

The Trump Administration is driving nationwide change to envision new possibilities for rural health care and build a future where all Americans, regardless of where they live, receive the care they deserve.

To learn more about the Rural Health Transformation Program and to access the Notice of Funding Opportunity, visit the program webpage at: https://www.cms.gov/priorities/rural-health-transformation-rht-program/rural-health-transformation-rht-program. 

A video message from Dr. Oz, highlighting the importance of this investment in rural health care, is available here: https://youtu.be/DzSrt777t7U

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When certain legislative payment provisions (“extenders”) are scheduled to expire, CMS directs all Medicare Administrative Contractors (MACs) to implement a temporary claims hold. This standard practice is typically up to 10 business days and ensures that Medicare payments are accurate and consistent with statutory requirements. The hold prevents the need for reprocessing large volumes of claims should Congress act after the statutory expiration date and should have a minimal impact on providers due to the 14-day payment floor. Providers may continue to submit claims during this period, but payment will not be released until the hold is lifted.

Absent Congressional action, beginning October 1, 2025, many of the statutory limitations that were in place for Medicare telehealth services prior to the COVID-19 Public Health Emergency will take effect again for services that are not behavioral and mental health services. These include prohibition of many services provided to beneficiaries in their homes and outside of rural areas and hospice recertifications that require a face-to-face encounter. In some cases, these restrictions can impact requirements for meeting continued eligibility for other Medicare benefits. In the absence of Congressional action, practitioners who choose to perform telehealth services that are not payable by Medicare on or after October 1, 2025, may want to evaluate providing beneficiaries with an Advance Beneficiary Notice of Noncoverage. Practitioners should monitor Congressional action and may choose to hold claims associated with telehealth services that are not payable by Medicare in the absence of Congressional action. Additionally, Medicare would not be able to pay some kinds of practitioners for telehealth services. For further information: https://www.cms.gov/medicare/coverage/telehealth.

CMS notes that the Bipartisan Budget Act of 2018 allows clinicians in applicable Medicare Shared Savings Program Accountable Care Organizations (ACOs) to provide and receive payment for covered telehealth services to certain Medicare beneficiaries without geographic restriction and in the beneficiary’s home. There is no special application or approval process for applicable ACOs or their ACO participants or ACO providers/suppliers. Clinicians in applicable ACOs can provide these covered telehealth services and bill Medicare for the telehealth services that are permissible under Medicare rules during CY 2025, irrespective of further Congressional action. For more information:

https://www.cms.gov/files/document/shared-savings-program-telehealth-fact-sheet.pdf.

MACs will continue to perform all functions related to Medicare Fee-for-Service claims processing and payment.

The Centers for Medicare & Medicaid Services (CMS) is issuing preliminary guidance for states regarding the implementation of new federal payment limits for State Directed Payments (SDPs) in Medicaid managed care. Providing this guidance now, while CMS works to issue a final rule, allows states additional time to plan their efforts to meet the requirements laid out in the One Big Beautiful Bill Act. The letter sent today provides states with information on the reduced payment, details on eligibility for a temporary grandfather period, and additional next steps. 

“Medicaid is a federal and state partnership and for years states have skirted their responsibilities to draw down more federal funds while contributing less state dollars. President Trump’s One Big Beautiful Bill Act will hold states accountable and make sure the federal government isn’t left to pick up the tab,” Health and Human Services Secretary Robert F. Kennedy, Jr. said. 

“Protecting Medicaid’s long-term fiscal integrity is at the heart of the Trump Administration’s promise to the American people,” said CMS Administrator Dr. Mehmet Oz. “By implementing safeguards required in the One Big Beautiful Bill Act, CMS is helping states continue to use state directed payments as a tool, while ensuring they are sustainable, transparent, and fully aligned with our mission to protect beneficiaries and preserve Medicaid for future generations.”

Under Medicaid managed care, states can direct how managed care plans pay providers through SDPs. These arrangements originally were not widespread, but they have ballooned in recent years. While only two states used them in 2016, 39 states use them today, and CMS projected that annual SDP spending would exceed $124.3 billion for FY 2025 and $144.6 billion for FY 2026.

By implementing the new required safeguards effective for rating periods beginning on or after July 4, 2025, CMS aims to ensure Medicaid resources are directed appropriately to strengthen program integrity and protect patient care. The letter to states provides key program elements and preliminary guidance on section 71116:

• Payment Limits: Beginning with rating periods on or after July 4, 2025, SDPs for inpatient hospital services, outpatient hospital services, nursing facility services and qualified practitioner services at an academic medical center must not exceed 100% of Medicare rates in Medicaid expansion states, or 110% of Medicare rates in non-expansion states. In the absence of a Medicare rate, the Medicaid state plan rate applies.
• Grandfathering Period: Certain eligible SDPs submitted or approved before July 4, 2025, may qualify for temporary grandfathering until rating periods beginning  January 1, 2028, followed by a phased reduction until they meet the new payment limits.
• Next Steps for States: States must revise any pending or future SDP preprints that do not qualify for grandfathering to comply with Section 71116 before CMS will continue review. For applicable SDPs that are currently under review by CMS, CMS will notify states of whether an SDP likely qualifies for grandfathering in our approval letters for the SDP once CMS has completed its review.

For more information, states and stakeholders can review the full guidance letter at: https://www.medicaid.gov/medicaid/managed-care/guidance/state-directed-payments

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WASHINGTON — The U.S. Department of Health and Human Services (HHS) announced today it is implementing important measures to expand access to more affordable catastrophic health coverage through HHS’ new hardship exemption guidance. This guidance streamlines access to more affordable catastrophic coverage for consumers who are ineligible for advance payments of the premium tax credit (APTC) or cost-sharing reductions (CSRs).

Through these efforts, more Americans will be able to qualify for catastrophic health coverage based on need, beginning November 1^stwith the start of open enrollment. Catastrophic plans generally have lower monthly premiums, are designed to protect consumers from very high medical costs in the event of serious illness or injury, and are required to cover three primary care visits pre-deductible. Consumers under the age of 30 have always been eligible for catastrophic plans through HealthCare.gov.

“Catastrophic coverage offers affordable health insurance for younger Americans and those facing hardship to have security when they need it most, ”Secretary of Health and Human Services Robert F. Kennedy, Jr. said. “Expanding access to catastrophic coverage is another step in making health insurance more affordable, building on the progress made since the passage of President Trump’s One Big Beautiful Bill.”

“President Trump promised to give Americans real choices in health care, and today we are delivering on that promise,” said Centers for Medicare & Medicaid Services Administrator Dr. Mehmet Oz. “By expanding access to catastrophic plans, we are making sure hardworking people who face unexpected hardships can get affordable coverage that protects them from devastating medical costs. This change reflects our commitment to lowering costs, strengthening program integrity, and ensuring every American has a pathway to coverage that fits their needs without burdening taxpayers.”

Under new HHS guidance, consumers may qualify for a hardship exemption to purchase a catastrophic plan on or off the Exchange if they are determined or expect to be ineligible for APTC or CSRs based on their projected annual household income. Catastrophic plans are specialized plans that provide all essential health benefits required under the Affordable Care Act, including full access to preventive services without cost-sharing, while maintaining lower premium structures designed for financial accessibility. Importantly, these plans offer comprehensive coverage designed specifically to protect consumers against serious illness or injury scenarios that could result in devastating medical expenses in an already unstable market. With a hardship exemption, eligible consumers can enroll in a catastrophic plan through HealthCare.gov.

How Americans can Apply

Beginning November 1, 2025, consumers can apply for the hardship exemption in two ways:

• Apply online for Marketplace coverage on HealthCare.gov or through a certified partner. Household income will be reviewed as part of the application process.
• Submit a hardship exemption form by mail.

HHS is also simplifying the process by streamlining the review of paper applications to reduce the administrative burden on consumers. This change will make it easier for individuals experiencing hardship and seeking a catastrophic plan to access the full range of catastrophic coverage options available to them.

HHS’ hardship exemption guidance for catastrophic coverage can be viewed on CMS.gov at:https://www.cms.gov/marketplace/resources/regulations-guidance#Health-Insurance-Marketplaces

A fact sheet on HHS’ hardship exemption guidance for catastrophic coverage is available at:https://www.cms.gov/newsroom/fact-sheets/expanding-access-health-insurance-consumers-gain-access-catastrophic-health-insurance-plans-2026

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