Insights^

On December 4 and 5, 2025, the Medicare Payment Advisory Commission (MedPAC) met to discuss recommendations for the March 2026 Report to Congress. Many of the sessions during this two-day meeting focused on evaluating payment rates for physicians, inpatient services, outpatient services, home health services, and services provided in institutions such as skilled nursing facilities (SNFs). There was also discussion about the quality of care Medicare beneficiaries receive across different settings, including hospitals, outpatient settings, other facilities, and at home.

PHYSICIAN AND OTHER HEALTH PROFESSIONAL SERVICES RATES

MedPAC staff offered a comprehensive view of current spending and service use under the Medicare

Physician Fee Schedule (PFS), followed by a discussion of access-to-care and quality-of-care metrics. There was a change in the provider mix, with more advanced practice nurses (APRNs) and physician associates (PAs) providing care. MedPAC staff found that Medicare Economic Index (MEI) growth outpaced PFS updates, and suggested that increasing compensation rates is not necessary to maintain wide access to care. The Chair’s draft recommendation is for Congress to increase payment rates by 0.5% more than current law, resulting in a 1.25% increase for advanced alternative payment model (A-APM) clinicians and a 0.75% increase for other clinicians.

The Commissioners expressed widespread support for the Chair’s recommendation. One Commissioner was unsupportive, indicating that, due to inflation, the proposed increase in payment would result in a net decrease of 2.2%. A few other Commissioners acknowledged this point but felt that increasing the rate more would lead to ballooning costs. There was sentiment that the reimbursement policy needs an overhaul, as the current system is squeezing providers and not benefiting either providers or patients.

Some Commissioners suggested that staff begin taking a closer look at the effects of concierge care and at how to quantify its use. There was also strong support for crafting new survey questions to measure quality of care, as the Merit-based Incentive Payment System (MIPS) is flawed. One Commissioner also noted that comparison data between private insurance options and Medicare is helpful, but if the comparison group is worsening, that does not automatically mean Medicare access and quality are improving.

HOSPITAL INPATIENT AND OUTPATIENT SERVICE RATES

MedPAC staff found hospital supply and availability were relatively steady for fiscal year 2024 (FY24), with Medicare inpatient stays and outpatient services increasing in 2024. Hospital margins increased slightly but remained low. Relatively efficient hospitals’ margins also increased from -2% to -1% in 2024. MedPAC staff also said that the Medicare Safety-Net Index (MSNI) remained a better predictor of hospitals’ all-payer operating margins than other metrics. The Chair’s draft recommendation for 2027 payments is to update the 2026 Medicare base payment rates by the amount specified in current law, and to implement MSNI as described in the March 2023 report, adding $1 billion to the MSNI pool.

There was general support for the recommendations, with many Commissioners specifically mentioning strong support for the MSNI contribution. Two Commissioners expressed reservations about supporting the recommendation because they wanted separate Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS) measures and recommendations.

The Commissioners were very interested in the efficient hospital model and in how it has been previously validated. There was also general interest in how the model is used; however, the Chair pushed for the committee to remain on the topic of recommendations and suggested revisiting the conversation at a later date. A few Commissioners asked how $1 billion was determined as the amount to contribute. The staff and the Chair clarified that it was about 0.5% of a rate increase and that additional information on the expected effects of the contribution would be provided.

POST ACUTE CARE: TRENDS AND KEY ISSUES

This presentation was suggested to evaluate, holistically, post-acute care facilities’ use and payment. The differences in eligibility requirements, benefits, and cost-sharing requirements make it difficult to conduct a one-to-one comparison of quality outcomes, but preliminary results indicate possible inefficient care. There are plans for future work to evaluate the new case-mix systems, monitor the TEAM alternative payment model, compare Medicare Advantage and fee-for-service (FFS) use of post-acute care, and examine Medicare Advantage’s impact on the financial performance of SNFs and inpatient rehabilitation facilities (IRFs).

The largest discussion thread was the desire for more data to support future recommendations. Measures such as patient experiences and outcomes, as well as how providers select facilities, were among the suggestions. There was discussion on the 3-midnight rule and the inclusion of observation status for post-acute care facilities. MedPAC previously recommended that observation be included, but there have been no further changes. Another large topic of commentary was understanding geographic locations of each type of post-acute care facility and how location may influence patient placement.

While the presentation stated that there are no guidelines for patient placement, one Commissioner responded that the rehabilitative specialties do have guidelines, along with their clinical judgement, for evaluating patients. This led to the suggestion that these guidelines be collected and examined to understand how they are used, and that the reports be reformatted as needed.

SKILLED NURSING FACILITIES RATES

The MedPAC presentation on SNFs suggested that SNF access has remained stable for Medicare beneficiaries, as the number of SNFs decreased while occupancy rates increased. Quality measures were also noted as being stable, but there are gaps in quality data since patient experience data is not uniformly collected. Margins for freestanding SNFs were high in 2024, averaging 24.4%. The Chair’s draft recommendation for 2027 rates is to reduce 2026 Medicare base payment rates for SNFs by 4%. The expected implications are a decrease in spending relative to the current law, but no adverse effect on access to care.

The design of nursing home star ratings was evaluated, and an alternative approach was proposed that would equally weight each domain. The idea is that it would increase the weight of the staffing rating. It was also suggested that the change in approach could provide a more complete picture of quality and compliance for SNFs.

There was broad support for the recommendation, with some saying that it is a conservative reduction in payment due to the high margins SNFs experience. There was commentary on ways to more accurately reflect SNF star ratings by changing domain weights, with some Commissioners suggesting a higher staffing weighting and others arguing that the other domains are equally necessary. It was also suggested that CMS overhaul the measures used to evaluate quality and compliance. More long-term thinking about paying for outcomes and care was raised as an avenue for the commission to explore.

HOME HEALTH CARE SERVICES RATES

MedPAC staff provided an overview of home health care services and spending, showing that access to care has remained adequate. They also highlighted that the overall use of home health services has declined by 1%, but Los Angeles, California, has seen rapid growth in the area. This has led to a usage rate of about twice the national average and has been accompanied by a rapid rise in costs. While some tools have been used to address program concerns, use remains high. Quality of care has also remained stable, and home health margins have remained high, averaging 21.2%. The Chair’s draft recommendation for 2027 is for Congress to reduce the 2026 Medicare base payment rate for home health services by 7%. The expected implications would be to decrease spending with no adverse effect on access to care.

A few Commissioners asked MedPAC staff whether what was being seen in California represented the start of a larger trend and requested a closer look at the differences in California’s usage rates. There was interest in whether the higher home health usage was offset by lower usage of other post-acute care settings, such as SNFs and IRFs. One Commissioner, who practices in Los Angeles County, offered some commentary he believed could explain the differences. In his opinion, low property tax rates encourage older populations to age in place and choose home health services over other types of care. Another possibility is the availability of remote home monitoring equipment, which makes it easier for patients and providers to feel comfortable with home health programs. The Commissioner encouraged MedPAC staff to examine discharge-to-home rates in Los Angeles County compared to the rest of the country to understand if the high usage of home health services results in lower emergency department readmission rates.

Other discussion topics revealed that Medicare FFS is the preferred payer for home health services, above both Medicare Advantage and private health insurance. A better understanding of the payer mix is a topic that multiple Commissioners expressed interest in revising. Other data points that future work could examine include utilization rates, especially comparisons between rural and urban communities, as well as utilization by living status.

Overall, there was broad support for the Chair’s draft recommendation. The only hesitation was why a 7% rate cut was chosen over similar rates, especially when compared with other draft recommendations. The Chair explained that the Commission is trying to preserve access and quality while signaling the feeling that rates need to be lowered. Some long-term planning to examine whether a single large rate cut or a series of smaller rate cuts over a longer period was preferred was suggested.

On December 3, 2025, the Senate HELP Committee held a hearing on health care affordability. The main topic of the day was what to do about the enhanced advance premium tax credits (APTCs), which expire at the end of the year. Democratic senators, and a few Republican senators, argued that the APTCs need to be extended. Most Republican senators countered that the enhanced APTC funding should be provided directly to patients through tax-free accounts. Senators from both parties also brought up other policy proposals to address health care costs. These included proposals to create a Medicare-for-all system, reform certain pharmacy benefit manager (PBM) practices, and strengthen price transparency requirements.

Opening Statements

• Chairman Bill Cassidy (R-LA)

Witness Testimony

• Joel White, President, Council for Affordable Health Coverage – Testimony
• Marcie Strouse, Owner and Partner, Capitol Benefits Group – Testimony
• Claudia M. Fegan, MD, National Coordinator, Physicians for a National Health Program – Testimony

Member Discussion

Enhanced APTCs

All Democrats in attendance, as well as Sens. Susan Collins (R-ME), Lisa Murkowski (R-AK), and Jon Husted (R-OH), agreed that the enhanced APTCs should be extended for at least a year, with Democratic senators proposing an extension of up to 3 years. There were also differences of opinion on whether it would be a clean extension or involve unspecified reforms. Dr. Fegan agreed there should be an extension of the enhanced APTCs and stated multiple times that an increase in cost, even minimal, is associated with patients waiting longer to seek care, which in turn leads to more preventable deaths. Chairman Cassidy (R-LA) countered that the enhanced APTCs go directly to insurance companies and not individuals.

Chairman Cassidy and Sen. Roger Marshall (R-KS) were the strongest supporters of funding health savings accounts (HSAs). They argued that this solution directly addresses high deductible and out-of-pocket costs, which Mrs. Strouse supported. However, Sens. Patty Murray (D-WA) and Andy Kim (D-NJ) raised concerns that this solution would still require individuals to purchase insurance, which may be unaffordable for them. Mr. White’s counter was to allow premium costs to be paid with HSAs. Chairman Cassidy also rebutted arguments against directing enhanced APTC dollars to HSAs, noting that funded HSAs would accompany Bronze and Copper ACA plans, which have lower premiums and high deductibles that would be offset by the HSAs.

Other Proposals

Ranking Member Bernie Sanders (I-VT) was vocal about his support for a Medicare-for-all approach and the need to designate health care access as a human right. He argued that a Medicare-for-all proposal would reduce administrative costs, therefore saving money. He suggested the committee should hold a hearing with health officials from countries with universal health coverage and lower per-person costs.

Sen. Tim Kaine (D-VT) suggested that the committee consider previous efforts that had strong bipartisan support, such as PBM reform. Sen. Kaine argued that this could reduce consolidation for health care providers, which the panel was in favor of, though Mrs. Strouse did feel that it could not be a “one size fits all” approach to reform.

There was also a lot of discussion about increasing price transparency and allowing for price shopping. Sen. Husted indicated he would be introducing a bill in the coming days that would allow for greater competition through plan price transparency. Sen. Marshall highlighted S.2355, the Patients Deserve Price Tags Act, which would allow patients to know the cost of care before they receive it.

Sen. Josh Hawley (R-MO) suggested that health care spending, such as premiums and out-of-pocket expenses, could be tax-deductible. There seemed to be some interest from the panel, as well as the other senators in the room, as to what this could look like in practice.

On November 25, 2025, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule that would revise the Medicare Advantage (MA) Program, the Medicare Prescription Drug Benefit Program (Part D), and the Medicare Cost Plan Program for Contract Year 2027 (PY27). The CMS press release can be found here. A CMS fact sheet can be found here.  The 60-day comment period under the Administrative Procedure Act (APA) for the PY27 MA/Part D Proposed Rule ends on January 26, 2026.

MA & PART D: UPDATES TO STAR RATINGS

The MA and Part D Star Ratings program evaluates plan performance on a 1-to-5-star scale across up to 43 measures for MA-PD contracts, 33 for MA-only, and 12 for Part D, covering categories like outcomes, intermediate outcomes, process, patient experience, and access. Ratings are based on CMS administrative data, enrollee surveys, and plan-submitted information. These ratings influence quality bonus payments (QBPs) for MA plans (up to 5-10% added to benchmarks for 4+ star plans), beneficiary rebates (50–70%), marketing rules, and the way consumers are presented plan options in the Medicare Plan Finder.

In keeping with the Trump administration’s effort to deemphasize equity programs, the CY27 proposed rule would eliminate the Biden-era Excellent Health Outcomes for All reward (formerly the Health Equity Index or HEI). This reward – finalized in the 2023 final rule for implementation in CY27 – was intended to incentivize high measure-level performance among enrollees with specific social risk factors (SRFs), such as dual eligibility for Medicare and Medicaid, receipt of the low-income subsidy (LIS), or disability. For CY27, the Biden-era reward would have given plans an HEI score ranging from -1 to 1 based on a subset of measures, and those plans with positive HEI scores would have received a bonus added to their overall Star Rating (0.4 for the top third, 0.267 for the middle third, and 0.133 for the bottom third). As proposed, the CY27 rule would eliminate this construct while retaining the historical reward factor (which similarly rewards plans but emphasizes improvement efforts in clinical care, outcomes, and patient experience across the entire patient population).

Continuing the administration’s deregulation theme, the CY27 proposed rule would also remove 12 measures starting from the 2027 measurement year. Removals would take effect for the 2028- or 2029-Star Ratings, depending on the measure. The measures slated for removal under the CY27 proposed rule include:

• Plan Makes Timely Decisions about Appeals (Part C, 2029)
• Reviewing Appeals Decisions (Part C, 2029)
• SNP Care Management (Part C, 2029)
• Call Center – Foreign Language Interpreter and TTY Availability (Part C, 2028)
• Call Center – Foreign Language Interpreter and TTY Availability (Part D, 2028)
• Complaints about the Health/Drug Plan (Parts C and D, 2029)
• Medicare Plan Finder Price Accuracy (Part D, 2029)
• Diabetes Care – Eye Exam (Part C, 2029)
• Statin Therapy for Patients with Cardiovascular Disease (Part C, 2028)
• Members Choosing to Leave the Plan (Parts C and D, 2029) \
• Customer Service (Part C, 2029) • Rating of Health Care Quality (Part C, 2029)

If finalized, these changes would, in the aggregate, have the practical effect of increasing QBPs to plans. Simulations using 2025 data show 62% of contracts with unchanged ratings, 13% gaining 0.5 stars, 25% losing 0.5 stars, 5% gaining QBP eligibility, and 4% losing it. CMS estimates these shifts in Star Rating status would result in a $13.18 billion net increase in Medicare Trust Fund spending over the 2027–2036 window (0.15% of MA payments). CMS projects that much of that increase (~$7.3 billion) would occur in the CYs 28 and 29.

MA: OPERATIONAL REFORMS

Per President Trump’s executive order (EO) #14192 (“Unleashing Prosperity through Deregulation”), the CY27 proposed rule includes several proposed reforms intended to reduce the regulatory burden on plans and, therefore, the marginal operational costs passed on to beneficiaries by those plans. Proposed changes include:

• Exempting account-based plans from creditable coverage disclosures: Currently, group health plans, including account-based arrangements such as Health Reimbursement Arrangements (HRAs), Flexible Spending Accounts (FSAs), and Health Savings Accounts (HSAs), must disclose their creditable prescription drug coverage status to CMS and Medicare-eligible individuals. CMS proposes amending this section to exclude these plans, as they do not directly offer drug coverage but only reimburse expenses. In practice, this would eliminate redundant paperwork for about 7,049 entities (mostly HR managers), saving approximately 585 hours and $90,266 annually.
• Rescinding mid-year notices for unused supplemental benefits: MA organizations must mail individualized mid-year notices by July 31 detailing unused supplemental benefits from the Evidence of Coverage. The proposal would rescind this requirement entirely. Practically, this reduces administrative burdens, yielding annual savings of $1.36 million in printing/mailing, plus $499,091 in one-time costs for system updates.
• Eliminating health disparities activities in MA quality improvement programs: Under § 422.152(a) (5), MA organizations must incorporate activities to reduce health disparities into their Quality Improvement (QI) programs. CMS proposes removing this requirement.
• Eliminating health equity requirements for MA Utilization Management (UM) Committees: Current rules at § 422.137(c)(5) require a health equity expert on UM Committees, and §§ 422.137(d)(6)– (7) mandates annual health equity analyses of prior authorizations. The proposal would rescind these provisions. In practice, this streamlines committee operations by saving about 6,040 hours and $814,000 annually in data aggregation and posting, enabling focus on core UM functions, but potentially reducing targeted equity reviews for vulnerable populations.
• Waiving the LI NET call center hours requirement: The Limited Income Newly Eligible Transition (LI NET) program currently requires toll-free call centers to be open from 8 a.m. to 8 p.m. in all regions. CMS proposes amending this requirement to limit hours to 8 a.m.–7 p.m. ET, Monday–Friday. This adjustment accounts for low call volumes and 24/7 pharmacy support, saving $800,000–$1 million annually in operational costs.

MA: SPECIAL ENROLLMENT PERIOD REFORMS

The MA program currently includes a Special Enrollment Period (SEP) for enrollees affected by a “significant” provider network change, such as terminations of providers or facilities, where significance is determined, case by case, by CMS and the MA organization based on factors like the scale of the termination. Affected enrollees – those assigned to, receiving care from, or who received care within the past three months from the terminated provider – can switch MA plans or disenroll to Original Medicare, but only if notified of eligibility. MA organizations must send termination notices, but these do not always include detailed SEP information, and separate notifications may be required for eligibility. CMS guidance (but not rules) requires that certain other SEPs, such as those for CMS sanctions, contract violations, or exceptional circumstances, receive CMS approval.

In the CY27 proposed rule, CMS proposes to modify the SEP for provider terminations by renaming it from “Significant Change in Provider Network” and eliminating the “significant” determination requirement, making eligibility automatic for affected enrollees upon any no-cause provider or facility termination. The SEP would begin in the month of eligibility notification and last for two additional calendar months, usable once per network change, with MA organizations assessing eligibility via beneficiary attestations rather than solely through 1-800-MEDICARE. Termination notices would be enhanced to include mandatory details on SEP eligibility, start/end dates, Annual Enrollment Period (AEP), MA Open Enrollment Period (MA-OEP), Medigap guaranteed issue rights, and impacts on employer/union coverage.

Separately, CMS proposes codifying the requirement for prior CMS approval of certain SEPs at §§ 422.66(g), 423.32(k), and 423.36(g), mandating that MA organizations obtain approval via CMS-operated mechanisms (e.g., 1-800-MEDICARE, Online Enrollment Center, or notices) before transmitting elections for specified SEPs like contract violations or sanctions.

MA: REQUESTS FOR INFORMATION (RFIS)

CMS includes several RFIs in the CY27 Proposed Rule to gather public input on enhancing the Medicare Advantage program, including:

• Dually Eligible Individual Enrollment Growth in C-SNPs and I-SNPs: CMS seeks comments on the significant growth in dually eligible individuals enrolling in chronic condition special needs plans (C-SNPs) and institutional special needs plans (I-SNPs) rather than dual eligible special needs plans (D-SNPs). Comments are sought on policy solutions such as requiring State Medicaid Agency Contracts for plans with high dually eligible concentrations (e.g., 60%+), enhancing care coordination requirements, applying D-SNP look-alike limitations, and strategies to encourage C-SNPs focused on mental health or substance use disorders.
• Future Directions in Medicare Advantage Risk Adjustment: CMS solicits input on modernizing the MA program through risk adjustment, including leveraging AI and alternative data sources for nextgeneration models, to promote data transparency, quality improvement, competition, taxpayer savings, and fraud reduction, potentially via programmatic changes or Innovation Center models.
• Future Directions in Medicare Advantage Star Ratings: CMS requests feedback on simplifying and streamlining the Star Ratings program, including reducing timelines from measure development to implementation and shortening the lag between measurement years and payment application to better incentivize quality improvements.
• Quality Bonus Payments in Medicare Advantage: CMS seeks information to refine the QBP structure and its impact on rebates, including options to shorten new-measure implementation timelines, delink bonuses from MA bids through an Innovation Center model, and broader strategies to encourage cost containment alongside enhanced care quality.
• Well-Being and Nutrition: CMS solicits input on tools and policies to improve overall health, happiness, and life satisfaction in MA, including emotional well-being, social connections, self-care, and nutrition strategies like promoting healthy eating, preventive care, and incentives for MA organizations to support long-term beneficiary nutritional habits.
• Marketing and Communications Oversight: CMS seeks comments on modernizing agent/broker regulations and marketing requirements, including redefining the Third-Party Marketing Organizations (TPMO) definition to segment by size, scope, or role; modifying the 5% translation threshold for materials; removing the requirement for CMS approval of Medicare card images in ads; revising testimonial standards for authenticity, substantiation, and disclosures; eliminating outbound enrollment verification and certain mailing statements; reducing call recording retention periods; and broader strategies for accountability, data-driven monitoring using AI, and preventing misleading practices.
• Other Medicare Advantage Program Areas: CMS solicits input on deregulation and simplification across various MA aspects, such as updating medical loss ratio calculations and reporting; streamlining network adequacy reviews, exceptions (including a new “pattern of care” exception), and access standards; enhancing oversight of supplemental benefits design and marketing; revising SNP Model of Care requirements; automating data sharing; and identifying burdensome reporting elements.

PART D: IMPLEMENTING CERTAIN PROVISIONS OF THE INFLATION REDUCTION ACT (IRA) OF 2022

The IRA significantly redesigned the Medicare Part D benefit to lower beneficiary costs, including eliminating the coverage gap phase, reducing the annual out-of-pocket (OOP) threshold starting at $2,000 (with annual indexing based on per capita Part D costs or CPI-U), and removing enrollee cost sharing in the catastrophic phase (setting it to $0 after the OOP threshold is met). It also terminated the Coverage Gap Discount Program (CGDP) and replaced it with the Manufacturer Discount Program (MDP), which requires manufacturers to provide discounts on applicable drugs (brand-name drugs under New Drug Application or Biologics License Application, excluding selected drugs under negotiation) in the initial coverage and catastrophic phases. The IRA granted CMS temporary authority to implement these changes through sub-regulatory program instructions and guidance through 2026. As part of the CY27 rule, CMS proposes to formally codify these reforms through rulemaking. A summary is below.

• CMS proposes to codify the termination of the CGDP for 2027. The CGDP (under which manufacturers provided 70% discounts on applicable drugs for non-LIS beneficiaries in the coverage gap) technically terminated on January 1, 2025, but continues to handle discounts and reconciliations for drugs dispensed before that date. If finalized, these changes would permanently sunset the program, ensuring that no new agreements or discounts apply after 2024.
• CMS proposes establishing a new Subpart AA to codify the MDP for 2027 and beyond, requiring manufacturers to enter agreements covering all labeler codes for applicable drugs, provide 10% discounts in the initial coverage phase and 20% in the catastrophic phase (calculated on negotiated price including dispensing fees, taxes, and units), with phase-ins for specified manufacturers (based on 2021 Part D spending ≥1% or 2.5% for LIS/non-LIS) and small manufacturers (one drug ≥80% of expenditures). Proposed additions include detailed rules on aggregation, acquisitions, terminations, audits, disputes, and civil penalties.
• CMS proposes codifying OOP changes for 2027 and beyond by revising § 423.100 to limit “coverage gap” definitions to 2006–2024, amending § 423.104(d)(4) for pre-2025 applicability, eliminating the initial coverage limit post-2024 (§ 423.104(d)(3)(iii)), setting the reduced OOP threshold at $2,000 for 2025 and indexing it annually (§ 423.104(d)(5)(iii)(G)–(H)), and confirming $0 cost sharing in the catastrophic phase (§ 423.104(d)(5)(i)).

On November 28, 2025, the Centers for Medicare and Medicaid Services (CMS) released the Calendar Year (CY) 2026 Home Health Prospective Payment System Final Rule. A CMS fact sheet can be found here.  The 60-day comment period under the Administrative Procedure Act (APA) for the CY26 Home Health Final Rule ends on January 27, 2026.

UPDATES TO HOME HEALTH AGENCY PAYMENT RATES

The Bipartisan Budget Act (BBA) of 2018 directed CMS to create the Patient-Driven Groupings Model (PGDM), intended to improve reimbursement for all patients eligible for home health benefits and to remove perceived incentives to over-provide therapy services. As part of this system, CMS applies two types of “behavioral adjustments” to ensure budget neutrality and prevent “gaming” that increases payments:

• Prospective adjustments are based on past conduct but are meant to prevent future overpayments. To assess the need for such adjustments, CMS calculates whether the actual expenditures (from two years prior) deviated from the agency’s estimate of what expenditures would have been under the pre–BBA system. CMS has made annual cuts since the start of PDGM. However, the magnitude of those cuts has been such that CMS has typically phased them in over 2 years. This has resulted in a dynamic in which CMS often implements cuts that were partially delayed from the year prior, as well as new cuts to account for “newly discovered” deviations from two years prior.
• Retrospective adjustments are intended to claw back overpayments already made when past conduct led to higher-than-expected payments (i.e., CMS’s prospective adjustments were not sufficient to prevent overpayments relative to the pre-BBA system). Since the start of PDGM, CMS has been keeping a running tally of overpayments, which currently totals ~$5.3b (through CY24; that figure is likely to grow once CY25 and CY26 – the final two years of the PDGM phase-in – are complete).

For CY26, CMS proposed an aggregate -6.4% cut to home health agency payments relative to FY25. Of this, 2.4% represented the CY26 home health market basket update. With respect to the PDGM adjustments, CMS first proposed a permanent prospective behavioral adjustment of -3.7% (-1.8%) attributable to a lingering phased-in cut from CY25 (projected based on CY23 spending) and -1.9% representing a new cut (projected based on CY24 spending). CMS then proposed – despite prior assurances it would not pursue prospective and retrospective cuts simultaneously – an incremental retrospective cut of -4.6% (accounting for ~15% of the amount that needs to be recouped). Finally, CMS proposed a fixed dollar loss (FDL) ratio adjustment of -0.5%.

In the final rule, CMS finalized policies resulting in an overall -1.3% (-$220m) cut to aggregate Medicare payments to home health agencies for CY26 compared to CY25. The net rate update is based on the following:

• 2.4% home health market basket update (unchanged from proposed rule).
• -0.9% permanent prospective PDGM cut (rather than phasing the cut over multiple years as in prior rules, CMS achieved softening by excluding CY23 and CY24 claims data from the permanent adjustment calculation and relying solely on CY20–22 data).
• -2.7% temporary retrospective PDGM cut (softened, but not abandoned, out of concern for provider impact).
• -0.1% FDL ratio cut (softened based on updated claims data).

Although CMS significantly softened the CY26 impact by reducing the permanent behavioral adjustment and lowering the temporary recoupment amount, the deferred over-expenditures from 2023 and 2024 remain outstanding and will need to be addressed in future years. This continues the pattern of recent rules in which significant adjustments are repeatedly deferred rather than fully implemented, causing the cumulative amount owed under PDGM budget-neutrality requirements to grow. Absent Congressional intervention to waive or reform the behavioral offset provisions (as requested by industry stakeholders), these deferred cuts will eventually translate into larger permanent rate reductions or extended temporary recoupments in the out-years, creating ongoing payment uncertainty for home health agencies.

HOME HEALTH QUALITY REPORTING PROGRAM (HH QRP)

The HH QRP is an initiative that requires certified home health agencies to submit standardized data, primarily through the Outcome and Assessment Information Set (OASIS) instrument, to measure and improve the quality of care provided to patients. This program ties data submission compliance to annual payment updates, imposing a 2% reduction in the home health market basket percentage increase for non-compliant agencies, which can result in lower payments than the prior year under certain conditions. The HH QRP aims to enhance care quality, increase transparency for consumers, and promote better health outcomes.

For CY26, CMS proposed removing the COVID-19 Vaccine: Percent of Patients Who Are Up to Date measure and its associated OASIS item O0350, effective for assessments on or after the final rule’s publication date, with the item fully removed from OASIS by April 1, 2026. CMS also proposed eliminating four social determinants of health assessment items related to living situation, food, and utilities, effective for patients discharged on or after April 1, 2026. Additional proposals included revising the reconsideration process for data noncompliance to allow requests demonstrating full compliance and limited extensions for extraordinary circumstances; and updating the Home Health Consumer Assessment of Healthcare Providers and Systems (HHCAHPS) survey with new questions, removals, and adjustments starting with the April 2026 sample month.

CMS finalized the HH QRP proposals without modification.

HOME HEALTH VALUE-BASED PURCHASING (HHVBP) MODEL

The HHVBP Model is a program that adjusts payments to certified home health agencies based on their performance on a set of quality measures, aiming to improve the quality of care provided to beneficiaries. Under this model, agencies receive a total performance score derived from measures in categories such as OASIS-based outcomes, claims-based utilization, and patient experience surveys, which determine payment adjustments ranging from -5% to +5%. The HHVBP Model encourages agencies to enhance care delivery, reduce unnecessary hospitalizations, and promote better patient outcomes by rewarding high performers.

For CY26, CMS proposed updates to the HHVBP Model’s measure set, including the removal of three HHCAHPS survey-based measures (Professional Care of Patients, Communications Between Providers and Patients, and Specific Care Issues) due to planned revisions in the HHCAHPS survey. CMS also proposed adding four new measures: three OASIS-based measures (Improvement in Grooming, Improvement in Toileting Hygiene, and Improvement in Feeding or Eating) and one claims-based measure (Medicare Spending Per Beneficiary-Post-Acute Care Home Health). Additional proposals included adjustments to the weights of measures/categories to reflect the updated set, as well as the addition of a new measure removal factor for measures that are not feasible to implement.

CMS finalized the HHVBP Model proposals without changes from the proposed rule.

FACE-TO-FACE ENCOUNTER REGULATIONS

The face-to-face encounter regulation requires a certifying physician to conduct an encounter with the patient to certify eligibility for Medicare home health services and to establish or review the plan of care. This encounter must occur within specified timeframes, be related to the primary reason the patient requires home health services, and include documentation explaining how the patient’s clinical condition supports homebound status and the need for skilled services.

For CY26, CMS proposed – in compliance with CARES Act revisions enacted by Congress – revising the language at 42 CFR 424.22(a)(1)(v)(A) to allow the face-to-face encounter to be performed by a physician, nurse practitioner, clinical nurse specialist, physician assistant, or certified nurse midwife. CMS also proposed removing 42 CFR 424.22(a)(1)(v)(C), which had limited the encounter to the certifying practitioner or to a physician or non-physician practitioner who cared for the patient in an acute or post-acute facility from which the patient was directly admitted to home health and who is different from the certifying practitioner.

CMS finalized the proposed changes to the face-to-face encounter regulations without modification.

FRAUD, WASTE, & ABUSE REFORMS

CMS and stakeholders have expressed significant concerns about waste, fraud, and abuse in the home health industry, including vulnerabilities to improper payments, abusive billing practices, and unqualified providers entering the program (concerns validated by recent GAO and OIG investigations showing unusually high improper payment rates in home health agencies, particularly in states such as California, Pennsylvania, and Texas). To that end – and given the Trump administration’s intense focus on reducing wasteful federal spending – CMS proposed several revisions to Medicare provider enrollment regulations to strengthen program integrity and address fraud, waste, and abuse, including:

• Expanding the grounds for revocation or denial of enrollment to cover abusive billing patterns, beneficiary attestations that services were not furnished, and modifications to language around prescribing authority for Medicare-covered drugs.
• Expanding the retroactive effective dates for revocations to the onset of noncompliance in additional scenarios, such as lapsed liability insurance for independent diagnostic testing facilities, failure to report required changes, or abusive billing, to enable recovery of improper payments from that date.
• Other reforms, such as requiring providers and suppliers to report adverse legal actions within 30 days, deactivating billing privileges for physicians and practitioners who have not ordered or certified services in 12 consecutive months, and making technical corrections to related regulatory text.

CMS finalized the Medicare provider enrollment provisions as proposed, without modification.

AGENCY REPLIES TO REQUESTS FOR INFORMATION (RFIS)

The proposed rule included four Requests for Information (RFIs) related to the Home Health Quality Reporting Program (HH QRP) and the expanded Home Health Value-Based Purchasing (HHVBP) Model, and the final rule summarized the public comments received. An overview of those RFIs is below.

• Data Submission Deadlines for HH QRP: Commenters generally supported reducing the deadline from 4.5 months to 45 days after the end of the reporting period to enable more timely public reporting and decision-making, though some suggested phased implementation, pilot programs, or alternatives like 60 or 90 days; concerns included increased administrative burden, potential errors, and financial pressures on smaller agencies.
• Digital Quality Measures for HH QRP: Commenters expressed strong support for transitioning to digital quality measures using standards like Fast Healthcare Interoperability Resources to reduce burden and improve quality, with recommendations for phased implementation, funding, technical assistance, APIs, and training; concerns focused on varying IT readiness among agencies and the lack of HITECH-like funding for home health.
• Future HH QRP Quality Measure Concepts: Commenters supported concepts in interoperability (e.g., national standards and federal funding, with barriers like low IT adoption noted), cognitive function (e.g., emphasis on maintenance rather than improvement and limitations of existing OASIS tools), well-being (e.g., evidence-based tools, process measures, and caregiver input, with concerns about scope in short stays), and nutrition (e.g., validated tools like the Malnutrition Composite Score and process measures, though some opposed due to complexity and short timeframes).
• Future HHVBP Measure Concepts: Commenters supported a respecified Falls with Major Injury measure using multiple data sources but raised concerns about reporting accuracy, episodic care, and unintended penalties; for HHCAHPS changes, there was opposition to achievement-only scoring and single-item additions, with preferences for full improvement points and patient-reported outcomes.

On November 19, 2025, the Senate Finance Committee held a hearing on the rising costs of health care. Overall, there was agreement that any reforms need bipartisan support. However, the hearing also featured a clear partisan divide: Democrats advocating for the extension of advance premium tax credits (APTCs), and Republicans suggesting that assistance for consumers should come through health savings accounts (HSAs) and flexible spending accounts (FSAs).

OPENING STATEMENTS

• Chairman Mike Crapo (R-ID)

WITNESS TESTIMONY

• Dr. Douglas Holtz-Eakin, PhD, President, American Action Forum – Testimony
• Mr. Jason Levitis, Senior Fellow, Health Policy Division, Urban Institute – Testimony
• Dr. Brian Blase, PhD, President, Paragon Health Institute – Testimony
• Mr. Bartley Armitage, Citizen – Testimony

MEMBER DISCUSSION

Extension of Advance Premium Tax Credits (APTC)

All Democrats in attendance, as well as Sen. Thom Tillis (R-NC), expressed support for at least a 1-year extension of the APTCs. These senators argued this would allow time for a larger reform process that could explore some of the other options floated in the hearing. Mr. Levitis supported this approach, stating more than once that the current IT infrastructure would not allow time for policy changes other than APTC extension to reach consumers.

Most Republicans in attendance, Chair Crapo (R-ID), Sens. John Cornyn (R-TX), Bill Cassidy (R-LA), Steve Daines (R-MT), Ron Johnson (R-WI), John Barrasso (R-WY), and Roger Marshall (R-KS), opposed the extension. These senators argued that such a measure would only place more money in the pockets of health insurance companies, allow fraud to continue, and perpetuate mistakes created in the Affordable Care Act.

HSAs/FSAs

Republicans, including Chairman Crapo, Sen. Cassidy, and Sen. Marshall, advocated for expanding access to HSAs and providing appropriate funds to fund them. Dr. Holtz-Eakin was supportive of this option but did concede that HSAs would not reach everyone and would not be able to be implemented on a large scale for 2026. Mr. Blase suggested that the money to fund HSAs could come from Cost Sharing Reduction (CSR) funding and would allow consumers greater control, instead of money going directly to health insurance companies. Mr. Blase further stated that he expected a 12% decrease in premium costs if this option were to be implemented.

Sen. Tina Smith (D-MN) asked Mr. Armitage if a check or HSA funding would help relieve the cost burden that he and his family are facing, to which Mr. Armitage replied that it would only help for “a couple of months,” and then he would be back in the same position he was before. When Mr. Levitis was asked his opinion on an HSA option, he was skeptical due to the lack of HSA access for people without insurance and stated that FSAs have been shown to increase health care spending. Sen. Raphael Warnock (D-GA) expressed a similar point, saying that HSAs are not helpful to those who cannot afford to enroll in ACA plans, and the money cannot be used to pay for premiums.

Government Regulation

There were competing opinions about the extent to which the federal government should regulate the health insurance market. On one end of the spectrum, Sen. Bernie Sanders (I-VT) proposed a universal health care, “Medicare for All” model, with a single, government payer system, which Sen. Peter Welch (DVT) agreed with. On the other side, Mr. Blase and Dr. Holtz-Eakin both suggested deregulation of health insurance to increase competition and choice in the private insurance sector. Sens. Cornyn, Johnson, and Barrasso agreed with this approach, saying they wanted to provide more health care shopping options for consumers, which, they argue, would force insurance plans to compete, therefore raising quality and lowering cost.

Other Suggestions

Some other reform suggestions mentioned came from both parties. Sen. Sheldon Whitehouse (D-RI) suggested shifting more to value-based care payments and ending prior authorization practices, which Mr. Levitas agreed with. Sen. Maria Cantwell (D-WA) suggested expanding Basic Health Program options to those within 250% or 300% of the federal poverty line, depending on the state. Sen. Barrasso mentioned reopening other pooling measures, such as the Farm Bureau plans for rural populations, and Sen. Tillis expressed support for catastrophic health plan options.