Insights^

On October 8, 2026, the Medicare Payment Advisory Commission (MedPAC) met for its second meeting of the 2026-2027 analytic cycle. During the meeting, Commissioners discussed several topics, including physician participation in Medicare Advantage (MA) networks, issues affecting the payment accuracy of the Physician Fee Schedule (PFS) and the Clinical Laboratory Fee Schedule (CLFS), and ways to improve clinician quality incentives in Fee-for-Service (FFS) Medicare.

PHYSICIAN PARTICIPATION IN MA PROVIDER NETWORKS: COMPARING PROVIDER DIRECTORIES WITH ENCOUNTER DATA

This session began with MedPAC staff providing an overview of MedPAC’s previous work on physician participation in MA networks and background information on provider directories. Staff then discussed physician participation in MA at the program level and beneficiaries’ use of services from physicians not listed in provider directories. Staff highlighted that over 95% of Medicare physicians provided care to MA enrollees in 2023; however, almost a third of MA encounters had a rendering physician not listed in the MA enrollee’s plan provider directory. Staff concluded the presentation with an overview of their interviews with National Cancer Institute (NCI) Designated Cancer Centers and MA plans, which covered contracting practices, coverage policies, payment rates, and prior authorization concerns.

Commissioner Discussion

Commissioners opened with clarifying questions about staff work. When asked who participated in the cancer center interviews, staff said most participants were payer strategy and finance staff. When asked about the data used in the analysis, staff explained that the program-wide participation analysis used a full year of encounters, while the plan-directory comparison used only February 2023 encounters to avoid lags in directory updates. Several Commissioners asked whether results differ between Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), since going out-of-network carries very different consequences in each. Staff confirmed that breakout of this data by plan type is underway, along with work using billing National Provider Identifiers (NPIs) and taxpayer identification numbers (TINs) to separate true out-of-network care from directory errors. Staff also confirmed that a physician’s participation status applies across all of Medicare, so a provider cannot participate in MA if they do not participate in FFS, and that non-participating providers can bill up to 115% of the FFS rate. Commissioners also discussed how to understand gaps in an MA provider directory. One Commissioner said plan explanations for outdated directories should be treated as problems to fix, not accepted as reasonable. Another said the industry should be held to high accuracy standards, suggesting plans could use artificial intelligence to reconcile directories with their contract databases. However, another Commissioner urged caution, arguing that directory inaccuracies should not be equated with barriers to care and that managed care’s value in coordinating care and controlling costs should be preserved. An additional Commissioner noted that a high participation rate overall does not guarantee network adequacy in a given local market.

Several Commissioners suggested treating physicians who practice at an in-network facility, such as emergency physicians, radiologists, anesthesiologists, and hospitalists, as in-network so beneficiaries are not surprised by a bill after choosing an in-network hospital. One Commissioner cautioned that a similar idea proved highly contentious in recent federal debates over surprise billing in the commercial insurance market.

The cancer center findings drew the most varied reactions. Some Commissioners suggested requiring plans to include an NCI-designated cancer center in their network, but others were skeptical. One noted there are not centers in every state and argued that a network requirement would give centers even more market power. It was also suggested centers may limit MA patients in favor of commercial patients who pay two to three times FFS rates. Another Commissioner noted that episode costs at these centers often run higher because of repeated imaging and testing. Others argued that modern cancer care is subspecialized, multimodal, and team-based, and that service-by-service prior authorization and site-of-service rules are fundamentally incompatible with that model. One Commissioner argued that the volume of single-case agreements points to a de facto contract that should simply be made a standing one. Another noted that one-time agreements often fail to cover the years of follow-up care that cancer patients need. MedPAC staff and the Chair reiterated that the interviews reflected what centers and plans reported and that the scope of this work is descriptive, not a review of network adequacy for cancer centers or any other sector.

Mid-year contract terminations were another recurring concern. One Commissioner called mid-year network changes unacceptable and a straightforward problem to fix by holding networks constant through the plan year. Another pointed out that switching plans mid-year resets out-of-pocket spending and suggested out-of-pocket spending should follow the beneficiary.

Several Commissioners pushed back on excluding nurse practitioner (NP) and physician assistant (PA) data from analysis, as they provide a growing share of primary care in rural, geriatric, and safety-net settings, and an increasing share of specialty care. Staff noted that MedPAC recommended direct billing for these clinicians in 2019, instead of billing under a supervising physician.

Commissioners requested the following additional analyses and context:

• A narrower encounter window to test whether timing explains some discrepancies
• A plan-level view showing what share of each plan’s directory physicians appear in its encounter data
• A beneficiary-level analysis of primary care physician relationships to see whether mismatches cluster among certain plans or enrollees
• A survey of access and appointment wait times at NCI Designated Cancer Centers for Medicare versus commercial patients
• More interviews with cancer center operations staff, additional MA plans, community cancer centers, and advocacy groups such as the American Cancer Society to understand potential harms beneficiaries experience as a result of fragmented cancer care
• More detail on how single-case agreements are approved and continuity of care protections
• Use of grievances, appeals, complaint tracking data, and disenrollment to measure how directory errors affect enrollees
• Exploration of policy options, including aligning contract cycles with the plan year, centralized provider directories, and counting directory accuracy toward Star Ratings

The Chair closed by emphasizing that this session’s work remains focused on fact-finding. The goal is to support informed beneficiary choice, separate from network adequacy and prior authorization, and MedPAC does not expect to make recommendations on this topic at the November meeting.

ISSUES AFFECTING THE PAYMENT ACCURACY OF THE PFS AND CLFS

MedPAC staff began this session with a background on the Commission’s previous work on payment accuracy for PFS and CLFS before explaining payment types such as global surgical services and “incident-to” billing, which is when providers bill under the NPI of a supervising physician. Staff then discussed telehealth billing under the PFS and the appropriateness of payment rates for those services. The last section of the presentation covered the CLFS, including recent developments from Congress, MedPAC, and private payers.

Commissioner Discussion

When asked about beneficiary cost sharing on global surgical services, staff said beneficiaries currently pay 20% coinsurance on the full bundle and would pay less under either reform option suggested in the June 2025 Report to Congress. Those options were to either convert 10- and 90-day global surgical services to 0-day services and let clinicians bill separately for postoperative visits, or keep the current payment structure but adjust valuations for 10- and 90-day global surgical services to reflect the postoperative services actually performed. Staff explained that postoperative visit assumptions come from specialty society surveys reviewed by the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) and the Centers for Medicare and Medicaid Services (CMS). The Chair added that clinical guidance on the right number of postoperative visits is largely nonexistent and that care patterns have shifted since the bundles were designed. Staff also noted that RAND looked beyond the bundle for visits furnished by other clinicians and still found the assumed visits were simply not happening, and that postoperative visits by an NP or PA in the surgeon’s practice remain part of the bundle. On labs, staff said no cost data are available, that cost sharing was originally waived because tests were inexpensive, and that MA rates are included in the private payer data used to set CLFS rates.

On the reforms suggested in the June 2025 Report to Congress related to global surgical services, most Commissioners who weighed in favored keeping the bundle and lowering its valuation rather than converting to 0-day services. Several argued that unbundling could increase postoperative visits and run counter to efforts to coordinate care, and one Commissioner noted that keeping the bundle preserves the incentive for surgeons to find efficiencies. Commissioners supported phasing in any revaluation.

Commissioners reaffirmed the 2019 MedPAC recommendation to eliminate “incident-to” billing. Some Commissioners saw little need for more work on the topic, while others asked staff to identify which practices and patients still rely on incident-to billing where direct billing is allowed, and what barriers prevent practices from billing directly.

Telehealth drew the most interest, and several Commissioners called it a high priority, particularly with flexibilities set to expire at the end of 2027. One Commissioner said paying the same rate regardless of modality made little sense, while others disagreed. One Commissioner said that in close calls MedPAC should err on the side of access and avoid heavy regulation that could stifle care innovation. Another warned that lower telehealth payment could push more visits in person and strain access. In response to a question on audio-only telehealth visits, staff said audio-only visits now make up about 10% of FFS telehealth, that most telehealth occurs in the beneficiary’s home, and that Medicare does not require a telehealth clinician to communicate with a beneficiary’s primary care provider. Staff also confirmed that MedPAC has no mandated telehealth report and that the NP and PA scope of practice is governed by state law, not Medicare billing rules.

Commissioners requested the following additional analyses and context:

• Beneficiary out-of-pocket costs under each global surgical option
• Interviews with primary care physicians about surgeons shifting postoperative follow-up to primary care
• A closer look at postoperative care patterns for high-volume 10-day and 90-day procedures across all treating clinicians
• Analysis of the states where incident-to billing persists despite direct billing being allowed
• Separating clinician-assisted telehealth from telehealth delivered to beneficiaries at home
• Outcomes data comparing telehealth and in-person care, such as blood pressure and A1C control
• Monitoring of telehealth prescribing, including GLP-1 prescribing, for Medicare beneficiaries

The Chair closed by noting strong Commissioner interest in continuing the telehealth work, pointing out that the Commission already has standing recommendations on global surgical services, and saying staff will continue tracking incident-to billing.

CLINICIAN QUALITY INCENTIVES IN FFS MEDICARE

The session began with MedPAC staff offering a background on previous MedPAC work on quality measurement in Medicare and the 2 current incentive pathways: the Advanced Alternative Payment Models (A-APMs) and the Merit-based Incentive Payment System (MIPS). Staff then explained concerns with MIPS, which MedPAC previously recommended eliminating in 2018, including burdensome reporting requirements, physician eligibility concerns, and performance differences across physician types. Staff then gave an overview of published literature on ways to incentivize clinician quality and some suggestions of potential analytic work. These suggestions included further analysis of MIPS participation and performance data; stakeholder interviews about experiences with MIPS, including benefits and challenges; and lessons from other performance-incentive programs.

Commissioner Discussion

Commissioners were nearly unanimous in their criticism of MIPS. One Commissioner pointed out that the reporting burden on physicians does not justify the pay benefits and urged Medicare to measure far fewer indicators, focused on outcomes, patient experience, and avoidable utilization at the practice or accountable care organization (ACO) level. Another Commissioner argued that MIPS bonuses are financed by penalties on the small and solo practices that most need resources, said the program may be contributing to consolidation, criticized CMS for being slow to retire topped-out measures, and cautioned that larger incentives can drive gaming, as seen in MA Star Ratings. A third Commissioner called for dissolving MIPS rather than tweaking the program, describing up to tenfold variation in clinician performance within a network and proposed a mandatory program built on evidence-based guidelines with meaningful rewards for high performers and penalties, or removal from Medicare, for persistent low performers.

Another Commissioner noted that 88% of physicians received a positive adjustment in 2024, that the advanced APM bonus has fallen from 5% to 1.9%, and that research found nearly four out of five quality measures do not crosswalk across FFS, ACO, and MA. This Commissioner proposed a single Medicare-wide system with capped measures, three categories (population health, beneficiary and workforce satisfaction, and cost), star ratings graded in 0.1 increments, and comparisons at a common geographic level. Several other Commissioners also supported a unified quality framework across FFS, ACOs, and MA.

Other Commissioners suggested reframing what quality measurement is for. One argued that after 25 years of modest results, policymakers should stop expecting pay-for-performance to improve quality and instead use measurement to identify low-quality outliers, while rewarding measures tied to broad structural change. Another Commissioner proposed using existing patient surveys to flag physicians performing two standard deviations below the mean, citing a Vanderbilt program in which about 85% of outlier physicians improved after intervention. The Chair noted that identifying the lowest performers requires far smaller samples than distinguishing among clinicians in the middle of the distribution. Another Commissioner suggested scrapping MIPS for small practices, possibly keeping only an interoperability measure, while holding very large practices to a zero-sum program on a core measure set with a simple socioeconomic adjustment. Other proposals included using unplanned hospital admissions as a shared outcome measure, measuring teamwork and staffing, and having CMS field patient experience surveys directly rather than requiring practices to do so.

One Commissioner called for abandoning both MIPS and the current Medicare Shared Savings Program (MSSP) structure, arguing that ACO quality thresholds have been lowered so far that many ACOs report at about the 50% level, that payments per beneficiary have more than doubled, and that the program now rewards coding over care improvement. The Commissioner urged a return to Pre-Pathways to Success program rules and called for an all-payer claims database that patients can use directly to compare quality and cost.

Other Commissioners were more cautious. One cautioned that reliability at the individual clinician level can be as low as 6% and rarely exceeds 50% to 60%, compared with 70% to 90% at the group level, and urged staff to separate flaws specific to MIPS from challenges any replacement would face. The Chair clarified that any further analysis would inform future policy options, not judge whether MIPS works, since the Commission’s 2018 recommendation still stands.

Commissioners requested the following additional analyses and context:

A breakdown of the 764 MIPS measures by specialty

• A side-by-side comparison of MIPS Value Pathways (MVPs) and traditional MIPS scores for clinicians who report both, along with early experience from the heart failure MVP used in the Ambulatory Specialty Model beginning in January
• Measure-level performance distributions and collection types over time
• Analysis of persistent low performers, tested against other Medicare data and for sensitivity to patient mix and sample size
• Interviews on what practices actually do to improve scores on current measures
• An explanation of why Congress has not acted on the 2018 recommendation to eliminate MIPS
• An estimate of MSSP’s current net cost or savings to Medicare
• Policy options for replacing MIPS, including the feasibility of a unified quality framework across FFS, ACOs, and MA

On September 24, the Senate Health, Education, Labor, and Pensions (HELP) Committee held a hearing on the nomination of Dr. Heidi Overton to be Commissioner of the Food and Drug Administration (FDA). Much of the questioning focused on whether Dr. Overton would keep FDA product decisions independent from the White House, particularly after President Trump’s recent comments calling the Measles, Mumps, and Rubella (MMR) vaccine lethal. Dr. Overton said repeatedly that every vaccine on the U.S. market is safe and effective and that she would follow the statutory standards for safety and efficacy in reviewing individual products. Senators also pressed her on recent flavored vape authorizations, the ongoing mifepristone safety review, expedited approvals for rare disease treatments, oversight of clinical trials in China, and resources for FDA’s Human Foods Program.

OPENING STATEMENTS

• Committee Chair Bill Cassidy (R-LA)
• Committee Ranking Member Bernie Sanders (I-VT)

WITNESS TESTIMONY

• Dr. Heidi Overton, MD, PhD, Nominee for Commissioner of Food and Drugs

MEMBER DISCUSSION

Vaccines and FDA Independence

Members expressed concerns regarding Dr. Overton’s history of supporting President Trump’s vaccine statements and questioned her ability to make informed decisions regardless of his input. Chair Bill Cassidy (R-LA), Sen. Maggie Hassan (D-NH), and Sen. Ed Markey (D-MA) asked Dr. Overton about President Trump’s claim that the MMR vaccine is lethal. She said the vaccine is safe, 97% effective, and the best tool currently available to combat MMR. She also expressed confidence in the safety of every vaccine on the U.S. market given the FDA’s oversight of each product. Chair Cassidy, Ranking Member Bernie Sanders (I-VT) pressed her on what she would do if the president’s directions conflicted with FDA science or the law. She said she would follow the law and the statutory standards for safety and efficacy, and that while the president sets policy priorities, individual product reviews belong to FDA experts. Sen. Lisa Blunt Rochester (D-DE) and Sen. Markey asked about her role in the executive order on childhood vaccines and the proposal to split the MMR vaccine into three shots. Dr. Overton said she simply coordinated agency input and presented options to the president. She also confirmed that no separate MMR vaccines are currently available in the U.S. and said any new application would be reviewed against the same standards. Sen. Hassan also asked about the President’s claims that Tylenol causes autism, and Dr. Overton said she has not seen causal evidence linking the two.

Drug Development and Clinical Trials

Members focused on ways to improve drug development and clinical trial timelines in the U.S. Sen. Susan Collins (R-ME) asked how FDA could speed approval of safe, promising treatments for rare diseases where large trials are not feasible. Dr. Overton called it a key priority, pointed to the plausible mechanism pathway, and said FDA’s flexible, risk-based approach should be formalized into policy. Sen. Jim Banks (R-IN) asked about inspections of clinical trials in China and other countries. She said progress has been made, but more is needed to ensure data meets good clinical practice standards, and that her goal is to make it easier to develop and manufacture products in America. Sen. Chris Murphy (D-CT) asked her to restore disbanded advisory committees. She called them a critical part of FDA’s work and said she would review each one to ensure they are all fulfilling their purpose.

Tobacco and Vaping

There was bipartisan concern regarding the FDA’s recent flavored vape authorizations. Sen. Tommy Tuberville (R-AL) and Sen. Tammy Baldwin (D-WI) raised that the changes have allowed flavored vapes to continue to be marketed to children. Dr. Overton said protecting kids comes first, that the flavored vape decision reflected adult use under current law, and that the administration has asked Congress for more authority to fight illicit products. Sen. Ashley Moody (R-FL) asked Dr. Overton about current guidance allowing companies awaiting application approval to continue to sell their products on the market. She said the application backlog has fallen from about 300,000 in May to about 100,000, with 48 products approved, and committed to revisiting current guidance that lets products stay on the market while applications are pending. Sen. Murphy, Sen. Angela Alsobrooks (D-MD), and Sen. Tim Kaine (D-VA) questioned the timing of the policy change after a major tobacco company donated to and met with President Trump. Dr. Overton rejected the framing, said career officials made the recommendation, and said she has not been involved since her nomination.

Mifepristone and Reproductive Health

Sen. Patty Murray (D-WA), Sen. Baldwin, Sen. Banks, and Sen. Josh Hawley (R-MO) questioned Dr. Overton on mifepristone from opposing directions. She said the drug was approved as meeting FDA’s safety and efficacy standard under its current Risk Evaluation and Mitigation Strategies (REMS), but that an internal safety review of the changes to the REMS is ongoing and she could not prejudge whether the label should change. Sen. Hawley noted that FDA has said in court it will not stand behind the REMS adopted under the Biden administration. Sen. Banks asked her to accelerate the review, and she said it would be on her desk immediately, noting an FDA update due to a Louisiana court filing deadline on October 7.

Food Safety and Nutrition

Members also sought clarity on Dr. Overton’s plans to manage food safety and labeling, especially after the large number of recalls this summer. Sen. Murray, Sen. Banks, and Sen. Murkowski asked about resources for the Human Foods Program and state and local inspection partnerships. Dr. Overton said the program would need more resources and that FDA, which has 17,000 employees, is hiring. She did not know the program’s current staffing and, when asked which office monitors foodborne illness outbreaks, named the Food Safety and Inspection Center before Sen. Murray corrected her with the Coordinated Outbreak Response and Evaluation (CORE) Network. Sen. Baldwin and Sen. Murkowski asked about labeling for dairy names and genetically engineered foods, and Dr. Overton called accurate labeling a top priority. Ranking Member Sanders asked about legislation banning over-processed food ads targeted at kids, and she said she supports addressing childhood obesity and improving food quality.

Other Topics

In response to a question on drug prices, she told Ranking Member Sanders that prices have dropped under Most Favored Nation (MFN) policies.

On September 24, 2026, the Medicaid and CHIP Payment and Access Commission (MACPAC) held its first meeting of the 2026-2027 cycle. During the meeting, MACPAC held sessions on implementing Medicaid community engagement (CE) requirements established under the One Big Beautiful Bill Act (OBBBA). This included an expert panel on how states are preparing for the January 1, 2027 implementation deadline. Commissioners then participated in a session to review two proposed Centers for Medicare and Medicaid Services (CMS) rules to implement changes to state-directed payments (SDPs) and provider taxes made by the OBBBA. Commissioners then discussed the current plan for updating the Inpatient Hospital Payment Index.

COMMUNITY ENGAGEMENT REQUIREMENTS IN MEDICAID: INTERIM FINAL RULE AND MONITORING FRAMEWORK

The session began with MACPAC staff reviewing the Commission’s prior work on CE, including a recommendation in the June 2026 Report to Congress directing CMS to monitor and evaluate the requirements. Staff then summarized the key provisions of the interim final rule with comment period (IFC), which outlined how CMS plans to implement the CE requirements. Staff next reviewed updates since the IFC’s release, including resources CMS has published since June, current lawsuits challenging aspects of the rule, and MACPAC’s monitoring framework, focusing on state readiness, medical frailty, beneficiary outreach, and federal and state reporting.

Expert Panel

The panel featured Jack Rollins, Director of Federal Policy at the National Association of Medicaid Directors (NAMD), and Laura Saunders, Associate Principal at Health Management Associates (HMA). Both described 2027 as an iterative year in which state policies and operations will continue to evolve. Neither panelist was aware of any state actively pursuing a good faith exemption, and most states are planning for a January 1 start.

When asked about medical frailty frameworks, Mr. Rollins said the CMS slide deck has been a helpful illustration, particularly its emphasis on ex parte verification (without verification from the individual) and on checking frailty only after considering if they are covered by other exclusions that are easier to verify. Ms. Saunders said at least a couple of states have already adopted a three-tier approach based on the CMS deck’s example framework. Under that framework, Tier 1 covers conditions where ICD-10 diagnosis codes confirm a significant impairment, Tier 2 covers conditions that need additional utilization or functional data to confirm severity, and Tier 3 covers individuals without enough data, who are sent to manual review. Other states are building on the medical frailty processes they use for alternative benefit plans. She described the latter as a half-step head start given the narrower CE definition. Of the four states that have released condition lists, all but Montana published specific diagnosis codes acceptable for the medical frailty exemption. Ms. Saunders also said many states will rely heavily on self-attestation and manual processes in 2027 as a temporary workaround while systems are built out.

Both panelists described the administrative strain of implementing CE alongside six-month redeterminations, changes to retroactive coverage, and October 1 changes to federal matching funds for certain immigrant populations. Ms. Saunders noted that many of the same eligibility workers are also focused on SNAP error rates ahead of new penalties, and she expects more notices, longer processing times, and more procedural terminations. States are drawing on lessons from the unwinding of the COVID-19 continuous enrollment provision, including text messaging, county-by-county roadshows led by Medicaid officials, CE web pages, and online screening tools. Ms. Saunders cautioned that many enrollees identify with their managed care plan rather than Medicaid and may not know they are in the expansion group, which could make it difficult for enrollees to understand that the new requirements apply to them. She also said providers remain unsure of their role, which will matter more for medical frailty documentation once self-attestation narrows in 2028.

When asked where states still need clarification before January 1, Mr. Rollins pointed to the following:

• Final state plan amendment templates and data reporting templates, both already available in draft through the Paperwork Reduction Act process
• More detail on the good faith effort exemption process
• Guidance on notices for short-term hardship exceptions, especially the two that require the individual to take action
• Continued attention to how CE interacts with other eligibility changes
• Clarity on future audit expectations, including how CE will be incorporated into the Payment Error Rate Measurement (PERM) program ahead of statutory changes in fiscal year 2030

Ms. Saunders added that new guidance that shifts direction would be of limited help this late, but additional example models and assurances that good faith decisions will not jeopardize future federal funding would be valuable. Mr. Rollins noted that much of the detailed guidance is moving through a weekly NAMD-convened call between states and CMS that averages more than 300 state staff.

Commissioner Discussion

Commissioners had a number of questions for the panelists. One Commissioner asked what protections exist for states and providers that make good faith decisions in 2027 that are later questioned in audits. Mr. Rollins said states are documenting their decisions, including correspondence with CMS and internal process manuals, so they can show what they understood the policy to be at a given point in time. Ms. Saunders added that self-attestations are made under penalty of perjury.

Another Commissioner asked a series of questions about state choices under the IFC. Ms. Saunders said most states she has tracked are adopting all of the short-term hardship exceptions, though three or four are not. Few states are choosing longer look-back periods, and she had not seen any longer than three months. On verification, education data from the National Student Clearinghouse will be available through the Federal Data Services Hub, while community service verification remains largely manual. When asked how MACPAC could support states, Mr. Rollins suggested scanning federal and state data sources to strengthen ex parte verification, and Ms. Saunders suggested sharing information on how well different state medical frailty algorithms perform.

Several Commissioners raised concerns about medical frailty determinations:

• One Commissioner questioned the quality of claims data for frailty algorithms. Panelists said states are designing the process as an automated yes/no flag, so caseworkers are not making clinical judgments.
• A Commissioner who is a practicing pediatrician noted that a single diagnosis can mean very different levels of impairment and worried about the documentation burden on providers. Mr. Rollins said provider documentation is meant to be a last step after ex parte data.
• When asked whether any state’s frailty approach has CMS’s support, Mr. Rollins said CMS is not formally approving state frameworks but views Louisiana’s approach as broadly aligned with its expectations.

Other Commissioners asked about presumptive eligibility, which will rely on self-attestation for CE, and about engagement with hospitals, federally qualified health centers, and community organizations, which panelists said is not yet a central focus for most states. Commissioners also asked about appeals capacity and provider rates for a potentially higher-acuity population. On rates, Mr. Rollins said heavy use of self-attestation may limit how useful 2027 data will be for future rate setting.

Lastly, one Commissioner asked what level of procedural disenrollment should cause concern. Ms. Saunders said results will vary widely based on each state’s ex parte performance and pointed to Nebraska, with its broad self-attestation, extensive condition list, and small population, as an early case study. Neither panelist could yet share results from the early-implementing states.

STATE DIRECTED PAYMENTS AND HEALTH CARE-RELATED TAXES: SUMMARY OF PROPOSED RULES

This session began with MACPAC staff providing background on the limits to SDPs and provider taxes. Staff then summarized the SDP proposed rule to implement SDP payment limits and the targeted Medicaid payment limit in Fee-for-Service. Staff then summarized the proposed rule implementing changes to provider taxes, including changes to the indirect hold harmless (safe harbor) threshold, permissible classes, and eliminating the 75/75 test. Staff also highlighted the comment letters submitted to CMS about the proposed rules.

Commissioner Discussion

Commissioners had several questions about the new class of health insurers. One Commissioner asked why CMS added the class when other providers, particularly home and community-based services providers, have long sought one. Staff said CMS was aware of a few states with taxes on insurers that may be impermissible under current regulations and appeared to want to prevent states from shifting taxes to a new class outside the safe harbor limits. Another Commissioner asked whether the premium taxes that most states levy on insurers could be pulled into the class. Staff said the rule does not clearly separate the new class from the existing managed care organization class, which is why the Commission asked for clarification.

Several Commissioners focused on the scale and administrative burden of the SDP rule. One Commissioner noted that CMS’s estimate of savings from the proposed rule is an order of magnitude larger than the estimate for the underlying legislation and said removing that much money from the system will affect access. The same Commissioner said it would be helpful to hear directly from CMS about how it plans to use the new reporting it will require from states and providers. Other Commissioners asked how states would calculate service-level Medicare equivalents. Staff explained that states could run Medicaid claims through the Medicare Severity Diagnosis-Related Group (MS-DRG) grouper or use CMS’s online pricing tool, and that vendors, hospitals, and plans operating in both Medicare and Medicaid may help. They also said physician services should be easier because payment is largely based on CPT codes. In contrast, services without a Medicare equivalent, such as home and community-based services, would be limited to the state plan rate. One Commissioner suggested that CMS review summary-level data first and conduct service-level reviews only where issues are identified, rather than requiring states to reprice millions of managed care claims.

Commissioners also raised the following concerns about access and innovation:

• Rural hospitals may reduce services such as maternity care or close before the effects of the new limits are fully understood, and those services are hard to restore.
• Service-level limits could constrain value-based payment arrangements, including efforts to improve access to maternity and dental services.
• Rural and tribal communities may be hit at the same time by lower payments and coverage losses from CE requirements.
• If payment increases are less available, MACPAC could examine other barriers to provider participation, such as payment delays and documentation requirements, particularly in behavioral health.

One Commissioner noted that MACPAC did not comment on CMS’s choice of phase-down method, which staff described as faster but simpler to administer. The same Commissioner highlighted that expansion states face lower safe harbor thresholds than non-expansion states, which could offer a way to compare access effects between the two groups over time. Another Commissioner said they would like to hear directly from expansion states about the options they are considering to replace provider tax revenue for the non-federal share.

INPATIENT HOSPITAL PAYMENT INDEX: COMPARISON ACROSS STATES

The session began with MACPAC staff presenting an update to the Commission’s Inpatient Hospital Payment Index. The update will be published in 2027 and is being developed using 2022 data. Staff provided Commissioners an overview of the methodology, the index findings, and the limitations of the analysis. Staff then discussed next steps and future analysis plans, including comparing Medicaid inpatient hospital payment to Medicare payment rates, grouping Medicaid claims to allow service-level comparison, and beginning a similar analysis for outpatient services.

Commissioner Discussion

Commissioners broadly praised the work and the transparency around its limitations. One Commissioner said the net payment measure is especially valuable because it reflects the money actually available to support hospital operations, but suggested acknowledging that some states use provider tax revenue to fund Medicaid expansion or general revenue rather than hospital payments, which means hospitals in those states bear a larger net burden. Another Commissioner asked how the 2017 index has been used. Staff said it has been widely cited, including by the American Hospital Association, because no comparable public analysis existed.

Commissioners also raised technical questions. Staff confirmed that the national average is weighted, that inpatient psychiatric hospitals were excluded, and that no specific adjustment was made for third-party liability. Two Commissioners suggested applying the wage and case mix adjustments to gross and net payments as well as base payments, since a dollar goes further in some states than others. They asked that the two adjustment factors be reported separately. Staff said they applied the adjustments only to base payments because supplemental payments are typically set as lump sums that do not vary with acuity but acknowledged the case for broader application.

Several Commissioners suggested ways to break out or contextualize the findings, including by:

• Comparing results for expansion and non-expansion states, and considering the role of uncompensated care pools in states such as Texas and Florida
• Vetting the variation in net payments with researchers and states before publication, since hospitals will be very interested in where they fall
• Accounting for the fact that plans often negotiate inpatient and outpatient rates together
• Separating results for high-Medicaid critical access hospitals, freestanding children’s hospitals, and urban, rural, and frontier hospitals, as well as public, private, and teaching hospitals
• Including a table of average dollar payments per stay by state, since index values can mask large differences in actual amounts

One Commissioner cautioned that 2022 data predate substantial growth in SDPs and would likely look very different today. The same Commissioner recalled that when Ohio previously reset its hospital rates, urban hospitals were at roughly 80% cost coverage and rural hospitals at roughly 35%, and raising rural hospitals to parity cost relatively little because of their small share of spending. On the outpatient analysis, staff said they will identify services using CMS’s federally assigned service categories and may need to benchmark against cost reports rather than Medicare because of gaps in outpatient data.

At the conclusion of the session, MACPAC opened the floor for public comment. Rob Nelb, Director of Policy at America’s Essential Hospitals, shared the Commission’s concerns about the service-level SDP limit and noted that his organization led a coalition letter with more than 24 provider, plan, and consumer groups on its effect on value-based payment. He said the Congressional Budget Office projected the SDP provisions would reduce spending by about $149 billion over 10 years. He said this contrasts with CMS projections of $510 billion in reductions under the proposed rule, or 3.4 times the congressional estimate. He urged the Commission to examine the effects on essential hospitals. He pointed to his organization’s proposed essential health system designation, which builds on MACPAC’s prior work on deemed disproportionate share hospitals.

On September 16, the House Science, Space, and Technology Oversight Subcommittee held a hearing to discuss how to balance biotechnology innovation and biosecurity. Members expressed concern about the administration’s gain-of-function policy, which was recently implemented in line with a 2025 Executive Order on the subject. There was bipartisan agreement that current policy is not striking the right balance between protecting U.S. research and enabling it to grow. Questions were also asked about the policy’s effects on broader issues within the biotech industry including on the domestic research environment the scientific workforce, and competition with China.

OPENING STATEMENTS

• Full Committee Chairman Brian Babin (R-TX-36)
• Full Committee Ranking Member Zoe Lofgren (D-CA-18)
• Oversight Subcommittee Chairman Rich McCormick (R-GA-7)
• Oversight Subcommittee Ranking Member Emilia Sykes (D-OH-13)

WITNESS TESTIMONY

• Dr. Anemone Franz, Visiting Research Fellow, American Enterprise Institute – Testimony
• Mr. Joshua Hodges, Visiting Fellow, Hoover Institution – Testimony
• Dr. Gigi Gronvall, Professor, Bloomberg School of Public Health, Johns Hopkins – Testimony

MEMBER DISCUSSION

Regulatory Uncertainty

Members from both parties had clarifying questions about the overall impacts of the gain-of-function policy and what the administration and Congress can do to reduce uncertainty. Full Committee Chair Brian Babin (R-TX-36) and Rep. Daniel Webster (R-FL-11) asked who oversees the current safety standards for gain-of-function research and what needs to be done to ensure the research is not misused. Mr. Hodges described this as one of his main areas of concern, as oversight is currently spread out across 15 agencies with no singular leader. In terms of improving oversight, he stated there needs to be better intelligence-gathering methods, and there should be someone accountable to Congress and the Executive. Chairman Babin also asked Dr. Franz how Congress should distinguish legitimate beneficial research from dangerous ones. She explained the focus should be on research with potential to cause outsized harm to society based on a risk-benefit analysis framework.

Oversight Subcommittee Ranking Member Emilia Sykes (D-OH-13) and Rep. Suzanne Bonamici (D-OR-1) asked Dr. Gronvall about the direct impacts of the gain-of-function policy and how the administration can better engage with the research community. Dr. Gronvall explained that the policy lacks any exception process for research with clear public health importance, researchers are self-censoring proposals out of concern for scrutiny, and there is no list of what is in- and out-of-scope. She further explained that the administration needs to talk to the researchers who are part of the regulated community to understand what they actually need.

Workforce

Democratic members were interested in understanding how this new policy, and additional policies implemented by the administration, had impacted the scientific workforce. Ranking Member Sykes asked Dr. Gronvall about the policy’s effects on the broader scientific workforce. Dr. Gronvall explained that there has been a lot of self-censorship as researchers try to navigate the changing policies and aim to avoid negative attention on their institution and work. She also stated that early career researchers have been hit the hardest as they are most dependent on consistent funding and most exposed to grant cancellations. Rep. Bill Foster (D-IL-11) focused on the contributions from international STEM scientists and the impact of changing immigration policies on that population. Dr. Gronvall confirmed that universities have not been able to accept as many students due to visa concerns, further harming the early career workforce, and emphasized the long-time importance international researchers have had in the U.S.

Competition

There was bipartisan discussion about maintaining U.S. leadership in biotech production and preventing important research from moving overseas, specifically to China. Full Committee Ranking Member Lofgren (D-CA-18) asked about the near-term consequences of the competitive shift in biotech innovation. Dr. Gronvall shared that U.S. researchers are already unable to be fully present in the international scientific community because of other policies and China is filling those gaps. Mr. Hodges explained that China is rapidly catching up to us, thanks to the U.S. funding Chinese development, and this is not a new phenomenon to blame on the current administration. He further stated that the country leading in biotech gets to set global standards, which is vital for the U.S. to maintain. Reps. Foster and April McClain

Dr. Gronvall and Mr. Hodges agreed this is a serious concern, which they have been watching for a long time, as it is cheaper and faster to get drugs developed in China. Mr. Hodges explained the risk mirrors what happened with rare earth minerals in that China could restrict American access to drugs and everyday products. All three witnesses agreed it is necessary to have a coordinated national strategy to match China’s whole-of-government approach.

Rep. Nicholas Begich (R-AK-At-Large) asked Mr. Hodges what Congress could do to move production back to American soil. He noted that China surpassed the U.S. in total clinical trials in 2020 and said the remaining advantage lies in lab innovation rather than manufacturing. Mr. Hodges urged Congress to include biotechnology in outbound investment legislation to invest more time and resources in the field.

On September 16, 2026, the Senate Health, Education, Labor, and Pensions (HELP) Committee held a hearing to consider the nominations of Chris Klomp, to be Department of Health and Human Services (HHS) Deputy Secretary, Dr. Nicole Saphier, to be US Surgeon General, and Dr. Timothy Westlake, to be Assistant Secretary for Mental Health and Substance Use. The nominees must next be voted out of Committee, Mr. Klomp by the Senate Finance Committee and the others by the HELP Committee, before consideration by the full Senate.

OPENING STATEMENTS

• Chairman Bill Cassidy (R-LA)
• Sen. Tammy Baldwin (D-WI)

WITNESS TESTIMONY

• Chris Klomp, MBA, to be HHS Deputy Secretary – Testimony
• Nicole Saphier, MD, to be US Surgeon General – Testimony
• Timothy Westlake, MD, to be Assistant Secretary for Mental Health and Substance Use – Testimony

MEMBER DISCUSSION WITH MR. KLOMP

Improving HHS

As with Mr. Klomp’s hearing before the Senate Finance Committee, there was bipartisan interest in how Mr. Klomp plans to improve the function and coordination of HHS. Sens. Tim Kaine (D-VA) and Lisa Murkowski (R-AK) both had concerns about the lack of coordination between HHS and Congress and the Indian Health Service, respectively, in providing technical assistance and consultation. Mr. Klomp assured the senators he intends to improve HHS coordination and wants to continue to work with their offices to provide assistance as needed. Sen. Roger Marshall (R-KS) asked about the status of technological advancement at HHS. Mr. Klomp shared that he is actively working with the Centers for Medicare and Medicaid Services (CMS) to update their information technology systems by bringing in qualified professionals and funding projects. Sen. John Hickenlooper (D-CO) asked how HHS intends to preserve scientific integrity. Mr. Klomp said there needs to be a distinction between science and policy, and that policy conversations should be based on science. Mr. Klomp also committed to publishing HHS research.

Other Topics

• Sen. Tammy Baldwin (D-WI) requested that Mr. Klomp work to restore the “press 3” option on the 988-suicide hotline, which was a specific option for LGBTQ+ youth. Mr. Klomp shared that a new contract for the 988 hotline has been awarded and includes the “press 3” option.
• Sen. Andy Kim (D-NJ) wanted to understand the plan to ensure safe staffing requirements for nursing homes, after the agency rescinded the Biden-era staffing rule. Mr. Klomp stated that he strongly believes in safe staffing levels and will work with experts and the senator’s office to develop a plan on this topic.
• Sen. Patty Murray (D-WA) requested that Mr. Klomp work to repeal the Wasteful and Inappropriate Services Reduction (WISeR) model. Mr. Klomp did not commit, but shared that he would evaluate the model after the report is published by the CMS Innovation Center.
• Sen. Jim Banks (R-IN) asked how HHS intends to improve and speed up Food and Drug Administration (FDA) inspections of both domestic and international manufacturing facilities. Mr. Klomp responded that slow inspections harm manufacturers and that international inspections need to be held to a high standard and include surprise inspections.
• Sen. Banks then asked if the FDA should use clinical research data collected in China in their evaluation, especially if the sites have not been inspected and do not comply with good clinical practice. Mr. Klomp shared the senator’s concern and stated that international data should be held to the same standards as domestic data.

MEMBER DISCUSSION WITH DR. SAPHIER

Role Priorities

Members on both sides of the aisle asked questions about Dr. Saphier’s priorities if confirmed as the surgeon general. Sen. Ashley Moody (R-FL) requested that Dr. Saphier explain the skills that she brings to the role, especially regarding improving the health of children. Dr. Saphier explained that as a physician she can only touch a few patients, but she wants to improve children’s mental health and well-being. Sen. Marshall asked how she plans to address chronic disease. Dr. Saphier shared that she is committed to ensuring people have information about small modifications that can improve health, as well as access to cancer detection and screening. Sen. Susan Collins (R-ME) asked her to expand on cancer screening work, especially as it relates to breast cancer. Dr. Saphier stated that she plans to increase messaging on the importance of early detection and work with other leaders within HHS to improve access and coverage for cancer screenings, as well as finding creative ways to mobilize the health care sector. Sen. Hickenlooper questioned how Dr. Saphier intends to preserve scientific integrity in her role. Dr. Saphier shared that integrity is very important to her as a physician, as well as her commitment to academic medicine.

Vaping

Multiple senators raised concerns about recent actions taken by the FDA in approving additional flavors of vape products and the possible effects of marketing flavors to adolescents. Sens. Kaine, Murkowski, and Collins all asked Dr. Saphier to clarify her position on smoking and vaping, as well as the effects of vaping on adolescents. Dr. Saphier shared that she believes all smoking is harmful for adolescents and is not supportive of marketing encouraging smoking behaviors.

Vaccines

Chairman Bill Cassidy (R-LA) pressed Dr. Saphier on her views about the safety of the Measles, Mumps, and Rubella (MMR) vaccine and whether she believes it causes autism. Dr. Saphier stated that she supports MMR vaccination and has not seen evidence that the vaccine causes autism. Chairman Cassidy then asked if Dr. Saphier supports the recommendation of universal Hepatitis B vaccination for newborns. Dr. Saphier expressed support for Hepatitis B vaccination.

MEMBER DISCUSSION WITH DR. WESTLAKE

Youth Mental Health

There was bipartisan questioning of how Dr. Westlake plans to improve youth mental health. Sen. Marshall asked how to empower the community health model of care. Dr. Westlake shared that it is important to look at the work providers are already doing and find ways to support the needs of each individual community. Sen. Moody questioned how to improve mental health issues related to social media. Dr. Westlake emphasized the need for more connection between families and communities outside of social media. Chairman Cassidy requested a plan to improve the identification and treatment of psychosis after the first episode. Dr. Westlake agreed and shared that he wants to understand what strategies are currently successful and how best to replicate them in other settings. Sen. Murkowski requested Dr. Westlake commit Substance Abuse and Mental Health Services Administration (SAMHSA) resources to improving youth suicide rates, especially in remote and underserved areas. Dr. Westlake agreed and shared that SAMHSA will work with states to see what resources are needed.

Other Topics

• Sen. Maggie Hassan (D-NH) requested Dr. Westlake’s commitment to restoring policy that allows grantees to purchase fentanyl test strips with federal funds as well as reinstate the Drug Abuse Warning Network. Dr. Westlake shared that there is no evidence that fentanyl test strips reduce overdoses so he cannot commit restoring that policy. Dr. Westlake also said he is not aware of the warning network but will look into it and put forward the best policy.
• Sen. Baldwin also asked Dr. Westlake to restore the “press 3” option on the 988-suicide hotline for LGBTQ+ youth. Dr. Westlake stated that he was not at the agency when the decision to remove the “press 3” option was made, but he committed to working through the bureaucratic silos to understand what happened.