On May 30, the Department of Health and Human Services (HHS) released its Fiscal Year 2026 (FY26) discretionary budget request. This summary provides an overview of key agency estimates and justifications, including HHS, Centers for Medicare and Medicaid Services (CMS), the Food and Drug Administration (FDA), the HHS Office of Inspector General.
WHY THIS MATTERS
The annual budget request demonstrates the priorities of the administration – how they intend to staff their agencies, what policies they will work on and what programs they intend to shutter from the previous year. Congress then takes these requests and determines what will be funded through the appropriations bills. Both the House and Senate will start marking up their appropriations bills in June.
REORGANIZATION
The budget repeatedly notes the intention of HHS to drive operational efficiencies by eliminating duplicative functions and consolidating programs that have similar aims.
The budget centralizes administrative functions, reduces 28 operating divisions to 15, closes five regional offices, reduces the level of full-time employees to 90 percent of pre-COVID levels, and ending or downsizing 5,000 contracts.
Administration for a Healthy America
HHS plans to create the Administration for a Healthy America (AHA) by combining:
- Health Resources and Services Administration (HRSA)
- Substance Abuse and Mental Health Services Administration (SAMHSA)
- Office of the Assistant Secretary for Health (OASH)
- National Institute for Environmental Health Sciences (NIEHS)
- Centers for Disease Control and Prevention (CDC) – certain programs
AHA will focus on prevention including:
- primary care
- maternal and child health
- mental health
- substance use prevention and treatment
- environmental health
- HIV/AIDS
- workforce development
- policy, research, and oversight
The Administration for Children, Families, and Communities (ACFC) will be a new division at HHS and will focus on:
- Head Start
- Child Care and Development Block Grant
- social services for children
- program formerly housed in the Administration for Community Living (ACL) such as nutrition services, falls prevention services, home and community-based support, and caregiver support
- National Institute on Disability, Independent Living, and Rehab Research
The budget eliminates the following programs:
Previously in HRSA: Healthy Start, Newborn Screening for Heritable Disorders, Early Hearing Detection and Intervention, Emergency Medical Services for Children, Ryan White Part F, Rural Hospital Flexibility Grants, State Offices of Rural Health, Rural Hospital Stabilization, Family Planning, and 15 workforce programs including some Nursing workforce programs and Medical Student Education.
Previously in CDC: Youth Violence Prevention, Adverse Childhood Experiences, Firearm Injury and Mortality Prevention Research, Traumatic Brain Injury, Elderly Falls, Drowning, Other Injury Prevention Activities, Injury Control Research Centers, the National Occupational Research Agenda, Education and Research Centers, Personal Protective Technology, Other Occupational Safety and Health Research (Total Worker Health), the Amyotrophic Lateral Sclerosis (ALS) Registry, Climate and Health, Trevor’s Law, Environmental and Health Outcome Tracking Network, and Asthma.
Previously in SAMHSA: Mental Health Awareness Training, Healthy Transitions, Infant and Early Childhood Mental Health, Mental Health Children and Family Programs, Consumer and Family Network Grants, Mental Health System Transformation, Project LAUNCH, Primary and Behavioral Health Care Integration Programs, Mental Health Crisis Response Partnership Program, Homelessness Prevention, Mental Health Criminal and Juvenile Justice Programs, Assertive Community Treatment for Individuals with Serious Mental Health Illness, Homelessness Technical Assistance, Minority AIDS, Seclusion and Restraint, Minority Fellowship Program, Tribal Behavioral Health Grants, Interagency Task Force on Trauma Informed Care, Strategic Prevention Framework, Sober Truth on Prevention Underage Drinking, Screening, Brief Intervention and Referral to Treatment, Targeted Capacity Expansion, Grants to Prevent Prescription Drug and Opioid Overdose-Related Deaths, First Responder Training, Improving Access to Overdose Treatment, Pregnant and Postpartum Women, Recovery Community Services Program, Substance Abuse Treatment Children and Families, Treatment Systems for Homeless, Building
Communities of Recovery, Substance Abuse Treatment Criminal Justice activities, Emergency Department Alternatives to Opioids, Treatment, Recovery, and Workforce Support, Peer Support Technical Assistance Center, Comprehensive Opioid Recovery Centers, Youth Prevention and Recovery Initiative, and Drug Abuse Warning Network.
Previously in OASH: Office of Population Affairs, Teen Pregnancy Prevention, Secretary’s Minority HIV/ AIDS Fund, Kidney X, Stillbirth Task Force, and Sexual Risk Avoidance.
National Institutes of Health
The National Institutes of Health will be reorganized into eight institutes. Reiterating the administration’s commitment to “gold standard science,” transparency, and the restoration of scientific integrity, the request prioritizes research related to research on nutrition and environmental factors that cause chronic disease and as well the rise in autism spectrum disorder.
Assistant Secretary for a Healthy Future
The budget creates an Assistant Secretary for a Healthy Future to bring together the Administration for Strategic Preparedness and Response and the Advanced Research Project Agency for Health (ARPA-H) into the. The Assistant Secretary’s mandate includes:
- addressing chronic disease
- America-made manufacturing and rural access
- proactive approaches to healthy well-being
- healthcare security, efficiency, and transparency
- American leadership in frontier health technologies
Consumer Product Safety Commission
The budget also changes the status of the Consumer Product Safety Commission (CPSC) from an independent agency and moves the functions of the commission into the HHS Office of the Secretary.
MEDICARE
The budget mentions $119 million for a new Prevention Innovation Program to promote broadband access to nutrition and physical activity and reduce dependence on medication. Included are $20 million for the Chronic Care Telehealth Centers for Excellence Program and $8 million for the Telehealth Nutrition Services Network Grant Program.
On prior authorization, CMS will continue to test and implement AI activities in medical review and prior authorization of the Medicare fee-for-service program, including AI to review medical records and make a recommendation regarding payment. CMS will also continue to look for services or items showing unnecessary increases in volume or utilization due to fraud, waste, or abuse, for which prior authorization would be appropriate. While CMS has focused on DMEPOS items and power mobility devices, the agency notes its success in requiring prior authorization for certain outpatient hospital department services which started in FY20.
CMS is working to expedite Medicare Advantage Risk Adjustment Data Validation (RADV) audits so the agency will be current with its audits of prior payment years and new audits will be started as close to the most recent payment year as possible. CMS is also developing a strategy to make it more efficient at identifying the approximately $17 billion in overpayments while reducing agency burden by providing more effective oversight of the MA program. Recently, CMS began conducting utilization management audits for MA plans that were effective Calendar Year 2024.
The budget includes $22 million to restart the durable medical equipment, prosthetics, orthotics, and supplies competitive bidding program.
ACA MARKETPLACE
The budget assumes the enhanced premium tax credits are not extended beyond 2025. Regardless of the administration’s assumptions, extending the tax credits requires Congressional action.
In FY 2025, CMS announced a reduction in funding for the Navigator program to $10 million per year and estimates that $360 million will be saved over the next four years.
In FY 2026, CMS is proposing a Marketplace Integrity rule which would:
- revise three standards relating to past-due premium payments
- exclude Deferred Action for Childhood Arrivals recipients from the definition of “lawfully present”
- define the evidentiary standard HHS uses to assess an agent’s, broker’s, or web-broker’s potential noncompliance
- reinstate the one year requirement for failure to file and reconcile
- strengthen income eligibility verifications for premium tax credits and cost-sharing reductions
- amend annual eligibility redeterminations for consumers in $0 premium plans
- eliminate the special enrollment period for consumers with annual household incomes below 150 percent of the federal poverty level
- amend the automatic reenrollment hierarchy
- shorten the annual open enrollment period
- tighten special enrollment periods
- widen the de minimis thresholds for the actuarial value for plans subject to essential health benefits
- (EHB) requirements and for income-based cost sharing reduction plan variations
- amend the premium adjustment percentage methodology,
- prohibit inclusion of gender affirming care as an essential health benefit
MEDICAID
CMS is prioritizing 1115 waiver budget neutrality policy and oversight, and monitoring and evaluation of demonstration financial and programmatic outcomes. The agency has updated its approach to budget neutrality formulation and is providing technical assistance to states as well as conducting reviews of states’ reported demonstration expenditures.
CMS will also try to ensure proper billing and rate reimbursement in the Home and Community Based Services (HCBS) waiver and state plan programs, including rate setting and financial reporting for PACE. The focus will be on ensuring compliance, providing technical assistance, and fraud and abuse in the delivery of personal care and other HCBS services.
Through the proposed rule called “Preserving Medicaid Funding for Vulnerable Populations – Closing a Health Care-Related Tax Loophole,” CMS is proposing to update the legal requirements in State proposals for Medicaid tax waivers to ensure that proposals using what the administration calls an algorithmic loophole are not approvable. The focus of this proposed rule is on taxes on managed care organizations.
The budget recommends shifting the 340B Drug Pricing Program to CMS to allow for “streamlined processes and the ability to utilize inhouse drug-pricing resources and expertise.”
CMS PERFORMANCE MEASURES
CMS indicates the agency will develop new performance measures that support the MAHA initiative. The status of current CMS performance measures can be found on electronic pages 144-166 of this document. CMS is discontinuing several measures (see electronic pages 167ff), including:
- ensure beneficiary telephone customer service
- increase Marketplace enrollment nationwide
- increase Federally facilitated Marketplace enrollment among underrepresented populations
- increase the national rate of low-income children and adolescents, who are enrolled in Medicaid and Medicaid expansion Children’s Health Insurance Programs (CHIP), who receive any preventive dental service
- increase the proportion of providers performing initial enrollment in the Medicare Program online
- reduce the infection control survey deficiencies (of F880) for nursing homes that have received a Targeted Response Quality Improvement Initiative (TR-QII)
- reduce Healthcare Associated Infections [HAIs] in Critical Access Hospitals (CAH)
- maintain or exceed percent of beneficiaries in Medicare fee-for-service who report access to care
- maintain or exceed percent of beneficiaries in Medicare Advantage (MA) who report access to care
- reduce the average out-of-pocket share of prescription drug costs while in the Medicare Part D coverage gap
- percentage of CMMI model awardees participating in learning activities
- percentage of Original Medicare beneficiaries in an accountable care relationship
FDA AND PCORI
The budget decreases FDA’s discretionary request by 11.4 percent from FY25 due to focusing the agency on its core functions, reducing its physical footprint, and reducing the number of full-time employees by 1,940. The agency proposes MAHA activities to address chronic disease, restore trust in the food system and strengthen the country’s nutritional and food safety. The budget increases by 4 percent the medical device user fee program to review new medical devices.
The budget proposes to eliminate the Patient-Centered Outcomes Research Institute (PCORI). Established under the ACA, PCORI funds patient-centered comparative clinical effectiveness research.
