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The following is the latest health policy news from the federal government for July 31 to August 6.  Some of the language used below is taken directly from government documents.

Congress

  • The Senate is expected to vote on its version of a continuing resolution (CR) before leaving for recess; it would extend federal government funding through December 11.  Notably, the legislation includes language that would prevent the Office of Management and Budget from moving forward with its proposed change in how federal grants are awarded and overseen.
    • Because appropriations bills have not cleared both chambers of Congress, the federal government faces a September 30 funding deadline and will require a CR to avoid a lapse in spending authority.  The House advanced its own CR before recess; both chambers must pass identical bills for a CR to become law.
  • The Senate Budget Committee held a hearing titled “Medicaid:  The Reality.”  Go here for statements from the committee’s chair and ranking member, a list of witnesses and their testimony, and a recording of the hearing.
  • Only the Senate was in session this week.  The chamber is scheduled to leave on August 7, though this could change depending on lawmakers’ ability to advance pending legislative priorities.  The Senate is expected to return on September 14 and the House on August 31.

New Final Medicare Payment Regulations

Final FY 2027 Medicare Inpatient Prospective Payment System Rule

CMS has published its final inpatient prospective payment system rule presenting how it will pay for and govern Medicare hospital inpatient services in FY 2027.  In the final rule, CMS announced a net increase of 2.3 percent in Medicare hospital inpatient payments.  Other major provisions in the final rule include:

  • An outlier threshold of $49,346, a substantial increase over the FY 2026 threshold.
  • A modest increase of $230 million in the Medicare disproportionate share (Medicare DSH) uncompensated care pool, to $7.94 billion.
  • The expiration of special payments for Medicare-Dependent Hospitals and low-volume hospitals at the end of the year unless Congress intervenes to save these payments, as it has in the past.
  • The finalization of CMS’s proposal to continue its transition payment adjustments associated with the discontinuation of the low-wage index policy and the application of a budget neutrality adjustment to the standardized amount for all hospitals.
  • The reintroduction, modification, and expansion of the Comprehensive Care for Joint Replacement Model beginning on January 1, 2028.  Most hospitals will be required to participate in the program.
  • Changes in the Transforming Episode Accountability Model (TEAM).
  • Revisions of graduate medical education policies addressing the selection criteria for participating medical residents and the criteria for identifying new residency programs.
  • The addition, modification, and removal of measures in the Hospital Inpatient Quality Reporting Program, Medicare Promoting Interoperability Program, Hospital Readmissions Reduction Program, and Hospital Value-Based Purchasing Program.

Learn more about these and other aspects of Medicare’s final FY 2027 hospital inpatient prospective payment system rule, which takes effect on October 1, from this CMS fact sheet; a separate CMS fact sheet about the return and expansion of the Comprehensive Care for Joint Replacement Model; and the final rule itself.

Final FY 2027 Medicare Long-Term Care Hospital Prospective Payment System Rule

CMS has published its final rule presenting how it will pay for and govern Medicare long-term-care hospital (LTCH) services in FY 2027.  In the final rule, CMS announced a net increase of 2.3 percent in Medicare LTCH payments.  CMS will maintain the LTCH outlier threshold at its current 2026 level.  It also removed two measures from the LTCH Quality Reporting Program and revised the data submission deadline, shortening that deadline to approximately 45 days after the end of each calendar year quarter.  Learn more about the final FY 2027 Medicare LTCH prospective payment system rule from this CMS fact sheet and the final rule itself.

Final FY 2027 Medicare Inpatient Rehabilitation Facilities Prospective Payment System Rule

CMS has published its final rule presenting how it will pay for and govern Medicare-covered inpatient rehabilitation facility (IRF) services in FY 2027.  In the final rule, CMS announced a net increase of 2.3 percent in Medicare IRF payments.

The final rule also:

  • Updates the outlier threshold, case-mix-group relative weights, average length-of-stay values, and wage index.
  • Revises the 36-hour rule and updates the interdisciplinary team (IDT) meeting requirement to mandate that the initial meeting must be completed on or before the fourth day of admission and clarifies that subsequent IDT meetings must be conducted weekly.
  • Requires that all – not just some – therapies be initiated within 36 hours of admission to an IRF.
  • Applies the third and final year of the phase-out of the rural adjustment for IRFs transitioning from rural to urban that were reclassified due to updated Core-Based Statistical Area delineations.
  • Finalizes the outlier threshold to maintain outlier payments at three percent of total payments.
  • Shortens the timeframe for data submission from 4.5 months to approximately 45 days beginning with the FY 2029 IRF Quality Reporting Program.

Learn more about the final rule from this CMS fact sheet and from the final rule itself.  The final rule takes effect on October 1.

Final FY 2027 Medicare Hospice Rule

CMS has published its final rule presenting how it will pay for and govern Medicare-covered hospice services in FY 2027.  In the final rule, CMS announced a net increase of 2.3 percent in Medicare hospice payments and the continuation of the statutory aggregate cap limiting the overall payments made to a hospice annually.  The FY 2027 cap will be $36,174.75, up slightly from the FY 2026 cap of $35,361.44.

The final rule also:

  • Establishes a new Service and Spending Variation Index (SSVI) to help enhance oversight.
  • Refines quality reporting penalties.
  • Provides flexibility for telehealth and discharge procedures.
  • Adds an icon on the Medicare.gov Care Compare tool, beginning in FY 2028, identifying hospices that fail to submit any quality data or submit less than the required 90 percent within a given year.
  • Requires providers to furnish a “Hospice Election Statement Addendum” to their Medicare patients upon admission that explicitly details items, services, or medications deemed unrelated to their terminal illness.

Learn more about the final FY 2027 Medicare hospice rule from this CMS fact sheet and from the final rule itself.  The final rule takes effect on October 1.

340B Rebate Model Pilot Program

Following a federal court rejection earlier this year of a previously announced pilot program to alter how the 340B drug pricing program is administered, HHS’s Health Resources and Services Administration (HRSA) has announced that it will implement a revised 340B Rebate Model Pilot Program through which qualifying drug manufacturers will be able to provide the 340B ceiling price to eligible 340B providers through rebates, an approach manufacturers have increasingly sought, rather than upfront discounts, as is currently the case.  HRSA believes its model will:

  • Improve claims-level transparency and accountability through transaction-level verification.
  • Strengthen verification of eligible 340B transactions before rebates are issued.
  • Prevent duplicate discounts.
  • Generate better data to inform oversight and future policymaking.
  • Preserve the long-term sustainability of the 340B program.

Acknowledging many of the concerns voiced by 340B-participating providers in response to a recent request for information, HRSA believes its revised model balances the burden on program stakeholders with the benefits of transparency and program integrity, building into its pilot program the following protections, some of which existed in the prior iteration of this pilot:

  • The scope is limited to a specific set of drugs – those in the Medicare Drug Price Negotiation Program for 2026 and 2027.  HRSA states that these drugs constitute 5.5 percent of 340B drug sales.
  • Manufacturers must permit covered entities to order the selected drugs under existing distribution mechanisms.
  • Manufacturer data collection is limited to a specific list of data elements that participating 340B entities should already have readily available.
  • Manufacturers must ensure that rebates are paid within 10 calendar days of completed data submission.
  • Manufacturers may not deny rebates based on eligibility or compliance concerns with diversion or Medicaid duplicate discounts.
  • Participating 340B entities can raise concerns about manufacturers not meeting the 10-day requirement for payment of rebates and concerns about denials to HRSA, which will have the authority to terminate manufacturers’ participation in the program.

Manufacturers have until August 24 to submit plans to participate in the model and HRSA plans to issue approvals, if any, by September 24.  The rebate pilot will begin on January 1, 2027.

Learn more about HRSA’s 340B pilot program from its formal notice and this HRSA news release.

Note that the last four pages of the HRSA notice present specific details about how the pilot will operate.

Centers for Medicare & Medicaid Services (CMS)

  • CMS has shared with the states the document “State Implementation Tool:  Section 71109 of the Working Families Tax Cut (WFTC) Legislation,” which it explains is designed to help states with their implementation of the statutory changes addressing Medicaid eligibility made by last year’s H.R. 1 budget bill.  The document outlines tasks CMS views as critical to accurately determining eligibility for full Medicaid and Children’s Health Insurance Program benefits; to providing the appropriate scope of coverage; and to properly claiming federal financial participation (FFP) for non-citizens.  A major aspect of the document is helping states adapt to the 2025 law’s new limits on federal funding for non-citizen Medicaid and CHIP coverage and how to distinguish non-citizens from lawful permanent residents for whom the federal government will continue to provide full FFP.  Learn more from the CMS state implementation tool document.
  • CMS has posted an announcement that beginning on November 1, 2026, the federal Independent Dispute Resolution (IDR portal), soon to be known as the IDR Gateway, will support the treatment of batched qualified IDR items and services requirements under the federal IDR Operations Final Rules.  Learn more about the upcoming change, including changes in the portal’s functionalities, from this CMS notice.
  • CMS has notified some facilities that it has determined that they are out of compliance with quality reporting program requirements for CY 2025 and that their non-compliance will affect their FY 2027 annual payment update.  Non-compliance notifications were placed into facilities’ “My Reports” folders in the Internet Quality Improvement and Evaluation System for hospices, inpatient rehabilitation facilities, long-term care hospitals, and skilled nursing facilities on August 5 and also are being distributed by the Medicare Administrative Contractors (MACs).  Facilities that receive a letter of non-compliance may submit a request for reconsideration to CMS via email no later than September 4.  Learn more from this CMS announcement.
  • CMS has updated its Electronic Clinical Quality Measure (eCQM) Data Element Repository for the CY 2027 reporting and performance periods.  This repository provides detailed information about the data elements used in eCQMs that support CMS’s quality reporting and incentive programs.  Learn more, and find a link to the updated data repository, in this CMS announcement.
  • CMS has added the following item to its Quality Payment Program resource library.  (Note:  clicking these links may give a prompt to download a file that may be a zip file.)

Department of Justice

The Justice Department has negotiated a $14.1 million settlement to resolve allegations that a company that manages, owns, and operates provider groups violated the False Claims Act by causing the submission of false diagnosis codes to increase payments that the provider groups receive from Medicare for services provided to Medicare Advantage patients with the understanding that the company would share its excess payments with those patients’ Medicare Advantage plans.  Learn more about the case and the settlement from this Department of Justice news release.

The Justice Department, the U.S. Attorney’s Office for the Eastern District of Pennsylvania, and Pennsylvania’s Attorney General have announced criminal charges against 19 defendants for their alleged participation in various home care fraud schemes involving more than $4 million in claims to Medicare and Medicaid.  Learn more about the expansion of the scope of activity of the Justice Department’s National Fraud Enforcement Division, through a significant expansion of the Division’s Northeast Health Care Fraud Strike Force to Philadelphia, that led to these charges, and about the charges themselves, from this Justice Department news release.

Department of Health and Human Services (HHS)

HHS’s Substance Abuse and Mental Health Services Administration (SAMHSA) has awarded $73.2 million in grants to strengthen children’s mental health services and suicide prevention programs and to expand assisted outpatient treatment for those with serious mental illness.  Learn more about the kinds of grants awarded and find links to lists of the grant recipients in this HHS news release.

Medicaid State Plan Amendments

CMS has approved state plan amendments for Medicaid and CHIP programs for the following states:

  • Kansas, updating the indirect medical education factor
  • Louisiana, amending provisions governing the pharmacy benefits management program
  • Maryland, updating the existing community violence prevention benefit
  • Nevada, establishing reimbursement authority for Nevada-accredited university training clinics as eligible Medicaid providers of behavioral health services
  • North Carolina, expanding eligible provider types and payment methodologies for school-based services
  • Ohio, updating outpatient hospital reimbursement to Enhanced Ambulatory Patient Grouping relative weights
  • Ohio, updating inpatient hospital reimbursement policies
  • Texas, updating the state’s Medicaid Estate Recovery Program
  • Texas, implementing the Patient Driven Payment Model for Long Term Care rate methodology and rates for nursing facilities

Health Policy Newsletters, Reports, and Videos

Centers for Disease Control and Prevention (CDC)

The Senate confirmed Erica Schwartz, M.D., as the Director of the Centers for Disease Control and Prevention (CDC) in a 51-44 vote.  Dr. Schwartz previously served as deputy surgeon general during President Trump’s first term.

Medicaid and CHIP Payment and Access Commission (MACPAC)

MACPAC submitted a comment letter to CMS Administrator Dr. Mehmet Oz on his agency’s interim final rule with comment period on the community engagement requirement for certain individuals seeking Medicaid coverage.  MACPAC expressed its support for the policy included in the interim final rule that requires state submission of monitoring data that will provide information regarding the status and success of community engagement implementation.  At the same time, however, MACPAC also expressed concern that the short implementation timeline, complexity of policies, and scope of needed systems changes will impede states’ ability to implement community engagement requirements in a timely way that ensures that eligible individuals obtain and maintain coverage.  MACPAC recommended that CMS develop a transparent monitoring and evaluation plan for assessing community engagement implementation.  Learn more from MACPAC’s letter to CMS and its recommendations for implementing Medicaid community engagement requirements.

Stakeholder Events

CMS – 2026 National Provider Compliance Conference – August 11–12

On Tuesday, August 11 and Wednesday, August 12, CMS will hold a national provider compliance conference that will bring together Medicare Administrative Contractors (MACs) and Center for Program Integrity experts to provide compliance professionals with the information and tools they need to submit Medicare Part A, Part B, home health and hospice, and durable medical equipment claims.  Learning opportunities will include individual presentations, Q&A segments, panel discussions, and a dedicated exhibit area for engagement between MACs and providers.  The target audience for this conference is Medicare fee-for-service providers only, including medical review contractors, compliance officers, nurse and billing managers, medical record staff, coders, and provider associations.  Go here to learn more about the conference and to register to participate.  The conference will be held in Charlotte and will have no virtual component and a limited number of participants.

CMS – Advisory Panel on Hospital Outpatient Payment – August 24

CMS’s Advisory Panel on Hospital Outpatient Payment will meet virtually on Monday, August 24 at 9:30 (eastern).  The purpose of this panel is to advise CMS on the clinical integrity of the Ambulatory Payment Classification groups and their associated weights, which are major elements of the Medicare hospital outpatient prospective payment system and the ambulatory surgical center payment system and supervision of hospital outpatient therapeutic services.  Interested parties are invited to submit comment letters and presentations.  Learn more about submitting such materials and how to participate in the meeting from this CMS notice.

CMS – PEPPER Training for LTCHs, IRFs, and IPFs – August 25

On Tuesday, August 25 at 1:00 (eastern),  CMS will hold a webinar to provide training for long-term-care hospitals, inpatient rehabilitation facilities, and inpatient psychiatric facilities on how to access, interpret, and use their latest PEPPER (Program for Evaluating Payment Patterns Electronic Report) report to support data-driven decision-making.  Go here to register to participate.

CMS – CCSQ Quarterly Stakeholder Webinar – August 26

CMS’s Center for Clinical Standards and Quality (CCSQ) will provide an update on its work to strengthen health care quality, safety, and coverage and share recent policy developments on Wednesday, August 26 at 11:00 (eastern).  Go here to register to participate.

MedPAC – Commissioners Meeting – September 3-4

MedPAC’s commissioners will hold their next public meeting virtually on Thursday, September 3 and Friday, September 4.  An agenda for the meeting and information about how to participate has not yet been posted; when they are, they will be found here.

CMS – PEPPER Training for Home Health Agencies and Partial Hospitalization Programs – September 24

On Thursday, September 24 at 1:00 (eastern),  CMS will hold a webinar to provide training for home Health Agencies and Partial Hospitalization Programs facilities on how to access, interpret, and use their latest PEPPER (Program for Evaluating Payment Patterns Electronic Report) report to support data-driven decision-making.  Go here to register to participate.

MACPAC – Commissioners Meeting – September 24-25

MACPAC’s commissioners will hold their next public meeting on Thursday, September 24 and Friday, September 25.  An agenda for the meeting and information about how to participate has not yet been posted; when they are, they will be found here.

CMS – PEPPER Training for Skilled Nursing Facilities – September 29

On Tuesday, September 29 at 1:00 (eastern), CMS will hold a webinar to provide training for skilled nursing facilities on how to access, interpret, and use their latest PEPPER (Program for Evaluating Payment Patterns Electronic Report) report to support data-driven decision-making.  Go here to register to participate.