Summary
Congress is in recess until after Labor Day and will resume on September 2. During this period, Impact Health Policy Partners will provide a series of brief policy outlooks examining key priority areas likely to shape the health policy landscape this fall. This week, we are examining Medicare and the Affordable Care Act (ACA) marketplace.
Medicare Payment: CY 2026 Proposals and the Road Ahead
The Center for Medicare & Medicaid Services’ (CMS’) CY 2026 proposed payment rules reaffirm the administration’s commitment to policies that prioritize site neutrality, transparency, and value-based care, with important implications for health care providers. Below is a high-level summary of key proposals, related legislation, and potential next steps.
Hospital Price Transparency
CMS proposes several transparency expansions in the outpatient prospective payment system (OPPS) proposed rule, including requiring hospitals to display negotiated payer rates alongside 10th, 50th, and 90th percentiles in machine-readable files. CMS also seeks to collect data on what hospitals charge Medicare Advantage plans to inform MS-DRG rate-setting for acute care hospitals, signaling a shift toward using transparency data not only for consumer decision-making but also for payment policy.
Several bills in the 119th Congress aim to strengthen or expand price transparency requirements. Most recently, Senators Hassan and Marshall introduced the Fair Billing Act (S. 2497), which would require hospitals to provide patients with clear, itemized bills and prohibit certain surprise billing practices, complementing CMS’s transparency regulations with patient-facing protections. Other notable proposals include the Health Care PRICE Transparency Act (H.R. 267), which would require hospitals and health plans to disclose negotiated rates, cash discounts, and billing codes, and the Patients Deserve Price Tags Act (S. 2355), which would further codify and standardize hospital and insurer price disclosure requirements.
Site-Neutral Payment
Aiming to eliminate incentives for unnecessary site-of-care based shifts, CMS proposes paying physician fee schedule (PFS) rates (about 40 percent of OPPS) for drug administration services furnished in non-excepted off-campus hospital outpatient departments. The agency also proposes phasing out the inpatient-only list over three years beginning in 2026, alongside expanding the ambulatory surgical center covered procedure list by 276 services.
In the PFS proposed rule, CMS introduces a policy to narrow the payment gap between facility and non-facility services by reducing how much facility PE relative value units (RVUs) are tied to work RVUs, cutting it to half the level used for non-facility settings. Specialties that primarily practice in facilities would see lower PE RVUs, while those in non-facility settings would see increases, potentially encouraging providers to deliver care in an office-based setting and reducing incentives for vertical consolidation. CMS also proposes using OPPS cost data to inform RVU calculations for certain services, signaling a broader shift toward setting-agnostic, cost-reflective pricing.
Several bills in the 119th Congress would expand or refine Medicare’s site-neutral payment policies. In the House, the Preventing Hospital Overbilling of Medicare Act (H.R. 3023) would eliminate certain exceptions to site-neutral payment rules for off-campus outpatient departments and require unique provider identifiers to improve billing accuracy. In the Senate, the Ambulatory Settings Site-Neutral Payment Act (S. 1629) would phase in standardized Medicare payments across ambulatory settings beginning in 2027, applying to at least 66 Ambulatory Payment Classifications identified by CMS. Other proposals include targeted exemptions, such as H.R. 1924, which would exclude long-term care hospitals. In addition, a bipartisan policy framework released in late 2024 by Senators Cassidy and Hassan outlines broader reforms with rural and cancer hospital protections, providing a blueprint for future legislative action.
Physician Fee Schedule Reform
CMS seeks to advance structural reforms to the PFS through three CY 2026 proposals:
- A potential 2.5 percent efficiency adjustment applied to non-time-based services’ (e.g., procedures/diagnostics) work RVUs/intraservice time to reflect accrued efficiencies;
- Continued refinement of the Advanced Primary Care Management (APCM) codes that bundle evaluation/management, care coordination, and patient communication into a single payment, supporting longitudinal, team-based care for clinicians in accountable care arrangements; and
- Launch of a mandatory, episode-based payment model for select specialty services. The Ambulatory Specialty Model would provide prospective bundled payments for condition-specific episodes, hold specialists accountable for quality and cost, and align specialty care more closely with population-based models.
Together with the site-neutral proposals, these policies respond to longstanding stakeholder concerns, including those raised by MedPAC, regarding insufficient opportunities for specialty engagement in value-based care, as well as the fee schedule’s misaligned incentives and undervaluation of coordinated care.
In Congress, legislative efforts to stabilize the PFS and modernize MACRA are informed in part by last year’s Senate Finance Committee white paper seeking stakeholder input on long-term payment policy changes. While proposals from that paper were discussed, they were ultimately not included in H.R. 1, and only a temporary 2.5 percent increase to the conversion factor (CF) was applied.
Potential Next Steps
CMS will finalize the CY 2026 rules in November, incorporating changes based on stakeholder feedback. Health care extenders expire at the end of September, coinciding with the close of the fiscal year. With Congress on recess and sharp spending disagreements between the chambers, passage of the FY 2026 budget on time is unlikely, raising the odds of a short-term continuing resolution (CR) or a shutdown. If a CR is enacted, an end-of-year package would be the next viable vehicle for action on the policies above.
However, given fiscal and political constraints, that package will likely be limited to “must-do” items and a small set of bipartisan provisions that produce savings. Broad PFS reform, such as permanent CF adjustments or MACRA modernization, is unlikely before late 2026, when the temporary Medicare physician payment increase expires. The Senate Finance Committee’s 2024 white paper and subsequent stakeholder feedback have laid the groundwork for that effort, with hill discussions focused on linking updates to the MEI, refining quality reporting, and strengthening APM incentives.
Near-term action on hospital price transparency and site-neutral payment is also unlikely given the budgetary and operational impacts of H.R. 1. For now, Congress may be content with letting the administration lead through rulemaking.
ACA Premium Tax Credit Enhancements
ACA Marketplace insurers are proposing a median price increase of about 18 percent, more than double last year’s 7 percent median proposed increase. The proposed rates are preliminary and could change before being finalized in early September. Consumers will have an opportunity to “window shop” for 2026 Marketplace plans by October before the Open Enrollment Period, which runs from November 1 to January 15 for healthcare.gov in most states. Some states have extended OEPs.
The expiration of enhanced premium tax credits is one of the factors driving premium increases. The Congressional Budget Office (CBO) estimates that the expiration of enhanced PTCs will increase the number of uninsured people by 4.2 million in 2034.
In June 2024, CBO and Joint Committee on Taxation estimated a one-year extension of the enhancements would cost $23 billion and a two-year extension would cost $55 billion. These estimates do not account for changes made by the One Big Beautiful Bill Act and the 2025 Marketplace Integrity and Affordability Final Rule that are expected to reduce the number of people who receive PTCs and lower federal spending. The cost of extending enhancements would need to be offset by other policies. Possible offsets include policy changes focused on pharmacy benefit managers and the prior authorization process, which have bipartisan support.
According to the latest KFF Health Tracking Poll, a large majority (77 percent) of the public favor Congress extending the enhancements, including most Republicans (63 percent). Among Republicans and Republican-leading independents, 56 percent of MAGA supporters and 74 percent of non-MAGA supports favor an extension.
However, Republicans are split on whether to extend PTC enhancements. Rep. Brian Fitzpatrick (R-PA), who represents one of three swing districts that President Donald Trump lost in 2024, is working on legislation to extend the enhancements. Whether the proposal seeks a straight extension of the enhancement or changes the subsidy amount or eligibility threshold (e.g., no zero-premium plans, return of 400 percent FPL cliff) remains to be seen.
Senate Democrats recently introduced legislation to permanently extend the ACA premium tax credits, but it is likely a nonstarter under the Republican trifecta. We will be closely monitoring whether an extension of the PTC enhancements is included in the FY 2026 funding package – either in the continuing resolution on September 30 or in a subsequent CR or funding package later this year.