Health Care Matters | August 1
Breaking News
Hot off the press! CMS dropped major policy updates on Thursday including changes to the TEAM model for 2026, HHS announced a first-of-its-kind 340B rebate pilot program, while the white house sent letters to pharmaceutical companies demanding actions to offer drugs at most-favored nation (MFN) prices.
IPPS Final Rule changes to TEAM
CMS has finalized updates to the Transforming Episode Accountability Model (TEAM) policies as part of the FY 2026 IPPS and LTCH PPS final rule, with the model set to begin January 1, 2026. These changes incorporate stakeholder feedback and modify various aspects of participation, quality measurement, pricing, and care delivery requirements. Key changes include:
Eliminated downside risk for participants not meeting the 31-episode minimum threshold in specific categories
Excluded Indian Health Services (IHS)/Tribal hospitals from TEAM participation requirements
Broadened SNF 3-Day Rule Waiver to include swing bed arrangements for greater care flexibility
Implemented limited deferment period for certain hospitals to delay participation
HRSA Opens 340B Rebate Pilot for Manufacturer Applications and Public Comment
HHS has opened applications for a new, voluntary 340B Rebate Model Pilot Program, allowing select drug manufacturers to test a post-purchase rebate approach for drugs on the 2026 Medicare Drug Price Negotiation list. The pilot aims to address deduplication and administrative challenges while gathering feedback on the feasibility of shifting from upfront 340B discounts to retrospective rebates. HRSA is accepting both public comments and manufacturer applications to participate in the pilot. Applications for the pilot are due by September 15, 2025, with approvals expected by October 15 for a January 1, 2026 start. Public comments are due within 30 days.
Trump Administration Adds Pressure on Drugmakers on MFN Pricing
President Trump has issued formal letters to 17 major drug manufacturers urging immediate action to align U.S. prices with those offered in other developed nations. Referencing the May 2025 Executive Order on Most-Favored-Nation (MFN) pricing, the letters call on companies to extend MFN pricing to Medicaid, guarantee those prices for new drugs across all payers, support direct purchasing at MFN levels, and reinvest international revenues to lower domestic costs. Manufacturers have until September 29, 2025 to commit. While the letters do not carry legal force, the White House signaled it is prepared to use regulatory and policy levers if manufacturers fail to act.
Happy 60th Anniversary to Medicare and Medicaid
Wednesday marked the 60th anniversary of the creation of Medicare and Medicaid, signed into law on July 30, 1965, by President Lyndon B. Johnson. At the signing ceremony, Johnson declared, “No longer will older Americans be denied the healing miracle of modern medicine. No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime..." These landmark programs fundamentally reshaped the American healthcare system, extending coverage to populations long excluded from the private insurance market.
Before Medicare and Medicaid, roughly half of Americans over age 65 had no health insurance, and those who did often paid over 50% of their healthcare costs out of pocket (KFF). Poverty among older adults was widespread, with nearly one in three seniors living below the poverty line in the early 1960s. The enactment of these programs not only expanded access to care but also helped reduce poverty and financial hardship for tens of millions of Americans.
Why It Matters
Today, Medicare insures approximately 68 million Americans, and Medicaid covers over 71 million low-income individuals, people with disabilities, and children—meaning more than 139 million people rely on these programs for access to care (CMS, Medicaid.gov). With the passage of the One Big Beautiful Bill Act (OBBBA) earlier this month, Democratic lawmakers and health policy experts have raised concerns that the law’s provisions—including nearly $1 trillion in Medicaid spending reductions, the reinstatement of eligibility and work requirements, and the expiration of ACA premium subsidies—could significantly erode access to coverage. The Congressional Budget Office estimates that between 10 and 12 million people may lose Medicaid coverage over the next decade, with total coverage losses reaching up to 17 million when including changes to the ACA marketplaces (CBO). Policy analysts caution that these shifts could have broad downstream effects—particularly for rural hospitals, low-income families, and individuals with complex health needs. As Medicare and Medicaid reach their sixth decade, these programs remain central pillars of the U.S. health system, and debates over their future continue to shape the country’s social contract.
The Great Health Care Tech Convergence: How AI Policy and Digital Health Initiatives Signal Fundamental Industry Shift
Last week, the Trump Administration unveiled two major initiatives: America’s AI Action Plan and the Health Tech Ecosystem Initiative. Together, they signal a federal push to accelerate digital transformation in health care by emphasizing AI-driven innovation, deregulation, and broad private-sector collaboration. The Action Plan establishes AI Centers of Excellence or regulatory sandboxes—domain-specific environments where healthcare innovators can rapidly prototype and test AI tools under reduced regulatory constraints, especially in clinical settings. It also advocates for open-source AI, expanded access to high-quality datasets, coordinated federal R&D, and rapid AI deployment across sectors including healthcare.
In parallel, the administration, via CMS, secured voluntary commitments from 60+ companies—including Apple, Google, Amazon, Anthropic, and major health systems—to co-develop a patient-centric digital health ecosystem. The focus includes:
Seamless interoperability across healthcare systems and apps
Conversational AI assistants and chronic disease management tools (e.g., diabetes and obesity)
A national “kill the clipboard” strategy to replace paper patient intake
A curated digital app library on Medicare.gov for trusted prevention and navigation tools
Both initiatives share the same philosophical approach: trust private sector innovation over federal oversight, prioritize speed over comprehensive planning, and let market forces drive adoption rather than mandated compliance. Read more here, here, and here.
Why It Matters
With these two initiatives, the Trump administration is attempting to move the U.S. towards a more agile, tech-first model of healthcare that rewards innovation. The AI Action Plan's regulatory sandboxes could accelerate approval of predictive analytics tools for population health management, while the CMS interoperability framework provides the data infrastructure to fuel these AI applications, potentially creating a virtuous cycle where better data enables smarter algorithms that drive measurable outcomes improvements. However, without strong oversight, rapid deregulation may introduce significant execution and compliance risks that require careful navigation. For example, the administration's emphasis on eliminating "ideological bias" from AI systems while maintaining focus on "American values" creates tension with existing VBC programs designed to reduce health disparities and account for social determinants of health, forcing organizations to balance federal AI guidance with VBC goals and requirements. The promise of seamless health data sharing through Big Tech platforms raises additional concerns about patient privacy and data monetization that could complicate trust-building efforts essential for population health management. Health care organizations should prepare for a period of rapid technological advancement coupled with policy uncertainty, making partnerships with technology vendors who can adapt quickly to evolving federal requirements more critical than ever for maintaining competitive advantage in an increasingly AI-driven health care landscape.
2026 Medicare Part D Bid Information and Part D Premium Stabilization Demonstration Parameters
The Centers for Medicare & Medicaid Services (CMS) released preliminary data showing that Medicare Part D prescription drug plan premiums are set to increase significantly in 2026, with the national average monthly bid amount rising 33% to $239.27 compared to the previous year. The base beneficiary premium will increase 6% to $38.99, hitting the maximum allowed under the Inflation Reduction Act's premium stabilization provision. In response to these steep increases, CMS negotiated bid terms and conditions with insurers and rejected some standalone prescription drug plan (PDP) bids that included significant premium increases or benefit reductions. The agency is also continuing its voluntary Part D Premium Stabilization Demonstration for 2026, though with reduced government support compared to 2025. Read here and here.
Why It Matters
These substantial premium increases highlight the ongoing challenges facing standalone prescription drug plans as they adapt to the Inflation Reduction Act's benefit redesign, which has altered the economics of Part D coverage. The 33% bid increase reflects insurers' difficulties adjusting to new cost structures, including increased liability for high-cost drugs. While CMS's bid rejections demonstrate regulatory oversight, they also illustrate the financial pressures threatening market stability. As government stabilization support decreases, we can expect continued consolidation and discontinuation of offerings in the PDP market. Some nsurers are likely weighing whether to exit standalone drug coverage or pivot toward Medicare Advantage plans, potentially reducing coverage options for traditional Medicare beneficiaries seeking coverage under separate drug plans.
Look for the Helpers: Historic Austin Hospital Reborn as Respite Center for Homeless Recovery
Central Health in Austin, TX is transforming the historic Children's Hospital of Austin building into a 48-bed respite center for people experiencing homelessness who are recovering from illness or injury, representing an $11 million investment in dignified care for the community's most vulnerable residents. This innovative facility will provide recovery pods, onsite health care services, and wraparound support to ensure individuals have a safe place to heal rather than being discharged to the streets. Under the leadership of Dr. Pat Lee, President & CEO, Central Health exemplifies the "helper" spirit by reimagining existing infrastructure to address health care inequity and break the cycle of hospital readmissions for those without stable housing. Read more here.
What We Are Reading
Six Core Competencies to Succeed in Accountable Care
The Accountable for Health Institute partnered with the West Health Policy Center to develop standardized core competencies that identify key capabilities of accountable care providers and create a framework for measuring accountable care effectiveness. Read here.
Modeling the Financial Viability of a Population Health Program: A Formidable Challenge for Health Systems
Researchers found that population health programs can only achieve financial viability when health systems optimize fee-for-service billing for care management codes, suggesting that current value-based payment structures may inadequately reimburse these initiatives. Read here.
What We Are Writing
Transforming Rural Health: What States Need to Know About the $50 Billion Rural Health Transformation Fund
The OBBBA has created a massive $50 billion Rural Health Transformation Program that will require all states to submit detailed transformation plans to CMS by December 31, 2025, reshaping how rural health care is funded and delivered across America. This legislation shifts away from traditional reimbursement-based funding models toward innovation-focused investments, giving states flexibility to address systemic challenges like low patient volumes and hospital closures while requiring rigorous accountability measures. While CMS has yet to announce the application process details, state Medicaid agencies should begin preparing now to develop comprehensive applications that demonstrate how they'll improve rural access, recruit clinicians, and leverage technology. Read our full analysis on our blog to understand the application requirements and strategic implications for your state.
New Resource
USofCare Releases AHEAD Messaging Toolkit
USofCare has released two new resources that provide strategic insights and lessons learned for stakeholder engagement and messaging around implementing the AHEAD Model: an interested parties memo highlighting work in Rhode Island and a communications toolkit. These resources offer valuable guidance for policymakers in participating states and those in non-participating states looking to adopt individual components like hospital global budgets. Access the tools here.
Pop Health Podcast
Caring for Patients Across Care Settings
Coral's Maria Alexander talks with Dr. Michael Zaplin and David Taback of Inpatient Physician Management Services (iPMGMT) about how they partner with ACOs and risk-bearing entities to improve patient outcomes and experience and manage total cost of care.