Health Care Matters | June 6, 2025
Meet the Administration for a Healthy America, HHS' Newest Agency
The Trump administration's FY 2026 HHS budget proposal represents the most sweeping departmental reorganization in decades, cutting discretionary funding by 25% while consolidating 28 operating divisions into just 15. The centerpiece is creating the new Administration for a Healthy America (AHA), which will absorb multiple agencies including HRSA, SAMHSA, and portions of CDC and NIH to centralize prevention-focused programs under Secretary Robert F. Kennedy Jr.'s "Make America Healthy Again" agenda. The plan eliminates agencies like HRSA and SAMHSA entirely while slashing NIH funding by roughly 40% and CDC funding by more than 40%. Key operational changes include transferring the 340B Drug Pricing Program from HRSA to CMS and eliminating approximately 10,000 HHS positions to achieve $3.1 billion in annual savings. Read here, here, and here.
Why It Matters
This restructuring will fundamentally alter how health care providers access federal funding, technical assistance, and regulatory oversight across primary care, behavioral health, rural health, and workforce development programs. ACOs and safety-net providers who rely heavily on HRSA programs, SAMHSA grants, and 340B discounts face significant uncertainty as these functions migrate to new organizational structures, potentially disrupting established relationships and funding pipelines. While the reorganization aims to streamline operations and reduce bureaucracy, providers should expect implementation challenges, potential service gaps during transitions, and new compliance requirements under the consolidated structure. Congressional approval will be required for many changes, and ongoing litigation regarding HHS layoffs could delay implementation, but organizations should begin preparing for operational adjustments and exploring alternative funding strategies given the scale of proposed cuts to traditional health programs.
A Vision for Rebuilding CMS
On March 27, 2025, HHS Secretary Robert Kennedy Jr. announced a dramatic 25% workforce reduction at HHS, cutting staff from 82,000 to 62,000 employees, with CMS facing significant cuts despite overseeing nearly double the budget it managed in 2015 ($1.5 trillion vs $0.9 trillion) and serving millions more beneficiaries across Medicare, Medicaid, and ACA Marketplaces. Author Jonathan Blum argues that CMS has been chronically underfunded relative to its expanding responsibilities, with newer functions like the Marketplaces and drug price negotiations receiving dedicated funding while core Medicare and Medicaid operations rely on general appropriations. He outlines three critical organizational decisions CMS must make: whether to continue heavy reliance on contractors versus building internal expertise, whether to maintain siloed business lines or develop enterprise-wide capabilities, and whether to focus solely on program efficiency or broader health system improvement. Read here.
Why It Matters
This reorganization comes at a time when CMS needs to modernize antiquated systems, manage increasingly complex health technologies, and facilitate seamless coverage transitions as the health system evolves toward managed care models. The workforce reductions threaten to eliminate irreplaceable institutional knowledge and technical expertise exactly when the agency needs to build cross-program capabilities, strengthen evaluation systems, and develop competencies in emerging areas like AI-enabled medical devices and gene therapies. Without strategic rebuilding focused on learning and development, including investments in data analytics, interoperability standards, and real-time evaluation capabilities, CMS risks compromising its ability to serve the 180+ million Americans who depend on its programs while undermining the payment and quality standards that anchor the entire U.S. health system.
CMS Rolls Out Aggressive Strategy to Enhance and Accelerate Medicare Advantage Audits
CMS has announced a dramatic expansion of its audit program for Medicare Advantage plans, moving from auditing approximately 60 plans annually to auditing all 550 eligible plans each year starting immediately. CMS plans to complete a massive backlog of audits covering payment years 2018 through 2024 by early 2026, while simultaneously scaling up its workforce from 40 to 2,000 medical coders and deploying advanced technology systems to review medical records. The agency will also increase the number of records examined per plan from 35 to as many as 200 annually, with the goal of identifying and recovering what federal estimates suggest could be $17 to $43 billion in annual overpayments from Medicare Advantage plans that may be billing the government for unsupported or inaccurate patient diagnoses. Read more here and here.
Why It Matters
This audit crackdown will directly impact how health care providers work with Medicare Advantage patients and get paid for their care. Providers can expect Medicare Advantage plans to demand much stricter documentation standards and may face new contract terms that make them financially responsible for any coding errors that lead to government clawbacks. Plans are already scrambling to clean up their diagnosis records from previous years and will likely conduct more frequent audits of their provider networks to catch documentation problems before the government does. For ACOs and risk-bearing providers, this means potential revenue losses if they have to pay back money tied to inadequately documented diagnoses, along with increased administrative burden as plans require more detailed medical records and proof of patient conditions. The policy implications are significant too, as this represents the most aggressive enforcement action against Medicare Advantage in years and could reshape how the program operates, potentially leading to reduced plan participation in certain markets, changes in provider payment structures, and renewed debate about whether Medicare Advantage actually saves money compared to traditional Medicare.
Look for the Helpers: Bringing Hospital-Level Care to Rural North Carolina
Mission Mobile Medical Group, based in Greensboro, NC, announced in February that it was awarded up to $26 million in federal dollars "to develop the next-generation mobile clinic under the Platform Accelerating Rural Access to Distributed and Integrated Medical Care (PARADIGM) program." CEO Travis LeFever and his team are developing MARCUS, a customizable mobile medical system that can deliver hospital-level care and advanced diagnostics to communities across the country addressing the critical reality that only 12 percent of physicians practice in rural communities. According to the company's website, the first modular units are expected by mid-2025, with a full national rollout anticipated by 2027. Read more here.
What We Are Reading
Building Bridges to Value: Infrastructure Essentials for Community Health Centers
Coral ally Hope Glassberg of Decipher Strategies co-authored a new Milbank Memorial Fund report, "Building Bridges to Value: Infrastructure Essentials for Community Health Centers," which provides a practical framework to help community health centers successfully transition to value-based payment models despite financial pressures. Read here.
The Medicare Drug Price Negotiation Program, Year Two: Effects on Access and Innovation
The Medicare Drug Price Negotiation Program is entering its second year with modest initial savings of $6 billion (22% decrease in Part D spending) from the first 10 negotiated drugs, while questions remain about its long-term effects on pharmaceutical innovation and patient access to medications, according to a Health Affairs Forefront analysis. Read here.
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