Enrollment in Medicare Advantage, the private plan alternative to traditional Medicare, has increased steadily over the past two decades, and since 2023, more than half of eligible beneficiaries have enrolled in Medicare Advantage. Amidst this growth, an increasing number of beneficiaries are enrolling in special needs plans (SNPs), especially since 2018, when SNPs became a permanent part of the Medicare Advantage program. SNPs now account for 21% of all Medicare Advantage enrollees, compared with just 13% in 2018. The increase in the share of Medicare Advantage enrollees in SNPs also means that SNPs contribute disproportionately to the growth in Medicare Advantage enrollment. For example, between 2024 and 2025, growth in SNPs comprised nearly half (48%) of the total increase in Medicare Advantage enrollment.

There are three types of SNPs, and enrollment in each is restricted to specific groups of beneficiaries, all of which comprise some of the highest-need beneficiaries in the Medicare population. Over 4 in 5 (82%) SNP enrollees are enrolled in dual eligible SNPs (D-SNPs), which are limited to people with both Medicare and Medicaid (“dual-eligible individuals”). Dual-eligible individuals tend to have lower incomes, more chronic conditions, and more functional and cognitive impairments than Medicare beneficiaries without Medicaid coverage. The two other types of SNPs are chronic condition SNPs (C-SNPs, 16% of enrollees), which are limited to people with certain chronic conditions, and institutional SNPs (I-SNPs, 2% of enrollees), which are limited to people who require an institutional level of care. All SNPs are required to have a model of care, or framework detailing how the plan will identify the needs of each enrollee and address those needs through the plan’s care management practices. Other requirements vary across the three types of SNPs. D-SNPs may have additional requirements depending on the state in which they operate. (See Box 1 for additional information.)

In recent years, the Centers for Medicare and Medicaid Services (CMS) has made several changes to requirements for D-SNPs and other Medicare Advantage plans, which may affect insurer decisions about the types of plans they offer and promote. To better understand the growing role of SNPs in Medicare Advantage and the potential implications for beneficiaries of changes to SNP and Medicare Advantage plan requirements, this brief examines SNP enrollment patterns and trends using recent Medicare Advantage enrollment data published by CMS.

Key Takeaways

• Since 2018 when SNPs became a permanent part of the Medicare program, SNP enrollment has tripled, rising from 2.6 million to 7.3 million, an increase of nearly 4.7 million enrollees.
• Through 2024, growth in SNPs was driven by an increase in enrollment in D-SNPs, which grew from 2.2 million enrollees in 2018 to 5.8 million enrollees in 2024, comprising more than 90% of SNP enrollment growth over that time.
• C-SNPs comprised 75% of total SNP enrollment growth between 2024 and 2025, in contrast to prior years, where enrollment growth was mainly in D-SNPs. In 2025, C-SNP enrollment increased by 476,300 new enrollees, triple the increase in D-SNP enrollment (159,400 new enrollees).
• A small share of SNP enrollees, just 14%, are in plans administered by non-profit insurers. SNP enrollment is highly concentrated among a small number of large national carriers, with UnitedHealth Group and Humana plans comprising over half (54%) of total SNP enrollment. UnitedHealth Group accounts for half of all C-SNP enrollees.
• The acceleration of C-SNP enrollment growth and slowing of D-SNP enrollment growth coincided with implementation of new rules for D-SNPs requiring greater integration between Medicare and Medicaid. C-SNPs are not required to have a similar level of integration.

From 2018-2024, growth in SNP enrollment was driven by increases in D-SNP enrollment, plans for dual-eligible individuals.

From 2018, when SNPs became a permanent part of the Medicare Advantage program, through 2024, growth in SNP enrollment was predominantly due to growth in enrollment in D-SNPs. In 2018, 2.2 million people were enrolled in a D-SNP, and in 2024, 5.8 million people were enrolled in a D-SNP. That increase comprises more than 90% of the total increase in SNP enrollment between 2018 and 2024.

C-SNP enrollment and I-SNP enrollment also increased during this period, though on a smaller scale relative to D-SNP enrollment growth. C-SNP enrollment grew from 346,000 enrollees in 2018 to 674,500 enrollees in 2024, and I-SNP enrollment grew from 71,500 enrollees in 2018 to 115,100 enrollees in 2024.

SNPs receive higher per capita payments under the Medicare Advantage payment system, on average, because enrollees have higher expected spending due to their higher health care needs. It is well-documented, however, that Medicare Advantage pays more for Medicare Advantage enrollees than spending would be for the same people if they were covered under traditional Medicare, and in 2025, MedPAC estimates that payments were 20% higher, on average. The higher payments are largely driven by the risk adjustment system, which pays more for people who are sicker, and less for those who are healthier, relying heavily on diagnosed heath conditions to determine adjustments to payment based on health status. SNPs are potentially better positioned to leverage this system to increase their payments relative to enrollee’s costs, contributing to higher margins for SNPs, on average, than other Medicare Advantage plans. MedPAC found that in 2022, the average margins for D-SNPs (7.5%) and C-SNPs (7.4%) were double the average margins of Medicare Advantage plans overall (3.6%). In turn, those higher payments leave more resources for plans to offer supplemental benefits that appeal to a population with complex health care needs.

Enrollment growth in SNPs from 2024-2025 was driven by an increase in enrollment in C-SNPs, plans for people with chronic conditions.

In recent years, CMS has made several changes to requirements for Medicare Advantage plans generally available to the public and D-SNPs, but not C-SNPs, which may affect insurer decisions about what types of plans to offer. Starting in 2022, CMS no longer contracts with conventional Medicare Advantage plans that enroll at least 80% dual-eligible individuals (“D-SNP look-alikes”). In 2025, this threshold was lowered to 70% and is scheduled to be lowered to 60% starting in 2026. Additionally, beginning in 2025, fully integrated dual eligible (FIDE) SNPs and highly integrated dual eligible (HIDE) SNPs have new enrollment, benefit, and coordination requirements (see Box 1 for additional details). The additional requirements are intended to promote better integration between Medicare and Medicaid for enrollees but could make D-SNPs less attractive to private insurers. These requirement changes could incentivize efforts to enroll more dual-eligible individuals in C-SNPs, which are not subject to the look-alike thresholds like conventional Medicare Advantage plans or Medicaid integration and coordination requirements like D-SNPs, particularly since many dual-eligible individuals have chronic conditions that may qualify them for C-SNP enrollment.

In contrast to previous years when enrollment growth in SNPs was driven by increased enrollment in D-SNPs, the largest increase in enrollment in SNPs from 2024 to 2025 was in C-SNPs, comprising more than three-quarters of the change in overall SNP enrollment. C-SNP enrollment increased sharply, rising by 476,300 enrollees from 2024 to 2025. That translates into a 71% jump over a one-year period. D-SNP enrollment and I-SNP enrollment remained relatively stable over the same period, with D-SNP enrollment growing by only 3% (159,400 enrollees) and I-SNP enrollment staying essentially unchanged.

While C-SNP enrollment has increased more quickly since the D-SNP look-alike rules first went into effect in 2022, the change accelerated over the last year, as the rules tightened further and other Medicaid integration and coordination requirements for FIDE and HIDE SNPs went into effect. This is the first time that the number of additional C-SNP enrollees has surpassed the number of additional D-SNP enrollees. A recent analysis of 2025 enrollment data (not yet available to KFF) shows that through January of 2025, just under 20% of the increase in C-SNP enrollment was comprised of dual-eligible individuals.

Dual-eligible individuals comprised a larger share of enrollment in SNPs than in non-SNP Medicare Advantage plans. For example, in 2023, 93% of SNP enrollees were dual-eligible individuals, which aligns with the dominance of D-SNPs in the SNP market. Over 90% of I-SNP enrollees were also dual-eligible individuals in 2023, reflecting the fact that Medicaid is the primary payer of long-term care, so people relying on an institutional level of care are more likely to be enrolled in both Medicare and Medicaid. In 2023, a quarter of enrollees in C-SNPs were dual-eligible individuals, while 9% of enrollees in individual Medicare Advantage plans were dual-eligible individuals.

For all SNP types, enrollment is highly concentrated among a small number of large national carriers.

Across all three SNP types, which enroll some of the most vulnerable beneficiaries in the Medicare population, a few large national carriers account for larger shares of enrollment in the SNP market as compared with the overall Medicare Advantage market. The distribution of D-SNP enrollment by insurer is more heavily concentrated in UnitedHealth Group Inc. (38% vs 29%) and Elevance Health Inc. (10% vs 7%) than for the overall Medicare Advantage market. UnitedHealth Group Inc. accounts for half (51%) of all C-SNP enrollment. Additional firms comprising larger shares of enrollment in C-SNPs than in the overall Medicare Advantage market include Humana Inc. (20% vs 17%) and Elevance Health Inc. (12% vs 7%). Although UnitedHealth Group Inc. accounts for a majority (51%) of I-SNP enrollment in 2025, smaller insurers play a larger role in the I-SNP market than in the overall Medicare Advantage market (42% vs 33%). Overall, 14% of SNP enrollees are in a plan offered by a non-profit organization (16% of D-SNP enrollees, 3% of C-SNP enrollees, and 5% of I-SNP enrollees).

For dual-eligible individuals, D-SNPs offer more integration with Medicaid than C-SNPs.

To facilitate integration of Medicare and Medicaid coverage, D-SNPs are required to contract with state Medicaid agencies, while C-SNPs are not subject to additional integration requirements. The minimum D-SNP requirements, which are set at the federal level, differ across the three categories of D-SNPs and can change year-to-year during annual rule making. D-SNPs with higher levels of integration, HIDE and FIDE SNPs, have additional requirements (see Box 1 for more details). Additionally, D-SNPs can be designated as applicable integrated plans if they meet federal requirements, including exclusively aligned enrollment, covering at least some Medicaid services through the D-SNP or an affiliated Medicaid managed care plan, and a unified grievance and appeals system. Given the lack of C-SNP integration requirements, to the extent the acceleration in C-SNP enrollment was driven by dual-eligible individuals, efforts to encourage greater integration between Medicare and Medicaid may face challenges.

States may establish additional requirements for D-SNPs through their contracts. Responses from KFF’s 24^th annual budget survey of Medicaid officials in all 50 states and the District of Columbia in July 2024 show that these requirements vary across the different types of D-SNPs. For example, just over half (19) of the 35 states with coordination-only D-SNPs required these plans to include any of the additional optional requirements, the most common of which was offering certain supplemental benefits (7 states) and providing integrated member materials, such as one summary of benefits document that provides information on benefits covered by both Medicare and Medicaid (5 states). HIDE and FIDE SNPs operated in less than half of states in 2024, though most states had additional requirements for these types of plans beyond the federal requirements (14 of 15 for HIDE SNPs and all 12 states for FIDE SNPs) (Figure 4). New federal requirements for HIDE and FIDE SNPs went into effect in 2025. For FIDE SNPs, these include exclusively aligned enrollment, which limits enrollment to full-benefit dual-eligible individuals who were enrolled in the affiliated Medicaid managed care plan, and the requirement that the affiliated plan cover behavioral health, and certain other Medicaid benefits. To the extent these were not previously required by states, the new requirements may represent an additional burden for Medicare Advantage insurers and could influence their decisions on which plans to offer. In 2024, most states with FIDE SNPs did have these requirements. Specifically, of the 12 states with FIDE SNPs, 9 required exclusively aligned enrollment and 10 required the affiliated Medicaid managed care plan to cover behavioral health. (New requirements for HIDE SNPs were not among the items asked in the budget survey.) While these requirements are intended to facilitate integration and coordination between the programs, the relatively low availability of HIDE and FIDE SNPs may limit how effective they are at achieving that goal.

Congressional Republicans and President Trump passed the tax and budget reconciliation bill in July 2025. The new law includes significant cuts to the Medicaid program as well as eligibility restrictions for many lawfully present immigrants, including refugees and asylees, to access Medicaid and the Children’s Health Insurance Program (CHIP), subsidized Affordable Care Act (ACA) Marketplace, and Medicare coverage. Under longstanding federal policy, undocumented immigrants already are ineligible for federally funded health coverage. This policy watch outlines the groups of lawfully present immigrants that will lose access to federally funded health coverage due to the 2025 tax and budget law and the Congressional Budget Office’s (CBO’s) estimates of the increases in the number of uninsured and federal savings and revenue changes due to these provisions.

CBO estimates that the law’s restrictions on eligibility for federally funded health coverage for lawfully present immigrants will result in about 1.4 million lawfully present immigrants becoming uninsured, reduce federal spending by about $131 billion, and increase federal revenues by $4.8 billion as of 2034. Additional lawfully present immigrants are likely to lose Marketplace coverage and become uninsured due to the anticipated expiration of the enhanced subsidies for this coverage. Moreover, under Trump administration regulatory changes, the more than 530,000 Deferred Action for Childhood Arrivals (DACA) recipients are ineligible for federally funded coverage options.  

Changes in Eligibility for Lawfully Present Immigrants Under the 2025 Tax and Budget Law

Medicaid and CHIP

Under prior law, to be eligible for Medicaid and CHIP, immigrants were required to have a “qualified” immigration status in addition to meeting other eligibility requirements such as income. Qualified immigrants, as defined by the 1996 Personal Responsibility and Work Opportunity Act and subsequent additions, include lawful permanent residents (LPRs or “green card” holders); refugees; individuals granted parole for at least one year; individuals granted asylum or related relief and certain abused spouses and their children or parents; certain victims of trafficking; Cuban and Haitian entrants; and citizens of the Freely Associated (COFA) nations of the Marshall Islands, Micronesia and Palau residing in U.S. states and territories. In addition, many had to wait five years after obtaining qualified status before they could enroll in Medicaid even if they met other eligibility requirements. States have an option to extend Medicaid and/or CHIP coverage to all children and/or pregnant individuals who are lawfully residing and waive the five-year wait for these groups, which 39 states plus D.C. had taken up as of January 2025. States also have the option in CHIP to provide prenatal care and pregnancy related benefits to targeted low-income children beginning from conception to end of pregnancy (FCEP) regardless of their parent’s immigration status, which 24 states plus D.C. had taken as of April 2025.

The 2025 tax and budget law will restrict Medicaid or CHIP eligibility to LPRs, Cuban and Haitian entrants, people residing in the U.S. under COFA, and lawfully residing children and pregnant immigrants in states that cover them under the Medicaid and/or CHIP option (Table 1). States also will still have the option to extend prenatal and pregnancy-related benefits to targeted low-income children from conception through the end of pregnancy through the FCEP option. These restrictions will eliminate eligibility for many other groups of lawfully present immigrants, including refugees and asylees without a green card, among others (Table 1). This provision will become effective October 1, 2026, and CBO estimates that it will reduce federal spending by $6.2 billion and lead to an additional 100,000 individuals becoming uninsured by 2034.

ACA Marketplaces

Under prior law, lawfully present immigrants have been eligible to enroll in ACA Marketplace coverage and receive premium subsidies and cost-sharing reductions, including individuals with Temporary Protected Status (TPS), those with Deferred Enforced Departure, and people on work visas. In general, Marketplace coverage is limited to individuals with incomes at or above 100% of the federal poverty level (FPL), since most of those with lower incomes would be eligible for Medicaid. However, some lawfully present immigrants with lower incomes remain ineligible for Medicaid (e.g., due to the five-year waiting period and eligibility limits to qualified immigrants). To address this gap, Marketplace eligibility was also extended to lawfully present immigrants with incomes under 100% FPL who do not qualify for Medicaid due to their immigration status, including those in the five-year waiting period for Medicaid coverage. In the years after the ACA was passed, DACA recipients were excluded from eligibility for the Marketplaces despite being lawfully present. Under regulations issued by the Biden Administration in May 2024, DACA recipients were made newly eligible for the Marketplaces and to receive subsidies to offset costs starting November 2024. However, this coverage was blocked in some states due to legal challenges, and on June 25, 2025, the Trump administration finalized a rule that once again made DACA recipients ineligible to purchase ACA Marketplace coverage as of August 25, 2025. Most states will terminate coverage for enrolled DACA recipients on September 30, 2025.

The law will also limit eligibility for subsidized ACA Marketplace coverage to lawfully present immigrants who are LPRs, Cuban and Haitian entrants, and people residing in the U.S. under COFA. (Table 1). A broader group of lawfully present immigrants will lose access to subsidized Marketplace coverage under this change, including refugees and asylees without green cards, people with TPS, and individuals on work visas, among others, beginning January 1, 2027. The CBO estimates that this provision will lead to an additional one million individuals becoming uninsured and reduce federal spending by $91.4 billion over the 2026 to 2035 time period. In addition, the provision is expected to increase federal revenue by $4.8 billion as of 2034. The law also eliminates access to subsidized Marketplace coverage for lawfully present immigrants earning less than 100% FPL who are not eligible for Medicaid due to immigration status, including those in the five-year waiting period for coverage, beginning January 1, 2026. During the 2025 open enrollment period, nearly 550,000 people with incomes under 100% FPL were enrolled in a Marketplace plan, who are likely primarily lawfully present immigrants who are ineligible for Medicaid due to immigration status. The CBO estimates that this provision will lead to an additional 200,000 individuals becoming uninsured and reduce federal spending by $27.3 billion over the 2026 to 2035 time period. In addition, the provision is expected to increase federal revenue by $176 million as of 2034.

Medicare

Lawfully present immigrants have been eligible for Medicare if they have the required work quarters and meet the disability or age requirements. Those without required work history could also purchase Medicare Part A after residing legally in the U.S. for five years continuously.

Under the new law, Medicare eligibility also will be limited to lawfully present immigrants who are LPRs, Cuban and Haitian entrants, and people residing in the U.S. under COFA, eliminating eligibility for refugees and asylees without a green card, people with TPS, and people with work visas, among others (Table 1). Current beneficiaries subject to the new restrictions will lose coverage no later than 18 months from the enactment of the legislation (January 4, 2027). The CBO estimates that this provision will lead to an additional 100,000 individuals losing coverage, with a federal spending reduction of $5.1 billion and a federal revenue decrease of $123 million as of 2034.

While most working age people get their health insurance through an employer-sponsored plan, the individual market – which is largely made up by the Affordable Care Act (ACA) Marketplaces – is also an important source of health insurance coverage for many workers. This is particularly true for people who have jobs that do not offer health benefits (such as small companies or gig jobs). In fact, nearly half of adult individual market insurance enrollees are small business owners, employees, or are self-employed.

On average, 8% of adults under age 65 who usually worked more than 20 hours per week in 2023 got their coverage in the individual market. However, the Individual market is a particularly important source of health insurance for workers in certain occupations, such as chiropractors and dentists, real estate brokers, and farmers, ranchers, and agricultural managers, where more than a quarter of adult workers were covered in the individual market.

Based on KFF analysis of administrative data, over 90% of individual market health insurance enrollees get their coverage through the ACA Marketplaces, and of them, 93% receive a tax credit to lower the monthly cost of their premiums.

For nearly 5 years, enhanced premium tax credits have further lowered monthly premiums for these enrollees, including people with middle and higher incomes who previously received no financial assistance and were sometimes priced out of insurance coverage. However, these enhanced premium tax credits are set to expire at the end of 2025. If this additional financial help expires, people currently receiving a tax credit will see their out-of-pocket premium payments increase sharply, by over 75% on average. The Congressional Budget Office estimates that nearly 4 million more people will eventually be uninsured if the enhanced tax credits expire, and the cost to extend them would be an average of $35 billion per year.

Changes are coming to Medicare’s drug price negotiation program that could result in at least $5 billion in additional Medicare spending over time, if not more, and higher out-of-pocket costs for people with Medicare. Under the Medicare Drug Price Negotiation Program, the federal government is required to negotiate with drug companies for the price of some high-spending drugs that have been on the market for several years without competition, with the goal of lowering Medicare drug spending and helping to reduce out-of-pocket costs for people with Medicare. The law that established the negotiation program, the Inflation Reduction Act of 2022, excluded certain types of drugs from negotiation, including orphan drugs approved to treat a single rare disease or condition. The new tax and budget reconciliation law passed by Congressional Republicans and signed by President Trump modifies the orphan drug exclusion in ways that will lead to higher Medicare spending, according to the Congressional Budget Office (CBO), and higher costs for beneficiaries who take these medications.

Takeaways

• The new tax and budget law will result in delayed eligibility or exclusion from Medicare drug price negotiation for several high-spending drugs, including a number of cancer drugs and other medications with $17.5 billion in total spending by Medicare and beneficiaries in 2023. For example, the changes in law are expected to delay selection of Keytruda and Opdivo, both on the market since 2014, by at least one year. In 2023, Medicare and beneficiaries spent $5.6 billion on Keytruda and $2.0 billion on Opdivo. Several other drugs are also likely to be delayed in their eligibility to be selected for negotiation or are now ineligible for negotiation unless they receive non-orphan approvals in the future.
• Expanding the orphan drug exclusion to allow more drugs to be delayed or excluded from Medicare drug price negotiation, as under the new tax and budget law, will mean higher out-of-pocket costs for Medicare beneficiaries who use these medications. Medicare’s negotiated drug prices can help to lower the amount beneficiaries pay, particularly in situations where they face a coinsurance requirement that is calculated based on the underlying price of the drug, such as in the case of Part B drugs and higher-cost Part D drugs. By delaying or excluding additional orphan drugs from selection for price negotiation, the tax and budget law will maintain higher prices for these drugs relative to the price Medicare would have paid if the drugs had been eligible and selected for drug price negotiation, which will translate to higher out-of-pocket liability. For example, if the government were to negotiate a 22% discount off the price of Keytruda, on par with the average 22% net price discount from the first round of Medicare drug price negotiation, that would generate annual savings on cost-sharing liability of around $3,300 for Medicare beneficiaries who use Keytruda.
• Delaying or excluding orphan drugs from Medicare drug price negotiation will cost the federal government several billion dollars over the coming decade – nearly $5 billion according to CBO, but this amount is likely to be an underestimate because it reportedly doesn’t fully account for the changes to the orphan drug provision in the new tax and budget law. This amount could also grow over time based on how the pharmaceutical industry responds in terms of changes in orphan drug research and development and the pipeline of new drugs coming to market and changing incentives around seeking additional orphan indications (as well as non-orphan indications) for orphan drugs already on the market.

What is the orphan drug exclusion and how does the new tax and budget law modify it?

Under the IRA, drugs that are designated for only one rare disease or condition with approvals under that one designation were excluded from Medicare drug price negotiation. This exclusion helped to address pharmaceutical industry concerns about the potential dampening effect on orphan drug research and development if drugs approved to treat a single rare disease were subject to Medicare price negotiation. After enactment of the IRA, efforts to expand the orphan drug exclusion were launched, based on pharmaceutical industry and rare disease advocacy group concerns about the potential impact on research and development for multi-orphan drugs. This echoes broader claims made by the industry about the impact on drug development associated with other policies to reduce drug prices, even as high drug prices create affordability and access challenges for patients. Nevertheless, lobbying efforts culminated with the inclusion of changes to the IRA’s orphan drug exclusion supported by the pharmaceutical industry in the recently enacted tax and budget law.

Changes in the tax and budget law include broadening the orphan drug exclusion to make orphan drugs that are designated for multiple rare diseases or conditions, not just a single rare disease, ineligible for Medicare drug price negotiation, and delaying the start of the 7- or 11-year waiting period for selection for drug price negotiation for orphan drugs that subsequently receive FDA approval for a non-orphan indication. Under the IRA, small-molecule drugs must be 7 years past FDA approval and biologics 11 years past FDA licensure when drugs are selected for negotiation. Under the new tax and budget law, for orphan drugs, this 7- or 11-year waiting period begins only when the drug has received approval for a non-orphan indication.

While these changes to Medicare’s drug price negotiation program might appear to be relatively minor, they will result in some very high-spending drugs becoming eligible for negotiation later than they otherwise would have been and other drugs will be excluded entirely unless they are approved for non-orphan uses in the future. Taken together, these changes have the potential to reduce savings to Medicare from the negotiation program and lead to higher beneficiary out-of-pocket costs.

The new tax and budget law could impact which high-spending drugs are selected for negotiation in the coming year

A number of drugs that were expected to be selected for Medicare drug price negotiation in the near future based on meeting the criteria for selection – including total Medicare spending of more than $200 million, lack of generic or biosimilar equivalents, and a sufficient number of years since FDA approval – are now likely to be off the table, either delayed in their eligibility to be selected for negotiation or no longer eligible. Among them are several high-spending cancer drugs, including Keytruda, Darzalex, Opdivo, and Jakafi, along with several other medications used to treat various types of cancer and other medical conditions (Table 1).

In 2023, spending by Medicare and beneficiaries on these drugs totaled $17.5 billion, an 83% increase since 2019 ($9.5 billion), based on Medicare Part B and Part D drug spending data from the Centers for Medicare & Medicaid Services (Figure 1, Table 2). These estimates include Part D spending under both traditional Medicare and Medicare Advantage but Part B drug spending in traditional Medicare only, since Medicare Advantage spending data are unavailable. Of these medications, Keytruda alone accounts for 32% of the total, with $5.6 billion in spending in 2023, up from $2.7 billion in 2019. Of the 734 drug and biologic products included in CMS’s Medicare Part B drug spending data for 2023, Keytruda ranked number one in terms of total spending by Medicare and beneficiaries, excluding any spending by enrollees in Medicare Advantage.

The change in law is expected to delay selection of Keytruda and Opdivo for price negotiation by at least one year, with a longer delay or exclusion from negotiation applying to other medications

Changes to the orphan drug exclusion will take effect beginning with the third round of drug price negotiation in 2026, with the selection of drugs required to be announced no later than February 1, 2026, and Medicare’s negotiated prices for these drugs taking effect on January 1, 2028. The changes are likely to have an immediate impact on which drugs are selected for Medicare price negotiation in 2026 by delaying the selection of Keytruda and Opdivo, which were likely to be selected for negotiation next year based on their total spending levels and meeting other statutory criteria.

• Keytruda, manufactured by Merck, was first approved as an orphan drug to treat melanoma in September 2014 and was subsequently approved for a non-orphan indication for non-small cell lung cancer in October 2015, followed by several other approvals for additional indications, broadening its use beyond the original rare disease approval. Under the IRA, Keytruda would have been eligible to be selected for price negotiation in February 2026, since that will be more than 11 years after its initial FDA approval, and Medicare’s negotiated price would have been available in 2028 if it had been selected next year. But under the new tax and budget law, Keytruda’s eligibility to be selected for negotiation will be delayed a year to 2027, with Medicare’s negotiated price available in 2029 if it is selected for negotiation. This is because the 13-month period that Keytruda was on the market as an orphan-only drug will not count towards the 11-year waiting period following initial FDA approval that determines when biologic drugs potentially become eligible for selection.
• A similar delay likely applies to Opdivo, manufactured by Bristol Myers Squibb, which was first approved as an orphan drug to treat melanoma in December 2014 but was subsequently approved for a non-orphan indication for non-small cell lung cancer in March 2015. Opdivo’s eligibility to be selected for negotiation will be delayed a year from 2026 to 2027, assuming the drug continues to meet other criteria for selection.

A longer delay likely applies to other orphan drugs, including Yervoy, manufactured by Bristol Myers Squibb, which was first approved as an orphan drug to treat melanoma in March 2011 but was subsequently approved for non-orphan indications for kidney cancer in April 2018 and colorectal cancer in July 2018. Eligibility for Yervoy to be selected for negotiation will likely be delayed by four years, from 2026 to 2030.

Exclusion from negotiation will now apply to several other orphan drugs based on the new tax and budget law’s changes to the IRA’s orphan drug exclusion provision. For example, Jakafi (manufactured by Incyte), Venclexta (manufactured by AbbVie), and Darzalex (manufactured by Janssen Biotech) are orphan drugs with multiple orphan designations and approvals but no non-orphan approvals, which previously made them eligible to be selected for negotiation under the IRA, but they are no longer eligible under the new tax and budget law, unless they receive approval for wider uses in the future.

The high price of these drugs has contributed to their relatively high annual Medicare spending per user

Total spending by Medicare and beneficiaries on a single claim for each of these drugs in 2023 exceeded several thousand dollars – in many cases, $10,000 or more – which translated to annual total spending per user of tens of thousands of dollars. For example, spending on the blood cancer drug Jakafi under Medicare Part D was $16,700 per claim and $138,200 per user in 2023; spending on Keytruda under Medicare Part B was $12,600 per claim and $76,100 per user in 2023, and for Opdivo, Part B spending was $10,500 per claim and $69,800 per user (Figure 2). While the total number of Medicare beneficiaries using any one of these medications is relatively low compared to more commonly used drugs – around 70,000 for Keytruda in 2023 and fewer than 30,000 for the other medications (Table 2) – their high prices translate to relatively high annual spending under Medicare.

Coinsurance requirements for high-cost Part B and Part D drugs translate to high out-of-pocket costs for Medicare beneficiaries

For high-priced drugs covered under Part B or Part D, beneficiary cost-sharing requirements in the form of coinsurance (a percentage of the drug’s total price) can translate to several hundred dollars, if not $1,000 or more, each time they fill a prescription or are administered the drug.

• Under Medicare Part B, which primarily covers physician-administered medications like Keytruda, Darzalex, and Opdivo, beneficiaries in traditional Medicare face a 20% coinsurance requirement. Most but not all traditional Medicare beneficiaries have some type of additional coverage to help with their Medicare cost-sharing requirements, such as employer-sponsored coverage, Medigap, or Medicaid. By law, beneficiary cost-sharing liability for a Part B drug or other service provided in a hospital outpatient setting on a single day cannot exceed the amount of the Part A hospital inpatient deductible, which is $1,676 in 2025. But this cap does not apply to Part B drugs administered in a physician’s office, and there is no limit on total annual out-of-pocket liability for services covered under Part A or Part B in traditional Medicare.
• Under Medicare Advantage, plans can charge no more than 20% for Part B drugs administered by an in-network provider and are required to have a maximum out-of-pocket limit, unlike traditional Medicare. In 2025, the limit averages $5,320 for in-network services and $9,547 for in-network and out-of-network services combined.
• Under Medicare Part D, coinsurance for high-priced drugs placed on the specialty tier, like Jakafi and Venclexta, ranges from 25% to 33%. Under the Part D benefit, an annual out-of-pocket spending cap of $2,000 in 2025 (increasing to $2,100 in 2026) limits an enrollee’s cost exposure, and another feature allows enrollees to spread out their out-of-pocket costs over the course of the calendar year, helping to limit the financial burden of high monthly cost-sharing requirements.

Based on these cost-sharing requirements, Medicare beneficiaries will face relatively high coinsurance for these orphan drugs each time the drug is administered or when they fill a prescription. For Part B drugs, out-of-pocket liability per claim can amount to $1,000 or more for drugs administered in a physician’s office or maxes out at the amount of the Part A inpatient deductible for drugs administered in hospital outpatient departments. For Part D drugs, beneficiaries in 2026 would likely hit the $2,100 out-of-pocket cap with a single prescription fill.

For example, based on the $12,600 total cost per claim for Keytruda in 2023, 20% coinsurance under Part B amounts to around $2,500, or roughly $15,000 for the year (based on six claims for each Keytruda user in 2023, on average). For Opdivo, coinsurance of 20% based on a $10,500 cost per claim amounts to $2,100 beneficiary liability per claim, or roughly $14,000 annually (based on 6.6 claims for each Opdivo user in 2023) (Figure 3). For Jakafi, the $16,700 total cost per claim would mean a Part D enrollee would hit the $2,100 annual out-of-pocket cap in 2026 with one fill, based on a specialty tier coinsurance requirement of 25% to 33%.

Additional delays and exclusions from Medicare drug price negotiation provided under the new tax and budget law will likely mean higher out-of-pocket costs for Medicare beneficiaries who use these medications

Medicare’s negotiated drug prices can help to lower the amount beneficiaries pay, particularly in situations where they face a coinsurance requirement that is calculated based on the underlying price of the drug, such as in the case of Part B drugs and higher-cost Part D drugs. By delaying price negotiation for certain orphan drugs or excluding them from eligibility for negotiation, the tax and budget law maintains higher prices relative to the price Medicare would have paid if the drugs had been eligible for drug price negotiation. The result will be higher out-of-pocket liability for Medicare beneficiaries, which could give rise to cost-related access problems and lower utilization.

Estimating the exact magnitude of higher cost-sharing liability would depend in part on how much lower Medicare’s negotiated prices would fall below status quo prices for drugs that would have been selected for negotiation but for the changes in law, and how much longer the higher prices apply. In the absence of these more exact estimates, the following examples of potential savings from Medicare drug price negotiation help to illustrate the potential foregone savings for beneficiaries of delaying or fully exempting orphan drugs from price negotiation.

• If the government were to negotiate a 22% discount off the price of Keytruda, on par with the average 22% net price discount from the first round of Medicare drug price negotiation, that would generate savings of around $550 per claim for Medicare beneficiaries, reducing out-of-pocket liability to just under $2,000. Annual savings would amount to around $3,300, based on an average of six claims per user in 2023.
• Similarly, for Opdivo, a 22% negotiated price discount would generate savings of around $460 per claim, reducing out-of-pocket liability to around $1,600. Annual savings would amount to around $3,000, based on an average of 6.6 claims per Opdivo user in 2023.

These illustrative examples suggest that the continuation of higher prices for certain drugs brought about by the new tax and budget law could place additional financial strain on beneficiaries in the form of higher out-of-pocket liability, with potential out-of-pocket savings from price negotiation for these high-cost drugs of several hundred dollars. At the same time, even reduced cost-sharing liability for these expensive medications might continue to represent a substantial financial burden for some Medicare beneficiaries, especially for those in traditional Medicare without additional coverage and those in Medicare Advantage prior to reaching their maximum out-of-pocket limit.

Delaying or excluding additional orphan drugs from selection for Medicare drug price negotiation will cost the federal government several billion dollars over the coming decade

The Congressional Budget Office (CBO) initially estimated that changes to the orphan drug exclusion in the new tax and budget law would increase Medicare spending by $4.9 billion between 2028 and 2034. However, this amount is likely an underestimate of the spending impact since CBO reportedly did not fully account for certain drugs in its initial estimate, including Keytruda, and is said to be reevaluating the cost impact of these changes. This amount could also grow over time based on how the pharmaceutical industry responds in terms of changes in orphan drug research and development and the pipeline of new drugs coming to market and changing incentives around seeking additional orphan indications (as well as non-orphan indications) for orphan drugs already on the market.

With several blockbuster drugs expected to be delayed or excluded from selection for negotiation due to the changes in the new tax and budget law, CMS will be required to skip over these higher-spending drugs when it selects the list of drugs for negotiation in the future. While the changes to the IRA’s orphan drug exclusion were made in response to claims about the potential for less innovation related to drugs for rare diseases under the original provision, the changes are expected to reduce the potential savings from Medicare’s drug price negotiation program and prolong higher out-of-pocket liability for Medicare patients who use these drugs.

Small businesses with Affordable Care Act (ACA)-compliant plans could face a median premium increase of 11% for 2026, according to an analysis of preliminary rate filings from 318 insurers across all 50 states and DC. A deep dive into filings from 16 states and D.C. (with a 12% median proposed rate increase) shows that these small group market insurers cite rising health care costs (commonly estimated at about 9%) as the primary driver of the 2026 rate hike, including higher prices for hospital care, physician services, and prescription drugs.

Some insurers also cite broader inflation, labor shortages, uncertainty about tariff-driven cost increases, specialty drugs like GLP-1s, and decreased enrollment and worsening risk pools in small group plans as sources of the cost increases. A subset of insurers have responded to mounting prescription drug costs by excluding coverage of GLP-1s for weight-loss in 2026. Final premium changes are expected to be published in early fall.

The analysis is part of the Peterson-KFF Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system.

One-fifth of the U.S. population (close to 70 million people) receive health insurance coverage through the Medicare program, a share which is expected to grow larger in the coming years as the population ages. While satisfaction with Medicare is high, Medicare beneficiaries often report feeling overwhelmed by their coverage options. In 2025, the average beneficiary has a choice of 42 Medicare Advantage plans, with or without prescription drug coverage, and 14 stand-alone Part D plans. Often these decisions are made in conjunction with beneficiaries’ access to supplemental coverage, such as Medicaid, employer coverage, and Medigap. Recent years have also seen a steep rise in advertising for private Medicare plans, as well as aggressive marketing tactics by insurance brokers and other third-party marketing groups, which may make it increasingly difficult for beneficiaries to seek clear guidance and select the coverage that best meets their needs.

The State Health Insurance Assistance Program (SHIP) provides funding to a national network of state-based SHIPs that offer free, local, in-depth counseling and education to Medicare beneficiaries and their families to help them make informed decisions about their health coverage and benefits. Established by Congress in 1990, the program funds SHIPs in every state and assists up to 4 million beneficiaries each year, relying on both paid staff and trained volunteers to counsel beneficiaries. In comparison to 1-800-MEDICARE, the federal helpline for information and assistance with Medicare health coverage issues, SHIPs cover counseling topics in greater depth and offer more personalized assistance. For this reason, SHIPs often take referrals from 1-800-MEDICARE and other federal aging and disability resources to address more complex beneficiary concerns.

While SHIPs serve as an important source of unbiased information about the Medicare program and coverage choices, federal funding has been relatively modest over the last decade, despite an increasingly complex landscape of Medicare coverage options. At $70 million in 2025, up from $60 million in 2015, SHIP spending has amounted to roughly $1 per beneficiary each year from 2015 to 2025, and has been relatively flat for the past several years (Figure 1). Federal administration of the program also appears to be in transition. The Trump administration has announced plans to make significant organizational changes to the Department of Health and Human Services (HHS), including a proposal to eliminate the Administration for Community Living (ACL), which has administered the SHIP program since 2012, and consolidate its functions within a new Administration for Children, Families, and Communities (ACFC). Congress has yet to approve funding for the ACFC, leaving the future outlook for the ACL and the administration of the SHIP program somewhat uncertain.

To give context to the changing demands facing the SHIP program and the population it serves, this brief provides an overview of the services offered by SHIP, describes the level and sources of program funding and trends in service utilization, and discusses potential effects of policy proposals under consideration.

SHIPs Provide Free Counseling and Education Related to Medicare Health Coverage Issues for Beneficiaries and Their Families

SHIPs are state-based programs currently administered by the Office of Healthcare Information and Counseling within the Department of Health and Human Services (HHS) Administration for Community Living (ACL). HHS provides federal funding to states and U.S. territories to offer outreach, counseling, and education to Medicare beneficiaries and their families. There are a total of 54 SHIPs nationwide, operating in every state and the District of Columbia, as well as Guam, Puerto Rico, and the U.S. Virgin Islands. State SHIPs in turn contract with a network of approximately 2,000 local affiliates, including health systems, senior centers, and Area Agencies on Aging, to oversee the daily operations of the program. This structure enables SHIPs to offer locally focused counseling that reflects the Medicare coverage options, hospitals, and physician groups available in a given area, as well as any regional- or county-level aging and disability resources.

One of the primary services offered by SHIPs is one-on-one counseling. Medicare beneficiaries and their families or caregivers can connect with SHIP staff and trained volunteers for personalized assistance with questions related to Medicare benefits and coverage decisions, Medicare Advantage network restrictions and denials, Medicaid eligibility and coverage issues, Part D prescription drug coverage, long-term care insurance, and a variety of other topics. Counseling is available in person at SHIP counseling sites, as well as over the phone, online, or by email. SHIPs also conduct outreach and educational activities through community presentations, senior fairs, and Medicare enrollment events, and share Medicare news and information through the SHIP Technical Assistance Center online resource. All SHIP services are free to the public and not limited by level of income or any other beneficiary demographic criteria.

Medicare Coverage and Enrollment Decisions are Becoming More Complex, Increasing the Need for Unbiased One-On-One Counseling

The Medicare coverage landscape has undergone significant shifts in recent years, due in large part to the expanding role of private Medicare plans. In 2025, more than half of eligible Medicare beneficiaries are enrolled in a Medicare Advantage plan, with an average of 42 plans to choose from—more than twice the number available in 2015. This growth in the Medicare Advantage market has come with an increase in television advertising, as well as reports of aggressive marketing by insurance brokers and other third-party marketing groups. Beneficiaries in traditional Medicare must also navigate numerous choices about their coverage, including an average of 14 options for stand-alone prescription drug coverage, as well as potential sources of supplemental coverage, such as Medicaid, Medigap, and retiree health benefits.

At the same time, a growing share of adults are now working past the age of 65, in part due to the rising age of eligibility for Social Security benefits. Working adults and their spouses may retain their employer-sponsored health insurance for some time after they become eligible for Medicare, necessitating several choices about when and how to enroll in the Medicare program. These include whether to waive Part B coverage until retirement, whether to enroll in Part A alongside an employer-sponsored health plan, and whether to extend employer-sponsored health benefits after retirement under the Continuation of Health Coverage Act (COBRA). Active or retired federal employees who receive health insurance through the Federal Employee Health Benefits (FEHB) Program face a choice of whether to receive their FEHB benefits alongside Medicare Part B or opt out of Part B entirely, which may impact their total premium costs, ability to enroll in Medicare Advantage, and numerous other considerations.

A KFF analysis of focus groups held with Medicare beneficiaries during the 2022 open enrollment period found that many participants felt overwhelmed by their coverage options, and often sought the advice of insurance brokers to assist them in choosing a plan. In contrast, most participants had not heard of or used SHIP services, consistent with other research suggesting that SHIPs are relatively underutilized. SHIPs have fairly modest resources to dedicate to outreach campaigns, and often rely on smaller community events, referrals, and word of mouth to boost awareness of their services, which may make it challenging to compete with the large volume of open enrollment advertising by brokers and other third-party marketing groups.

Nonetheless, while many beneficiaries find brokers to be a helpful resource, they generally do not offer the same level of unbiased counseling as financially disinterested resources such as SHIPs or 1-800-MEDICARE, as they may not represent all coverage options available in a given county or region, and often have a financial incentive to steer beneficiaries towards Medicare Advantage over other forms of coverage. Following a rise in beneficiary complaints about misleading marketing practices by brokers and other third-party marketing groups, the Centers for Medicare & Medicaid Services (CMS) began requiring third-party marketing materials to mention SHIPs as an additional resource in 2024, highlighting the unique service that SHIPs provide in Medicare’s increasingly complex coverage environment.

More than 4 Million Medicare Beneficiaries Received SHIP Services in 2022, Including Lengthy One-On-One Counseling

Roughly 4.3 million Medicare beneficiaries, family members, and caregivers received SHIP services in 2022. Of these, more than one-third (1.7 million) received direct one-on-one counseling, most often in person or over the phone. Counseling sessions may be lengthy and often involve more in-depth issues than those handled by other beneficiary resources, such as 1-800-MEDICARE. In 2021, the most recent year for which these data are available, SHIP counselors spent an average of 33 minutes on each one-on-one counseling contact, more than three times the 9.5 minutes spent on the average call to 1-800-MEDICARE. Moreover, some evidence suggests that the counseling needs of SHIP clients have become more complex in the past decade. The average length of one-on-one counseling sessions increased by nearly 20% from 2014 to 2021.

Given the more extensive one-on-one support provided by SHIP counselors, CMS often coordinates with local SHIP offices to refer beneficiaries whose cases are too complex to be addressed during calls to 1-800-MEDICARE alone. Demand for SHIP services is highest during the annual Medicare open enrollment period, when SHIPs are primarily focused on helping beneficiaries compare plan options for the coming year. In 2021, the six-week open enrollment period accounted for one-third of all one-on-one counseling sessions for the year. Other common topics that may require substantial in-depth counseling include coordinating Medicare benefits with employer or retiree health coverage, completing applications for financial assistance programs such as the Medicare Savings Programs and the Part D Low-Income Subsidy, navigating claims denials and appeals, and shopping for long-term care insurance to cover extended nursing home stays and other services not generally covered by Medicare.

To gain the knowledge and expertise required to offer these counseling services, all SHIP team members (nearly half of whom are volunteers) are required to undergo a thorough training and certification process before interacting with the public. The SHIP Technical Assistance Center provides an Online Counselor Certification Tool to assist with this process, which includes 21 courses and special topics on various aspects of the Medicare program. Reliance on volunteers enables SHIPs to make more efficient use of the funding available to them, and is a common strategy used by similar insurance and benefit navigation programs, such as the Affordable Care Act (ACA) Navigator program. On the other hand, SHIP program coordinators cite availability of volunteers as one of the primary barriers to expanding access to SHIP services, and note that the breadth of learning required often leads to volunteer attrition during training.

Federal Funding for SHIPs Has Been Fairly Modest in the Past Decade, Despite the Growing Complexity of the Medicare Program

The majority of SHIP funding (roughly 80%) comes from discretionary appropriations, provided to the ACL under the annual Departments of Labor, Health and Human Services, Education, and Related Agencies (LHHS) Appropriations Bill. The bulk of this funding is used to supply federal grants to each of the 54 states and territories within the SHIP network, based on regulatory formulas that account for the size of the state’s Medicare population and other factors, such as the share of the state’s Medicare beneficiaries that live in rural areas or have incomes below a certain threshold. In 2025, the ACL received just over $55 million in discretionary funding for SHIP, of which $51 million was distributed in grants with an average award size of roughly $950,000 (Appendix Table 1). The remaining $4 million was reserved for program administration and national program resources, such as the SHIP Technical Assistance Center (see above).

Additional SHIP funding comes from the Medicare Improvements for Patients and Providers Act (MIPPA) program. MIPPA provides targeted grants to states and territories in select programs administered by the ACL to assist low-income beneficiaries with applying for cost assistance through Medicare. SHIP grants under MIPPA are distributed based on a statutory funding formula that considers the number of Medicare beneficiaries in the state who meet certain criteria, such as those who are eligible for the Part D low-income subsidy but have not yet enrolled to receive it. In 2025, the ACL received $15 million in MIPPA funding for SHIP, of which $13.5 million was distributed in grants with an average award size of roughly $260,000 (Appendix Table 1). Finally, some states may supplement federal funding for SHIP with additional state funds.

Federal funding for SHIP has increased modestly over the past decade, but has remained below $1 per beneficiary each year, despite evidence that the cases fielded by SHIPs are becoming more complex. While certain aspects of the SHIP program, such as the use of volunteer counselors and staff, have allowed SHIPs to make efficient use of these funds, greater resources could enable them to reach a larger number of beneficiaries and accommodate the growing complexity of one-on-one counseling services being provided.

HHS Has Proposed Significant Changes to SHIP Program Administration for Fiscal Year 2026

In March 2025, the Trump administration announced a restructuring throughout the Department of Health and Human Services (HHS), including plans to eliminate the ACL, which administers the SHIP program through its Office of Healthcare Information and Counseling. The ACL was formed in 2012 to consolidate the functions of several agencies aimed at supporting the health and wellbeing of older adults and people with disabilities, enabling them to live more independently within their communities. Since that time, the ACL has also been responsible for administering grants to Senior Medicare Patrol offices, which often coordinate with SHIPs to resolve beneficiary complaints of suspected health care fraud, and State Units on Aging, which in turn supply funding to Area Agencies on Aging where many local SHIP offices are housed, along with numerous other programs that serve the aging and disabled populations.

The President’s HHS FY 2026 budget proposal proposes to integrate the programs administered by the ACL into a new Administration for Children, Families, and Communities (ACFC). The proposal maintains discretionary funding for SHIP, as well as mandatory funding through MIPPA, at FY 2025 levels, which may allow SHIPs to continue operating with minimal disruption. On the other hand, HHS has not confirmed whether the ACL staff that administer SHIP funding at the federal level will be subject to staffing cuts during the restructuring, which has included layoffs of roughly 10,000 full-time employees. Media reports from earlier in 2025 suggested that as many as four in 10 (40%) ACL staff were laid off or offered early retirement during prior waves of staffing cuts, such as the “Fork in the Road” deferred resignation program.

Adding to this uncertainty, funding for the ACFC and other new agencies included in the President’s HHS budget proposal has not yet been approved by Congress. The Appropriations Committees in the Senate and the House have recently passed their respective versions of the FY 2026 Labor, Health and Human Services, Education, and Related Agencies (LHHS) Appropriations Bill. While there are numerous differences between the two bills, both maintain funding for the ACL as an independent agency, and do not generally reflect many of the administration’s proposed changes to HHS’s departmental structure. Congress has until September 30 to reconcile the two bills, or else enact a Continuing Resolution (CR) to preserve federal funding at current levels. While these developments do not impact SHIP funding in the short term, they create some uncertainty about the future outlook for the SHIP program and refocus attention on longstanding questions about whether SHIPs will have the resources to meet the demand among Medicare beneficiaries for one-on-one counseling to make informed health coverage decisions in the coming years.

Appendix