The recently finalized 2027 Medicare Hospital Outpatient Perspective Payment System (OPPS) rule from the Centers for Medicare & Medicaid Services (CMS) includes a rule to reduce Medicare’s reimbursement for 340B drugs. The rule will reduce reimbursement for 340B drugs from average sales price (ASP) plus 6% (what Medicare generally pays for Part B outpatient drugs administered by providers) to ASP minus 28%, a 32% reduction (CMS originally proposed reducing reimbursement to ASP minus 33.4%). CMS indicated that this change will better align Medicare reimbursement with hospitals’ costs of acquiring 340B drugs.

The 340B Drug Pricing Program requires drug manufacturers participating in Medicaid to sell outpatient drugs to eligible nonprofit and government providers at a substantial discount, allowing providers to earn larger profits when being reimbursed for 340B drugs. The intent of the program is to support providers, such as certain disproportionate share hospitals and federally qualified health clinics, that care for low-income and other underserved populations. Critics have raised concerns that the 340B program, which has grown substantially over time, is not well-targeted; that savings from the program are not shared with patients; and that the program incentivizes hospitals to acquire clinics and physician practices in order to extend 340B discounts to those settings, enabling them to generate more revenue. Supporters of the program say that revenues generated by the difference between Medicare (and other payer) reimbursement for 340B drugs and the discounted price help 340B providers care for underserved populations and invest in operations.

CMS based the amount of the payment reduction on the maximum allowed acquisition costs under the 340B program, after also considering a cost acquisition survey of 340B drugs completed by hospitals in early 2026 (CMS originally proposed setting reimbursement to ASP minus 33.4% based on the survey, but set reimbursement using the maximum allowed acquisition costs in the final rule to simplify future updates, among other reasons). This change revives an earlier effort by CMS to reduce Medicare payments for 340B drugs that was implemented in 2018 under the first Trump administration, but the Supreme Court overturned that rule in 2022 because the agency had not first conducted a cost acquisition survey. CMS’s Medicare 340B payment reduction will take effect on January 1, 2027, and will have disparate effects on different types of hospitals, as described more below.

CMS’s finalized cut to 340B drug reimbursement will reduce Medicare spending on 340B drugs by an estimated $4.65 billion in 2027, while increasing spending on non-drug outpatient services by the same amount because of budget neutrality requirements. Under federal law, CMS is generally required to maintain the same amount of aggregate spending through OPPS regardless of reimbursement changes (i.e., maintain budget neutrality). Based on this requirement, CMS finalized a 7.5% across-the-board increase in payments for non-drug outpatient services covered under the OPPS, which the agency estimates will offset the impact of cuts to spending on 340B drugs in 2027.

The budget neutrality requirement means that savings from reductions in 340B payments to 340B hospitals would be redistributed to both 340B and non-340B hospitals through higher payments for non-drug outpatient services. Similarly, Medicare beneficiaries would face lower cost sharing on 340B drugs (e.g., based on 20% coinsurance applied to a lower amount) but higher cost sharing for non-drug outpatient hospital services. CMS estimates that Medicare beneficiaries who use 340B drugs would save $1.1 billion in total in 2027, but cost sharing would increase for beneficiaries who use non-drug outpatient hospital services based on Medicare’s proposed 7.5% payment increase.

Proposed cuts will reduce revenues among safety-net hospitals while increasing revenues among for-profit hospitals, among other differences. For 340B hospitals, total Medicare revenues will decrease or increase depending on how reliant they are on revenues from 340B drugs versus non-drug outpatient services, but non-340B hospitals would experience revenue increases only based on the higher payment rate for non-drug outpatient services. CMS’s rule to reduce reimbursement for 340B drugs will exempt rural sole community hospitals (SCHs) (rural hospitals that are the only source of short-term, acute inpatient care in a region), children’s hospitals, and PPS-exempt cancer hospitals. Changes will not affect hospitals that are not reimbursed under the OPPS, including critical access hospitals (CAHs), which make up the majority of rural hospitals.

In the aggregate, some types of hospitals will lose or benefit more from these changes than others, based on estimates from CMS (Figure 1):

• Safety-net hospitals will face a 5.2% net reduction of OPPS revenue under this proposal (see figure notes for definition of “safety-net hospitals”). Other types of hospitals will also see net reductions in OPPS revenue in the aggregate, including large urban hospitals (with 500 beds or more) (-4.8%), major teaching hospitals (-3.9%), government hospitals (-2.9%), and nonprofit hospitals (-0.4%). Some hospitals that will see the largest decrease in revenue likely fall into more than one of these categories (e.g., major teaching hospitals tend to be large urban hospitals).
• For-profit hospitals will see a 6.8% net increase in OPPS revenues. For-profit hospitals are not eligible for the 340B program and so will only see increases in reimbursement for non-drug outpatient services. Other types of hospitals will also face net increases in Medicare OPPS reimbursement in aggregate, including rural SCHs (5.3%), small urban hospitals (with 0 to 99 beds) (4.5%), and non-teaching hospitals (3.5%). 

Reductions in 340B payments could add to the financial challenges facing safety-net hospitals while increasing margins of for-profit hospitals. Safety-net hospitals have lower operating margins than average and so could have an especially difficult time absorbing any revenue losses from the 340B payment cut, while for-profit hospitals have much higher operating margins than the average hospital. Additionally, safety-net hospitals, which are particularly dependent on Medicaid revenues, are likely to be disproportionately affected by the 2025 reconciliation law, as it achieves most of its health care savings through federal Medicaid spending reductions.

The substantial growth of the 340B program in recent years has led hospitals, pharmaceutical companies, and policymakers to focus on whether and how to change the program. At the federal level, lawmakers have proposed options that would preserve or narrow the scope of the program and have proposed increasing transparency around the program, such as by requiring hospitals to report 340B savings. At the state level, some states have passed laws that would preserve the ability of hospitals to use multiple contract pharmacies to dispense 340B drugs, among other things. Other states have implemented requirements for hospitals to disclose the amount of savings generated from the 340B program (as required by Minnesota) or how those savings are spent.

Some pharmaceutical companies have attempted to start providing 340B drug discounts through a rebate model, an approach that would require hospitals to purchase 340B drugs at a non-discounted price and receive post-sale rebates after submitting claims information. These efforts have been halted by the courts due to lack of authorization from HHS, the agency that administers the 340B program. In 2025, the Trump administration attempted to implement the 340B Rebate Model Pilot Program, but a court halted the pilot after a lawsuit was filed by the hospital industry. HHS announced a revised rebate model pilot in July 2026, which has also been challenged in court.

Appendix

The Affordable Care Act (ACA) Marketplace 2027 Open Enrollment period starts November 1, 2026, in most states. In 2026, the enhanced premium tax credits expired, provisions of the 2025 budget reconciliation law (the “One Big Beautiful Bill Act”) began to take effect, and Trump administration regulations began to change Marketplace coverage, with effects expected to carry into 2027 enrollment. Further changes in the ACA Marketplaces are again expected in 2027.

Here are the nine things to know for the 2027 Open Enrollment period:

1. Premiums are going up by double-digits, but most people get a subsidy.

While insurers proposed a median premium increase of 15%, the average increase in finalized benchmark silver premiums for 2027 is 13%, marking a second consecutive year of double-digit proposed increases (these premiums rose by 26% from 2025 to 2026). In states that use the Healthcare.gov platform, benchmark silver premiums are increasing 11%, whereas states that run their own enrollment platforms are seeing premium increases of 16%. From 2025 to 2026, HealthCare.gov states saw a 30% increase, whereas state-based Marketplaces saw a roughly 17% increase in benchmark premiums.

In their rate filings, insurers point to a higher-than-usual increase in the underlying cost of care, which is not unique to the ACA Marketplaces; some employer plans have also seen steep cost increases.

ACA Marketplace insurers also cite the expiration of the enhanced premium tax credits and the resulting changes in the risk pool as factors contributing to higher premiums. KFF’s analysis of insurer filings found that insurers estimated risk pool changes added about four percentage points on average to premiums in 2026 and expect a similar, additional effect in 2027.

Most enrollees get a subsidy that will cushion the impact of these increases in 2027. However, people with incomes above 400% of the federal poverty level (FPL) will be particularly hard hit because they no longer qualify for premium tax credits and must pay the full cost of coverage. Sharp premium increases in 2027 follow even steeper increases going into 2026. These higher costs may lead additional healthier enrollees to drop coverage, further worsening the risk pool and putting additional upward pressure on premiums.

2. Marketplace enrollment is declining following the expiration of enhanced premium tax credits, and may continue to fall for other reasons.

Enrollment in the ACA Marketplaces declined following the expiration of the enhanced premium tax credits. During the 2026 Open Enrollment Period, Marketplace plan selections fell by 1.2 million from 2025. By February 2026, effectuated Marketplace enrollment (i.e., people who pay their premiums and remain enrolled) was down 12% (or 2.6 million people) from the previous year to 19.2 million people. More recent Marketplace-specific enrollment data are not yet available, but enrollment data for the individual market suggest the decline may have continued through the first half of 2026. Data for the broader individual market, which includes both Marketplace coverage and plans purchased directly from insurers or brokers, show a continued decline. Individual market enrollment fell 18% by June 2026, from 25.2 million to 20.5 million people—a loss of more than 4.6 million.

Looking ahead to 2027, several insurers have said they expect the market to continue to deteriorate in 2027 as a continued result of the enhanced premium tax credits ending. Some enrollees who were able to keep coverage in 2026 may no longer be able to make ends meet.

As discussed more below, anti-fraud efforts and changes to eligibility for tax credits affecting certain immigrants will also have a downward effect on Marketplace enrollment. In its latest projections, the Congressional Budget Office (CBO) estimated ACA Marketplace enrollment would fall from a peak of 22.4 million in 2025 to 13.1 million in 2027.

3. Insurer exits outnumber new entrants.

The number of insurers participating in the ACA Marketplaces is expected to decrease again in 2027, with more insurers announcing plans to exit the Marketplace than to enter. As of October 29, 2026, 11 carriers had announced plans to exit at least one state for 2027, while seven carriers had announced plans to enter a new state. Shrinking Marketplace enrollment after the expiration of the enhanced premium tax credits has reduced the potential market for insurers and raised concerns about the future of the risk pool. The changes will vary across states, but in some areas, consumers will have fewer insurers to choose from in 2027. Cigna, for example, is leaving the individual market in all 11 states where it currently participates.

Insurer exits can reduce competition and leave consumers with fewer choices of plans and provider networks and disrupt coverage for some enrollees.

4. Some state-based Exchanges have backfilled lost enhanced federal tax credits.

Some states that operate their own Exchanges are using state-funded subsidies to help offset the expiration of the enhanced premium tax credits, with several continuing or expanding assistance in 2027. New Mexico went furthest in 2026, fully backfilling the lost federal assistance for Marketplace enrollees. While enrollment declined nationally, New Mexico saw Marketplace enrollment grow during the 2026 Open Enrollment Period. The state is continuing its assistance in 2027.

Other states provided more limited assistance in 2026 and may expand eligibility in 2027. California, for example, is continuing state-funded premium subsidies but is expanding its program to partially backfill lost enhanced tax credits for households with incomes between 165% and 200% FPL. Previously, only households with incomes between 138% and 165% FPL were eligible for state assistance to replace any portion of the expired enhanced tax credits. Several other states have also maintained subsidy programs such as New Jersey, while Rhode Island and Virginia moved to create new state-specific subsidies for the 2027 plan year. These state efforts may help some consumers afford coverage despite the loss of federal assistance, but the amount of support available varies by state and income.

5. Recent federal actions to address fraud may affect enrollment counts and make it more difficult for enrollees needing brokers' services in 2027.

Recent initiatives to combat Marketplace broker fraud could impact counts of the number of enrollees this Open Enrollment cycle, the availability of enrollment assistance, and certain agent and broker practices in 2027. Some provisions that attempt to address fraud by placing new requirements on consumers have been temporarily paused due to court action (discussed more below).

In September 2026, HHS reported they cancelled coverage for approximately 760,000 individuals who CMS says were "phantom” enrollees, meaning a broker or agent may have signed them up without their knowledge. HHS sent a list of about 1.2 million people to insurers to review. These individuals had been signed up by an agent or broker, had no premium payment and were missing a Social Security number or immigration document that could be verified in real time. If insurers were unable to make contact with these individuals or verify they had incurred claims, CMS cancelled the coverage. There are reports that some enrollees have had their coverage reinstated suggesting that the criteria CMS used to identify potential fraud may have also flagged legitimate enrollees. Others who lost coverage through these efforts may not have their coverage restored.

Additionally, HHS is implementing new safeguards on certain agents, brokers, and web-broker practices that put consumers at risk of inappropriate or fraudulent enrollments. This follows investigations of brokers and other related entities moving enrollees to different plans or enrolling them in Marketplace coverage without their knowledge. For instance, the HHS Notice of Benefit and Payment Parameters for 2027 updates standards of conduct for agents, brokers, and web-brokers regarding prohibited marketing tactics, including but not limited to providing cash, monetary rebates, or cash equivalents to persuade consumers to enroll in coverage; falsely claiming that consumers will always qualify for zero-dollar insurance or zero-dollar premiums; and providing false information on enrollment timelines and deadlines. Agents, brokers, and web-brokers must submit marketing materials to HHS upon request in response to monitoring, auditing, or enforcement activities. Agents, brokers, and web-brokers that contract with a third party or other entity to produce marketing materials must ensure that those entities follow the requirements that apply to agents, brokers, and web-brokers.

In September 2026, HHS announced an even more stringent restriction that temporarily pauses the registration of new agents and brokers in the federally facilitated Marketplace and for Marketplaces that operate on the federal platform until February 2027. CMS estimates that approximately 19,000 new agents and brokers would have registered absent the temporary restriction. Combined with the reductions in Navigator funding for 2026 announced in February 2025, consumers may have less access to enrollment assistance in 2027.

6. Some lawfully present immigrants will no longer qualify for subsidized Marketplace coverage in 2027.

Currently, subsidized ACA Marketplace coverage is available to lawfully present immigrants. Lawfully present immigrants include lawful permanent residents (LPRs or green card holders), people on work visas, and humanitarian immigrants such as refugees, victims of human trafficking, asylees, among others. Undocumented immigrants are not eligible to purchase ACA Marketplace coverage, even at full cost. While immigration statuses eligible to purchase ACA Marketplace coverage have not changed for 2027, the 2025 budget reconciliation law limits eligibility for tax credits in the Marketplace to only certain groups of lawfully present immigrants including:

• Lawful permanent residents
• Cuban and Haitian entrants, as defined in section 501(e) of the Refugee Education Assistance Act of 1980
• Any lawful residents living in the U.S. under the Compact of Free Association

Other lawfully present immigrants such as refugees, victims of human trafficking, and asylees, can still purchase Marketplace coverage but will no longer be eligible for premium tax credits. Without subsidies, many may be unable to afford their premiums and could drop coverage. CBO estimates that one million more individuals will be uninsured as a result of this provision by 2035.

7. Enrollees will face the elimination of repayment limits.

Beginning in the 2026 tax year, limits that previously capped how much some Marketplace enrollees had to repay in excess premium tax credits were eliminated as enacted through the budget reconciliation law (“The One Big Beautiful Bill Act”). Because the first tax filings under the new rules will not happen until early 2027, enrollees will choose 2027 plans without having seen how uncapped repayment works in practice. Those whose incomes end up higher than projected may face larger tax bills than they expect, and accurately estimating income and updating it when circumstances change will be especially important for people near income thresholds for premium tax credits or cost-sharing reductions.

Some enrollees may be able to lower their modified adjusted gross income (MAGI) through contributions to accounts such as health savings accounts (HSAs) or traditional individual retirement accounts (IRAs). These contributions could increase premium tax credits or help people near 250% FPL qualify for cost-sharing reductions (CSRs). However, HSA contributions are available only to people enrolled in HSA-eligible plans, and not everyone has the funds to contribute. Because Marketplace assistance is based on projected annual income, enrollees considering this approach may also need to update their income estimates during the year.

8. Consumers who are denied or removed from Medicaid coverage for not meeting work requirements will also be ineligible for premium tax credits.

Starting in 2027, in states required to implement Medicaid work requirements, consumers who lose or are denied Medicaid coverage solely for not meeting work requirements will also be ineligible for subsidized Marketplace plans in these states. Prior to the budget reconciliation law, a consumer who was denied Medicaid coverage or disenrolled from Medicaid could sign up for Marketplace coverage as long as they met Marketplace eligibility requirements. Because income eligibility for Medicaid references a monthly income whereas Marketplace premium tax credits are based on an estimated annual income, consumers may be concurrently eligible for both, especially in Medicaid expansion states. While this is likely a small group of people, it may include individuals who recently lost a job and who would likely not meet the Medicaid work requirements.

When the budget reconciliation law was signed, only Georgia had Medicaid work requirements in place; the law now requires 43 states and the District of Columbia to implement work requirements by the start of 2027. Exclusion from ACA tax credits based on failing Medicaid work requirements will apply to adults in Medicaid expansion states and those that are covered under Medicaid Section 1115 waiver programs to expand coverage. People who lose Medicaid coverage as a result of these requirements, including those who are working or qualify for an exemption but fail to navigate reporting rules, may face challenges finding affordable coverage because they will remain ineligible for premium tax credits until they are no longer eligible for Medicaid for reasons other than not meeting work requirements (such as a change in income).

9. Litigation has halted implementation of some Marketplace requirements for 2027.

Litigation challenging two final regulations that make substantial changes to Marketplace requirements – the 2025 program integrity rule and the HHS Notice of Benefit and Payment Parameters for 2027 – have halted implementation of many new rules for the time being. Four key cases are working their way through the courts: The 2025 program integrity rule was challenged in City of Columbus et al. v. Kennedy (Columbus I) and California et al. v. Kennedy (California I). Litigation over the 2027 Payment Notice is also ongoing in City of Columbus et al. v. Kennedy (Columbus II) and California et al. v. Kennedy (California II), with some provisions of the 2027 Payment Notice stayed as the litigation continues.

The state of play after several court decisions over the past year include the following:

• Failure to reconcile requirement: For plan year 2027, consumers will not be disqualified from receiving premium tax credits if they fail to file and reconcile prior years' premium tax credits. So, for example, an enrollee who failed to file their tax return and reconcile for the 2025 tax year in 2026, will not lose subsidies for 2027 coverage.
• Expansion of eligibility for catastrophic plans: A 2025 announcement expanded who can enroll in catastrophic plans, allowing individuals who were not eligible for premium tax credits or other cost-sharing help because their projected income was below the federal poverty level or above 250% FPL to sign up for catastrophic coverage. This expanded eligibility has been temporarily paused due to a June decision in Columbus II. This means only a narrow group of people including individuals under age 30, those whose Marketplace or employer coverage would cost more than 8.5% of their income, and those who qualify for a hardship exemption can enroll in these plans during open enrollment.
• Other requirements are not in place for now or have been vacated. Due to litigation, CMS has stated that it will not implement a long list of final requirements. This includes certain income verification requirements, network adequacy requirements, and the elimination of standardized health plans. In addition, other requirements, including an Administration rule that would prohibit states from including gender-affirming care as an essential health benefit and a rule that would have shortened the Open Enrollment Period to nine weeks, have been vacated.

Introduction

In recent years, scientists, researchers, health care providers and various medical organizations have been evaluating the use of race in clinical decision-making tools to understand how its use may exacerbate or mitigate longstanding racial health disparities. This brief provides an update on how the use of race in clinical decision-making tools has changed in recent years, as a growing number of medical specialties and institutions have moved away from race-based tools, and the implications of this change for racial health disparities. Overall, it shows that clinical medicine is moving toward removing race and ethnicity from clinical calculators and guidelines, which has mitigated disparities and improved health outcomes. However, questions remain about the impact of this movement. Some continue to view using race to guide clinical decision-making as a way to mitigate health disparities because race and ethnicity capture patient aspects that influence health, even if not perfectly understood. Key takeaways include:

• Although there are no biologic differences by race, race and ethnicity affect individuals’ health and health care experiences due to bias, discrimination, and differences in underlying structural factors that influence health. Medical research historically used race in many ways despite there being no biological or genetic basis for the concept. Similarly, false ideas about race have been embedded in clinical medicine in ways that may impact clinical care.
• Research has established that the use of race in clinical decision-making tools and guidelines may contribute to racial health disparities. Despite the lack of consensus on the appropriate use of race in clinical medicine, dozens of clinical decision-making tools include race and/or ethnicity to inform decision making. In addition to clinical calculators and risk assessment scores, race plays a role in the clinical management guidelines for many diseases. These tools and guidelines can reinforce the disproven idea that biological differences between racial groups drive disparate health outcomes. They also can result in differential diagnostic and treatment decisions based on race, which may contribute to racial health disparities.
• Amid growing attention to the implications of using race to inform clinical care, several clinical decision-making tools have removed race and/or ethnicity data in recent years, with research showing reductions in disparities and improvements in health outcomes. For example, research shows that the removal of a race-based correction from a formula used to measure kidney function resulted in earlier diagnosis and treatment for chronic kidney disease (CKD) and more access to kidney transplants for Black patients. The removal of race-based corrections from lung function equations resulted in more Black patients being reclassified with severe lung disease. The American Heart Associated and American College of Cardiology removed race from a risk calculator for heart disease and found that the calculator’s predictive accuracy was equal to or better than the previously used race-based version.

Researchers and clinicians are still investigating what information race captures, as race and racism may be related to structural inequalities that disparately impact the health and health care experiences of some groups more than others. Continued research on health outcomes following the shift towards removing race from clinical decision-making tools is important to understand their impact on racial health disparities and health outcomes. However, information will likely become more limited amid federal cutbacks to funding for disparities-related research.

Race and Ethnicity in Medical Research and Clinical Medicine

Medical research historically used race in many ways despite there being no biological or genetic basis for the concept. Race is a socio-political system of human categorization that has been used to justify social hierarchy based upon false notions of “biological differences” between racial groups. Historically, medical research has used race to explain differences in health outcomes among people, including by conflating race with genetic variation in disease risk despite well-evidenced consensus disproving the idea. This history can be traced back to early American medical research, where pseudoscientific fields of phrenology and eugenics were put forth as evidence of biological differences between races. In recent years, some of the most influential medical journals and medical societies have recognized that race is a poor proxy for biological differences between populations and the role scientific racism in medical research has played in contributing to racial health disparities. Calls have grown for medical researchers to explore how racism impacts health and to provide clear rationale for when and why race is used in research studies.

Similarly, false ideas about race have been embedded in clinical medicine that may impact clinical care. A 2021 KFF analysis detailed the influence of race in clinical medicine and provided multiple examples of the discriminatory treatment of people of color in health care. Researchers have identified medical education, disease naming, and provider bias as some of the areas in which racism is embedded in clinical medicine. A key example is beliefs about differences in pain between Black and White patients. Multiple studies have demonstrated that medical students and physicians may hold false beliefs about biological differences between Black and White people, including that Black people have less sensitive nerve endings. Decades of research have demonstrated Black patients’ pain is not recognized and consistently undertreated compared with White patients. Scholars suggest that these false beliefs about pain and Black patients’ experiences navigating pain in health care are closely related.

Over the past several years, there has been growing attention to the potential implications of using race in clinical care and to inform clinical decision-making.In the wake of the COVID-19 pandemic and the striking structural inequities revealed, research investigating how the use of race in medicine contributes to health disparities became a priority for the medical community. Clinicians and researchers have been analyzing and reconsidering how race has impacted clinical care, most notably as it relates to clinical decision-making tools and algorithms. As clinicians have learned more about the impacts of using race in clinical decision-making, there has been a push to explore new approaches that are more conscious of how race and racism influence clinical care and racial health disparities.

Although there are no biologic differences by race, race and ethnicity affect individuals’ experiences in the health care system and their health due to bias, discrimination, and differences in underlying structural factors that influence health. KFF survey data from 2023 showed that health care experiences vary by race and ethnicity, which can influence patient trust in health care settings, treatment decisions, and ultimately health outcomes. The survey showed that Black, American Indian or Alaska Native (AIAN), Hispanic, and Asian adults who recently received health care were more likely than White adults to report being treated unfairly or with disrespect by a health care provider because of their racial or ethnic background. AIAN, Black, Hispanic, and Asian adults also were more likely than White adults to say they had at least one of several negative experiences with a health care provider due to their race and ethnicity, including a provider assuming something about them without asking, suggesting they were personally to blame for a health problem, ignoring a direct request or question, or refusing to prescribe pain medication they thought they needed. The survey also showed that Black, Hispanic, and Asian adults who had at least half of their visits with providers who share their racial or ethnic background reported having more frequent positive and respectful interactions with providers. A separate experimental study showed that racial concordance between patient and provider significantly increased uptake of preventative and invasive services among Black men, which could decrease the cardiovascular mortality gap between Black and White males.In addition to differential experiences, there are racial and ethnic differences across key social and economic factors that influence health, many of which reflect underlying structural inequities.

Use of Race in Clinical Decision-Making Tools and Guidelines

Despite the lack of consensus on the appropriate use of race in clinical medicine, dozens of clinical decision-making tools include race and/or ethnicity to inform decision making. In 2025, researchers identified 42 risk calculators, five laboratory tests, 15 medications, and one therapy that accounts for race in some way. These tools use clinical and demographic information to estimate disease risk, organ function, and other important health metrics that aid clinicians’ decision-making. Most clinical decision-making tools that use racial and ethnic data do not provide clear rationale for using race as a variable nor explain the mechanism for how race influences disease risk. Those that do generally indicate that they use race based on previous studies using race, epidemiological data, or patterns that vary by race (which likely represent underlying structural factors). For example, the National Cancer Institute’s Breast Cancer Risk Assessment Tool estimates five-year and lifetime risk of developing breast cancer in people without a personal history of the disease and includes race and ethnicity as an input variable. The calculator’s creators note that race and ethnicity are used in the model because “incidence of breast cancer and some risk factor associations differ by race and ethnicity within the U.S. population.” Similarly, a colon cancer survival calculator from a major U.S. health care system includes race as an input variable, stating that it is a clinically relevant predictor of survival but does not include any additional rationale for its inclusion.

In addition to clinical calculators and risk assessment scores, race is used in clinical management guidelines for many diseases. In contrast to clinical calculators and risk assessment tools which may use race as a variable in an equation that outputs a number, race-based clinical management guidelines may guide clinicians’ thinking, disease screening or drug prescribing. In these cases, the use of race may have mixed impacts. For example, the American Diabetes Association 2026 diabetes management guidelines use a lower body mass index (BMI) threshold for Asian people compared to other groups to recommend diabetes screening. The guidelines also prompt clinicians to consider screening in patients with overweight and obesity from “high-risk” racial and ethnic groups including African American, Latino, Native American, Asian American populations. Using race and ethnicity in this way may help diagnose diabetes earlier in these populations, but it also could result in over-screening and increased health care costs. Similarly, the American College of Rheumatologists has differential screening recommendations for Asian and African American adults taking allopurinol for gout due to an increased risk of adverse skin reactions in these groups. Screening for the gene variant associated with the adverse skin reactions has significantly reduced the incidence of these reactions and health care costs, however one of the main alternative gout medications carries notable cardiovascular risks. BiDil, a drug designed to treat heart failure that was initially rejected by the FDA, was recommended for use specifically in self-identified Black patients based on a clinical trial of 1,050 Black patients. The trial showed promise for treating Black adults with heart failure, but it failed to assess the drug response in adults of other racial backgrounds, social determinants of health contributing to disease, and only had a 12-month follow up period. Most notably, the FDA’s approval of BiDil was met with overwhelming concern over the implications of race-specific prescribing guidelines from clinicians, researchers, and patients. Using race in clinical management guidelines in this manner may be intended to provide care in a way that is beneficial to specific racial and ethnic groups but may also lead to a number of unintended downstream effects.

Research has established that the use of race in clinical decision-making tools and guidelines may contribute to racial health disparities. These tools can reinforce the disproven idea that biological differences between racial groups drive disparate health outcomes. They also can result in differential diagnostic and treatment decisions based on race, which may contribute to racial health disparities. One study found that The American Heart Association’s Get With The Guidelines Heart Failure Risk Score Calculator adds three points to the risk score for non-Black patients without providing a rationale as to why, consistently categorizing all Black patients as lower risk of death during a hospitalization for heart failure. The same study also found that the original STONE score, a clinical prediction tool for kidney stones, consistently assigned lower risk scores for Black patients with symptoms of kidney stones compared to patients with different racial or ethnic backgrounds. The lower risk scores for certain groups can lead clinicians to make differential decisions about care, such as whether patients are admitted for specialty versus general care in the hospital or whether patients get the appropriate clinical care in a timely manner.

Debate continues about what information race captures and the relative benefits and harms of using it to inform clinical practice. Some view using race to guide certain clinical decisions, like screenings and medication prescribing, as a way to mitigate health disparities. Proponents of using race in clinical decision-making tools argue that race and ethnicity capture patient aspects that influence health, even if not perfectly understood, and that they should continue to be used until better alternatives are identified. While race does not represent genetic or biological differences, some argue that it is appropriate to use as a variable because it reflects underlying differences in socioeconomic factors or exposures that can influence health. Others argue that race-based medicine, in whatever form it may take, always implicitly promotes racial stereotyping, reinforces the false notion that there are clinically significant biological differences between racial groups, and undermines research efforts to identify more precise markers of disease. The lack of standardized racial and ethnic groups in the U.S. poses significant challenges to determining the true significance of race and ethnicity in clinical medicine. Many researchers note that it is still important to collect data and fund studies that research disparate health outcomes by racial groups alongside the goal to address the appropriate role of race in health care. However, recent changes to federal funding for research on racial health disparities and loss of public data stratified by race and ethnicity may lead to more limited data and research going forward.

Impacts of Removing Race from Clinical Decision-Making Tools and Guidelines

Several clinical decision-making tools and guidelines have removed race and/or ethnicity information in recent years (Table 1). Following these changes, research has emerged about the impact of removing race and ethnicity information from these tools, particularly for three widely used clinical decision-making tools that removed race and/or ethnicity as input variables.

• Research shows that the removal of a race-based correction from a formula used to measure kidney function resulted in earlier diagnosis and treatment for chronic kidney disease (CKD) and more kidney transplants for Black patients. In 2021, the National Kidney Foundation and other research groups revised the estimated glomerular filtration rate (eGFR) equation, which estimates kidney function, to remove a race-based correction that overestimated kidney function for Black people. This race-based correction resulted in Black people having higher kidney function values, which may have impacted time to CKD diagnosis, treatment decisions, and eligibility for kidney transplantation compared to non-Black individuals. After revising the eGFR equation to remove race and applying it to patients, researchers found that Black patients were consistently reclassified to have more severe kidney disease than they would have under the race-based equation, potentially enabling earlier diagnosis of CKD, earlier treatment planning, and increased access to kidney transplantation for Black patients.
• The removal of race-based corrections from lung function equations resulted in more Black patients being reclassified with severe lung disease, which also had impacts on disability reimbursements and occupational eligibility. In 2023, the Global Lung Function Initiative (GLI) published updated equations that no longer included race and ethnicity as input variables in lung function equations to address concerns about the use of race and its contribution to health inequities.Lung function is measured using spirometry data, which since inception, supported racist notions about biological deficiencies among enslaved people. Lung function equations previously included a race-correction that predicted lower normal reference values for Black individuals, which researchers argued may have contributed to historical underdiagnosis and treatment of lung impairment. Research has shown that the revised equations that do not use race and ethnicity reclassified more African American patients as having abnormal lung function and identified additional African American adults with evidence of chronic obstructive pulmonary disease (COPD). Notably, a study on the implications of race adjustments in lung function equations found that the equations that do not use race and ethnicity would increase disability compensation for Black veterans with lung disease by 17% but also would lead to occupational disqualifications for firefighting jobs for Black adults doubling.
• The American Heart Associated and American College of Cardiology removed race from a risk calculator for heart disease and found that the calculator’s predictive accuracy was better than the previously used race-based version. In 2023, the PREVENT calculator, a cardiovascular disease (CVD) risk calculator, was developed to predict heart disease and did not include race as an input variable.Before 2023, the American College of Cardiology and the American Heart Association CVD prevention guidelines recommended equations that applied different weights for the same risk factor (e.g. smoking status) depending on if the patient was White or Black. This could result in two individuals with the same risk factors receiving different CVD risk scores based solely on race. Research has found the PREVENT calculator to perform as well or better at predicting CVD risk than the previous race-based equations, a finding that has been observed in studies among racially diverse populations.

In addition to these tools, the vaginal birth after caesarean (VBAC) risk calculator and pediatric urinary tract infection (UTI) risk calculator also removed race and ethnicity from their respective risk equations. Since race and ethnicity were removed from the VBAC risk calculator in 2021, Black and Hispanic patients were reclassified from having 35-65% chances of successful VBAC to greater than 65% chances of success. Similarly, the pediatric UTI risk calculator removed race in 2021 and has been found to be equally accurate to the race-based version that was retired in the same year.

In addition to clinical risk calculators, clinical medicine has shifted away from using race to guide drug prescribing and screening for many diseases in recent years. For nearly four decades, the American Heart Association and American College of Cardiology recommended that Black adults with hypertension be preferentially prescribed calcium channel blockers or thiazide-type diuretics instead of renin-angiotensin system inhibitors based on clinical trial data showing Black patients have greater blood pressure reduction when taking either of those two medications compared to other options. However, after decades of this practice, Black adults continue to have lower self-reported rates of blood pressure control even when preferentially prescribed calcium channel blockers or thiazide-type diuretics. In 2025, the guidelines for treating hypertension did away with race-based prescribing for the first time since 1988, due to insufficient evidence showing any benefit to the practice and a concerted effort to move away from race-based prescribing. Research suggests that culturally competent prescribing practices can be more effective at improving blood pressure control among Black adults with hypertension than race-based prescribing. Similarly, screening for hyperbilirubinemia, elevated bilirubin levels in newborns that can cause serious neurological consequences if left untreated, has moved away from race-based practices. Previously, East Asian newborns were classified as increased risk while Black newborns were classified as decreased risk, despite research suggesting Black newborns are overrepresented in cases of severe hyperbilirubinemia leading to neurological disease. The American Academy of Pediatrics removed race as a risk factor in 2022. One study found a significant decrease in hospitalizations for jaundice in newborns immediately after these guidelines changed.

Looking Ahead

Moving forward, there are continued efforts within medicine to remove race from clinical decision-making tools and guidelines. In 2022, the American Academy of Pediatrics issued a policy statement on the elimination of race-based medicine in the field. Similarly, in 2023, the American Medical Association, the nation’s largest association of physicians, committed to redressing the harms of misusing race in medicine. A 2024 survey of medical societies found that 50% of respondents were working on eliminating harmful race-based clinical algorithms. The National Kidney Foundation is also leading a coalition that is urging pharmacy organizations across the nation to transition to the eGFR equation that does not use race for medication decision-making. Research shows that many clinical labs across the country quickly adopted the new eGFR equations after they were published in 2021. Funders, medical societies, researchers, and other collaborators are engaged in ongoing efforts to evaluate how race is used in clinical decision-making tools and the development of more equitable tools in the future.

More studies analyzing the effects of removing race and/or ethnicity from clinical decision-making tools on health outcomes will be key to understanding how they impact all individuals. Some researchers are calling for the responsible removal of race from clinical medicine, as prior work has demonstrated that removing race from clinical decision-making tools can have unintended effects that worsen health disparities. Continued research will be important for informing efforts to eliminate race from clinical practice, including increasing understanding of patient preferences, effective implementation processes, and the role of structural inequalities that impact health. However, health disparities research is facing funding challenges due to the federal government’s sweeping cuts to disparities research. These cuts will likely hinder the ability of clinicians and researchers to understand how the shift away from race-based medicine is impacting racial health disparities.

Removing race from clinical decision-making tools may help mitigate harms of race-based medicine, but additional efforts are important for addressing racial health disparities. Despite more accurate estimations of kidney function and policies that provided transplant wait time corrections for Black patients based on the equation that does not use race, racial health disparities in access to kidney transplants persist. A March 2026 study found that the transplant rate for Black patients that did not get transplant wait time corrections significantly declined, which may be related to racial disparities in access to kidney-specific medical care to be eligible for transplantation.

There is growing interest in how artificial intelligence (AI) may mitigate or worsen racial health disparities as AI is increasingly integrated into clinical decision-making. Large language models and other AI technologies are trained using enormous amounts of data, which include data rooted in race-based medicine. Early research suggests that racially biased training data is one pathway through which AI may perpetuate or worsen racial health disparities. Alternatively, AI models may help mitigate disparities if carefully designed with inclusive data. For example, recruiting diverse research cohorts may result in more accurate data for both clinicians and AI models to use that does not exacerbate existing health disparities. AI could also address disparities through correcting clinician bias in real-time, reducing administrative workload for clinicians in safety-net hospitals, and revealing previously unknown underlying disparities in health outcomes.

States have substantial flexibility in setting Medicaid payment rates, which can affect provider participation in Medicaid and enrollee access to care. Previous research found that Medicaid fees for selected physician services were about 75% of Medicare fees and that physicians were much less likely to accept new patients insured by Medicaid than those with other coverage. However, information about Medicaid payment rates has been limited. Greater transparency could make it easier to compare Medicaid rates across states and payers and help inform payment decisions aimed at supporting provider participation and enrollee access to care. These goals differ somewhat from broader federal policy debates that aim to make health care prices more visible to consumers, researchers, and policymakers in an effort to reduce overall costs to consumers. Medicaid already has significant out-of-pocket protections for enrollees given their low incomes.

In 2024, the Centers for Medicare & Medicaid Services (CMS) finalized new transparency provisions for Medicaid fee-for-service (FFS) and separate requirements for managed care. The requirements differ because under FFS, states directly pay providers for services rendered, whereas under managed care, states pay a health plan or managed care organization (MCO) to deliver services and the MCO establishes payment rates for providers. In fiscal year (FY) 2024, 42% of Medicaid spending was paid through FFS and 53% was paid through managed care. As some provisions of the FFS rule go into effect, CMS has provided additional guidance to states on implementing FFS requirements, including specifications for conducting the comparative rate analysis. The FFS reporting requirements took effect in July 2026, meaning that data are now available online.

This brief describes the transparency requirements that took effect in July 2026, uses T-MSIS data to assess the share of FFS spending and claims captured by certain reporting requirements, and discusses limitations of the new transparency requirements. This brief lays the groundwork for future KFF analyses of Medicaid provider payment rates and how those rates may compare to Medicare. Key takeaways include:

• To help states implement the new payment transparency requirements, CMS specified 68 billing codes that states must use to compare Medicaid FFS rates to Medicare; however, those codes account for a small share of spending (2% of noninstitutional FFS spending) and number of services delivered (5% of noninstitutional FFS claims or services delivered). In addition to capturing a narrow set of services, it may be challenging to compare Medicaid rates to Medicare for certain services and populations, and the value of the information will vary by state based on which delivery systems they use and the extent to which FFS payment rates govern the rates paid by MCOs.
• States also report more comprehensive lists of payment rates. Differences in reporting practices and variation in rates by population and geographic area can make it difficult to compare comprehensive payment rates across states, including for the narrower set of services covered by the Medicaid-to-Medicare comparative analyses.

What are the new payment transparency rules for Medicaid?

States have substantial flexibility to set Medicaid provider payment methods and rates, particularly under FFS, where state Medicaid agencies pay providers directly. The 2024 Access rule established new FFS payment transparency requirements. The rule also included payment transparency requirements for certain long-term care services, while a separate 2024 rule established managed care payment transparency requirements. The long-term care and managed care provisions are outside the scope of this analysis.

CMS specified 68 evaluation and management (E/M) billing codes that states must use for the FFS comparative rate analysis. The E/M codes cover office visits and other services involving the evaluation and management of patients and may be used for primary care, obstetrical and gynecological care, and outpatient mental health and substance use disorder services. Starting in July 2026, and every two years thereafter, states must report FFS rates for each code and show rates that vary by provider type, geographic area, or population. States must compare each Medicaid rate with the corresponding Medicare rate and report the Medicaid-to-Medicare payment ratio. All E/M codes required by CMS have a Medicare established payment rate, but some may have limited or no Medicare coverage. This may be particularly common for codes that are seldom used in Medicare, such as services for children.

The fee schedule requirement applies broadly to FFS payment rates, but CMS does not prescribe a standard format for posting the information. States were required to post most FFS payment rates on publicly accessible state websites by July 1, 2026. CMS does not prescribe a standard format, which may result in variation in the presentation and organization of those rates.

What share of Medicaid FFS spending and claims will be affected by the rules?

The FFS comparative rate analysis captures a small share of spending and claims: 2% of noninstitutional FFS spending and 5% of noninstitutional claims (Figure 1). The estimates included in this analysis use Medicaid claims from noninstitutional services, which encompasses a wide range of services including professional and clinical services, labs and radiology, outpatient hospital services, and home care. It can also include professional services billed separately during inpatient stays.

Which Medicaid enrollees are most likely to use services subject to the transparency requirements?

Children account for 31% of enrollees using selected E/M services, compared with 22% of all FFS enrollees (Figure 2). This difference may partly reflect that the analysis includes E/M codes that are commonly used for pediatric well-child and sick visits. Enrollees with chronic conditions are also overrepresented. Approximately 66% of those using the selected services had at least one chronic condition, compared with about 35% of the overall FFS population, likely reflecting their greater use of health care services (data not shown).

What are the limitations?

The comparative rate analysis provides a more consistent basis for comparing rates across states, but it captures a narrow set of services and has some limitations. By requiring states to report rates for the same services and characteristics relative to Medicare, it allows for more consistent comparisons across states. However, the selected E/M service codes account for only 5% of FFS noninstitutional claims, leaving 95% outside the standardized comparisons with Medicare. Comparisons may also be complicated by differences in how states set payment rates, including variation by population or geographic area. In addition, in some states, certain provider types may not bill with E/M codes, such as psychologists, social workers, and counselors.

It may be challenging to compare Medicaid rates to Medicare for certain services and populations. The intent of the comparative rate analysis was to provide transparency into how FFS rates for primary care, obstetrical and gynecological care, and outpatient mental health and substance use disorder services compare to Medicare rates. However, Medicare may be a less meaningful benchmark for populations and services with limited Medicare coverage, such as children and well-child visits.

The fee schedule requirement is broader, but the published information is not standardized, making comparisons more challenging. Requiring states to post all FFS rates may improve access to payment information. However, differences in how states organize fee schedules and structure their payments may make comparisons with Medicare or other states difficult and time-consuming. For example, Rhode Island and Virginia provide searchable databases, while some other states, such as Nebraska, Washington, and Kentucky, post downloadable fee schedules, which can be in different formats–PDF, excel, or both. States also differ in how they show rates across provider type and geography, and in whether they centralize fee schedules on one page or provide links to multiple web pages.

The usefulness of the FFS payment transparency information will vary by state based on which delivery systems they use and the extent to which FFS payment rates govern the rates paid by MCOs. In states that rely primarily on FFS or use a mix of FFS and managed care, the disclosed rates apply to a larger share of Medicaid services. In states that rely primarily on managed care, FFS rates may apply to relatively few services and provide a less complete picture of provider payment levels overall. The information will also be useful in states that rely heavily on managed care if the FFS payment rates serve as benchmarks for MCO payments.

Methods

Medicaid Claims Data: This analysis used the 2023 T-MSIS Research Identifiable Files, including the other services (OT) line and header files and the demographic and eligibility (DE) files. The OT file captures claims for all noninstitutional services, which encompasses a wide range of services including professional and clinical services, labs and radiology, outpatient hospital services, and home care. It also includes professional services billed separately during inpatient stays. The analysis includes Medicaid and Medicaid-CHIP (M-CHIP) enrollees and excludes Separate CHIP (S-CHIP), which was identified using CHIP_CD_01-CHIP_CD_12 = 2, 3, 4, or missing and ELGBLTY_GRP_CD_01-ELGBLTY_GRP_CD_12 = 61-68.

State Exclusion Criteria: Illinois was excluded due to a known issue with duplicate lines in the OT line file. In addition, the DQ Atlas also reported unusable procedure codes for the “OT institutional files” for this state.

Defining Fee-for-Service (FFS) Medicaid: The analysis defines claims as FFS if the T-MSIS claim type code of 1 (CLM_TYPE_CD=1). The analysis identifies FFS enrollees as people with zero months of comprehensive managed care enrollment. To determine enrollment in comprehensive MCOs, enrollment was limited to plans from the list MC_PLAN_ID_01_MM-MC_PLAN_ID_16_MM from the Managed Care Participation segment of the T-MSIS eligibility file which also has a positive capitated payment to a plan on behalf of the enrollee in the month (MM) in the T-MSIS Other Services (OT) file. This analysis calculated positive capitated payment to a plan on behalf of the enrollee in a month by summing the MDCD_PD_AMT for claims with CLM_TYPE_CD = 2 (Medicaid or Medicaid-expansion Capitated Payment) having a SRVC_END_DT in the month in 2023. Capitated payments were attributed to a specific plan using the MC_PLAN_ID from the OT file.

Share of Spending and Service Volume Associated with Selected E/M Codes: To estimate the share of FFS spending associated with CMS selected evaluation and management (E/M) codes for the FFS comparative rate analysis, the analysis sums Medicaid payment amounts at the line (LINE_MDCD_PD_AMT) for FFS lines with a selected E/M code and divides this amount by payments for all FFS lines in the OT file. To estimate the share of FFS service use associated with CMS selected evaluation and management codes (E/M) codes for the FFS comparative rate analysis, the analysis sums the number of FFS service lines with a selected E/M code and divides it by the total number of FFS OT service lines .

The Medicare Advantage market, the private plan alternative to traditional Medicare, is dynamic, and plan offerings can change from year to year. With 28 Medicare Advantage prescription drug (MA-PD) plans available to the average beneficiary in 2027, most people with Medicare have a robust set of MA-PD options. However, Medicare Advantage plans are offered at the county level, and variation in plan availability across the country has long been a feature of the Medicare Advantage market. This analysis uses Medicare plan landscape data from the Centers for Medicare & Medicaid Services to examine county-level variation in MA-PD plan availability in 2027 and changes from 2026. This analysis does not examine changes in costs, benefits, or other plan characteristics. The analysis shows that plan level availability varies widely across the country in 2027, with a modest reduction in the share of enrollees having more than 40 MA-PDs to choose from compared to 2026, some major insurers exiting a much larger number of counties than they are entering, and a larger number of firms exiting the market than the number of new entrants.

Findings

One in five Medicare beneficiaries (20%) can choose from more than 40 MA-PDs for coverage in 2027.

The 20% of Medicare beneficiaries who have more than 40 MA-PD options are concentrated in 4% of counties (Figure 1). This is a decrease from 2026 when 27% of beneficiaries, who resided in 6% of counties, had more than 40 options.Similar to 2026, the counties with the most plan options are predominantly in Pennsylvania, Ohio, and Michigan, as well as Los Angeles County, California. Beneficiaries in Lancaster, Pennsylvania can choose from 66 MA-PDs – the most offerings of any county in the U.S.

Nearly 13 million people have a choice of more than 40 Medicare Advantage plans with drug coverage for 2027, down from 16.6 million for the 2026 plan year. Another 12.8 million beneficiaries have a choice of 31 to 40 plans for 2027, down slightly from 13.2 million for 2026. In contrast, nearly 7 million people have 1 to 10 Medicare Advantage plans with drug coverage available for 2027, up from 4.8 million people for the 2026 plan year.

For 2027, Medicare beneficiaries residing in 193 counties will have no MA-PDs available for general enrollment, an increase from 123 counties in 2026.

Beneficiaries in the 193 counties without any MA-PD option for general enrollment for 2027 comprise 1% of all Medicare beneficiaries, or 638,000 people. This is an increase from 2026, when 399,000 beneficiaries did not have a MA-PD option (an increase of 239,000 beneficiaries).

The counties with no MA-PD options are located in 16 states (Alaska, California, Colorado, Idaho, Kansas, Minnesota, Montana, Nebraska, Nevada, New Hampshire, North Dakota, Oklahoma, Oregon, South Dakota, Utah, and Vermont) and U.S. territories other than Puerto Rico. These are the same states as 2026, with the addition of New Hampshire, North Dakota, and Oklahoma. Similar to 2026, there are no MA-PDs for general enrollment being offered in any county in Alaska in 2027, which includes about 110,000 beneficiaries.

In six counties (Boyd, Nebraska; Aurora, Beadle, Bon Homme, Brown, and Charles Mix, South Dakota) there is a Medicare Advantage plan option without prescription drug coverage, but in the other 187 counties, no Medicare Advantage plans with or without prescription drug coverage for general enrollment are available. In some counties where Medicare Advantage plans for general enrollment are not available, there are other private plan options, including cost plans as well as special needs plans, which restrict enrollment to Medicare beneficiaries who meet specific criteria.

The average Medicare beneficiary can choose from among MA-PDs offered by seven firms for 2027.

The average Medicare beneficiary can choose from Medicare Advantage prescription drug plans offered by seven firms for 2027, a decline of one firm from the 2026 plan year. Despite most beneficiaries having access to plans operated by several different firms, enrollment is concentrated in plans operated by UnitedHealthcare and Humana, which together account for nearly half (46%) of Medicare Advantage enrollment in 2026.

For 2027, two in ten beneficiaries (20%), in 68 counties, are able to choose from MA-PDs offered by 10 or more firms (a decline from 29% of beneficiaries in 131 counties for the 2026 plan year; Figure 3).

In contrast, about 9% of beneficiaries, in 679 counties, can choose from MA-PDs offered by two or three firms (an increase from 572 counties and 7% of beneficiaries for the 2026 plan year). Further, in 259 counties, only one firm will offer an MA-PD for 2027, an increase from 180 counties for the 2026 plan year. These are mostly rural counties with relatively few Medicare beneficiaries (about 2% of the Medicare population for 2027, a slight increase from 1% of the population for the 2026 plan year).

The two largest Medicare Advantage insurers – UnitedHealth Group and Humana – are exiting more counties, meaning they are no longer offering any MA-PDs in those counties, than they are entering in 2027.

UnitedHealth Group is exiting 228 counties and entering 9 new counties, and Humana is exiting 62 counties and entering 4 new counties (Figure 4). Humana is offering MA-PDs in the largest number of counties relative to other insurers – about 80% of all U.S. counties, similar to 2026 – while UnitedHealth Group is offering plans in about 70% of counties, a decline from 2026, when the insurer offered plans in nearly 80% of counties.

Among insurers offering MA-PD plans, Health Care Service Corporation is making the largest reduction in its county footprint, exiting the greatest number of counties in 2027 (498 counties) while entering no new counties. Centene has the second largest reduction, exiting 359 counties and entering 15 new counties for 2027. Blue Cross Blue Shield of Michigan Mutual Ins. Co., which had offered MA-PDs in Iowa, Michigan, North Dakota, South Dakota, and Wyoming in 2026, is exiting 177 counties and entering one new county, and will only offer MA-PDs in Michigan and Wyoming for 2027. Elevance Health is exiting 66 counties and entering 10 new counties in 2027.

Two insurers - Group 1001 (marketed as Clear Spring Health), which offered plans in Colorado, Georgia and Illinois, and Molina Healthcare – are completely exiting the MA-PD market, though Molina is still offering SNPs in many counties in 2027.

In contrast, Devoted Health is expanding its MA-PD footprint, entering 342 counties and exiting none in 2027. Second to Devoted Health, CVS Health is entering a larger number of new counties in 2027 than other insurers (63 new counties), but is also exiting 186 counties.

Kaiser Foundation Health Plans, a high enrollment insurer, is maintaining its footprint, exiting three counties while entering three new ones in 2027 (data not shown).

The characteristics of markets that insurers are leaving vary. In some cases, multiple insurers are exiting more rural areas with relatively small Medicare populations, such as four counties in Minnesota (Brown, Lake of the Woods, Morrison, and Renville), in each of which three insurers who offered MA-PDs in 2026 are no longer offering MA-PDs for 2027. In other cases, individual insurers are exiting counties in more urban areas with higher Medicare Advantage penetration, such Miami-Dade County, FL where Health Care Service Corporation is no longer offering MA-PDs in 2027 and Monroe County, New York (Rochester) where Humana left the market. The different decisions of insurers to exit certain counties suggest a combination of factors are at play, including local market characteristics, cost pressures, shifts in firm-level strategies, and ultimately the insurers’ assessment of profitability.

In 2027, more firms are exiting the Medicare Advantage market than entering it.

In 2027, four firms are entering the Medicare Advantage market for the first time, ten firms are exiting the market, and four have had contracts taken over by other insurers (Figure 10). Three of the four firms entering the market are offering only HMO plans, while one firm is offering both HMOs and C-SNP plans.

In recent years, some firms have introduced plans that are either co-branded or are in partnership with another company. For example, Alignment Health is offering plans co-branded with Instacart in California and Nevada in 2027, as they did in 2026 and 2025. These plans will offer groceries to qualifying beneficiaries with chronic conditions. Alignment Health also continues to partner with Walgreens, and Humana continues to partner with USAA. New for 2027, SCAN Group is offering co-branded plans with Costco in California and Nevada as well as plans with Walmart in Arizona and Texas.

Ten firms that participated in the Medicare Advantage market in 2026 are not offering plans in 2027. Some of the firms, such as Memorial Hermann Health Plan and Central Mass Health (Mass Advantage) cited specific reasons for exiting the market, such as the changing Medicare landscape, cost pressures, and regulatory uncertainty, but others often do not specify why they are leaving the market.

Another four firms left the market but had their contracts taken over by other insurers, typically through a merger or affiliation. Three of the firms that are no longer in the Medicare Advantage market had contracts taken over by other parent organizations that were already offering plans in the Medicare Advantage market (Community Care, Inc., Marshfield Clinic Health System, Inc., and Renown Health). Summa Health plans are now part of General Catalyst Group Management Holdings LP, which is new to the Medicare Advantage market.

While they are not exiting the Medicare Advantage market completely, an additional four firms that had previously offered Medicare Advantage prescription drug plans available for general enrollment will only be offering SNPs in 2027 (Elderplan, Inc., Horizon Mutual Holdings, Inc, Molina Healthcare, Inc, and Presbyterian Healthcare Services).

Introduction

On July 20, 2026, the Department of Homeland Security (DHS) published a final rule that largely rescinded 2022 Biden-era public charge regulations. The new rule gives immigration officials broad discretion to decide whether to deny a green card to someone applying for Lawful Permanent Resident (LPR or “green card”) status because they are likely to become a “public charge.” The new rule provided limited details in place of the prior regulations, suggesting in the preamble that DHS would provide additional information through sub-regulatory guidance. On August 18, 2026, U.S. Citizenship and Immigration Services (USCIS) issued accompanying Policy Manual guidance on how officers should make public charge determinations under the new rule. The rule took effect on September 18, 2026. This issue brief discusses the sub-regulatory guidance issued by USCIS to guide public charge determinations under the new rule and implications for immigrant families’ access to health coverage and care.

The 2026 final rule removed the 2022 regulatory definitions and the determination framework for determining whether someone is a public charge without replacing them. The updated sub-regulatory guidance also does not provide a specific definition of who may be considered a public charge and does not provide an exhaustive list of benefits that would count towards public charge determinations, granting immigration officers significant authority in making such determinations. The lack of an exhaustive list of benefits that may be considered when making public charge determinations will likely result in increased confusion and fear among immigrant families that may limit their participation in public programs that help pay for health care, food, and housing, including among citizen children in these families. The lack of details in the guidance also increases uncertainty and challenges for those serving immigrant families to advise on the potential implications of participating in specific programs.

Overview of the 2026 Public Charge Rule

Under longstanding immigration policy, federal officials can deny a green card or entry into the U.S. to someone they determine is likely at any time to become a public charge. By statute, officers must at a minimum consider age; health; family status; assets, resources, and financial status; and education and skills. Some groups, such as refugees and asylees, are exempt from public charge determinations. Under 2022 regulations consistent with longstanding guidance, a public charge was defined as someone likely to become primarily dependent on the government, as shown by use of cash assistance for income maintenance or long-term institutionalization at government expense. The regulations excluded noncash programs, including Medicaid (except for long-term institutionalization) and the Children’s Health Insurance Program (CHIP), and prohibited consideration of family members’ use of programs from determinations.

On July 20, 2026, DHS published a final rule largely rescinding the 2022 Biden-era public charge regulations governing determinations for individuals seeking adjustment to LPR status. The 2026 final rule removes the 2022 definitions and the determination framework without replacing them, giving officers broad discretion and moving away from the “primary dependence” standard. DHS received over 8,800 comments in response to the proposed rule and acknowledged that most opposed the rule but finalized it as proposed. DHS stated that USCIS would issue nonbinding sub-regulatory guidance that would provide additional information to guide determinations. The rule took effect September 18, 2026. While the same statutory grounds apply to individuals seeking entry into the U.S., those public charge determinations are generally made by consular officers at the U.S. Department of State (DOS) for visa applicants or by U.S Customs and Border Protection for applicants seeking admission at a port of entry. According to media reports, in November 2025, DOS issued new guidance directing visa officers to consider a wide range of health conditions when making public charge determinations for visa applicants seeking entry into the U.S.

Overview of Public Charge Guidance

On August 18, 2026, USCIS released updated Policy Manual guidance (Volume 8, Part G) to direct how officers make public charge determinations under the new rule. The guidance supersedes prior guidance, including the 1999 Interim Field Guidance that was largely consistent with the Biden-era regulations and governs USCIS adjustment of status adjudications only (not determinations by U.S. Customs and Border Protection, DOS, or immigration courts). Unlike a statute or regulation, this policy guidance can be revised or rescinded without formal rulemaking or a notice and comment period.

The guidance reaffirms statutory requirements related to public charge, including exemptions for certain groups and that determinations are based on a totality of circumstances, which must include consideration of certain factors. As specified in statute, groups exempt from public charge determinations include refugees and asylees, special immigrant juveniles, Violence Against Women Act (VAWA) self-petitioners, T and U visa holders, certain Cuban and Haitian entrants, and Afghan and Iraqi special immigrants. The guidance reaffirms the statutory requirement that public charge decisions will be made based on a “totality of circumstances,” meaning that any one factor, including benefit use, does not determine whether someone is a public charge. It also identifies the minimum statutorily required factors officers must consider in making determinations, including age; health (including disability); family status; assets, resources, and financial status; and education and skills.

The guidance does not define who may be considered a public charge and does not provide an exhaustive list of benefits that would count towards public charge determinations; instead, it indicates officials may consider receipt of any means-tested benefits. The guidance does not define a “public charge.” Instead, it indicates that immigration officers should assess whether the individual is, “likely at any time to depend on means-tested public benefits.” The guidance also does not provide a definition or list of means-tested benefits that immigration officers may consider when making public charge determinations. Instead, it describes means-tested benefits generally as those for which eligibility is based on income or assets falling below a threshold and that are provided by government agencies or funds. Examples include, but are not limited to, government-funded health coverage such as Medicaid or CHIP; food assistance such as the Supplemental Nutrition Assistance Program (SNAP) or the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); public or assisted housing; postsecondary financial aid; and cash assistance from any federal, state, Tribal, territorial, or local government. It specifies that benefits for which eligibility is based on payments into the system, such as Social Security, Medicare, and unemployment insurance, are not considered means-tested and therefore not subject to public charge. The rule’s preamble suggests that universal programs will not be considered, indicating, for example, that school meals available to all students in a school (through community eligibility or statewide programs) should not be considered. Illustrative case studies in the guidance also make a distinction between receipt of school lunches as part of a universal school lunch program and receipt of school lunches due to an applicant’s income falling below a certain threshold, suggesting that officers should consider “the nature of the free school lunch program.” Illustrative case studies discussed in the guidance also suggest that officers should not consider benefits use in isolation when making public charge determinations and instead take into account an individual’s totality of circumstances, as statutorily required.

Unlike prior regulations and guidance, the 2026 rule and guidance state that family members’ receipt of benefits may be considered when making public charge determinations in specific circumstances. The 2026 guidance states that USCIS will not attribute to the applicant benefits received by relatives, including children, or received on behalf of others. However, when making public charge determinations, officers may consider benefits received by family members the applicant is legally obligated to support when eligibility was based on the applicant’s income falling below a threshold. It is unclear from the guidance how officers would consider benefits used by family members, including U.S. citizen children. The application form for adjustment to LPR status (Form I-485) only asks about the applicant’s own benefit use. However, officials could potentially ask about this information during an interview process.  

The guidance clarifies that the rule will only apply to applications submitted and benefits used on or after its effective date of September 18, 2026. For benefits received before September 18, 2026, officers will consider only cash assistance for income maintenance and long-term institutionalization at government expense, consistent with the 2022 public charge final rule. For benefits received on or after September 18, 2026, officers may consider receipt of any means-tested benefit. Per the final rule, benefits approved for a period extending past the effective date will be considered unless the applicant shows they disenrolled or withdrew. However, the guidance does not clarify what evidence applicants must provide to show they disenrolled from benefits before September 18, 2026, or how benefit agencies will help with those requests.

The guidance also does not detail how USCIS will conduct oversight and quality reviews or how the new public charge rule could interact with other policies. In the final rule,USCIS stated that it will “provide guidance and training to officers” and apply “general quality control processes.” However, the guidance does not detail what these processes are and how they will be carried out. In addition, the guidance does not address how public charge determinations interact with other policies that may heighten fears among immigrant families, such as the Centers for Medicare and Medicaid Services’ (CMS) sharing of noncitizen Medicaid enrollee data with Immigration and Customs Enforcement (ICE), which DHS deemed out of scope, or separate State Department public charge standards for visa applicants.

Looking Ahead

While the public charge guidance provides more detail than the rule, it leaves several key details unspecified and grants substantial discretion to individual officers, leaving immigrant families without clear information. Families will likely experience increased confusion and fear due to a lack of clear information about what benefits may be considered. As a result, many may avoid participating in programs, with effects extending beyond those directly affected by the rule, including citizen children. Previous KFF analysis found that if the final rule leads to disenrollment rates ranging from 10% to 30% as suggested by past experience, about 1.4 million to 4.1 million people living in a household with a noncitizen could disenroll from Medicaid and CHIP, including about 560,000 to 1.7 million citizen children. Among the nearly 1.7 million eligible but uninsured people in these households, between about 166,000 and 498,000 could forgo enrolling, including over 60,000 to more than 181,000 citizen children.

Providers and organizations working directly with immigrant families will likely also face increased confusion and challenges due to the guidance’s lack of clarity. Immigrant-serving organizations, health care providers, benefits navigators, and legal service providers may find it challenging to advise families about which programs could affect their green card applications. Providers may also face increased strains serving immigrant families if they are less likely to participate in assistance programs and more are uninsured.

DHS acknowledges that the new rule could lead to adverse health and economic impacts but maintains that these impacts are outweighed by the rule’s self-sufficiency goals. DHS estimates a $13.05 billion annual reduction in federal and state transfer payments due to disenrollment or forgone enrollment in programs including Medicaid, CHIP, WIC, SNAP, Temporary Assistance for Needy Families, Supplemental Security Income, and Federal Rental Assistance. DHS also acknowledges the rule may lead to worse health outcomes, increased emergency room use, higher prevalence of communicable disease, increases in uncompensated care, and reduced revenues for health care providers.

Section 1115 Medicaid demonstration waivers offer states an avenue to test new approaches in Medicaid that differ from what is required by federal statute, if [in the Health and Human Services (HHS) Secretary’s view] the approach is likely to “promote the objectives of the Medicaid program.” Nearly all states have at least one active Section 1115 waiver and some states have multiple 1115 waivers. Under long-standing policy and practice, Section 1115 demonstration waivers were required to be “budget neutral” to the federal government over the course of the waiver, meaning federal costs under the waiver could not exceed what they would have been for the state without the waiver. Using 1115 waivers has allowed states to generate “savings” that can be reinvested (under the waiver) to support new initiatives (e.g. coverage expansions, new benefits etc.).

The 2025 reconciliation law, signed by President Trump on July 4, 2025, codified budget neutrality in federal statute (for the first time) and added a requirement that the Centers for Medicare and Medicaid Services (CMS) Chief Actuary certify 1115 waivers are budget neutral before approval. In June 2026, CMS released initial guidance on CMS’ interpretation of the new statutory provision and updated budget neutrality policy guidance that will be implemented through forthcoming rulemaking (expected in early 2027). Overall, the new guidance makes significant changes to how CMS will assess budget neutrality and may reduce state flexibility to pursue certain 1115 initiatives. This policy guidance follows administrative action to phase out or rescind certain Biden-era waiver policies (related to health-related social needs services (HRSN), continuous eligibility policies, workforce initiatives, and certain waiver financing tools).  

 In August 2026, Arkansas announced that CMS will not be approving the state’s request to renew its “ARHOME” waiver (set to expire at the end of 2026) due to the new budget neutrality rules. Under the waiver, Arkansas enrolled its Medicaid expansion population directly into ACA Marketplace plans. The state is seeking a temporary two-year extension to provide time to develop a new solution (delivery system) and transition plan. In addition, while additional guidance will be forthcoming (including clarification on how states may be able to fund infrastructure costs under new budget neutrality rules), CMS approved five state waivers that support community reentry for people who are incarcerated in late September 2026 (D.C., Louisiana, Maine, Minnesota, and Nevada).

This brief discusses key policy changes included in the June 2026 CMS budget neutrality guidance and identifies open questions involving how the policy changes may be further clarified in the forthcoming rule and how the changes may impact states with existing 1115 waivers or states interested in applying for new demonstration waivers.

Key takeaways include:

• The new guidance outlines major shifts in policy and aims to reduce federal 1115 waiver expenditures. Key changes include a more rigorous prospective determination of budget neutrality, new rules involving “hypothetical” expenditures that may require states to demonstrate “savings” for more initiatives, the inclusion of administrative costs in budget neutrality calculations, and limits to budget neutrality savings.
• Forthcoming rules (expected in early 2027) may include further guidance and clarification for states. Key areas where additional clarification and information may be needed include financial impact analysis methodology expectations, monitoring requirements, evaluation and renewal standards, and financial risk clarification.
• CMS’s response to waivers up for renewal (in 2026 and early 2027) may provide insights involving how the new rules will be applied and how states may adapt to changing policies. States may have difficulty gaining approval for HRSN services, delivery system reforms, certain “home- and community-based services” (HCBS) 1115 initiatives, and/or uncompensated care pool financing under the new rule, if these services or initiatives newly require offsetting savings or states are constrained by new rules involving the accrual and rollover of waiver “savings.”

How has waiver budget neutrality historically been assessed?

Under long-standing policy and practice, Section 1115 waivers were required to be “budget neutral” to the federal government over the course of the waiver (usually 5 years). Section 1115 waiver budget neutrality meant that federal spending under a waiver could not exceed the projected costs without the waiver. Budget neutrality calculations and the use of any budget neutrality “savings” have been negotiated between states, CMS, and the Office of Management and Budget (OMB). At a high level, the budget neutrality process has included the following:

• Setting expenditure limits. A “without waiver” baseline was established (when a waiver was approved by CMS) that acted as a limit on total demonstration spending. Typically, budget neutrality calculations were determined on a per enrollee basis, putting states at risk for the costs per individual but not for the number of individuals enrolled.
• Excluding hypothetical expenditures. Costs for some populations and/or services, referred to as “hypothetical,” were excluded from budget neutrality calculations if they were similar to populations or services that could have been covered without the 1115 waiver, generally meaning states did not need offsetting savings to pay for these expenditures.¹
• Assessing budget neutrality, including identifying savings. While the “without waiver” baseline was compared to projected “with waiver” spending (using state data to generate aggregate spending projections) prior to approval, budget neutrality was formally assessed at the end of the demonstration period. If a state exceeded the “without waiver” limit, it was required to pay back any federal spending above the limit. If demonstration spending was below the limit, a state accumulated budget neutrality “savings” that could be used to fund the federal share of costs not otherwise allowed (in future demonstrations).

Because Section 1115 budget neutrality has not been defined in federal statute or regulations, CMS agency policy and guidance to states has changed over time. For example, the first Trump administration made changes to 1115 waiver budget neutrality policy in 2018 (e.g. changing the rules for calculating the “without waiver” baseline) that limited the amount of federal funds that could be used for waiver spending. The Biden administration later made changes that aimed to provide greater flexibility for states to design and implement 1115 demonstration programs, including health-related social needs (HRSN) initiatives.

The U.S. Government Accountability Office (GAO) has raised concerns involving CMS’s budget neutrality policy. Specifically,GAO has raised concerns related to transparency and accountability in the 1115 waiver approval process, the methods used to calculate spending baselines (“with” and “without” waiver) and waiver “savings,” and the monitoring of federal spending under 1115 waivers. Most recently, a 2025 GAO report raised concerns about HRSN services and reentry services, approved under 1115 waiver authority as “hypothetical” expenditures (that do not require offsetting savings). After the 2025 GAO report was released, the Republican Chairman of the House Committee on Energy and Commerce called for “stronger oversight” of 1115 waiver demonstrations.  

What budget neutrality changes will go into effect in January 2027?

In June 2026, CMS released initial guidance outlining a new approach to budget neutrality policy that will be effective January 1, 2027. The 2025 reconciliation law codified budget neutrality in federal statute for the first time and added a requirement that the CMS Chief Actuary certify 1115 waivers are budget neutral prior to approval. The new guidance indicates states will need to perform an “actuarial, economic, statistical, or other comparable rigorous analysis of the projected financial impacts of individual demonstration activities” before a waiver can be approved. In the guidance, CMS says it aims to reduce state reliance on Section 1115 authority, directing states to use alternative authorities (e.g. state plan authority, 1915 authority) where possible. While budget neutrality policy changes will be implemented formally through CMS rulemaking (expected in early 2027), the new policies described in the guidance letter will take effect on January 1, 2027, even if a final rule is not released by then.

The new guidance outlines major shifts in policy, beyond the codification of the longstanding budget neutrality policy, and aims to reduce federal 1115 waiver expenditures. Key changes to budget neutrality policy described in the June 2026 guidance letter are included below:

• Replacing expenditure limits assessed at the end of the demonstration with a more rigorous prospective analysis of financial impacts. Instead of setting expenditure limits (based on state data/aggregate projections) and formally assessing budget neutrality after the demonstration period ends, the CMS Chief Actuary will determine whether a demonstration is budget neutral (and approvable) at application based on an actuarial, economic, or statistical analysis of projected financial impacts of individual demonstration activities. These rigorous prospective analyses may limit waiver approvals. Activities will be classified as either “1115-only” (subject to budget neutrality calculations) or “Medicaid Authorizable Populations and Services” (or “MAPS”) (considered to have a net financial impact of zero, because they are activities the state could have implemented through state plan or other authority).
• New rules for “hypothetical” expenditures. The guidance replaces the concept of “hypothetical” expenditures with a new “Medicaid Authorizable Populations and Services” (“MAPS”) policy. Under the new “MAPS” policy, to be excluded from the budget neutrality calculation, both the service and the population receiving the service must be coverable under a different Medicaid authority. This stricter standard may result in the recategorization of certain activities currently considered “hypothetical” (e.g. some home- and community-based services (HCBS), HRSN, infrastructure costs) as “1115-only,” which will require states to find savings offsets.²
• Inclusion of administrative costs. Budget neutrality calculations will consider the administrative costs associated with the activity, which have historically been excluded.
• Limits to budget neutrality savings. Under the new approach, savings may be more difficult to generate, and rollover savings will be limited. Currently, states can accrue savings if their actual spending stays below the projected (“without waiver”) spending baseline and may use the savings for multiple future demonstration periods. Under the new approach, savings will be tied to actuarial determinations of savings potential and may only be used in the period they are accrued or the demonstration period that immediately follows. In its June 2026 slide deck, CMS indicated managed care will not be able to generate budget neutrality savings. (States have used savings from Medicaid managed care in the past to offset other waiver costs.)

Obtaining approval for Section 1115 waivers takes time—new requirements add complexity and may further lengthen the approval process. There has been significant variation in the length of time it takes to get final approval of a waiver. NAMD has noted the typical negotiation/approval timeframe ranges from 6 months to 2 years. Under new requirements, states will need to conduct rigorous analyses of expected cost impacts and provide significant implementation details prior to approval (currently, states often submit these implementation details and protocols after gaining approval). Due to these budget neutrality policy changes, CMS recently rescinded guidance allowing certain renewals to be done via a “fast-track” process. The fast-track process was introduced in 2015, offering states requesting straightforward renewals (i.e. with few to no changes) a standard template and expedited review/approval time (often used for less complex / narrow waivers, like family planning-only waivers).

What are key 1115 areas to watch for clarification or additional guidance?

The June 2026 guidance indicates CMS intends to formally implement budget neutrality policy changes through rulemaking (although the new policies will take effect on January 1, 2027, even if a final rule is not released by then).

Key areas to watch for additional clarification in the proposed rule include:

• Financial impact analysis methodology. While CMS notes it will give states flexibility to determine the form of analysis used to estimate/project financial impacts of demonstration activities (e.g. actuarial, statistical, economic), additional clarification involving the standards the Chief Actuary will use to evaluate financial impacts is likely needed. States may also need additional guidance on how to estimate/project waiver-specific administrative costs, as well as the expected standards for determining indirect impacts and utilization shifts at the activity level.
• Monitoring information. In its June 2026 guidance, CMS noted states would be expected to monitor key indicators (e.g. program outcomes and expenditures) and to manage demonstrations within “to be defined” CMS guardrails. States would need to complete “corrective actions” if expenditures deviate “substantially” from initial projections. It remains unclear how CMS will define “substantial” deviations or what types of corrective actions may be imposed.
• Evaluation and renewal standards. CMS intends to propose revised evaluation expectations for demonstrations that are meeting evaluation goals, to ensure “sustained achievement in outcomes.”
• Financial risk clarification. The current guidance also notes that while analysis should generally be done on a per-member per-month basis, enrollee count estimates should also be included to generate aggregate impacts. The new rule may also provide clarity on whether (and when) states would be exposed to financial risk if they experience enrollment or utilization shifts beyond projected levels.

CMS’s budget neutrality and related waiver policies are likely to reduce state flexibility to pursue 1115 waivers generally and certain initiatives specifically. Specifically, states may have difficulty gaining approval for HRSN services, delivery system reforms, certain HCBS initiatives, and/or uncompensated care pool financing under the new rules, if these services or initiatives require offsetting savings (that were not previously required) or states are constrained by new rules involving the accrual and rollover of waiver “savings.” Once an activity is labeled “1115-only,” the state must prove net savings to pay for it. Finding savings to “pay for” these services may be harder, as CMS is limiting rollovers and including administrative costs in the budget neutrality calculation. Additionally, certain programs currently “deemed budget neutral,” like coverage of traditional healing practices (for American Indian and Alaska Native people), would need to be classified as “MAPS” or 1115-only activities, which may require states to offset those costs (if determined 1115-only). While CMS recently approved two new traditional healing waivers (Maine and Utah), it did not indicate how these waivers would be treated in the future under the new budget neutrality rules. CMS has already indicated that it will not approve Arkansas’s request to renew its “ARHOME” waiver under new budget neutrality rules (which provides coverage to Medicaid expansion adults through Marketplace plans). The state is seeking a temporary two-year extension to develop a new delivery system.

Many states have obtained approval for IMD (Institutions for Mental Disease) services and/or reentry services under 1115 authority, which will not require cost offsets under the new guidance. The new guidance specifies that expenditures that could be made under state plan or other authority but for the site of service (e.g. IMDs, in carceral settings) will be considered “MAPS” expenditures that would not require offsets. However, infrastructure funds used to support the implementation of reentry waivers will no longer be considered “hypothetical” (or “MAPS”). (CMS notes additional reentry guidance is forthcoming.) The Trump administration recently approved five new state reentry waivers; in these approvals, CMS indicated it does not anticipate approving infrastructure expenditures and will instead work with states on potential pathways for administrative claiming to support implementation cost.

Future waiver activity, including CMS approvals and state requests, will provide greater insight into how the new budget neutrality rules will be applied and how states may adapt to changing federal 1115 priorities and budget neutrality policy.

• Waivers expiring in 2026 & 2027 (Table 1). States with waivers expiring soon (27 waivers are due to expire by the end of 2027) may have already started the renewal process or submitted requests to CMS (that are currently pending) and may need to make changes based on the new budget neutrality policy. For some states with waivers expiring before the end of the year, CMS may choose to approve certain demonstration activities under the current methodology, while continuing negotiation of other requests into 2027 when new rules apply.³
• Amendment requests for ongoing waivers. The guidance indicates mid-demonstration amendment requests would trigger full waiver review using the new budget neutrality rules and require certification from the Chief Actuary. This requirement may make states with waiver expiration dates further out reticent to pursue mid-demonstration amendments or reconsider currently pending amendment requests.
• Transition initiatives to other Medicaid authorities. States may choose to transition provisions currently authorized under 1115 to State Plan or other federal Medicaid authorities. This may have implications for states, including finding the administrative capacity to reorganize longstanding programs—at a time state resources are particularly stretched, implementing the 2025 reconciliation law provisions.

1. Although hypothetical expenditures were usually subject to separate spending limits / caps. ↩︎
2. In addition, certain 1115 expenditures (e.g. traditional health care practices, out-of-state former foster care youth coverage) that were previously “deemed” budget neutral now must be classified (as “MAPS” or “1115-only”), which may require states to offset those costs with savings if they are determined to be “1115-only.” ↩︎
3. For example, in recent renewal approvals in D.C. and Maine, CMS approved reentry demonstrations but said it would continue to work with the states on the details of pending SDOH requests. ↩︎