The expiration of the Affordable Care Act’s enhanced premium tax credits, along with the passage of the budget reconciliation law, implementation of new Marketplace regulations, and other administrative changes, could bring significant changes to ACA Marketplace enrollment and affordability for the 2026 plan year and beyond. Anticipated increases in what enrollees pay for premiums and new standards for health savings accounts (HSAs) could lead some consumers to consider plan options with lower premiums in exchange for higher deductibles, such as catastrophic or bronze plans. This issue brief examines key features of bronze and catastrophic plans, recent policy changes, coverage and costs, and the complicated choices for consumers.

What are some key features of Marketplace bronze and catastrophic plans?

Affordable Care Act (ACA) qualified health plans (QHPs) are categorized into four “metal levels” based on the overall amount of cost sharing they require: bronze, silver, gold, and platinum, plus catastrophic plans, which are a separate tier of QHPs. Bronze and catastrophic plans offered through the Marketplaces must cover essential health benefits, limit the amount of annual cost sharing for covered benefits ($10,600 for an individual or $21,200 for a family in 2026), cover certain preventive services without cost sharing, and have other ACA-required consumer protections.

There are several notable differences between the characteristics of bronze and catastrophic plans (Table 1). Bronze plans usually have the lowest premiums of all metal levels, but the highest deductibles. Catastrophic plans often, but not always, have even lower premiums than bronze plans, but a higher level of cost sharing. In 2026, bronze plans have an average deductible of $7,476, while catastrophic plans have deductibles equal to the out-of-pocket maximum allowed under the ACA ($10,600 for an individual or $21,200 for a family in 2026).

Both bronze and catastrophic plans can be purchased on or off the Marketplaces, but premium tax credits are only available for metal level plans that are sold on the Marketplace, meaning they cannot be applied to any plans sold off the Marketplace, nor to catastrophic plans. (Cost-sharing reductions— which lower out-of-pocket costs for enrollees with income between 100% and 250% of the federal poverty level (FPL)—are only available for silver plans on the Marketplace.)

Actuarial value — the expected share of health care expenses a plan covers for a standard population — also differs between bronze and catastrophic plans. Bronze plans are currently required to have an actuarial value (AV) between 58% and 62%, though the AV for expanded bronze plans can be as high as 65%. (Regulations finalized in June 2025 would permit an AV as low as 56% for standard bronze plans, but a court ruling has temporarily blocked that provision (and others) from taking effect.) Catastrophic plans, on the other hand, are not required to meet minimum actuarial value targets, except that they must have a lower AV than bronze plans. However, due to the permitted range of bronze actuarial values, the “generosity” of these two types of plans can be similar.

Unlike metal level plans, which can be sold to anyone eligible for Marketplace coverage, catastrophic plans can only be sold to individuals under age 30 or individuals over 30 who qualify for a “hardship” or “affordability” exemption. Consumers may be eligible for the affordability exemption if their lowest cost coverage option available through a Marketplace or employer would cost more than 8.05% of their household income in 2026. A person may qualify for a hardship exemption if they experience one of several examples of financial or domestic circumstances, such as an unexpected natural or human-caused disaster, domestic violence, or bankruptcy.

What recent changes have been made to catastrophic plans and bronze plans?

In September 2025, the Trump administration issued guidance expanding the catastrophic plan hardship exemption to include consumers who are not eligible for premium tax credits or cost-sharing reductions due to their income, chiefly those with incomes below 100% FPL or above 250% FPL, beginning with the 2026 plan year. This change currently applies to individuals in all states except California, Connecticut, Maryland, and the District of Columbia.

Even though those below 100% FPL are ineligible for premium tax credits, they are generally eligible for Medicaid in states that have expanded Medicaid. With varied eligibility criteria in non-expansion states, this population may fall in the coverage gap. While they could theoretically buy a catastrophic plan, they would be unlikely to be able to afford the premium or the very high deductibles.

The administration has begun streamlining the application process for this hardship exemption through HealthCare.gov and its paper applications to make it easier for consumers to enroll in a catastrophic plan. Also, HealthCare.gov now automatically displays catastrophic plans (where available) for consumers age 30 and older if they enter an income above 400% FPL or below 100% FPL. These plans are not currently displayed for consumers with incomes between 250% FPL and 400% FPL.

In addition to the hardship exemption changes, the 2025 budget reconciliation law expanded the availability of health savings accounts (HSAs) on the Marketplace. Previously, only plans that met IRS rules related to minimum annual deductible amounts, out-of-pocket maximums, and other design features were eligible to be paired with an HSA. No catastrophic plans were HSA-eligible. Starting on January 1, 2026, all individual market bronze and catastrophic plans are considered HDHPs and eligible to be paired with an HSA even if the plan does not meet the minimum annual deductible requirement ($1,700 for individual coverage and $3,400 for family coverage in 2026) or the HSA out-of-pocket (OOP) maximum requirement ($8,500 for self-only coverage and $17,000 for family coverage in 2026) for an HDHP. New IRS guidance states that this change applies to all bronze and catastrophic plans, even those not purchased through a Marketplace (“off-exchange”). Other changes to HSA-eligible HDHPs include allowing pre-deductible coverage of telehealth and other remote care services, and allowing individuals covered by certain direct primary care arrangements to be eligible for an HSA.

Separately, congressional Republicans have recently proposed alternatives to continuing the enhanced premium tax credits that would further expand access to HSAs. While precise details vary, they generally propose directing funds to HSAs for eligible consumers enrolled in a catastrophic or bronze Marketplace plan to pay for out-of-pocket expenses. President Trump has also signaled his support for replacing tax credits with direct payments to consumers. None of these proposals has advanced.

What is the availability of and enrollment in bronze and catastrophic Marketplace plans?

An insurer selling QHPs on the Marketplace must offer at least one silver and one gold plan in all the areas where the insurer sells Marketplace coverage. Although Marketplace insurers in most states are not required to offer a bronze plan in all areas, only one county in the US does not have a bronze plan for sale for 2026; the availability of catastrophic plans is more limited. Where catastrophic plans are available, there tend to be fewer plan choices than there are for bronze plans.

In 2026, catastrophic plans are offered in 36 states and the District of Columbia—down from 40 states and the District of Columbia in 2025. The share of Marketplace enrollees with access to catastrophic plans fell from 87% to 76% over the same period.

In 2025 (without the new hardship exemption extension in effect), less than 1% of Marketplace enrollees chose a catastrophic plan, and 30% selected a bronze plan. The highest uptake of catastrophic plans was in the District of Columbia and Minnesota, where about 2% of Marketplace enrollees were in a catastrophic plan in 2025.

How do premiums for bronze and catastrophic plans compare?

In 2026, the average lowest-cost catastrophic Marketplace plan for a 27-year-old individual is $346 per month, a 29% increase from 2025. The average lowest-cost unsubsidized bronze plan (where catastrophic plans are also available) is $369 for a 27-year-old, a 19% increase from 2025. On average, the gap between premiums for unsubsidized bronze and catastrophic plans shrank by $19 per month for a 27-year-old individual from last year. (Differences in where catastrophic plans are offered may have contributed to this change.) The lowest-cost catastrophic Marketplace plans for 2026, where available, are, on average, $23 cheaper per month than the lowest-cost unsubsidized bronze plan for a 27-year-old individual. However, this varies a lot by county. For example, unsubsidized bronze plans offered in more than half of the counties in Oklahoma are over $200 cheaper per month than the cheapest catastrophic plan for a 27-year-old individual. Conversely, all counties in Connecticut have catastrophic plans around $200 a month cheaper than the lowest-cost unsubsidized bronze plan for a 27-year-old individual.

The Trump administration’s expansion of catastrophic plan hardship exemptions was not announced until September, after many insurers had already submitted their proposed rates for the 2026 plan year. As a result, its effect on pricing for bronze and catastrophic plans is unclear and may affect the relative pricing of bronze and catastrophic plans in future years, with more data on which to base premiums.

Even with the hardship exemption expansion, potential enrollees may have difficulty finding affordable coverage options in places where catastrophic plans are available. For a 27-year-old individual earning $45,000 a year (just under 300% FPL), expenditures on premiums would amount to 9% of income; a 50-year-old with the same income would spend 16% on premiums ($7,027 annually) on average.

One of the reasons catastrophic plans have lower premiums, on average, than bronze plans is that catastrophic plans tend to enroll younger and healthier consumers, thus lowering average claims costs per enrollee. Insurers may then be able to offer lower premiums, on average, compared to bronze plans, which may enroll an overall sicker (higher cost) population. Additionally, while all non-grandfathered individual market plans are part of the same general risk pool, for the purpose of the ACA’s risk adjustment program, which redistributes funds from plans with lower-risk enrollees to plans with higher-risk enrollees, catastrophic plans are treated as a separate risk pool from the metal level plans.

What is the outlook for consumers?

Recent policy changes could have wide-reaching implications for Marketplace coverage. As a result of the anticipated expiration of enhanced premium tax credits, out-of-pocket premiums in 2026 are estimated to more than double what subsidized enrollees currently pay annually for premiums, net of tax credits. To help offset these increases, some enrollees may switch to a plan with a higher deductible, while others, such as those with incomes above 400% FPL, who will lose subsidies altogether, may choose to exit the Marketplace.

Changes to HSA eligibility may also influence some Marketplace enrollees’ choice of plan. For plan year 2026, 35% of Marketplace plans sold on HealthCare.gov are HSA-eligible, compared to just 4% in plan year 2025. With all bronze and catastrophic plans now HSA-eligible, some consumers who were enrolled in a gold or silver plan, particularly those with enough income to set some aside into health savings accounts, may choose a bronze or catastrophic plan to take advantage of this change. HSAs offer a triple tax advantage: contributions are tax-deductible; withdrawals are tax-free if used to pay for qualified medical expenses; and investment earnings grow tax-free. Although more people will have access to HSA-eligible HDHPs starting in 2026, higher-income individuals typically have more disposable income to contribute to these accounts than those with lower incomes. Because they are in a higher tax bracket, higher-income enrollees save more money for every dollar contributed to their HSAs. The IRS’s interpretation of the budget reconciliation law’s expansion of HSA eligibility to include off-Marketplace catastrophic and bronze plans may also create new incentives for HSA vendors, who often charge fees for monthly account maintenance, making withdrawals, and other transactions, to market individual plans with HSAs outside the Marketplace.

Additionally, expanded hardship exemptions for catastrophic plans could increase uptake of these plans. The new HealthCare.gov display options for shoppers whose incomes make them ineligible for premium tax credits increase the visibility of catastrophic plans, and the streamlining of the hardship exemption process may make enrolling in these plans easier. More consumers choosing catastrophic plans could have implications for the Marketplace risk pool. To the extent that catastrophic plans pull enough healthy people out of metal level plans or off the Marketplace, premiums for these plans, which would be left with more sick people, could increase in the future.

In an already complex health insurance system, consumer awareness of these policy changes and their implications may be limited. The 2023 KFF Survey of Consumer Experiences with Health Insurance found that many individuals already have trouble understanding various aspects of health insurance. For example, 31% of Marketplace consumers reported difficulty comparing cost-sharing features, and 25% had trouble comparing premiums when presented with different coverage options. The barrage of marketing pitches consumers face during open enrollment (including through internet searches, telemarketing, and social media) can compound the challenges of making an informed decision. Some consumers could unknowingly be directed to off-Marketplace plans, which can be difficult to distinguish from on-Marketplace plans, as the websites can look very similar. While ACA-compliant plans may also be sold off-Marketplace, these websites often also sell non-ACA-compliant plans, which may make plan comparison more difficult for consumers and could result in consumers losing out on premium tax credits who would otherwise be eligible for them if they had purchased a plan on a Marketplace. With few impartial resources, shoppers may feel less confident choosing a plan that best meets their needs or be left with unanswered questions about their specific circumstances.

Lack of understanding of plan options can have far-reaching effects on consumer finances. Price-sensitive consumers shopping for bronze and catastrophic plans can face difficult tradeoffs. While these plans typically have lower premiums than other Marketplace plans, these plans come with higher deductibles. In addition, cost-sharing reductions are only available to enrollees in silver plans. Compared to a bronze plan, a silver plan with cost-sharing reductions often leads to a lower total health expenditure even with a higher premium. If an enrollee has a medical emergency or develops a serious illness, they may be on the hook for substantial out-of-pocket costs. Many Marketplace enrollees are already struggling to afford health care costs. According to a recent KFF poll, about six in ten (61%) Marketplace enrollees report having difficulty affording out-of-pocket costs for medical care. Considering that 37% of all U.S. adults reported that they would not be able to cover a $400 expense with cash or its equivalent—only 5% of the average bronze individual deductible or 4% of the catastrophic individual deductible—many consumers in plans with high deductibles could find themselves scrambling to pay for health care when they need it.

Methods

Premium information for 2026 come from the medical individual market file of the QHP landscape file from CMS for states using the federally-facilitated platform (HealthCare.gov) and from HIX Compare for all other states and the District of Columbia. Analysis of data from HIX Compare assume that all plans are available in all counties in their respective rating areas where the issuer offers at least one plan. To assess plan availability and differences in premiums, county data were weighted by the number of plan selections in 2025. Plan eligibility for health savings accounts was obtained from the plan attributes public use file, which is only available for plans offered on HealthCare.gov

On December 18, 2025, the Centers for Medicare and Medicaid Services (CMS) issued two proposed rules that would  further limit youth access to gender affirming care. One rule would change the hospital Conditions of Participation (CoPs) which would prohibit most Medicare and Medicaid enrolled hospitals from providing specified gender affirming medical care for youth (the proposed CoPs rule). The second proposed rule would prohibit federal Medicaid or CHIP funds from covering this care for youth (the proposed Medicaid rule). Despite gender affirming care being considered a best practice model of care and consisting of interventions recommended by major medical associations, if finalized and implemented, the proposed rules would have a sweeping impact, albeit for a small number of young people, significantly limiting their access to these services.  

The rules broadly align with a range of other administrative actions that take a multipronged approach to restrict this care. In particular, the proposed rules follow a January 2025 Executive Order that set a pathway for limiting youth access to gender affirming care and directed the Secretary of Health and Human Services (HHS) to “take all appropriate actions to end” gender affirming care for youth, including in Medicaid, and which specifically identified the CoPs as a possible vehicle for this. Additionally, on April 11, 2025, CMS sent a State Medicaid Director’s letter with the stated purpose of “reminding states of their responsibility to ensure that Medicaid payments are consistent with quality of care and that covered services are provided in a manner consistent with the best interest of recipients” and appearing to encourage states to take steps to limit gender affirming care for youth within their state Medicaid programs. Then, in May 2025, HHS sent a second letter to an unspecified group of providers, state medical boards, and health risk managers urging them to update treatment protocol to move away from provision of gender affirming medical care.

The proposed rules do not take effect immediately. Both have a 60-day comment period following their publication in the federal register. Then, following the comment period, CMS is tasked with considering the comments and could ultimately choose to finalize the proposed rule—either in amended form or as currently written—or elect not to do so. If finalized, both rules will likely face legal challenges, which could further slow implementation.

The Proposed Conditions of Participation (CoPs) Rule

If finalized, the proposed hospital CoPs rule would limit gender affirming care for youth, regardless of payer. The CoPs rule proposes to prohibit certain hospitals (i.e. those covered by section 42 CFR part 482) that accept payments from the Medicare or Medicaid programs from providing identified pharmaceutical and surgical services related to gender affirming care to young people under age 18. Prohibited services would include puberty blockers (which delay the onset of puberty), hormone therapy, and surgery (which is very rare among youth). While these services would be prohibited for the purposes of providing gender affirming care, the rule would permit hospitals to provide them to youth in some scenarios when the service is not intended to affirm a person’s gender.

The changes under the proposed CoPs rule represent a condition based on facility type (not payer) and therefore, if adopted, would prohibit hospitals from offering gender affirming services to all patients under 18 years old, regardless of payer, including youth with private insurance or other coverage and those paying cash, not just those covered by Medicare and Medicaid.  It does not prohibit other types of facilities (e.g. free standing clinics, primary care or specialist providers in other settings) from offering these services (there are a variety of CoPs for providers which are not affected by the proposed CoPs rule).

Hospital Conditions of Participation (CoPs) are currently used to regulate how services can be provided safely and with high quality, rather than prohibiting specific services from being offered altogether. There are a variety of CoPs across different provider types which set standards and requirements, primarily related to quality and safety of care that health care providers must generally meet to participate in and receive reimbursement from Medicare and Medicaid. Hospital CoPs regulate a variety of administrative functions and health care services, including a hospital’s responsibilities to its patients, obligations of the hospital’s governing body, requirements related to emergency preparedness and planning, staffing requirements, minimum medical record requirements, and processes to develop safety procedures and quality improvement plans.  While the proposed rule states that it is offering the revision to existing hospital CoPs regulations to address “the health and safety of children,” there is no medical consensus that gender affirming care represents a safety issue, and using hospital CoPs this way marks a departure from their current function of regulating how services can be performed (e.g., by licensed professionals, with equipment like defibrillators available during surgeries, etc.), rather than which services can be provided.  

Hospital compliance with the CoPs is monitored with detailed surveys conducted by state agencies or accredited organizations (like the Joint Commission on Accreditation of Hospitals). These surveys are conducted during onsite visits to the hospitals; CMS usually gives hospitals time to fix violations.  When hospitals are unwilling or unable to fix violations, CMS issues a termination notice, which happens relatively rarely. Medicare and Medicaid do not reimburse services rendered at terminated hospitals.

If finalized, the rule would apply to most hospitals in the United States. The proposed rule estimates there are a total of “4,832 Medicare/Medicaid certified hospitals” (covered by section 42 CFR part 482) that would be subject to its provisions. The restrictions would also apply to gender affirming care clinics and other clinics if they  operate as a part of a hospital, including at off-campus locations. In 2023, the American Hospital Association identified more than 6,000 hospitals nationwide and it is likely that the large majority of hospitals not covered in the proposed rule and not included in 42 CFR part 482 are facilities such as Critical Access Hospitals and Rural Emergency Hospitals which are small rural facilities that may be less likely to offer gender affirming care. Although the proposal would apply to the large majority of hospitals, it is not clear what share of hospitals currently offer gender affirming care services for youth and many systems have recently stopped offering such services and have cited growing concern about pressure from the federal government (e.g. Los Angeles Children’s cited the “complex and uncertain regulatory environment” and Children’s National the “escalating legal and regulatory risks,” among many other examples).

If the proposed CoPs rule were finalized, most hospitals would be prohibited from providing gender affirming care services for youth.  Although hospitals could in theory stop participating in Medicare and Medicaid to continue providing gender affirming services, it is very unlikely that they would do so given the financial challenges this would present. Nationally, nearly half (44%) of all spending on hospital care comes from Medicare and Medicaid payments. 

Although the rule would apply broadly to most hospitals, hospitals provide relatively few gender affirming care services and almost no gender affirming surgeries to youth. Accounting for states that already restrict youth access to gender affirming care, the proposed rule estimates the change would impact 8,570 young people. The Williams Institute estimates that there are approximately 724,000 trans identified youth (13-17) in the U.S. This suggests that approximately 1.2% of trans youth in the U.S. receive gender affirming medical services in hospitals and could be impacted by the proposal each year.  As with past research, the CMS finds that most of this care is pharmacologic with surgery being very rare among transgender youth. The proposed rule identifies 85 surgeries in facilities that would be impacted by the rule over the course of one year nationwide. This represents less than 0.0003% of youth under 18 in the United States (based on the denominator of people aged 12 to 18 being 29,600,770 as described in the proposed rule).

Although gender affirming services could still be provided outside of hospitals subject to the proposed CoPs rule, there would be fewer facilities available in a landscape where accessing this care has already become challenging. Many types of gender affirming care sought by young trans people (such as puberty blockers and hormone therapies) can be provided in outpatient settings and therefore received at non-hospital providers. However, patients may need to travel farther and pay more to receive the set of services they need. They may also face challenges finding a specialized pediatric gender clinic offering a cross-specialty integrated care experience as those clinics are often based in hospital settings. Indeed, the proposal states young people may face “difficulty in identifying in-network providers that have available space and longer commute times to these providers” and assumes that 4,285 youth (half of those estimated to be impacted by the proposed rule) would stop receiving care.

The Proposed Medicaid Rule

The proposed Medicaid rule would prohibit the use of federal Medicaid and CHIP funds to cover the specified gender-affirming care services, regardless of the site of care, limiting access for minors who are covered by these programs. The specified services are the same pharmaceutical and surgical services the CoPs proposed rule seeks to bar. Unlike the CoPs proposal, which seeks to limit access at the hospital level (regardless of coverage type), the Medicaid proposal seeks to limit funding for services for youth based on their coverage source (i.e. Medicaid or CHIP) and would therefore restrict reimbursement for care regardless of provider type (e.g. hospitals, primary care providers, endocrinologists, etc.). However, it does not prohibit providers from offering these services. Based on statutory definitions of “minor” the proposed rule would prohibit federal Medicaid reimbursement for this care to those under 18 years of age, while separately administered CHIP programs would limit reimbursement for people through age 18. (CMS is requesting comment on the feasibility of implementing the proposal with these age differences in Medicaid compared to CHIP.) As with the CoPs proposed rule, although Medicaid programs would be prohibited from covering the identified services for gender affirming care with federal funds, programs would be permitted to reimburse for these same services for youth when used for other purposes. Also, similar to the CoPs proposed rule, these health programs could cover other related services such as psychotherapy, which is a common part of gender affirming care services, especially for youth.

Although the proposed rule would prohibit states from using federal Medicaid or CHIP funds to cover gender affirming care, it would not restrict states from covering these services using state-only dollars. It is likely that different states will make different choices about whether or not to cover these services using state funds. Already, some states restrict coverage of gender affirming care in their Medicaid and CHIP programs.

The Medicaid proposed rule (unlike the CoPs proposal) does not offer an estimate on the number of individuals it would impact but it does find that only a very small share of Medicaid/CHIP funds are spent on gender affirming care, likely suggesting low utilization. Although the impact of the proposed Medicaid restrictions would be meaningful for individuals and families, only a very small amount of Medicaid funding is spent on services for which the Medicaid proposed rule would prohibit reimbursement. In the proposed rule, CMS estimates that Medicaid spent about $31 million on the specified services for enrollees aged 18 years and younger in 2023. This represents about 0.003% of all Medicaid spending that year (based on the proposed rule’s spending estimate and FY 2023 total Medicaid spending). Of this total ($31m), CMS finds most of the spending occurred on services provided to older teens, with two-thirds of identified spending (66%) occurring among those 15-18 years old. Notably, this includes some spending for 18-year-olds, some of whom would not be impacted by the proposal. Nonetheless, the agency’s analysis supports the conclusion of other researchers that utilization of gender affirming medical services is relatively rare among adolescents and most spending is nonsurgical. Ninety-two percent (92%) of spending on the specified services for enrollees aged 18 years and younger was nonsurgical and almost all surgical spending (98%) occurred among youth in the 15-18 age group. It is not possible to know how much of this was spent on eighteen-year-olds, a group not impacted by this policy, and the age of majority in most states.

KFF estimates 37% of people under 18 in the United States are covered by Medicaid or CHIP with variation across states. Applying state specific shares of youth enrolled in Medicaid to Williams Institute state level estimates of trans youth (and assuming the coverage distribution among trans youth is similar to youth in general), KFF estimates there to be approximately 270,000 trans youth covered by Medicaid or CHIP. We estimate that, approximately, 138,000 young trans people with Medicaid or CHIP live in a state without a state law prohibiting gender affirming care (and without a state-based Medicaid ban) and could face insurance limitations under the proposed Medicaid rule, if they sought gender affirming care. Notably, not all transgender youth would seek or desire access to the proposed restricted services, and the CoPs rule, along with other research, finds uptake of gender affirming medical services is low. Nonetheless, if finalized, the proposed rule could foreclose on their ability to receive covered care.

While young people with Medicaid and CHIP coverage could theoretically seek care outside of hospitals without using their insurance, the cost of doing so would likely be prohibitive. Families with children covered by Medicaid and CHIP have low to moderate incomes and would face difficulty paying for any uncovered care.

Looking Ahead

As noted earlier, the proposed rules do not take effect immediately. If finalized (following a 60-day comment period), these proposed rules taken together would lead to youth access to gender affirming care being further limited. Patients with the most financial and other supportive resources would have the greatest ability to navigate access (e.g., travel long distances to providers offering these services or have commercial insurance which might cover gender affirming care), whereas those with more limited resources and Medicaid/CHIP coverage, which is by definition insurance for low-income families, could find accessing services the most challenging. The rules would not limit other care for transgender young people.

Losing access to gender affirming care could have meaningful health implications for young people and their families.  Research has demonstrated that young transgender people’s mental health is negatively impacted when this care is denied, including leading to an increased risk of suicidality and that when care is received, well-being is improved. Hospitals with larger gender affirming care programs may also be conducting academic or clinical research on the experiences of and care for young transgender patients. If these hospitals close or limit their services, that may change or eliminate their ability to do this research.

Immediately following their release, the proposals faced criticism from the American Academy of Pediatrics which wrote, “these rules are a baseless intrusion into the patient-physician relationship” and that the association “remains committed to ensuring that all children — including gender-diverse youth and children covered by Medicaid — receive care that is backed by science, delivered with compassion, and offered without political interference.”

There has been significant litigation challenging efforts to limit gender affirming care at both the state and federal level and if finalized, lawsuits challenging these rules would be likely and could happen on multiple grounds (e.g., Constitutional, Administrative Procedure Act (APA), Section 1557 of the Affordable Care Act (ACA), and violations of Medicaid and Medicare statute and/or regulations, etc.). Indeed, the ACLU has already suggested a willingness to challenge these are regulations, stating that “if this administration moves forward with this attempt to enact a national ban on our medical care through coercion, the ACLU will see them in court.” Additionally, multiple state attorneys’ general have stated that they oppose the rule and plan to fight its implementation.

Beyond these two rules, also on December 18^th 2025, HHS Secretary Kennedy issued a declaration stating that the same pharmaceutical and surgical  procedures are “neither safe nor effective…and therefore, fail to meet professional recognized standards of health care” (the determination does not apply to these procedures when the service is not intended to affirm a person’s gender). It further noted the HHS Secretary has existing authority to exclude individuals or entities from participation in federal health programs, if the Secretary determines delivered services fail “to meet professionally recognized standards of health care.”  Unlike the two rules, the declaration is not limited to payer (as the Medicaid proposed rule is) or to a specific facility type (as the Conditions of Participation rule is).

On December 24, 2025, a lawsuit was filed in which nearly half of all states challenged the administration’s authority to issue the declaration, claiming it violates the Administrative Procedures Act and the Medicare and Medicaid statutes and that “the Secretary has no legal authority to substantively alter the standards of care and effectively ban, by fiat, an entire category of healthcare.”  On December 30^th, HHS announced it had referred at least one hospital to the Office of Inspector General based on the declaration.

Introduction

Recent and forthcoming policy changes may have important implications for American Indian or Alaska Native (AIAN) people and could widen existing disparities in health and health care. This brief provides an overview of recent policies affecting health and health care for AIAN people and their potential impacts. It draws on data from KFF’s Key Data on Health and Health Care for American Indian or Alaska Native People and KFF analysis of recent laws and policy changes. AIAN people are identified as a racial and ethnic group. However, AIAN is also a political and legal classification. This status recognizes over 570 AIAN Tribes as sovereign nations, establishing a government-to-government relationship that dictates the federal government’s trust responsibility, including the provision of health care to AIAN people in federally recognized Tribes.  Key takeaways include the following:

• The 2025 reconciliation law makes large cutbacks in federal Medicaid spending that could negatively impact AIAN people and communities. The Congressional Budget Office (CBO) estimates that the law will reduce federal Medicaid spending over the next decade by an estimated $911 billion and increase the number of uninsured people by 10 million due to changes to Medicaid and other programs, including the ACA Marketplace. Medicaid is the primary source of health coverage for Native communities, with over one in three (35%) AIAN individuals under age 65 enrolled in Medicaid or the Children’s Health Insurance Program (CHIP), including 52% of AIAN children. Medicaid and CHIP are also the largest source of third-party funding for the Indian Health Service (IHS) and Tribal health facilities, and one of the main ways the federal government upholds its trust responsibility. To replace reductions in federal funding, states will need to increase spending or make program reductions, which could lead to eligibility and benefit cutbacks that might reduce coverage for low-income people overall, including AIAN people, and reduce funding available to IHS and other Tribal providers. Further, although the law provides exemptions for most AIAN people from new work requirements and more frequent eligibility determinations, AIAN people may face challenges documenting their eligibility for such exemptions and may experience coverage losses.
• Similarly, changes to the ACA Marketplace may erode coverage for AIAN people. Enhanced premium tax credits are set to expire at the end of 2025, which would make coverage unaffordable for many, including AIAN people. Estimates show that as many as 40% of AIAN people enrolled in the Marketplace with tax credits will lose their coverage if these credits expire.
• Continued underfunding of the IHS, broad reductions in federal funding and equity initiatives, and shifts in vaccination policy and attitudes may also negatively impact health and health care access for AIAN people. Despite proposed increases, FY 2026 funding for the IHS falls short of levels estimated to fully meet health care needs and fulfill the federal trust responsibility. Further, while Executive Orders focused on eliminating Diversity, Equity, and Inclusion (DEI) initiatives largely exempt Tribes, broader federal budget cuts and rollbacks to equity initiatives may reduce resources available to Tribal communities, including for data, public health surveillance, and outreach. Recent declines in vaccination rates, rising misinformation about vaccines, and shifts in federal vaccine policy may increase the risk of preventable disease outbreaks in AIAN communities, including recent measles outbreaks in the U.S.

Health Care for AIAN People

Under treaties and laws, the U.S. has a unique trust responsibility to provide health care to AIAN people. The IHS is the primary federal agency through which the federal government fulfills its trust responsibility for members of federally recognized Tribes, who make up approximately 2.8 million AIAN people from 574 federally recognized Tribes nationwide. Members of federally recognized Tribes, as well as certain other eligible AIAN individuals, can receive IHS-funded services through a network of IHS- and Tribally-run hospitals and clinics, along with Urban Indian Organizations (UIOs). AIAN people receiving services through IHS providers are not charged or billed for the cost of their services. However, the IHS has long been underfunded and lacks the resources needed to fully meet the health care needs of AIAN people. Services available through the IHS are primarily limited to primary care, although the IHS does provide some ancillary and specialty services. When care is not available within IHS or Tribal facilities, the Purchased/Referred Care (PRC) Program may fund services from outside providers. Yet, the funding for PRC has historically been insufficient and does not extend to UIOs. As a result, access to care through the IHS varies widely by location, and AIAN individuals who rely solely on the IHS often face significant barriers to obtaining needed services.

AIAN people can access health coverage through Medicaid, CHIP, and the Affordable Care Act (ACA) Marketplace, with certain unique benefits and protections. Tribal members enrolled in these programs can continue receiving care from IHS, Tribal, or UIO providers at no cost and additionally have access to a broader network of services than those available solely through IHS since they can access care through any provider participating in Medicaid and are covered by the comprehensive Medicaid benefit package. Medicaid offers specific protections for Tribal members, including exemptions from out-of-pocket costs. For the ACA Marketplace, Tribal members eligible for premium tax credits can enroll in zero or limited cost-sharing Marketplace plans and have other specific protections. For example, AIAN individuals with incomes between 100% and 300% of the federal poverty level who enroll in zero cost-sharing plans pay no out-of-pocket costs for covered services. Additionally, AIAN Marketplace enrollees have access to a Special Enrollment Period, allowing them to enroll in or switch plans once per month, beyond the standard open enrollment window that is available for other eligible people.

Health coverage improves access to care for AIAN people and strengthens Tribal health systems. Given the limitations of IHS funding and service availability, health coverage through Medicaid and the Marketplace enhances access to care for AIAN people since they can access covered care through a broader network of providers and have coverage for a comprehensive set of benefits. In addition to improving individual access to care, Medicaid is also an important source of funding for IHS and Tribal facilities and is one of the primary ways the federal government upholds its federal trust responsibility to provide health care to AIAN people. Medicaid is the largest third-party payer for the IHS, accounting for $1.3 billion out of the total almost $1.8 billion in third-party collections in fiscal year 2025. Further, unlike other Medicaid costs, which are typically shared between the federal government and states, the federal government covers 100% of the cost for services provided to AIAN Medicaid enrollees through the IHS or Tribally operated facilities whether operated directly by the IHS or on its behalf by a Tribe. Importantly, in contrast to IHS funding, Medicaid funding is not subject to annual appropriations and is provided on a continuous, claims-based basis throughout the year. As a result, Medicaid revenues are a vital funding stream that help facilities cover operational costs, pay providers, and invest in infrastructure development.

Due to a combination of lower coverage rates, additional access barriers, and historical and ongoing discrimination, AIAN people continue to face significant disparities in health and health care. AIAN people have shorter life expectancies relative to their White counterparts (70.1 vs 78.4 years at birth), higher rates of chronic diseases such as diabetes and asthma, and higher rates of suicide deaths and substance use disorder. About a quarter (26%) of AIAN adults report having fair or poor health status compared to 17% of White adults. Additionally, AIAN people face greater risks during pregnancy, including higher rates of preterm births and infant mortality. Among those under age 65, AIAN people are three times more likely to be uninsured (21%) compared to White people (7%).

Recent and Proposed Policies Related to AIAN Health and Health Care

Since President Trump took office in January 2025, the Administration and Congress have made significant health policy changes. While in some cases AIAN people have been specifically exempted or protected from new requirements or cutbacks, many changes may have significant impacts on health and health care for AIAN people that could exacerbate the large disparities they already face in health and health care.

Medicaid and ACA Marketplace Changes

The 2025 reconciliation legislation makes large cutbacks in federal Medicaid spending that could negatively impact low-income people overall, including AIAN people and communities. CBO estimates that the law will reduce federal Medicaid spending over the next decade by an estimated $911 billion and increase the number of uninsured people by 10 million due to changes to Medicaid and other programs, including the ACA Marketplace. Medicaid is the primary source of health coverage for Native communities with one in three (35%) AIAN individuals under age 65 enrolled in Medicaid or the Children’s Health Insurance Program (CHIP), including 52% of AIAN children. As noted, Medicaid is also the largest source of external funding for IHS and Tribal health facilities, accounting for roughly two-thirds of their third-party revenue and providing a stable funding source to support operations. To replace reductions in federal funding, states will need to increase spending or make program reductions, which could lead to broad eligibility and benefit cutbacks that might reduce coverage for low-income people overall, including AIAN people and reduce funding available to IHS and other Tribal providers.

The law imposes an array of new requirements on Medicaid enrollees but largely exempts AIAN people from these changes. The law will require more frequent Medicaid eligibility determinations (every six months), adds a new work requirement, and imposes increased cost sharing for adults enrolled in the ACA Medicaid expansion. The law exempts AIAN people from these new requirements. However, it is unclear how state Medicaid programs will verify AIAN people’s Tribal citizenship. Some AIAN people may face challenges documenting their exemption status. While states are required to use available data to verify exemption status, some AIAN people who need to document their Tribal citizenship may face challenges to submitting documents, including long distances to post offices and limited internet access, as seen during the recent unwinding of Medicaid continuous enrollment.

While the 2025 reconciliation law exempts AIAN people from changes to Marketplace coverage, the pending expiration of enhanced Marketplace subsidies could lead to declines in coverage for AIAN people. Without renewal of the enhanced tax credits, premium payments for individuals enrolled in the Marketplace are expected to more than double on average. Estimates suggest that a substantial share of AIAN people currently enrolled in a Marketplace plan could lose coverage if the enhanced premium tax credits expire, particularly in states that have not expanded Medicaid to adults.

Funding for IHS

Congressional appropriations bills for Fiscal Year (FY) 2026 increase funding for the IHS compared to prior years but still fall far short of the funding levels to fulfill the federal trust responsibility to AIAN communities. In late July 2025, both the House and Senate Appropriations Committees passed their respective FY 2026 bills, each proposing increased funding for the IHS. The House bill allocates $8.41 billion, while the Senate bill allocates $8.1 billion, both above the FY 2025 enacted level of $6.96 billion. These increases are expected to support expanded primary care, behavioral health, and preventive services, as well as help offset inflationary pressures that threaten to erode service capacity. The House bill also includes $105.99 million for Urban Indian Health and $6.05 billion in advance appropriations for FY 2027. Following the most recent government shutdown, the deadline to pass FY 2026 appropriations bills has been extended through the end of January, during which time IHS continues to operate at FY 2025 funding levels. While these bills increase funding, they fall short of estimated needs. The Tribal Budget Formulation Work Group, led by Tribal leaders across all IHS regions, has recommended full funding at $73 billion for the IHS and $1.09 billion for Urban Indian Health to meet health care needs and fill service gaps. The group has identified several areas that would benefit from increased funding including workforce shortages, Infrastructure improvement, and targeted public health initiatives, such as mental health, substance use and opioid treatment programs, efforts to eliminate HIV and hepatitis C, and culturally tailored chronic disease management through the Special Diabetes Program for Indians.

Federal Cutbacks to Staff, Diversity Initiatives, Data, and Research

Although Tribes have largely been exempted from recent reductions in DEI initiatives, broader federal program and budget cutbacks that eliminate staff and programs focused on health equity may still undermine efforts to address longstanding disparities affecting AIAN communities. While Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. has suspended layoffs at IHS, Tribal leaders caution that deep cuts at other federal health agencies are causing widespread disruption. These reductions are impacting many programs Tribal communities rely on, including public health surveillance, data systems, and community outreach efforts. Tribes report that staffing losses in key federal health agencies have led to gaps in data collection, weakened communication, and delayed implementation of essential programs. Maintaining strong health data infrastructure and partnerships with Tribal communities is key for tracking health inequities and targeting resources effectively. One notable loss is the Centers for Disease Control and Prevention’s (CDC) Healthy Tribes Program, which previously provided roughly $32.5 million annually to support culturally grounded approaches, such as community gardens and incorporation of traditional wellness practices, but has now been effectively dismantled. Broader restructuring across the HHS has also affected Indian country. Tribal representatives, including the National Indian Health Board, have expressed concerns that dismantling equity-focused initiatives threatens to reverse gains addressing disparities affecting AIAN people.

Changes in Vaccine Policy

Shifts in vaccine policy, misinformation about vaccine safety, and declines in childhood vaccination rates may lead to a rise in outbreaks of once eradicated diseases with disproportionate impacts for AIAN people. HHS Secretary Kennedy, known for his longstanding opposition to vaccines and for spreading vaccine misinformation, has recently spearheaded initiatives to review the federal childhood vaccination schedule, overhaul the membership of the Advisory Committee on Immunization Practices (ACIP), and limit both COVID-19 vaccines and mRNA vaccine research. Additionally, the Trump administration has released a report advocating for a new vaccine policy framework, which includes revisiting the childhood vaccine schedule and focusing on vaccine-related injuries. Since the COVID-19 pandemic, childhood vaccination coverage has declined nationwide. Gaps in immunization are higher in AIAN communities, increasing their susceptibility to disease resurgence. Among children born in 2020, only 57% of AIAN children were fully immunized by age two, compared to 71% of non-Hispanic White children. Additionally, roughly 76% of AIAN children have received their first MMR dose, falling short of the 95% coverage required to achieve herd immunity. AIAN adults were also 30% less likely to receive a flu shot than their non-Hispanic White counterparts during the 2023–2024 season. These declines have contributed to the most severe measles outbreak in the U.S. in more than three decades. Recent measles clusters in Tribal communities, especially in the Northern Plains and Southwest, have disrupted health care access and led to temporary clinic closures. In response, IHS, Tribal, and Urban health facilities have implemented mobile vaccination units, walk-in clinics, and multilingual public health campaigns tailored to meet local needs.

At the same time, misinformation about vaccine safety continues to circulate widely. KFF polling data shows that a majority of Americans have read or heard the false claim that the MMR vaccine causes autism in children. About one-third have heard that getting the measles vaccine is more dangerous than becoming infected with measles, and 34% believe the debunked claim that MMR vaccines cause autism. Among parents, about one in ten (9%) believe the MMR vaccine can cause autism, and roughly one in six (16%) say they have ever skipped or delayed at least one childhood vaccine for any of their children. Additionally, while formally supportive of the MMR vaccine’s effectiveness, Senator Kennedy has amplified anti-vaccine narratives including debunked claims linking the MMR vaccine to autism, creating confusion and reducing clarity on vaccine safety. Beyond the existing mistrust of the health care system due to historical trauma and abuse, some Tribal leaders warn that skepticism and mistrust of the health care system among AIAN people is increasing. Together, the increased skepticism among the public about the safety and effectiveness of measles vaccines and a decline in trust of health authorities in general, have contributed to lower vaccination rates and complicated outreach and communication efforts to combat preventable disease outbreaks.

Health care affordability has been a longstanding concern in the U.S., including among older adults, many of whom have relatively low incomes and modest assets to help cover the cost of premiums and medical bills. Medicare offers important financial protection by providing health insurance coverage to 69 million people in the U.S., including adults age 65 or older and younger adults with long-term disabilities. However, Medicare-covered benefits are subject to cost-sharing requirements and exclude some commonly needed services, like dental and vision care.  Additionally, traditional Medicare does not include a cap on out-of-pocket costs.

To help with cost sharing for Medicare-covered services and fill the gaps in Medicare benefits, most Medicare beneficiaries supplement traditional Medicare with additional coverage, such as Medigap, for which policyholders pay an average of $2,600 annually in premiums. More than half of people with Medicare are currently enrolled in Medicare Advantage, which offers extra benefits not available in traditional Medicare and caps annual out-of-pocket costs. Medicare beneficiaries may also have employer- or union-sponsored coverage or Medicaid coverage in addition to Medicare. But some people on Medicare lack additional coverage and face the risk of incurring high out-of-pocket costs if they need expensive medical care.

This analysis documents the different sources of coverage among people with Medicare and examines variation in beneficiary characteristics by source of coverage. The analysis draws on data from the Centers for Medicare & Medicaid Services (CMS) March 2025 Medicare Advantage enrollment files and the 2023 Medicare Current Beneficiary Survey (see Methods for details).

Key Facts

• More than half of all people with Medicare Part A and Part B (54% or 34.1 million in 2025) are enrolled in a Medicare Advantage plan, while 46% (28.7 million) are in traditional Medicare.
• Among traditional Medicare beneficiaries, most (87%) had additional coverage that supplements Medicare benefits in 2023, but 3.5 million beneficiaries (13%) lacked additional coverage, leaving them at risk of facing high out-of-pocket costs for medical care.
• Overall, 14.1 million beneficiaries (23% of all Medicare beneficiaries) had employer or union sponsored coverage in 2023, either as a supplement to traditional Medicare or through group Medicare Advantage plans, another 12.2 million (20%) had Medicaid in addition to traditional Medicare or Medicare Advantage, and the same number, 12.2 million (20%) had a Medicare supplemental insurance (Medigap) policy to supplement traditional Medicare.

• The number and share of Medicare beneficiaries with Medicaid (dual eligible individuals) were substantially higher in Medicare Advantage (68%) than traditional Medicare (32% in 2023).
• Compared to traditional Medicare beneficiaries, Medicare Advantage enrollees were more likely to be Black or Hispanic, have incomes below $20,000 per person, and self-report fair or poor health.

More than Half of All People with Medicare Are Enrolled in Medicare Advantage

In 2025, Medicare Advantage covered more than half (54%) of Medicare beneficiaries with both Medicare Parts A and B, or 34.1 million out of about 62.8 million people. Of the total number of Medicare Advantage enrollees in 2025, most (62%) are enrolled in individual plans available to all Medicare beneficiaries. One in five (21%) are in Special Needs Plans (SNPs) and 17% are enrolled in employer- or union-sponsored group plans, where employers or unions contract with an insurer and Medicare pays the insurer a fixed amount per enrollee to provide benefits covered by Medicare. (These estimates are based on March 2025 Medicare Advantage plan enrollment data and therefore differ from those discussed below and shown in Figure 1, which are based on the 2023 Medicare Current Beneficiary Survey (MCBS)).

Compared to traditional Medicare beneficiaries, Medicare Advantage enrollees were more likely to be Black or Hispanic, have incomes below $20,000 per person, and self-report fair or poor health, based on KFF analysis of the 2023 MCBS (Figure 2, Appendix Table 1).

Most Medicare Beneficiaries in Traditional Medicare Have Additional Coverage that Supplements Medicare Benefits

In 2023, most (87%) people in traditional Medicare had some form of additional coverage, either through Medigap (43%), employer coverage (29%), Medicaid (14%), or another source (1%),based on estimates from the MCBS.But 3.5 million Medicare beneficiaries in traditional Medicare (13%) had no additional coverage. A more detailed discussion of these types of coverage and the characteristics of people with each coverage type is below.

Nearly a Quarter of Medicare Beneficiaries Have Employer Coverage, Either through Group Medicare Advantage Plans or in Addition to Traditional Medicare

In total, 14.1 million Medicare beneficiaries – nearly a quarter (23%) of Medicare beneficiaries overall – had some form of employer or union-sponsored health insurance coverage in 2023 in addition to Medicare Part A and Part B. Of this total, 8.2 million beneficiaries had employer coverage in addition to traditional Medicare (29% of beneficiaries in traditional Medicare), while 5.9 million beneficiaries were enrolled in Medicare Advantage employer group plans. Most people with both Medicare Part A and Part B and employer- or union-sponsored coverage are retirees with Medicare as their primary source of health insurance coverage.

Compared to traditional Medicare beneficiaries overall in 2023, beneficiaries with employer or union-sponsored coverage in addition to traditional Medicare were more likely to have higher incomes ($40,000 or greater per person), a bachelor’s degree or higher, self-report excellent or good health, and were less likely to be under age 65 (Figure 3, Appendix Table 1).

Separately, in 2023, an estimated 5.8 million Medicare beneficiaries had Part A only, a group that primarily includes people who were active workers (either themselves or their spouses) and had primary coverage from an employer plan and Medicare as a secondary payer. People with Part A only cannot enroll in a Medicare Advantage plan, so people with coverage through Medicare Advantage employer group plans are likely to be retired.

Four in 10 People in Traditional Medicare Have a Medigap Supplemental Policy

Medicare supplement insurance, also known as Medigap, covered 2 in 10 (20%) Medicare beneficiaries overall, or 43% of those in traditional Medicare (12.2 million beneficiaries) in 2023. Medigap policies, sold by private insurance companies, fully or partially cover Medicare Part A and Part B cost-sharing requirements, including deductibles, copayments, and coinsurance. Medigap limits the financial exposure of Medicare beneficiaries and provides protection against catastrophic medical expenses. However, Medigap premiums can be costly and can rise with age, among other factors, depending on the state in which they are regulated.

Compared to all traditional Medicare beneficiaries in 2023, beneficiaries with Medigap were more likely to be White, have higher annual incomes (above $20,000 per person), self-report excellent, very good, or good health, and have a bachelor’s degree or higher (Figure 3, Appendix Table 1).

In contrast, a smaller share of traditional Medicare beneficiaries under age 65 have a Medigap policy than traditional Medicare beneficiaries ages 65 and older (1% versus 9%). Federal law provides a 6-month guarantee issue protection for adults ages 65 and older when they first enroll in Medicare Part B if they want to purchase a supplemental Medigap policy, but these protections do not extend to adults under the age of 65 with disabilities, and most states do not require insurers to issue Medigap policies to beneficiaries under age 65.

One in Five People with Medicare Also Have Coverage from Medicaid, with More Covered Under Medicare Advantage than Traditional Medicare

Medicaid, the federal-state program that provides health and long-term services and supports coverage to low-income people, was a source of supplemental coverage for 12.2 million Medicare beneficiaries with low incomes and modest assets in 2023, or 20% of all Medicare beneficiaries. A larger number and share of Medicare beneficiaries with Medicaid (known as dual-eligible individuals) were enrolled in a Medicare Advantage plan (8.3 million, or 68% of all dual-eligible individuals) than in traditional Medicare (4.0 million, or 32%) (Appendix Table 1). For these beneficiaries, Medicaid typically pays the Medicare Part B premium and may also pay a portion of Medicare deductibles and other cost-sharing requirements. Most dual-eligible individuals are also eligible for full Medicaid benefits, including long-term services and supports.

Compared to traditional Medicare beneficiaries overall in 2023, dual-eligible individuals were more likely to have low incomes and relatively low education levels, self-report fair or poor health, identify as Black or Hispanic, and be under the age of 65 (Figure 3, Appendix Table 1).

3.5 Million Traditional Medicare Beneficiaries Lack Supplemental Coverage

In 2023, 3.5 million Medicare beneficiaries – 6% overall –and 13% of beneficiaries in traditional Medicare – had no supplemental health insurance coverage. Traditional Medicare beneficiaries with no additional coverage are fully exposed to Medicare’s cost-sharing requirements, which would mean paying a $1,736 deductible for a hospital stay in 2026, daily copayments for extended hospital and skilled nursing facility stays, and a $283 deductible plus 20% coinsurance for physician visits and other outpatient services. (These costs are in addition to the standard Part B premium amount of $203 per month in 2026). Beneficiaries in traditional Medicare without additional coverage also face the risk of high annual out-of-pocket costs because there is no cap on out-of-pocket spending for Part A and B services in traditional Medicare, unlike in Medicare Advantage plans.

Beneficiaries in traditional Medicare without any form of additional coverage were more likely to have modest incomes (between $20,000 and $40,000 per person) compared to all traditional Medicare beneficiaries in 2023 (Figure 3, Appendix Table 1). Medicare beneficiaries with modest incomes have limited ability to afford Medigap premiums and are unlikely to qualify for Medicaid because their income and assets are not low enough to meet eligibility guidelines.

The number and share of traditional Medicare beneficiaries without any form of supplemental coverage has steadily declined in recent years. Between 2018 and 2023, the number of traditional Medicare beneficiaries without supplemental coverage declined from 5.6 million beneficiaries (10% of the total Medicare population, or 17% of those in traditional Medicare) to 3.5 million (6% of the total Medicare population, or 13% of those in traditional Medicare). This decline likely reflects the increase in Medicare Advantage enrollment over time, which has increased from 20 million in 2018 to 34 million in 2025.

Appendix

The price of prescription drugs in the U.S. continues to be a concerning issue to the public, with KFF polling consistently showing the public supports various approaches to lowering prescription drug costs. Efforts to rein in drug costs have long been a priority for both federal and state policymakers. The Trump administration has recently taken steps to address drug costs through Executive Orders and multiple pricing agreements to bring ‘Most Favored Nation’ pricing to consumers in the U.S., though the impact and savings from these efforts are not yet known. The Biden administration enacted the Inflation Reduction Act of 2022, which authorized the federal government to negotiate lower drug prices with manufacturers for some drugs covered by Medicare, among other provisions, resulting in an estimated reduction in the federal deficit of $237 billion over 10 years for the drug pricing provisions alone.

One player in the system of pharmaceutical pricing in the U.S. that has come under increasing scrutiny in recent years is the pharmacy benefit manager, or PBM. These so-called ‘middlemen’ are used by health insurance companies to manage their pharmacy benefits. PBMs have been the focus of attention from policymakers for several reasons, including their business practices, market consolidation, and lack of transparency, all of which factor into concerns that PBMs themselves have played a role in increasing drug prices, even as they work to manage pharmacy benefits and costs for insurers.

In an April 2025 Executive Order, the Trump administration directed the Assistant to the President for Domestic Policy to reevaluate the role of ‘middlemen’ to “promote a more competitive, efficient, transparent, and resilient pharmaceutical value chain”. In the current session of Congress, legislation addressing various concerns related to PBMs and their business practices has been introduced and voted on but not enacted, including provisions in recent House GOP legislation responding to the expiration of the enhanced ACA premium subsidies, which passed the House in December 2025, and in budget reconciliation legislation passed by the House but not the Senate in May 2025. This brief provides an overview of the role of PBMs in managing pharmacy benefits, discusses recent federal legislation focusing on several elements of PBM business practices, and explains the potential federal budgetary impact of this legislation, which would have a relatively modest impact on the federal deficit, based on available CBO estimates. (This brief focuses on actions at the federal level and does not address state legislative efforts related to PBMs, which have occurred in all 50 states.)

The Role of PBMs

Pharmacy benefit managers (PBMs) act as intermediaries between drug manufacturers and insurance companies that offer drug benefits to employer health plans, Medicare Part D prescription drug plans, state Medicaid programs, and other payers. In this role, PBMs serve several functions: negotiating rebates and price discounts with drug manufacturers, processing and adjudicating claims, reimbursing pharmacies for drugs dispensed to patients, structuring pharmacy networks, and designing drug benefit offerings, which includes developing formularies (lists of covered drugs), determining utilization management rules, and establishing cost-sharing requirements.

Although there are many PBMs, a few companies dominate the overall U.S. market. According to the Federal Trade Commission (FTC), the top 3 PBMs – OptumRx (owned by UnitedHealth Group), Express Scripts (owned by Cigna), and CVS Caremark (owned by CVS Health, which also owns Aetna) – manage 79% of prescription drug claims on behalf of 270 million people in 2023 (Figure 1).

Certain PBM Business Practices Have Given Rise to Concerns About Their Impact on Drug Prices

Sources of revenue: PBMs generate revenue in different ways. PBMs are typically paid fees for the functions they serve managing pharmacy benefits. PBMs also negotiate rebates with drug manufacturers in exchange for preferred placement of rebated drugs on a health insurance plan formulary, and they may retain a portion of the drug rebates they negotiate, though this may be more common in the commercial employer market than in the Medicare Part D market. Many state Medicaid programs and Medicaid managed care plans also contract with PBMs to manage or administer pharmacy benefits, including negotiating supplemental prescription drug rebates with manufacturers.

Rebates can help lower the cost of drug benefits for health insurers, which enables them to offer lower premiums in turn and may translate to lower out-of-pocket costs for patients at the point of sale. In order for PBMs to maximize rebate revenue, however, they may favor higher-priced drugs with higher rebates over lower-priced drugs with low or no rebates in their negotiations with drug companies. This may have an inflationary effect on drug pricing by manufacturers, increase costs for payers across the system, and raise out-of-pocket costs for patients who pay based on the list price – a particular concern for those without insurance but also for those with high-deductible insurance plans or when cost sharing is calculated as a percentage of the drug’s price, such as for Part B drugs under Medicare.

Because of these impacts, some have suggested that rebates negotiated between PBMs and drug manufacturers should be passed along in full to individuals at the point of sale and make discounts available upfront at the pharmacy counter. This arrangement would produce savings for individuals who take drugs with high rebates, since they would face lower out-of-pocket costs on their medications when they fill their prescriptions. However, if rebates are no longer being used to reduce a plan’s overall drug benefit costs, point-of-sale drug discounts could result in higher premiums for all plan enrollees.

Spread pricing: Another potential source of revenue for PBMs comes from the contracting practice of spread pricing, which is when a PBM pays a lower rate for a drug to the dispensing pharmacy than the amount the PBM charges an insurer for that drug and retains the difference or “spread” as profit. The practice of spread pricing can result in higher costs for insurers, while lower reimbursement levels put financial pressure on pharmacies.

PBMs have come under bipartisan scrutiny in recent years for spread pricing arrangements in Medicaid managed care that have increased Medicaid costs for states and the federal government. As a result, a number of states have prohibited spread pricing or adopted other reforms to increase transparency and improve oversight. Concerns about Medicaid spread pricing also led the Centers for Medicare & Medicaid Services (CMS) to issue an informational bulletin in May 2019 about how managed care plans should report spread pricing, which may have reduced the practice.

Consolidation: Consolidation in the PBM market has enabled a few PBMs to gain significant market power. As mentioned above, three PBMs manage nearly 80% of all prescription claims in the U.S. Moreover, the top three PBMs are vertically integrated with major health insurers: OptumRx is owned by UnitedHealth, Express Scripts is owned by Cigna, and CVS Caremark is owned by CVS Health, which also owns Aetna. Each of these PBMs also own mail order pharmacies and specialty pharmacies.

The FTC and members of Congress on both sides of the aisle have raised concerns that this level of market concentration and vertical integration enables PBMs to steer consumers to their preferred pharmacies, mark up the cost of drugs dispensed at their affiliated pharmacies, reimburse PBM-affiliated pharmacies at a higher rate than unaffiliated pharmacies for certain drugs, and apply pressure over certain contractual terms, all of which may disadvantage unaffiliated and independent pharmacies, contributing to pharmacy closures.

Transparency: Financial contracts between PBMs and drug manufacturers, including drug pricing information and the rebate arrangements that PBMs negotiate with drug manufacturers, are generally not made public. This means that plan sponsors often do not have insight into how much PBMs are actually paying for drugs on their formularies, and PBMs often consider this information to be proprietary. In the pharmaceutical supply chain as whole, many players operating in this market do not have information about prices, which can make informed decision-making difficult and imperfect.

Recent Federal Legislation Related to PBMs

In recent years, federal lawmakers have focused several Congressional hearings on the topic of PBMs, including their role in prescription drug pricing, drug spending growth, and rising out-of-pocket costs for drugs, and have introduced legislation focusing on several elements of PBM business practices. The legislation highlighted below is not an exhaustive list but includes some of the more recent and prominent legislative efforts in the 119^th Congress.

In May 2025, the House passed a version of the 2025 federal budget reconciliation law that included several provisions that would have addressed some PBM operations, though the PBM provisions were not included in the final version of the bill that was passed by Congress and signed into law in July 2025 (sometimes referred to as the “One Big Beautiful Bill Act”). The provisions in the May 2025 House-passed budget reconciliation bill include:

• Delinking PBM compensation from drug prices, rebates, and discounts that they negotiate for drug plans under Medicare Part Dand instead basing compensation on a ‘bona fide service fee’, which would be a flat dollar amount.
• Establishing transparency and reporting requirements for PBMs, including data on utilization, pricing, and revenues for formulary covered drugs; PBM-affiliated pharmacies; contracts with drug manufacturers; and other PBM business practices. This provision would require PBMs to provide this data to Part D plan sponsors as well as the HHS Secretary.
• Prohibiting spread pricing in Medicaid and instead basing payments on a ‘pass-through model’ in which payments made by a PBM on behalf of the State Medicaid program to the pharmacy are limited to the drug ingredient cost and a professional dispensing fee. Payments to PBMs and similar entities would be required to reflect the pharmacies’ costs and an administrative fee that is fair market value. 
• Ensuring accurate payments to pharmacies under Medicaid: All retail pharmacies and certain non-retail pharmacies would be required to complete the National Average Drug Acquisition Cost (NADAC) survey, if they are selected for participation in the survey. This provision would require survey participation across all retail pharmacies, including larger chain pharmacies who have historically not participated in the survey and who likely obtain their drugs at lower prices, which could lower pharmacy reimbursement for some drugs and result in federal and state savings.

In December 2025, the House passed GOP legislation responding to the expiration of enhanced ACA premium subsidies, the Lower Health Care Premiums for All Americans Act (H.R. 6703), which included a separate PBM provision that would increase oversight of PBMs that provide services to employer group health plans through data transparency and reporting requirements. This provision would require PBMs to report detailed prescription drug utilization and spending data to plans, including gross and net spending, out-of-pocket spending, pharmacy reimbursement, and other details related to the plan’s pharmacy benefit.

Separately, reflecting the bipartisan support for legislation related to PBMs, Representatives Buddy Carter (R) and Vincente Gonzalez (D) introduced the PBM Reform Act of 2025 in the House, while the chairman and ranking member of the Senate Finance Committee, Senators Mike Crapo (R) and Ron Wyden (D), introduced the Pharmacy Benefit Manager (PBM) Price Transparency and Accountability Act in the Senate. These bills are similar but not the same; the PBM Reform Act of 2025 includes the provision that would increase oversight of PBMs that work with employer group health plans (as in the broader House GOP bill), which is not included in the PBM Price Transparency and Accountability Act. A bipartisan group of representatives, including Representatives Jake Auchincloss (D), Diana Harshbarger (R), and James Comer (R) also recently reintroduced the Pharmacists Fight Back Act, which includes two coordinated pieces of legislation that would regulate PBMs in certain federal health benefits programs.

• The PBM Reform Act of 2025 (H.R.4317) includes most of the PBM provisions that were included in a preliminary version of the budget reconciliation bill that passed the House in May 2025 and includes: delinking PBM compensation from the cost of medications for drug plans under Medicare Part D, prohibiting spread pricing in Medicaid, and ensuring accurate payments to pharmacies under Medicaid. In addition, the bill includes provisions to increase oversight of PBMs that work with employer group health plans and to assure pharmacy access and choice for Medicare beneficiaries, which were not included in the May 2025 House-passed bill.
  • The provision to assure pharmacy access for Medicare beneficiaries would reinforce existing regulatory requirements that Part D plan sponsors contract with any willing pharmacy that meets their standard contract terms and conditions and have those conditions be ‘reasonable and relevant.’ These conditions would be defined and enforced according to standards determined by the Secretary of Health and Human Services (HHS).
• The PBM Price Transparency and Accountability Act (S.3345) also includes most of the PBM provisions that were included in the May 2025 House-passed bill and includes: delinking PBM compensation from the cost of medications for drug plans under Medicare Part D, prohibiting spread pricing in Medicaid, and ensuring accurate payments to pharmacies under Medicaid. Additionally, it includes the provision to assure pharmacy access and choice for Medicare beneficiaries, which was not included in the May 2025 House-passed bill.
• The Pharmacists Fight Back Act (H.R. 6609) and (H.R. 6610) would establish certain requirements with regard to PBMs in Medicare and Medicaid and in Federal Employee Health Benefits Plans, respectively. Plan sponsors (or PBMs acting on behalf of those sponsors) would be required to reimburse pharmacies for drugs based on pricing benchmarked to the National Average Drug Acquisition Cost (NADAC) and would be required to share a portion of rebates at the point of sale, with the remainder of the rebates being used to lower plan premiums. The legislation also prohibits PBMs from steering patients to PBM-affiliated pharmacies.

Budgetary Effects of PBM Legislation

In general, cost estimates from the Congressional Budget Office (CBO) have scored PBM provisions with relatively low savings to the federal government. CBO estimated a total federal deficit reduction of $3.2 billion over 10 years (2025-2034) attributable to the PBM provisions incorporated in the May 2025 House-passed budget reconciliation bill (which were not included in the final legislation enacted in July 2025):

• A reduction of $400 million from delinking PBM compensation from the cost of medications for drugs under Part D and establishing PBM transparency and reporting requirements

• A reduction of $261 million from prohibiting spread pricing in Medicaid
• A reduction of $2.5 billion from ensuring accurate payments to pharmacies under Medicaid

The provision to increase oversight of PBMs that work with employer group health plans was scored as part of the Lower Health Care Premiums for All Americans Act (H.R. 6703) that passed the House in December 2025. CBO estimated this provision would reduce the federal deficit by $1.9 billion over 10 years (2026-2035), with $1.8 billion in additional revenues and savings of $22 million. CBO assumes this provision would modestly reduce premiums charged in the group health insurance market, which could increase wages and therefore increase federal revenues.

CBO has not provided cost estimates for the PBM Reform Act of 2025, the PBM Price Transparency and Accountability Act, or the Pharmacists Fight Back Act. The provision to assure pharmacy access and choice for Medicare beneficiaries is not reflected in any of the cost estimates above. It is also possible that the effects of the Medicaid spending reductions in the budget reconciliation law will impact estimates of savings from the Medicaid PBM provisions. The law is expected to result in fewer Medicaid enrollees, which could lower Medicaid drug spending and translate to lower savings from Medicaid PBM provisions.