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.

The 2025 reconciliation law could have major implications for nearly 15,000 federally certified nursing facilities and the more than 1.2 million people living in them. Nursing facilities provide medical and personal care services for older adults and people with disabilities. In 2023, Medicaid paid for 44% of long-term institutional care costs; 37% of long-term institutional care costs were paid for out-of-pocket; and the remaining 18% was covered by other public and private payers. Although provisions in the reconciliation law do not directly limit or reduce nursing facility services, changes to the Medicaid program could result in reduced payments from Medicaid for nursing facility care and may result in fewer people having Medicaid coverage of nursing facility care (see Box 1 for more on the 2025 reconciliation law.)

This data note discusses the impact of the 2025 reconciliation law on nursing facilities and examines the characteristics of nursing facilities and the people living in them with data from Nursing Home Compare, a publicly available dataset that provides a snapshot of information on quality of care in each nursing facility, and CASPER (Certification and Survey Provider Enhanced Reports), a dataset that includes detailed metrics collected by surveyors during nursing facility inspections. State-level data are also available on State Health Facts, KFF’s data repository with downloadable health indicators. Key takeaways from July 2025 data include:

• There are 14,742 nursing facilities certified by CMS and about 1.24 million residents living in these certified nursing facilities (Figure 1).
• Nursing facility residents receive, on average, about 3.85 hours of nursing care per day from licensed practical nurses (LPN/LVN), registered nurses (RNs), and nurse aides (Figure 2).
• On average, nursing facilities receive 9.5 deficiencies over the course of a survey cycle (Figure 3).
• While nearly all facilities receive at least one deficiency over the course of a survey cycle, 27% of facilities receive serious deficiencies for actual harm or jeopardy posed to a resident (Figure 3).

As of July 2025, there are 14,742 nursing facilities certified by CMS (Figure 1). The number of nursing facilities certified by CMS decreased by 6% between July 2015 and July 2025. There has generally been a steady decline during that time period. In order to receive payment under the Medicare and/or Medicaid programs, nursing facilities are required to follow certain regulations and be certified by CMS. The decreased number of nursing facilities reflects the net change in the number of certified facilities after accounting for newly-certified facilities and facilities that are no longer certified, including facilities that closed.

There are about 1.24 million residents living in certified nursing facilities (Figure 1). Since 2021, the number of nursing facility residents has gradually increased from 1.10 million to 1.24 million. However, between 2015 and 2025, the number of residents living in nursing facilities decreased by 9%, with most of that coming from a steep decline between 2020 and 2021, reflecting the effects of the COVID-19 pandemic. Prior to the pandemic, the number of residents was relatively steady, although it declined from 1.37 million in 2015 to 1.32 million in 2020. COVID-19 exacerbated the decrease in nursing facility residents—in part because nursing facility residents and staff incurred so many deaths during the pandemic.

Residents receive an average of 3.85 hours of nursing care per day, including 0.87 hours of LPN care, 0.68 hours of RN care, and 2.3 hours of nurse aide care (Figure 2). While staffing levels have gradually slightly increased overtime since 2022, the average hours of nursing care that nursing facility residents received declined by 7%, from 4.13 hours to 3.85 hours per resident each day, between July 2015 and July 2025. The decrease was driven by a 19% decline in registered nurse (RN) hours and a 7% decline in nurse aide hours. Licensed practical nurse (LPN) hours increased by 5% in this same time period. The 2024 rule would have required nursing facilities to meet minimum standards in staff hours for RNs and nurse aides but did not include any requirements for LPNs. A Texas judge overturned key elements of the rule in April 2025, the 2025 reconciliation law delayed all provisions of the rule until October 2034 (Box 1), and the Trump Administration rescinded the rule in December 2025. Previous KFF analysis show that just 19% of nursing facilities met the standards at the time of the rule’s passing.

The total hours of nursing care per resident decreased between 2015 and 2025, but rose briefly in 2021. The relatively higher staffing hours per resident in 2021 reflected the fact that the number of residents declined more quickly than the number of total nursing staff hours did between 2020 and 2021. In 2021, the number of staffing hours was 12% lower than in 2020 (data not shown). These lower staffing levels in the last several years align with data as of March 2024 showing that the number of workers employed at long-term care facilities continues to remain below pre-pandemic levels.

Nursing facilities receive an average of 9.5 deficiencies over the course of a survey cycle and 27% of facilities receive deficiencies for actual harm or jeopardy (Figure 3, Box 3). While nearly all facilities receive at least one deficiency during a survey cycle, this analysis focuses on the share with serious deficiencies since there is wide variation in the types of deficiencies a facility may receive. Both the average number of deficiencies and the share of facilities with serious deficiencies have increased over time, which could reflect increased oversight and low staffing levels that lead to staffing-related deficiencies. Between 2015 and 2025, the average count of deficiencies per nursing facility increased from 6.8 to 9.5, an increase of 40%. The increase was generally steady overtime, except for two stable periods: 1) between 2020 and 2022 and 2) between 2024 and 2025 (though 2024 and 2025 reported the highest number deficiencies during the 10-year period). The share of facilities reporting serious deficiencies between 2015 and 2025 increased from 17% to 27%, with a slight decrease between 2024 and 2025. A 2023 report on nursing home staffing by Abt Associates found that better-staffed nursing homes are typically cited for fewer deficiencies or violations of federal regulations, suggesting there may be a relationship between the increase in deficiencies and the general decrease in staffing levels over the 10-year time period.

Medicaid is the primary payer for 63% of nursing facility residents; Medicare for 14% of residents; and the remaining 23% of residents have another primary payer (ex. out-of-pocket) (Figure 4). The share of residents by primary payer has stayed relatively stable over time. Medicare does not generally cover long-term care but does cover up to 100 days of skilled nursing facility care following a qualifying hospital stay. KFF polling shows that four in ten adults overall incorrectly believe that Medicare is the primary source of insurance coverage for low-income people who need nursing facility care. 

Nearly three-quarters (73%) of nursing facilities are for-profit, one-fifth (20%) are non-profit, and the remaining seven percent are government-owned (Figure 5). The share of facilities by ownership type has also stayed relatively stable over time but there was increasing scrutiny over the 73% of facilities that are for-profit during the prior Administration. Despite little change in the type of ownership, there have been reports of private equity firms purchasing nursing facilities and changing operations to increase profits, resulting in lower-quality care. The GAO estimates that about 5% of nursing facilities had private equity ownership in 2022.

The Biden Administration issued a final rule in November 2023 on nursing facilities (separate from the April 2024 staffing rule that was delayed by the 2025 reconciliation law and then rescinded by the Trump Administration in December 2025). The 2023 nursing facility rule requires nursing homes enrolled in Medicare or Medicaid to disclose detailed information regarding their owners, operators, and management, including:

• Anyone who exercises any financial control over the facility;
• Anyone who leases or subleases property to the facility, including anyone who owns 5% or more of the total value of the property; and
• Anyone who provides administrative services, clinical consulting services, accounting or financial services, policies or procedures on operations, or cash management services for the facilities.

Facilities must also disclose whether any of the owning or managing entities are a private equity company or real estate investment trust (REIT). Facilities began self-reporting this data to CMS in early 2024 and the data is now available to the public. However, these data may be incomplete for now as fewer than 100 facilities report private equity ownership and just over 300 facilities report REIT ownership. Other research estimates those counts to be higher. 

The Trump administration has made several recent changes to federal routine vaccination recommendations. Specifically, under the auspices of Secretary Kennedy, who has long questioned the safety and efficacy of vaccines and stated his intention to review vaccine schedules, the CDC’s Advisory Committee on Immunization Practices (ACIP) has recommended changes (including to age group, type of vaccine, and/or clinical decision-making process) to seven vaccine usage recommendations in the United States: Meningococcal; RSV for adults; RSV for children; influenza; COVID-19; Measles, Mumps, Rubella and Varicella (MMRV); and Hepatitis B. These recommendations, which have been adopted by the HHS Secretary or Acting CDC Director, have raised questions about the implications for insurance coverage, since most insurers are required to cover ACIP/CDC recommended vaccines at no-cost, either due to requirements of the Affordable Care Act or other federal statutes.

Below, we provide an overview of each of these changes and what they mean for coverage requirements. As the table indicates, of the seven recent changes, two have no implications for coverage, two removed the coverage requirement, and three expanded the requirement. When a coverage requirement is removed, an insurer could still choose to cover a vaccine at no cost. In fact, AHIP, the trade association for the health insurance industry whose members cover more than 200 million Americans, announced that health plans will continue to cover all ACIP-recommended immunizations that were recommended as of September 1, 2025 with no cost-sharing for patients through the end of 2026. When a coverage requirement is expanded, insurers (with limited exception) must cover the vaccine at no-cost. The insurance requirement extends to vaccines with “individual decision-making” (also known as “shared clinical decision-making”) recommendations as well, which are those “individually based and informed by a decision process between the health care provider and the patient or parent/guardian”.

In addition to federal requirements for coverage, states have the authority to require state-regulated health insurers (employer plans that are fully insured and individual and small-group marketplace plans) to cover vaccines beyond minimum federal requirements (and not necessarily linked to current ACIP/CDC recommendations). As of December 2025, eight states have moved to do so (and one state authorizes the state Commissioner of Insurance to do so). Still, states cannot impose coverage requirements on self-insured employer plans, which cover most (67%) people with employer coverage.

Additional changes to ACIP-recommended vaccine schedules are likely, as President Trump has issued a Presidential Memorandum calling on HHS and CDC to begin a “process to align U.S. core childhood vaccine recommendations with best practices from ‘peer, developed countries’”. Beyond their implications for insurance coverage, changes to vaccine recommendations, particularly those that narrow or limit access, are likely to have other implications, such as driving down already falling vaccine coverage rates in the United States.

Changes to Vaccine Recommendations and Insurance Coverage

Notes: See KFF, ACIP, CDC, and Insurance Coverage of Vaccines in the United States, for coverage criteria by payer. *While Medicare Part B is required to cover influenza vaccine by statute, not linked to ACIP/CDC, this change will result in the removal of the multi-dose vaccine from the market.

Sources:

• https://www.cdc.gov/acip/vaccine-recommendations/index.html
• https://www.cdc.gov/acip/vaccine-recommendations/index.html#:~:text=RSV%20Vaccines%20%2D%20Adults
• https://www.hhs.gov/press-room/acip-recommends-covid19-vaccination-individual-decision-making.html 
• https://www.hhs.gov/press-room/thimerosal-mercury-removed-from-us-flu-vaccines-acip.html
• https://www.hhs.gov/press-room/cdc-immunization-schedule-individual-decision-covid19-standalone-chickenpox-toddlers.html
• https://www.hhs.gov/press-room/acip-recommends-chickenpox-vaccine-for-toddlers.html
• https://www.hhs.gov/press-room/acip-recommends-individual-based-decision-making-hepatitis-b-vaccine-birth-dose-infants-born-women-test-negative-virus.html
• https://www.hhs.gov/press-room/cdc-adopts-individual-based-decision-making-for-hepatitis-b-immunization-for-infants-born-to-women-who-test-negative-for-the-hepatitis-b-virus.html