Were you forwarded this email? Click here to subscribe

From the President's Desk: Leveraging Expertise in Policy Analysis

By Jim Scott, President and CEO

Bill Rogers, our Chief Medical Officer, draws on more than four decades of clinical practice and 14 years at the Centers for Medicare & Medicaid Services (CMS) in his examination of the agency’s current efforts to manage spending on skin substitutes in traditional Medicare.

Simay Okyay McNutt, Senior Health Policy Manager and a longstanding member of our Medical Devices team, summarizes CMS's final rule establishing a remote competitive bidding program in DMEPOS and outlines stakeholder reaction to this much-debated policy shift.

Senior Health Policy Associate Caitlyn Bernard Shreve analyzes the GENEROUS Model, through which the Trump Administration will introduce MFN pricing into Medicaid. As noted in our summary of November’s Northern Virginia Health Policy Forum, CMS's Dr. Inma Hernandez identified this as a pillar of drug-pricing reform.

We are also happy to debut a refined structure for our regulatory summaries. In our reviews of the DMEPOS, OPPS/ASC, ESRD, and CY 2026 Home Health PPS final rules, it is now easier to identify which provisions were finalized as proposed and which were finalized with modification. We believe this will allow for more efficient review as the rulemaking calendar accelerates.

Beyond being thankful for our team, I am grateful to the clients and readers who have supported our work throughout the year. I wish you good health and a restful holiday season as we look ahead to another busy year.

Skin Substitute Use in Medicare:

Trends, Challenges, and CMS’s Policy Response

By William Rogers, M.D., FACEP, CMO

The Calendar Year (CY) 2026 Medicare Physician Fee Schedule final rule includes a restructured payment approach for skin substitutes in the non-facility setting. CMS cited steep growth in Medicare spending for these products as the impetus for this reform. This analysis explores both the underlying spending trends and the changes the agency has finalized.

There are currently more than 75 skin substitute products on the market. Although some offer limited or variable evidence of clinical efficacy, their use accounted for more than 15 percent of total Medicare Part B drug spending in 2024. Between 2019 and 2024, annual Medicare Part B expenditures on these products grew from $256 million to more than $10 billion—a nearly forty-fold increase.

Three factors contributed to this growth in spending: an increase in the number of beneficiaries undergoing treatment with a skin substitute, an increase in the quantity of product used per patient, and an increase in the cost per unit.

Notably, similar increases have not been observed in the Medicare Advantage (MA) program. The Department of Health and Human Services Office of Inspector General found that in the third quarter of 2024, total spending for skin substitutes in MA was $192 million—about 7 percent of the $2.9 billion spent under traditional Medicare during the same period. This contrast is particularly striking given that more than half of all Medicare beneficiaries are now enrolled in MA plans.

Administration Pursues MFN Pricing Through GENEROUS Model

By Caitlyn Bernard Shreve, Senior Health Policy Associate

In unveiling the GENErating cost Reductions fOr U.S. Medicaid (GENEROUS) Model on November 6, the Trump Administration illustrated how it will use federal authority to advance “most-favored-nation” (MFN) pricing as a strategy to reduce drug costs. By channeling the model through CMS’s Center for Medicare & Medicaid Innovation and structuring it as a voluntary demonstration, the Administration also signaled an appreciation for policy lessons learned during President Trump’s first term.

GENEROUS is not the broad, mandatory application of MFN pricing that some anticipated based on the Administration’s prior rhetoric. However, as a deliberately designed and legally insulated experiment based on voluntary participation, it could be an appropriate platform for demonstrating the potential of MFN.

The announcement of the GENEROUS Model followed months of escalating White House rhetoric on drug pricing. This included the April executive order (EO) Lowering Drug Prices by Once Again Putting Americans First and a May EO in which President Trump warned that drug manufacturers who failed to offer Americans MFN lowest prices would face “additional aggressive action.”

Stakeholders Have Questions as CMS Finalizes RID CBP

By Simay Okyay McNutt, Senior Health Policy Manager

When CMS released the CY 2026 Home Health Prospective Payment System and DMEPOS Competitive Bidding Program final rule on November 28, 2025 (summarized here), it largely mirrored the proposed rule issued in July. This was despite the fact that, as we noted in September, CMS received a significant number of comments on the proposal, many expressing concern about the establishment of a Remote Item Delivery Competitive Bidding Program (RID CBP) for new product categories.

As finalized, the rule will create a nationwide RID CBP or several large regional RID CBPs for new product categories, including all continuous glucose monitors (CGMs) and insulin infusion pumps, urological supplies, ostomy supplies, and off-the-shelf braces. Interestingly, CMS also listed hydrophilic urinary catheters as a category, separate from urological supplies, in its fact sheet. New codes for hydrophilic urinary catheters will go into effect on January 1, 2026, distinguishing them from existing intermittent urinary catheters.

CMS also finalized recategorization of CGMs and insulin pumps under the frequent and substantial servicing category, which represents a substantial shift from how these items have been covered and paid under the durable medical equipment program. The recategorization eliminates beneficiary ownership of CGMs and insulin pumps for new patients and shifts payment for these devices, associated supplies, and accessories to a monthly rental model.

On the evening of Tuesday, December 9, HME News reported that the next round of CBP would be limited to the product categories selected for RID CBP, rather than including traditional CBP categories such as CPAP machines and enteral nutrition. While CMS has not issued an official clarification, its minor update to the fact sheet suggests that the next round will include only the listed product categories.

Many stakeholders have expressed disappointment that the comments submitted in response to the proposed rule did not shift CMS policy. Almost all continue to have questions about implementation.

A Year of Insight: Highlights from 2025

By John Voorhees, COO

Applied Policy Insight covered a range of health policy issues in 2025.

Long before they made headlines in mainstream media, we provided backgrounders on such topics as the president’s authority to remove federal employees, visa policy for physicians and healthcare workers, the Advisory Committee on Immunization Practices, and the budget reconciliation process.

We also supplied context for several evolving issues, including tariff policy as it relates to pharmaceutical and device supply chains, state-directed payments in Medicaid financing, and significant shifts in federal AI policy.

Over the course of the year, we examined the paradoxical incentives in the Medicare Access and CHIP Reauthorization Act of 2015; summarized critical CMS rulemaking, from updates to home health payments to the establishment of the RID CBP for DMEPOS; tracked the status of telehealth policy; and reported on MedPAC and MACPAC meetings. When the nation entered the longest government shutdown in history, we focused on helping subscribers understand its operational and policy effects across CMS and other Health and Human Services agencies.

We have also seen our executive order tracker, which began as a companion to a story on how EOs have shaped health IT, become a convenient reference point for readers seeking a single place to review White House directives relevant to healthcare.

Thank you for reading and for trusting us to bring clarity to a fast-moving policy environment. We look forward to continuing that work in 2026.

Updates on Federal Rulemaking

CY 2026 Home Health Rule Finalizes Smaller Permanent Adjustment and Sets One-Year Temporary 3.0% Rate Reduction

By Meghan Basler, Senior Health Policy Associate

On November 28, 2025, CMS released the CY 2026 Home Health Prospective Payment System final rule for home health agencies (HHAs).

The rule updates Medicare home health payment rates for CY 2026 and includes behavioral adjustments, recalibration of case-mix weights, and changes to low-utilization payment adjustment (LUPA) thresholds. It also updates requirements for the face-to-face encounter policy, the Home Health Quality Reporting Program (HH QRP), and the expanded Home Health Value-Based Purchasing (HHVBP) Model, as well as technical updates to conditions of participation for home health agencies.

CMS Finalizes Rule on Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Competitive Bidding Program Without Major Changes

By Simay Okyay McNutt, Senior Health Policy Manager

On November 28, 2025, CMS released the CY 2026 Home Health Prospective Payment System and DMEPOS Competitive Bidding Program (CBP) final rule.

CMS finalizes the following provisions:

• Create a new remote item delivery competitive bidding program
• Reclassify continuous glucose monitors and insulin pumps to the frequent and substantial servicing payment category
• Establish new methodology for determining single payment amounts for lead items in a competitive bid product category
• Update certain CBP bid processes
• Add new items to CBP, including urological and ostomy supplies
• Update DMEPOS provider enrollment
• Update DMEPOS supplier accreditation process
• Establish a process to exempt DMEPOS suppliers from prior authorization of certain DMEPOS

In the fact sheet for the rule, CMS announces a goal timeline for the implementation of the new CBP as no later than January 1, 2028. CMS also states that there will be a 6-month transition period for beneficiaries to switch suppliers.

CMS Finalizes 2.2% Payment Increase for ESRD Facilities in CY 2026 

By Emma Hammer, Health Policy Manager

On November 20, 2025, CMS issued the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) final rule for calendar year CY 2026. This rule finalizes proposals to:

• Increase ESRD payment rates by 2.2 percent
• Update transitional drug add-on payment adjustment (TDAPA) policies, including applying the TDAPA to two new drugs and continuing it for six drugs
• Establish a new non-contiguous area payment adjustment (NAPA) for ESRD facilities in some non-contiguous states and territories
• Update the transitional add-on payment adjustment for new and innovative equipment and supplies (TPNIES)
• End the ESRD Treatment Choices Model (ETC) early, on December 31, 2025
• Make updates to the ESRD Quality Incentive Program (QIP), including updates to performance standards and quality measures

CMS also sought feedback on ESRD facilities’ use of health information technology and potential measure concepts for future years.

CMS Finalizes 2.6% OPPS/ASC Increase, Declines 340B Offset Acceleration, and Launches IPO Phase-Out

By Meghan Basler, Senior Health Policy Associate

On November 21, 2025, CMS issued the CY 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Final Rule, which updates the Medicare OPPS and ASC payment system for CY 2026.

Key policy updates include:

• A 2.6% payment rate increase for hospital outpatient departments and ASCs
• 340B Remedy: Implements the previously finalized 0.5% annual reduction to the OPPS conversion factor
• A national survey on drug acquisition costs to inform CY 2027 drug payment policy
• Transition to market-based MS-DRG weights using payer-negotiated charge data
• Community Mental Health Center payments stabilized with a 40% adjuster; maintains hospital-based rates for Partial Hospitalization Programs and Intensive Outpatient Programs
• Updated and streamlined quality reporting programs
• Phase-out of the Inpatient Only (IPO) list by 2029

On May 9, 2024, the Department of Health and Human Services (HHS) Office for Civil Rights published a final rule, Nondiscrimination on the Basis of Disability in Programs or Activities Receiving Federal Financial Assistance. 

While the rule was undertaken to update and clarify HHS’s implementation of Section 504 of the Rehabilitation Act of 1973, many stakeholders still have questions about the scope of the protections and the obligations of entities that receive federal funding.

Join the Northern Virginia Health Policy Forum on December 11 as we welcome Lauren Erickson of the Institute of Exceptional Care, who will provide an overview of the final rule and discuss how the updated Section 504 regulations apply within healthcare settings. The session will offer attendees an opportunity to gain a clearer understanding of the rule’s provisions and consider what compliance may mean for their organizations.

This is a virtual event.

Senior CMS Advisor Shares Insights on Federal Drug-Pricing Policy

In November, the Northern Virginia Health Policy Forum welcomed Dr. Inmaculada (“Inma”) Hernandez, Senior Advisor to the CMS Administrator for Drug Prices. CMS Administrator Mehmet Oz recently recognized Hernandez—who is currently on leave from the University of California San Diego’s Skaggs School of Pharmacy and Pharmaceutical Sciences—for her work in securing GLP-1 pricing agreements.

In conversation with Applied Policy President and CEO Jim Scott, Hernandez outlined the two major tracks shaping federal drug-pricing policy: the Inflation Reduction Act negotiation program and the Administration’s new Most Favored Nation framework.

A recording of the event is available below. Download a written summary here.

Welcome to Our Newest Interns

We are pleased to welcome Jasmine Garner and Crystal Uba to the Applied Policy internship program.

Jasmine recently earned her MPH with an emphasis in health policy and management from the University of Georgia. She has previously interned with a regional hospital, a science advocacy organization, and on Capitol Hill. As a Congressional intern, she tracked policy developments across the FDA and CMS to support legislative research and assess implications for constituent priorities. With a long-term goal of improving health equity, Jasmine envisions a future role in consulting, project management, or policy analysis.

Crystal holds a master’s degree in bioinformatics and molecular biochemistry from The George Washington University, where she also completed her bachelor’s degree in neuroscience. Before joining us, she completed an internship at AstraZeneca and worked at CMS under the agency’s Pathways Program. She is currently drawn to opportunities at the intersection of healthcare and technology and is considering future roles in medical informatics, market access, or other related fields.

COO John Voorhees said he was not surprised that, when asked about their first days at Applied Policy, both Jasmine and Crystal remarked on the strength of the team and on the value of being introduced to the tightly connected community of health policy professionals in the Washington, DC, region.

“Offering meaningful exposure to that network has always been a hallmark of our internship program,” said Voorhees. “It is one reason we continue to attract such qualified applicants for a limited number of slots. With graduate degrees and prior experience, both Crystal and Jasmine might have pursued regular positions elsewhere, but they recognized the benefit of beginning their policy careers with a program that provides mentorship and introductions. We are delighted to have them on board.”

Applied Policy is following these rules under review at the Office of Management and Budget:

• Medicaid Program; Prohibition on Federal Medicaid Funding for Sex Trait Modification Procedures Furnished to Children and Youth
• Medicare and Medicaid Programs; Hospital Condition of Participation: Limiting Participation Based on the Performance of Sex Trait Modification Procedures on Children
• Center for Medicare & Medicaid Innovation Payment Models
• Transparency in Coverage
• Amendments to Rules Governing Organ Procurement Organizations
• Ensuring Safety through Domestic Security with Made in America Personal Protective Equipment (PPE) and Essential Medicine Procurement by Medicare Providers and Suppliers
• Health Data, Technology, and Interoperability: ASTP/ONC Deregulatory Actions to Unleash Prosperity
• Global Benchmark for Efficient Drug Pricing (GLOBE) Model
• Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Model
• HHS Notice of Benefit and Payment Parameters for 2027
• Preserving Medicaid Funding for Vulnerable Populations – Closing a Health Care-Related Tax Loophole
• Advance Notice of Methodological Changes for Calendar Year (CY) 2027 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies

See all rules under OMB review here.

Applied Policy continues to track executive orders that could impact healthcare and health policy. Access our regularly updated page below.

December 11: MACPAC Public Meeting

December 11: Senate HELP Committee: Examining the Future of the U.S. Organ Procurement and Transplantation Network

December 11: NVHPF Presents HHS's Section 504 Requirements

December 25-26: Applied Policy Office closed for Christmas Holiday

January 1: Applied Policy Office closed for New Year's Day

Why was Santa hesitant about having an MRI?