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From the President’s Desk: Reading the Signals in Health Policy

By Jim Scott, President and CEO

Prescription medicines, which account for roughly 9 percent of the nearly $5 trillion the United States spends on healthcare each year, have long drawn bipartisan scrutiny. As we have previously reported, the Trump administration has embraced a deal-driven approach with drug manufacturers, using most-favored-nation pricing as a benchmark and pressing companies to offer steeper discounts. At the same time, reforms set in motion under the Biden-era Inflation Reduction Act are beginning to take effect.

One challenge persists across drug pricing strategies: how to reduce costs without discouraging innovation. In this month’s issue of Insight, Health Policy Manager Emma Hammer explores the interaction, implications, and future trajectory of the Medicare Drug Price Negotiation Program, MFN, and TrumpRx.

Also in this issue, Health Policy Associate Annie Tuttle looks closely at the ACCESS Model, a new initiative from the CMS Innovation Center (CMMI) that tests outcome-aligned payments and care strategies for chronic conditions. She situates ACCESS within the broader effort to modernize Medicare, examining how the model could reshape chronic care through technology-enabled, results-driven approaches.

We are also pleased to share our response to a CMS request for information on modernizing Medicare Advantage. In our comment letter, we outline opportunities to improve risk identification and care targeting by integrating existing federal data in a privacy-conscious, evidence-based manner.

As this issue goes to press amid a partial government shutdown, many issues remain unresolved. We are providing an update on the implications for the healthcare sector and will continue to track developments as Congress and the Administration work to resolve the current impasse.

Winter Drug Pricing Recap: Where We Stand and What Comes Next

By Emma Hammer, Health Policy Manager

Recent drug pricing deals and CMS initiatives reflect an active policy agenda, though many details have yet to be clarified.

Although we are less than halfway through winter, we have already seen significant activity in drug pricing. In this article, we review key developments from recent months and consider where further action is likely in 2026.

Since last summer, President Trump has announced deals with 16 of the 17 drug manufacturers to whom he sent letters directing voluntary alignment of U.S. prices with those paid in other countries. AbbVie and Johnson & Johnson were the most recent companies to announce agreements, following a series of individual deals reached throughout the fall and a White House announcement on December 19 involving nine manufacturers. Under their agreements, AbbVie and Johnson & Johnson will participate in selling drugs through TrumpRx, offer Medicaid pricing comparable to international benchmarks, and invest in U.S. manufacturing. While specific terms have not been disclosed, company press releases suggest the agreements include exemptions from certain U.S. tariffs.

As with earlier announcements, the agreements between the White House and drug manufacturers are generally confidential.

President Trump has also called on Congress to codify these arrangements as part of his Great Healthcare Plan. However, details remain limited, and any statutory provisions would likely require subsequent regulatory implementation. Tariff exemptions, in particular, would also require coordination with the Department of Commerce.

Applied Policy Submits Comment Letter on Modernizing Medicare Advantage

In comments to CMS, Applied Policy outlines how responsibly integrating existing federal data could improve payment accuracy, care targeting, and outcomes in Medicare Advantage.

In its response to a recent CMS request for information on modernizing the Medicare Advantage (MA) program, Applied Policy encouraged the agency to explore new approaches to responsibly combining data across federal agencies to improve risk identification, payment accuracy, and care targeting.

Applied Policy President and CEO Jim Scott notes that current MA and CMS Innovation Center models rely largely on retrospective claims and clinical data, which often identify risk only after disease progression or an acute medical event has occurred. In the comment letter, he suggests that incorporating selected social and economic risk indicators—many of which are already collected by other federal agencies—could support more predictive, proactive models of care.

"We recommend that CMMI consider launching a targeted model test: the Predictive Resource Alignment Model," writes Scott. "This model would assess whether incorporating cross-agency social risk indicators into benchmark calibration and care management targeting improves clinical outcomes and reduces total cost of care for MA or ACO populations."

The letter highlights limitations of the current Hierarchical Condition Categories (HCC) risk adjustment model, noting that while it captures costs associated with established disease, it does not reflect upstream factors that influence beneficiaries’ ability to manage chronic conditions. As a result, care management efforts are often deployed only after avoidable deterioration has already occurred.

In alignment with broader federal efforts to improve outcomes, accountability, and value in Medicare Advantage, Applied Policy urged CMS’s Innovation Center to test alternative data use and modeling approaches that rely on de-identified, geographically based risk indicators rather than individual-level non-CMS data.

Applied Policy also emphasized the importance of transparency and independent evaluation, noting that existing legal authorities provide a foundation for responsible cross-agency data use and testing.

“Modernizing risk identification doesn’t require reinventing Medicare Advantage,” said Brittany La Couture, Vice President for Health Policy at Applied Policy. “It can be achieved by using existing data more effectively to understand variation in outcomes and target resources where they can have the greatest impact.”

With ACCESS Model, CMS Rethinks Chronic Disease and Medicare Spending

By Annie Tuttle, Health Policy Associate

CMS’s new ACCESS Model explores whether Medicare can reward measurable improvement in chronic care while preserving provider flexibility.

When CMMI announced the Advancing Chronic Care with Effective, Scalable Solutions (ACCESS) Model in December, the framing echoed the aspirations of all its models: better patient outcomes and lower Medicare costs. Yet beneath that familiar framing, ACCESS signals something more distinct. The model is designed to test whether Medicare can pay for technology-enabled chronic care while allowing providers flexibility in how care is delivered.

The significance of ACCESS lies in how CMS proposes to pursue those goals. Rather than layering additional billing codes onto fee-for-service Medicare, the model introduces an outcome-aligned payment methodology designed to support technology-enabled chronic care across a defined set of conditions rather than dictating provider activities.

Healthcare Groups Ask CMS for Guidance on Anti-Violence Signage

Hospitals want clearer rules on how to deter violence in emergency departments without running afoul of EMTALA.

On January 20, the American Hospital Association joined nine other organizations—including the National Rural Health Association, the American Medical Group Association, and the American Nurses Association—in urging CMS to issue clear guidance on the use of signage meant to discourage threats and acts of violence against healthcare workers in emergency departments, while remaining consistent with the Emergency Medical Treatment and Labor Act (EMTALA).

Federal workplace safety agencies have long recognized that healthcare workers—like law enforcement officials and workers who handle cash transactions—are at elevated risk of workplace violence. That risk has recently been poignantly reflected in popular medical dramas, including HBO’s The Pitt.

What such portrayals do not fully convey is how little formal guidance exists for hospitals confronting these situations in real life. While The Pitt’s characters move decisively through an emergency department marked by signs declaring that “Aggressive Behavior Will Not Be Tolerated,” real-world hospitals must navigate a maze of overlapping and sometimes unclear federal regulations.

NVHPF Considers What's Next for Medicaid

By Annie Tuttle, Health Policy Associate

On January 27, the Northern Virginia Health Policy Forum convened What’s Next for Medicaid, a discussion on how recent federal legislation and fiscal pressures are reshaping the cornerstone of the nation’s healthcare safety-net program. Moderated by Jim Scott, President and CEO of Applied Policy, the conversation featured Verlon Johnson, Executive Vice President and Government & Corporate Affairs Chief at Acentra Health and Chair of the Medicaid and CHIP Payment and Access Commission, and Cheryl Powell, Vice President for Health Policy at Applied Policy.

The discussion explored several key provisions of the One Big Beautiful Bill, including the new Rural Health Transformation Program, work and community engagement requirements, and changes to Medicaid financing and provider taxes. The conversation pointed to implementation as the central challenge: how states use new flexibility, whether administrative systems protect continuity of coverage, and how financing changes affect safety-net and rural providers. Johnson and Powell suggested that 2026 will be a year of planning and system design, with more tangible effects on providers and beneficiaries likely to emerge in 2027.

A recording of the event is available below.

Verlon Johnson participated in the discussion in her personal capacity and not on behalf of MACPAC.

What the Partial Government Shutdown Means for Healthcare

Applied Policy will continue to closely monitor and share updates with clients as additional information becomes available.

CMS Finalizes Rule Closing Medicaid Health Care–Related Tax Loophole

By Meghan Basler, Senior Health Policy Associate

On January 29, CMS issued a final rule titled, “Preserving Medicaid Funding for Vulnerable Populations – Closing a Health Care-Related Tax Loophole Final Rule.”

The rule will become effective on April 3, 2026.

In this final rule, CMS finalizes changes to the Medicaid health care-related tax regulations to clarify and strengthen the standards for determining whether a tax is “generally redistributive,” as required under section 1903(w) of the Social Security Act. The rule is intended to ensure that state health care-related taxes used to finance the non-Federal share of Medicaid do not disproportionately burden Medicaid providers or plans.

The rule prohibits higher tax rates on Medicaid businesses by addressing a mathematical loophole in the applicable statistical test which was designed to ensure that waiver approved non-uniform and non-broad-based health care-related taxes are generally redistributive. It also bars the use of vague language or complex design as an attempt to obfuscate the impact of the tax on Medicaid. Finally, the rule incorporates statutory requirements of Public Law 119-21, enacted on July 4, 2025, which included provisions previously proposed in regulation and allowed for a transition period for states to bring existing tax structures into compliance with these requirements.

CMS Proposes Overall 0.09 Percent Increase in MA Plan Payments and Risk Adjustment Updates For 2027

By Caitlyn Bernard Shreve, Senior Health Policy Associate

On January 26, CMS released the Calendar Year (CY) 2027 Advance Notice of Methodological Changes for Medicare Advantage Capitation Rates and Part C and Part D Payment Policies, which makes proposals to update program policies for MA and Part D beginning in 2027.

CMS proposes:

• Updates to the CMS-Hierarchical Conditions Categories (HCC) risk adjustment model, including exclusions for diagnoses from audio-only encounters and unlinked Chart Review Records (CRRs)
• Continued transition to the CMS-HCC risk adjustment model for Program of All-Inclusive Care for the Elderly (PACE) organizations
• Continued use of the End-Stage Renal Disease (ESRD) risk adjustment model
• Updates to the frailty adjustment for Fully Integrated Dually Eligible (FIDE) Special Needs Plans (SNPs) 
• Updates to Star Ratings, including requests for feedback on new quality concepts
• Updates to the Part D risk adjustment (RxHCC) model reflecting Inflation Reduction Act (IRA)-related changes, separate MA-PD and Prescription Drug Plan (PDP) segments, and exclusions of audio-only diagnoses and unlinked CRRs

Overall, if these proposals are finalized, CMS anticipates a 0.09 percent, or over $700 million, increase in MA plan payments from 2026 to 2027.

Public comments on the Advance Notice must be submitted by 11:59 PM Eastern Time on Wednesday, February 25, 2026.

MedPAC Advances Key Payment Recommendations

By Hugh O'Connor, Health Policy Associate

At its January 15–16 meeting, the Medicare Payment Advisory Commission (MedPAC) advanced a series of recommendations and analyses that could help shape Medicare payment policy ahead of the 2027 update cycle. Building on work from its December meeting, the Commission voted on payment adequacy recommendations for physicians, hospitals, and post-acute providers, and reviewed mandated reports and status updates across Medicare Part D, Medicare Advantage, ambulatory surgical centers, and dual-eligible special needs plans.

Across sessions, commissioners found that beneficiary access remains generally strong, while recognizing ongoing challenges related to margins, quality measurement, and payment accuracy. The meeting featured recommendations for modest increases to physician payments, reductions or the elimination of updates for several post-acute care settings, continued scrutiny of hospital payment policy, and in-depth discussion of recent policy changes affecting Part D and Medicare Advantage.

Cora Palomar-Nelson Joins Spring Intern Class

Cora previously completed a public health internship with the Massachusetts Department of Public Health’s Division of Epidemiology and has held research roles with the Alliance for Citizen Engagement. She has also supported strategic communications and organizational advancement at the Community Health Center of Cape Cod and served as a Department Manager and Climate Action Fellow at Seaside Sustainability.

At Georgetown, Cora is active with Project RISHI, a student-run nonprofit focused on improving rural health access in India. She also directs Chicas for Change, a chapter-based nonprofit dedicated to advancing female empowerment, gender justice, and menstrual equity for middle and high school students in Massachusetts.

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

• HHS Notice of Benefit and Payment Parameters for 2027
• Amending the Indirect Hold Harmless Threshold of Health Care-Related Taxes
• Administrative Simplification: Adoption of Standards for Health Care Attachment Transactions and Electronic Signatures
• Interoperability Standards and Prior Authorization for Drugs
• Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH)
• Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals; the Long-Term Care Hospital Prospective Payment System; and FY 2027 Rates
• Independent Dispute Resolution Operations

See all rules under OMB review here.

Nominations Solicited for MEDCAC Appointments

On January 14, CMS published a notice seeking nominations for membership on the Medicare Evidence Development & Coverage Advisory Committee (MEDCAC), which provides advice to the Department of Health and Human Services and CMS on the adequacy of scientific evidence used in Medicare coverage determinations. Nominations must be received by February 17, 2026. CMS indicated particular interest in candidates with expertise in clinical medicine, epidemiology and biostatistics, health disparities, clinical trial design, geriatrics, patient advocacy, and health economics, as well as in specialty areas such as cancer screening, genetic testing, dementia treatment, and women’s health.

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

On January 29, President Trump issued an executive order launching the Great American Recovery Initiative, a new White House–led effort to coordinate the federal response to substance use disorder. Framing addiction as a chronic, treatable disease with wide-ranging economic and social consequences, the order emphasizes the gap between the number of Americans who need treatment and those who receive it, and calls for a more unified, evidence-based national approach to treatment and recovery. The initiative is intended to complement the Administration’s drug-interdiction efforts by prioritizing treatment, recovery support, and public awareness.

Feb. 10-12: NRHA Rural Health Policy Institute

Feb. 19: ASTP Health IT Advisory Committee

Feb. 23: FDA Rare Disease Day

Feb. 24: State of the Union Address

Feb. 25: CMS Burden Reduction Conference

March 2-3: MedPAC Public Meeting

March 2-4: MedTrade

Why can't you lie to a cardiologist?

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