Weekly Health Care Policy Update – January 17, 2025

In this update: 

• Administration Update
  • HHS Leadership Team Continues to Take Shape
• Legislative Update
  • House GOP Budget Chair Floats Potential Health Care Cuts
• Federal Agencies
  • HHS Releases Report on Consolidation and Private Equity in Health Care Markets
  • DEA Releases Proposed Rule on Remote Prescribing of Controlled Substances
  • CMMI Publishes 2025 ACO Participation Fact Sheet
  • CMS Releases Proposed MA Payment Update and Draft Part D Redesign Program Instructions
  • CMS Releases 2026 Final Notice of Benefit and Payment Parameters
  • FDA Proposes Front of Package Nutrition Labeling
  • Health Centers Receive $60 Million to Expand Hours
  • CMMI Publishes Blog on Successor Pathways and Scaling Models
  • Biden Administration Rescinds Proposed Rule on OTC Contraception Coverage
  • Departments Issue FAQs on No Surprises Act
• Other Updates
  • Supreme Court Agrees to Hear Challenge to ACA Preventive Care
  • Over 17,000 Doctors Sign Letter Opposing RFK’s Nomination
  • 19 Democratic AGs Submit Amicus Brief on Non-Compete Rule
• New York State Updates
  • Governor Hochul Delivers State of the State Speech and Releases Policy Agenda
  • OMH Releases Adopts Final Regulations for PROS Redesign

Administration Update

HHS Leadership Team Continues to Take Shape
Over the past week, various news outlets have reported that President-elect Trump has selected several more individuals who will serve as senior deputies under Mehmet Oz, his pick to lead the Centers for Medicare and Medicaid Services (CMS): 

• Chris Klomp, a health care entrepreneur, is expected to oversee the $1 trillion Medicare program as director of the Center for Medicare.
• Abe Sutton, who served in the first Trump Administration, will likely lead the CMS Innovation Center.
• Stephanie Carlton, a McKinsey consultant and former GOP Senate staffer, is anticipated to take on the role of Chief of Staff.
• Drew Snyder, a former Mississippi state Medicaid director, is expected to run the Center for Medicaid and CHIP Services.

Legislative Update

House GOP Budget Chair Floats Potential Health Care Cuts
On January 10^th, Republicans on the House Budget Committee circulated a menu of $5 trillion in potential spending cuts, including significant reductions in health care funding. The document proposes $2.3 trillion in Medicaid cuts, including a shift to per-capita caps, equalizing payments for non-disabled adults with those of traditional Medicaid enrollment, work requirements for Medicaid program beneficiaries, limiting Medicaid provider taxes, and lowering the Federal Medicaid Assistance Percentage (FMAP) floor, among other ideas. The Committee also proposes $479 billion in Medicare cuts, including imposing site-neutral payments for almost all outpatient services, cutting uncompensated care, and eliminating payments for bad debt policies. Lastly, the Committee proposes $151 billion in Obamacare cuts including changes to premium tax credit and cost-sharing reductions provisions.
 
The Budget Committee document is available here.

Federal Agencies

HHS Releases Report on Consolidation and Private Equity in Health Care Markets
On January 15^th, the Department of Health and Human Services (HHS) released a report responding to a March 2024 Request for Information on the impacts of the corporate ownership trend in health care. The RFI sought comment on “how certain health care market transactions executed by health systems, private insurers, private equity funds and other private investors may increase consolidation and compromise patients’ health, quality of care, and affordability, while also threatening worker safety, satisfaction, and wages, and creating taxpayer burden.” HHS received over 2,000 comments in response to the RFI which were reviewed by an interagency team. The report synthesizes findings from the comments, highlighting key facts and lessons.

Responses to the RFI highlighted two major trends: increasing consolidation of health care markets—most pronounced in the hospital sector—and a recent influx of private equity and other private investors into healthcare services, with heavy investment in both inpatient and outpatient services, elder and disabled care, and pharmaceuticals. The report summarizes comments into five key themes: 

1. Provider consolidation leads to higher prices and less access for patients;
2. M&A in health care services, especially in PE-backed transactions, results in process changes and quality reductions;
3. Physicians that worked with PE firms offer mixed reviews;
4. There is widespread desire for transparency on PE-led transactions; and
5. People are dissatisfied with private health insurers, especially vertically integrated insurers.

The full report is available here.

DEA Releases Proposed Rule on Remote Prescribing of Controlled Substances 
On January 14^th, the Drug Enforcement Administration (DEA) released a proposed rule addressing tele-prescribing of controlled substances. The rule follows an extension of pandemic- era flexibilities through December 31, 2025, and seeks to build a longer-term structure for remote prescribing of controlled substances through a three-tiered system. The three-tiered system would subject providers to different levels of scrutiny depending on the nature of the substances they seek to prescribe: 

• The first level would apply to practitioners seeking to prescribe Schedule III, IV, and V substances.
• The second level (or “advanced special registration”) would apply to providers seeking to prescribe Schedule II substances and be available only to certain specialties like psychiatry, palliative care, and pediatrics.
• The third level is for telemedicine companies seeking to prescribe Schedule II through V controlled substances. This tier excludes hospitals, clinics, insurance providers, and local in-person medical practices, instead seeking to establish a new business activity within the DEA’s registration framework for true telehealth platforms.

Providers seeking to prescribe Schedule II medications would need to be located in the same state as the patient. Providers would also need to write at least 50% of their prescriptions for in-person visits. The rule would still require providers to be licensed by the DEA in every state where they wish to prescribe, and to check state prescription drug monitoring programs wherever a patient is located.

For individual clinicians, the registration fee would be $888 plus an additional fee of $50 per state; for telemedicine companies, the fee could be up to $40,000.

The proposed rule is available here.

CMMI Publishes 2025 ACO Participation Fact Sheet 
On January 15^th, the Center for Medicare and Medicaid Innovation (CMMI) released the 2025 CMS ACO Participation Fact Sheet, which includes participation data for traditional Medicare beneficiaries in an accountable care relationship. Overall, as of January 2025, 53.4% of traditional Medicare beneficiaries, or 14.8 million people, are in an accountable care relationship with a provider, including patients whose providers are in Accountable Care Organizations (ACOs) or other Innovation Center models focused on total cost of care, advanced primary care, or specialty care. This represents a 4.3 percentage point increase from January 2024, the largest annual increase since CMS began tracking accountable care relationships.

Over the past year, CMS also approved 228 applications for the Medicare Shared Savings Program, including 55 new ACOs and 173 renewing ACOs, bringing the total ACO number to 476 for Performance Year 2025. In addition, 103 ACOs are participating in the ACO Realizing Equity, Access, and Community Health (REACH) Model, and over 90 entities are participating in the Kidney Care Choices (KCC) Model.

The participation fact sheet is available here.

CMS Releases Proposed MA Payment Update and Draft Part D Redesign Program Instructions
On January 10^th, CMS released the Calendar Year (CY) 2026 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (the Advance Notice) and the Draft CY 2026 Part D Redesign Program Instructions (the Draft CY 2026 Program Instructions).

Overall, CMS estimates that the policies proposed in the Advance Notice will increase average payments to MA plans by 4.33%, or more than $21 billion, relative to CY 2025. Major factors driving the increase include an effective growth rate of 5.93% and an average risk score trend of 2.10%, moderated by a -3.01% adjustment due to risk model revision and fee-for-service (FFS) normalization and small reduction (-0.69%) in estimated Quality Bonus Payments under the Star Ratings program. For CY 2026, CMS calculated the risk score trend using two years of data (from 2022 and 2023), rather than three years, to reflect plan experience since the onset of the Covid-19 pandemic while avoiding noise in the data from the pandemic’s early days. These estimates do not include the impact of rebasing or repricing, which will be available upon finalization of the average geographic adjustment index in the CY 2026 Rate Announcement.
Policy proposals in the Advance Notice include: 

• CMS proposes to finalize the phase-in of the updated Part C risk adjustment model, which began in CY 2024 (the 2024 CMS-HCC risk adjustment model) by calculating 100% of risk scores using only the 2024 CMS-HCC risk adjustment model. CMS notes that pausing the phase-in and making technical adjustments to MA growth rates regarding medical education costs would result in $10.4 billion in additional payments to MA plans that are not necessary to support stability in the program. CMS further notes that its work to calibrate the risk adjustment model using MA encounter data will provide the option to begin phasing in an encounter data-based risk adjustment model as early as CY 2027.
• For Program of All-Inclusive Care for the Elderly (PACE) organizations, CMS proposes to begin phasing in the 2024 CMS-HCC risk adjustment model in CY 2026, calculating 10% of the risk score using the 2024 CMS-HCC model and 90% of the risk score using the 2017 CMS-HCC model. CMS intends to complete the transition to the 2024 CMS-HCC model for PACE organizations by CY 2029.
• As in 2025, CMS proposes policies to provide stability for MA program enrollees in Puerto Rico due to the greater proportion of people with Medicare who receive benefits through MA compared to every other state or territory.
• The Draft CY 2026 Program Instructions provide guidance on implementation of changes made to the defined standard Part D benefit by the Inflation Reduction Act (IRA). Changes for CY 2026 include the establishment of the selected drug subsidy program and proposed revisions to the simplified determination methodology for calculating actuarial equivalence of creditable coverage. In CY 2026, the defined standard Part D drug benefit will have an annual deductible of $615 and an annual out-of-pocket (OOP) spending threshold of $2,100.
• CMS proposes updates to the Star Ratings including the list of disasters eligible for adjustment, measure specification updates, and the measures included in the Part C and D Improvement measures and Categorial Adjustment Index. In addition, CMS solicits feedback on several proposals including substantive measure specification updates, new measure concepts, updates to display measures, and adding geography to the Health Equity Index Award.

​​CMS will accept comments on both the Advance Notice and the Draft CY 2026 Program Instructions through February 10^th and will finalize each by April 7^th.

The Advance Notice is available here. The fact sheet is available here and a press release is available here. The Draft CY 2026 Program Instructions are available here and a fact sheet is available here.

CMS Releases 2026 Final Notice of Benefit and Payment Parameters
On January 13^th, CMS released the 2026 Final Notice of Benefit and Payment Parameters (Payment Notice). The Payment Notice finalizes key changes to State-Based Marketplaces (SBMs), including: 

• Certification Standards: CMS finalized a clarification of current regulations to explicitly permit Exchanges to deny certification of any Qualified Health Plan (QHP) that does not meet qualification criteria;
• MLR Modifications: CMS finalized with modification its proposal to adjust the medical loss ratio (MLR) calculation for qualifying issuers that focus on underserved communities that often have higher rates of serious health conditions;
• Silver Loading: CMS finalized regulatory amendments to affirm that silver loading practices that are permitted by State regulators are permissible under Federal law, to the extent that they are reasonable and actuarially justified.
• Public Reporting and Transparency: CMS will not publicly release the State-based Marketplace Annual Reporting Tool (SMART), as proposed, but will release SBM metric data for which there is reasonably comparative data from Exchanges using the federal platform;
• Premium Payment Thresholds: CMS finalized its proposal to allow issuers to implement either a fixed-dollar or a percentage-based premium payment threshold to enable consumers to maintain their coverage even if they have not paid the full amount owed. CMS further proposes to allow issuers to select between two percentage-based thresholds: net premium threshold and gross premium threshold;
• Risk Adjustment Program: Funds in the risk adjustment program are subject to sequestration at a rate of 5.7 percent. For 2026, CMS will recalibrate the risk adjustment models using new data; final coefficients will be released at a later date. CMS finalized a risk adjustment user fee of $0.20 per member per month, an increase of $0.02 from the proposed rule and the 2025 fee; and
• Basic Health Program: CMS finalized its proposed changes to the methodology used to recalculate the premium adjustment factor for Basic Health Program payment.

The final Payment Notice is available here and a fact sheet is available here.

FDA Proposes Front of Package Nutrition Labeling 
​​On January 14^th, the Food and Drug Administration announced a proposal requiring a front-of-package (FOP) nutrition label for most packaged foods. The intent behind the rule is to “give consumers readily visible information about a food’s saturated fat, sodium and added sugars content—three nutrients directly linked with chronic diseases when consumed in excess.” The FOP or the “Nutrition Info box” will show whether the food has “low,” “med,” or “high” levels of these three nutrients, and is part of the White House’s broader national strategy on hunger, nutrition, and health to reduce diet-related diseases by 2030.

The rule would require food manufacturers to add the Nutrition Info box to most packaged food products three years after the final rule’s effective date for businesses with $10 million or more in annual food sales and four years after the final rule’s effective date for businesses with less than $10 million in annual food sales. 

More information is available here.

Health Centers Receive $60 Million to Expand Hours 
On January 14^th, the Health Resources and Services Administration (HRSA) announced $60 million in awards to 125 HRSA-funded health centers to expand their hours of operation and improve access to health care services. Health centers receiving the additional funding will be able to add an average of 20 hours clinical and administrative staff time to support new early morning, night, and weekend hours.

Awardees in New York State include Refuah Health Center ($500,000), Sun River Health ($500,000), La Casa de Salud ($500,000), Housing Works Health Services ($500,000), The Institute for Family Health ($335,245), and Apicha Community Health Center ($500,000). A full list of awardees is available here.  

CMMI Publishes Blog on Successor Pathways and Scaling Models 
On January 13^th, CMMI published a blog titled “Successor Models, Scaling Pathways and the CMS Innovation Center” which describes the Innovation Center’s efforts to “iteratively test concepts and build on lessons learned from an originator model to successor models.” Authored by CMMI staff including Liz Fowler, Eliot Fishman, Purva Rawal and Ellen Lukens, the blog also describes how the CMMI “leverages lessons learned from models to chart a path to what ultimately might be expanded or scaled nationally to Medicare and Medicaid programs.” The blog offers several key examples of successful iteration, including the Acute to Post-Acute Episodic Payment Models and the Kidney-Focused Accountable Care Organization Models.

The blog is available here.

Biden Administration Rescinds Proposed Rule on OTC Contraception Coverage
On January 14^th, the Departments of HHS, Labor, and the Treasury issued a withdrawal of a rule proposed in October that would have required non-grandfathered group plans and health insurance issuers offering non-grandfathered group or individual coverage to cover over the counter (OTC) contraceptive items without cost sharing and without a prescription. In addition, the proposed rule would have required the same plans and issuers to disclose coverage and cost-sharing requirements for OTC contraceptive items, to provide an exceptions (to reasonable medical management techniques) process that allows an individual to receive coverage for the preventive service determined necessary by their attending provider, and to cover recommended drug and drug-led combination contraceptive items without cost-sharing. The Departments indicate they are withdrawing the proposed rules to focus “on other matters,” and note that this action does not limit their ability to propose new regulations in these same policy areas in the future.

The withdrawal of the notice of proposed rulemaking is available here.

Departments Issue FAQs on No Surprises Act
On January 14^th, the Departments of HHS, Labor, and the Treasury and the Office of Personnel Management issued frequently asked questions (FAQs) regarding the effect of ongoing legal disputes on implementation of portions of the No Surprises Act. Given the uncertainty regarding calculation of the Qualifying Payment Amount (QPA), the Departments are extending their enforcement discretion for items and services furnished before August 1, 2025. Requirements regarding plan disclosure of the QPA to nonparticipating providers remain in effect. The FAQs also address disclosure requirements for initial payments and notices of denial of payment, the initiation of open negotiation periods and the federal Independent Dispute Resolution (IDR) process, calculation of patient cost sharing, and the gag clause prohibition.

The FAQs are available here.

Other Updates

Supreme Court Agrees to Hear Challenge to ACA Preventive Care
On January 10^th, the Supreme Court announced it would hear a challenge to the Affordable Care Act’s requirement to cover certain preventive items and services. Last fall, the Biden Administration petitioned the Court to reverse a Fifth Circuit Appeals Court decision in Braidwood v. HHS which held that because their recommendations set coverage requirements, members of the U.S. Preventive Services Task Force (USPSTF) should be nominated by the president and confirmed by the Senate. Absent this, the plaintiffs cannot be compelled to cover items and services recommended by the Task Force since March 23, 2010, but this relief was not extended to all employers/issuers. The Biden Administration argues that because HHS oversees the USPSTF, requiring employers/issuers to cover its recommended services is valid. At this time, it is unknown whether the incoming Trump Administration will pursue this appeal and defend the law’s requirements; if they do not, the Court could appoint another lawyer to do so. It is anticipated that oral arguments would occur in March or April with a decision expected by the end of the Court’s current term in June.
 
More information is available from the Supreme Court here.
 
Over 17,000 Doctors Sign Letter Opposing RFK’s Nomination 
On January 9^th, the Committee to Protect Health Care, which represents over 20,000 doctors and advocates across the United States, sent a letter to the members of the Senate expressing their opposition to the nomination of Robert F. Kennedy, Jr. as HHS Secretary. The letter characterizes Kennedy as “not only unqualified…[but] actively dangerous” and cites his record on undermining public confidence in vaccines, spreading false claims and conspiracy theories, and eroding the public trust in evidence-based medicine. The letter also questions Kennedy’s apparent lack of credible experience in health care or medicine and expresses grave concern about his commitment to cutting the staff, funding, and resources of agencies responsible for protecting public health.
 
The letter, signed by over 17,000 members, is available here.
 
19 Democratic AGs Submit Amicus Brief on Non-Compete Rule 
On January 9^th, Democratic Attorneys General from the District of Columbia, New Jersey, Arizona, California, Colorado, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington submitted an amicus brief to the Fifth Circuit Court of Appeals supporting the Biden Administration’s rule prohibiting employers from entering into and enforcing most non- compete clauses nationwide. The Fifth Circuit is currently considering whether to overturn the decision of Judge Ada Brown of the Northern District of Texas, who ruled in August that the Federal Trade Commission “exceeded its statutory authority in implementing the rule” and that “the rule is arbitrary and capricious.”
 
The amicus brief argues that the FTC “properly considered important aspects of the serious problems that non-competes cause” and that “the rule will provide a uniform and predictable federal regulation to benefit workers and foster greater innovation and competition in critical industries.” The plaintiffs in the case are due to respond by February 3^rd. However, the incoming Trump Administration could choose to drop the Biden Administration’s appeal altogether.
 
The amicus brief is available here.

New York State Updates

Governor Hochul Delivers State of the State Speech and Releases Policy Agenda
On January 14^th, Governor Kathy Hochul delivered her fourth State of the State speech, outlining her policy agenda for the 2025 Legislative Session. The accompanying 2025 State of the State book describes the Governor’s proposed agenda across 15 sections, three of which focus on health care and social services.

Some of the notable health-related proposals in the 2025 State of the State include:  

• Evaluating Medicaid coverage options for GLP-1 agonist drugs like Ozempic;
• Extending the Safety Net Transformation Program;
• Strengthening oversight of “corporate and investor-backed” health care transactions;
• Undertaking a “comprehensive review” of network adequacy standards;
• Advancing integrated care for dual eligibles; and
• Expanding the range of options for involuntary commitment and mandatory treatment for behavioral health conditions.

SPG’s full summary of proposals relevant to health care providers and stakeholders in the State of the State is available here. The 2025 State of the State book is available here.

Further details, including legislative language for proposals that require funding appropriations, will be included in the Governor’s upcoming Executive Budget and Financial Plan, which are expected to be released later next week.

OMH Releases Adopts Final Regulations for PROS Redesign 
On January 15^th, the NYS Office of Mental Health (OMH) adopted final regulations that repeal and replace Part 512 of Title 14 NYCRR to “modernize and simplify” the Personalized Recovery Oriented Services (PROS) program. The regulations update outdated language, amend provider qualifications and service definitions, add new services, and change the reimbursement methodology. OMH has indicated that it has worked closely with PROS programs and participants over the last three years on the programmatic and reimbursement changes to the model, and currently has a SPA pending with CMS for approval of the redesign.

The Notice of Adoption and public comment received on the proposed rule are available in the State Register here.