Weekly Health Care Policy Update – April 11, 2025

April 18, 2025

In this update: 

  • Administration Updates
    • Several Battles Continue Over NIH Grants and Contracts
      • Trump Administration Orders NIH to Cut $2.6 Billion in Contracts
      • 16 State AGs Sue Trump Administration Over Cancelled NIH Grants
      • Judge Grants Permanent Injunction on NIH Indirect Costs
  • Legislative Update
    • House Passes Budget Blueprint
  • Federal Agencies
    • CMS Holds Webinar on Updated AHEAD Global Budget Methodology
    • CMS Will No Longer Approve or Extend DSHP and DSIP Requests
    • DOJ Announces Anticompetitive Regulation Task Force
    • CMS Finalizes MA Rule Without GLP-1 Coverage
    • CMS Finalizes 2026 Medicare Advantage and Part D Rate Announcement, Program Instructions
    • NIH Rescinds Scientific Integrity Policy
  • Other Updates
    • CBO Predicts 17-Year Extension of Medicare Trust Fund
    • Federal Judge Blocks Nursing Home Staffing Mandate
  • New York State Updates
    • NYS Budget Deadline Continues to Be Pushed Back
    • DOH Reaches Agreement to Maintain Current CDPAP Services and Payments and Extend Deadline for Statewide FI Transition

Administration Updates

Several Battles Continue Over NIH Grants and Contracts
Over the past week, funding battles continued over the future of National Institutes of Health (NIH) grants and contracts: 

  • Trump Administration Orders NIH to Cut $2.6 Billion in Contracts: By April 8th, at the direction of the Department of Government Efficiency (DOGE), NIH leadership was required to offer plans for reducing contract spending across all 27 institutes and centers by approximately 35%, or to $2.6 billion. The 35% cut is in addition to the 1,200-employee workforce reduction NIH absorbed last week through DOGE’s overall reorganization effort. NIH contracts span many domains including IT, human resources, security and facilities management, services for research volunteers, and specimen storage. Since the NIH is approximately halfway through its fiscal year, much of the funding has been spent, meaning cuts could be paralyzing to ongoing work, including clinical studies and trials. DOGE is circulating lists of contracts to be terminated, which are being reviewed by institute leadership.
  • 16 State AGs Sue Trump Administration Over Cancelled NIH Grants: On April 4th, 16 attorneys general filed a suit against the Trump Administration over its withholding of National Institutes of Health dollars to public health and research institutions. The states – including New York, New Jersey, and Massachusetts – are asking for preliminary and permanent injunctions that would block grant cancellations and resume the NIH’s review of pending or delayed applications. This lawsuit came shortly after a case filed by the American Public Health Association alleging that over $1.1 billion in grant funding had been illegally revoked. The complaint for declaratory and injunctive relief is available here.
  • Judge Grants Permanent Injunction on NIH Indirect Costs: On April 4th, Judge Angel Kelly for the District of Massachusetts granted permanent injunctions in three lawsuits prohibiting the Trump Administration from capping research costs, specifically indirect research costs. Judge Kelley agreed with the plaintiffs that the policy was reckless and could inflict serious harm on ongoing and future medical research, in addition to violating the Administrative Procedures Act. The Trump Administration plans to appeal this decision. The decision is available here.

Legislative Update

House Passes Budget Blueprint 
On April 10th, the House of Representatives passed a budget resolution by a vote of 216-214, after delays due to resistance from several Republican lawmakers. The House budget resolution instructs the Energy and Commerce Committee to reduce government spending by $880 billion over 10 years, and requires overall reductions in government spending of at least $1.5 trillion. The Senate budget resolution calls for only $4 billion in cuts, putting the two chambers far apart on top-line numbers.
 
In order to continue to move the reconciliation process forward, the House and Senate must adopt the same budget resolution. They must also come to agreement on whether or not the Senate will use a “current law” or “policy” baseline for their budget work. Using a “policy” baseline allows lawmakers to extend certain policy provisions – such as President Trump’s tax cuts – without offsetting their costs with other revenue or spending cuts. Fiscal hawks are objecting to this method as a budgetary gimmick.
 
The House budget resolution calls for committees to produce their reconciliation bills by May 9th.

Federal Agencies

CMS Holds Webinar on Updated AHEAD Global Budget Methodology
On April 8th, the Centers for Medicare and Medicaid Services (CMS) hosted a webinar on its latest revisions to the financial methodology for the Hospital Global Budget component of the CMS AHEAD model. Under CMS AHEAD, participating hospitals in six states—including the four counties of the Bronx, Brooklyn, Queens, and Westchester in New York—may elect to receive their Medicare FFS and Medicaid revenue in the form of an annual global budget, based on their historical revenue and adjusted for various market shifts.
CMS confirmed that they intend to release new AHEAD updates and information in the coming months, including: 

  • A new v3 of the Medicare FFS Hospital Global Budget Financial Methodology;
  • A “plug and play calculator” to demonstrate how the Medicare FFS global budget will be calculated for a given hospital; and
  • Additional live sessions for AHEAD states and hospitals to go through the calculator tool.

CMS covered initial details on the v3 Methodology on the call. While the large-scale structure of the proposed global budget remains similar to previous iterations, notable changes include: 

  • Additional baseline adjustment. CMS will apply an “advanced logistic regression model” to further refine its estimate of each participating hospital’s baseline Medicare revenue.
  • Changes to the market shift adjustment (MSA):
    • Hospital markets based on ZIP code. In defining a hospital’s “market area”—the geography in which the hospital will be subject to comparison to other hospitals in the MSA—CMS will uniformly use zip codes rather than counties, for greater precision.
    • MSA formula. Instead of being based solely on case weights as in v2, the v3 MSA is a 50/50 “blend” of fee-for-service payments and case weights. Although payments are based largely on case weights, they are also adjusted by various hospital-specific factors. The hospital’s MSA will also be adjusted by the State Growth Benchmark (for the AHEAD region) and an 80% funding factor (up from 50% in v2). The net result is that the v3 formula will likely have significantly larger allowed MSAs.
    • Upside-only market shift for “small” hospitals. CMS mitigated this effect for small hospitals, defined as those with less than 2% of the total AHEAD region’s Medicare payments, by making MSAs “upside-only,” i.e., no negative market shift will be applied.
  • Outlier adjustment removed from trend factor:
    • In v2, outlier adjustments, like other case add-ons (DME and IME), would have been added to the Annual Payment Adjustment (APA) trend factor.
    • In the new v3, outlier amounts will instead be based on claims rather than estimates, and the Hospital Global Budget will be adjusted by “the change in the share of FFS outliers included in HGBs.” This suggests the HGB will be adjusted by that hospital’s specific share of outlier claims within the region, meaning that if the hospital has a greater proportion of outlier claims than its baseline amount, the budget will be increased.  
  • Changes to social risk adjustment and Health Equity bonus: Social risk adjustment will be calculated based on beneficiaries’ census block group area. The “health equity” bonus has been renamed the Community Improvement bonus, and now uses different quality measures.
  • Changes to total cost of care adjustment: The total cost of care (TCOC) adjustment now is tied explicitly to the State Total Cost of Care Benchmark. The adjustment will kick in if the hospital’s TCOC for its population is +/- 2% compared to the AHEAD State’s growth target for that year. The actual value of the adjustment remains in the range of -2% to 2%, with that maximum adjustment applying if the TCOC is 10% or more above (or below) the target performance.

CMS Will No Longer Approve or Extend DSHP and DSIP Requests
On April 10th, the Centers for Medicare and Medicaid Services (CMS) sent a letter to states notifying them that the agency will no longer approve new – nor extend existing – requests for federal matching funds for state expenditures on designated state health programs (DSHP) or designated state investment programs (DSIP). In its announcement, CMS uses five examples of such programs, three of which are from the State of New York, including “$11M in grants to a labor union in New York to reduce costs of health insurance for certain childcare providers,” “$241M for a program in New York for non-medical in-home services, such as housekeeping,” and “$3.8M for diversity in medicine initiative in New York.” CMS argues that the changes will refocus resources on programmatic goals, and “safeguard the financial health of the Medicaid program.”
The letter is available here.

DOJ Announces Anticompetitive Regulation Task Force
On March 27th, the Department of Justice (DOJ) launched an Anticompetitive Regulations Task Force within the Antitrust Division. The objective of the Task Force is to identify and undo laws and regulations that stifle competition in accordance with two recent executive orders (EOs). As a first step, the Task Force will seek information from the public on laws and regulations that make it more difficult for businesses to compete across five key sectors, including health care. The DOJ will look into policies that encourage overbilling and consolidation, while threatening access to affordable care. These efforts are in step with goals of the Federal Trade Commission (FTC).  The public will have 60 days to submit comments.

The announcement is available here.

CMS Finalizes MA Rule Without GLP-1 Coverage 
On April 4th, the Centers for Medicare and Medicaid Services (CMS) finalized the Medicare Advantage (MA) and Part D final rule for contract year (CY) 2026. Key policies include: 

  • Inpatient Admission Decisions: CMS is finalizing a provision that restricts a plan’s ability to reopen and/or modify an approved inpatient hospital decision on the basis of new information. Plans may only reopen decisions for error or suspected fraud. The intent of this policy change is to ensure plans honor prior authorizations;
  • MA Appeals: CMS is finalizing a suite of policies intended to close loopholes in the MA appeals process, including clarifying the definition of “organization determination,” adding requirements for provider notice, and adding protections around an enrollee’s liability to pay for services under a coverage denial appeal;
  • Improving Dual Eligible Experiences: CMS is finalizing new requirements for the integration of certain dual eligible special needs plans (D-SNPs) by 2027;
  • Inflation Reduction Act: CMS included several IRA provisions that require codification in the final rule, including provisions regarding vaccine cost sharing, $35 cost sharing for insulin, and the Medicare Prescription Payment Plan; and
  • GLP-1 Coverage: CMS is not finalizing the Biden Administration’s proposed coverage of GLP-1 agonists.

The announcement is available here, and the final rule is available here.  

CMS Finalizes 2026 Medicare Advantage and Part D Rate Announcement, Program Instructions
On April 7th, Centers for Medicare and Medicaid Services (CMS) released the Announcement of Calendar Year (CY) 2026 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (the CY 2026 Rate Announcement) and the Final CY 2026 Part D Redesign Program Instructions (the Final CY 2026 Program Instructions).

Overall, CMS projects that these policies will increase payments to MA plans by 5.06%, or more than $25 billion, relative to CY 2025 (this is a larger payment increase than the 2.23% included in the Advance Notice earlier this year). This expected revenue change does not include an adjustment for the underlying coding trend, which CMS expects will increase risk scores by 2.10% on average. 

Major factors driving the increase include an effective growth rate of 9.04% (substantially higher than the 5.93% included in the Advance Notice) 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 (both factors are unchanged from the Advance Notice).

Policies finalized in the Rate Announcement and Program Instructions include: 

  • Calculating 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;
  • Completing the phase-in of the updated Part C risk adjustment model for non-PACE organizations by calculating 100% of risk scores using only the 2024 CMS-HCC risk adjustment model. For PACE organizations, CMS will use a blend of 10% of the risk score using the 2024 CMS-HHS model and 90% of the risk score using the 2017 CMS-HCC model;
  • Implementing 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;
  • Implementing changes to the Part D benefit made by the Inflation Reduction Act (IRA), including establishing the selected drug subsidy program; finalizing the defined standard Part D drug benefit annual deductible of $615 and annual out-of-pocket (OOP) spending threshold of $2,100; and limiting cost-sharing for covered insulin products to the lesser of $35, 25% of the Maximum Fair Price (under the Medicare Drug Price Negotiation Program), or 25% of the negotiated insulin price under the beneficiary’s plan;
  • Permitting non-retiree drug subsidy group health plans to use either the existing simplified determination methodology or the revised simplified determination methodology (proposed in the Advance Notice) to calculate actuarial equivalence of creditable coverage; and
  • Finalizing the list of disasters eligible for adjustment in the 2026 Star Ratings, measure specification updates, and the measures included in the Part C and D Improvement measures and Categorical Adjustment Index.  

The CY 2026 Rate Announcement is available here. The fact sheet is available here and a press release is available here. The Final CY 2026 Program Instructions are available hereand a fact sheet is available here.

NIH Rescinds Scientific Integrity Policy
On March 28th, the National Institutes of Health rescinded its scientific integrity policy – originally adopted under the Biden Administration – which aimed to protect scientists from political pressures and interference. In formally withdrawing the policy, the Trump Administration stated that the change was meant “to ensure alignment” with administration priorities, noting that the Biden Administration has “weaponized the NIH’s scientific integrity policy to inject harmful DEI and gender ideology into research.”

The Union of Concerned Scientists criticized the decision, argument that the rescission was a “deliberate weakening of the structures that protect public health, the scientific process and the American peoples’ access to truth.”

The formal rescission is available here.

Other Updates

CBO Predicts 17-Year Extension of Medicare Trust Fund 
On March 27th, the Congressional Budget Office (CBO) published its long-term predictions for the federal budget. The report estimates that the Hospital Insurance Trust Fund, which pays for benefits under Medicare Part A, will remain solvent until 2052, 17 years later than what the CBO estimated last year. The change is credited to lower than anticipated Part A spending in 2024, slower growth in payments to hospitals, and updated modeling for Medicare Advantage payments. It forecasts that the balance will increase through 2038, before beginning to deplete. Medicare’s other trust fund, the Supplementary Medical Insurance (SMI) Trust Fund, cannot be exhausted. In the spring, the Medicare Trustees will release their own updated report on the program.
 
The report is available here.
 
Federal Judge Blocks Nursing Home Staffing Mandate 
On April 7th, Judge Matthew Kacsmaryk of the U.S. District Court for Northern Texas blocked a Biden Administration rule that set new minimum staffing requirements for federally-funded nursing homes. Judge Kacsmaryk ruled that the Centers for Medicare and Medicaid Services (CMS) did not have the authority to require set staffing in nursing homes, extending beyond its authority granted by Congress. The rule would have required 24/7 staffing by registered nurses as well as an increase in the total hourly requirements for direct patient care. The Department of Health and Human Services (HHS) declined to comment on this decision.

New York State Updates

NYS Budget Deadline Continues to Be Pushed Back
Negotiations between the Executive, Assembly, and Senate over the New York State Fiscal Year (FY) 2025-26 Budget are continuing, requiring ongoing extensions of the statutory April 1st deadline. Lawmakers have passed a fourth budget extender, ensuring the government remains funded through April 15th.
 
DOH Reaches Agreement to Maintain Current CDPAP Services and Payments and Extend Deadline for Statewide FI Transition
This week, the New York State (NYS) Department of Health (DOH) and the New York Legal Assistance Group have agreed to a proposed preliminary injunction to ensure continued payment and uninterrupted services for participants of the State’s Consumer Directed Personal Assistance Program (CDPAP) while the State transitions to a single Statewide Fiscal Intermediary (FI). The State had planned for the Statewide FI, Public Partnerships LLC (PPL), to be the only entity authorized to provide FI services for CDPAP effective April 1st. However, following opposition from existing FIs and other stakeholders, a federal judge issued a limited Temporary Restraining Order for the transition at the end of March.
 
The preliminary injunction, which is awaiting approval by a judge, allows consumers receiving CDPAP to remain covered by their prior FI and ensure continued payments to personal assistants through the prior FI. The injunction also extends to May 15th the deadline under which consumers receiving CDPAP need to complete their registration with PPL. The injunction remains in effect until June 6th to further protect services and payments while personal assistants complete onboarding. If necessary, the court may extend the timeline further to avoid disruptions to services or personal assistant payments.
 
The proposed preliminary injunction is available here.