Top News
Elevance Challenges CMS Recalculation of Medicare Advantage Ratings
Elevance Health is suing the Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS), alleging the agencies did not give them the same Medicare Advantage (MA) star ratings recalculation provided to Clover Health after a federal court invalidated 20 measures used in the 2026 ratings methodology. The lawsuit, filed July 1 in the U.S. District Court for the Southern District of Georgia, concerns five Elevance MA contracts. Elevance estimates that applying the Clover recalculation method would increase their quality bonus payments by about $115 million, including an estimated $65.8 million for a multistate contract and $36.5 million for a Texas contract.
The dispute stems from a May decision in Clover Insurance Co. v. HHS, in which the court found that 20 measures used in the CMS star ratings calculation were unlawful. While CMS recalculated Clover’s rating and issued a memo that they would voluntarily recalculate 2027 quality bonus payments for certain MA contracts, Elevance argues that this is a different methodology than that used in Clover’s recalculation. This broader approach excluded additional measures beyond those addressed in the Clover decision, including measures on which Elevance performed well. This lawsuit adds to a broader series of disputes over the CMS star ratings methodology, which plays a central role in determining MA plan payments and incentives.
Marketplace Premium Increases in 2027
Premiums in the Affordable Care Act (ACA) Marketplace are set for another steep climb in 2027. Across 77 ACA Marketplace insurers in 16 states and Washington, D.C. with public rate filings for plan year 2027, the median proposed premium increase is 14%, the second consecutive year of double-digit hikes following an 18% median increase for plan year 2026. This marks the second-highest proposed increase since 2018, and if remaining plans remain on the same trajectory, typical premiums will have risen more than a third in just two years. Though only a small portion (~10%) of Americans get their health insurance through individual Marketplace plans, the detailed reporting requirements of ACA-compliant plans can offer insights into the factors driving premium growth that translate across all the entire insurance market.
Rising underlying medical costs remain the biggest driver of this growth, with a median expected trend of 10% for 2027. This growth is compounded by general inflation, healthcare labor shortages, increasingly severe and complex health care needs, rising GLP-1 drug utilization, and provider consolidation. In addition to these cost trends, the expiration of enhanced advanced premium tax credits at the end of 2025 prices out healthier enrollees from the risk pool, a trend that added roughly 4% to premiums in 2026 and insurers expect to continue into 2027. Other federal policy changes were cited as additional contributions to the increase including the Marketplace Integrity and Affordability Rule, the 2027 Notice of Benefit and Payment Parameters, H.R.1, and the Working Families Tax Cut Act.
Administrative Action
MACPAC Analysis Highlights PACE
The Program of All-Inclusive Care for the Elderly (PACE) provides social and medical Medicare and Medicaid services for its enrollees through a comprehensive, fully integrated care model that operates without typical benefit limits. The program targets individuals over the age of 55, most of whom are dually eligible enrollees, who qualify for a nursing-facility level of care but can safely remain in their communities. Although roughly 90,000 individuals are enrolled in the program, little is known about service use, outcome trends, or enrollee characteristics.
This month, the Medicaid and Children’s Health Insurance Program Payment Advisory Committee (MACPAC) released an issue brief examining the demographic characteristics of PACE beneficiaries to identify variation in service-use patterns associated with those characteristics. The analysis found that dually eligible enrollees (those eligible for both Medicare and Medicaid) make up the majority of beneficiaries, while Medicaid-only PACE enrollees account for less than 20% of the beneficiary pool. Dually eligible enrollees were substantially older, had higher shares of White and Black enrollees, and had higher rates of long-stay nursing facility use than Medicaid-only enrollees. By contrast, the Medicaid-only population had higher shares of Hispanic and Asian enrollees and over half were under the age of 65. The brief demonstrates significant variation in characteristics in PACE enrollee characteristics based on coverage type and calls for improved data collection within the program to help policymakers and administrators better serve the intended population.
SAMHSA Announces More Than $281 Million in New Funding for Addiction, Overdose, and Mental Health Programs
On July 6, the Substance Abuse and Mental Health Services Administration (SAMHSA), announced more than $281 million in funding opportunities spanning 15 grant programs. HHS framed the investments as part of the administration’s Great American Recovery Initiative, with funding directed toward substance use disorder treatment, overdose prevention and response, mental health and suicide prevention, trauma-informed care, integrated care, recovery supports, first responder training, and workforce development.
The largest single allocation is $68.2 million for Medication-Assisted Treatment – Prescription Drug and Opioid Addiction grants, aimed at expanding access to medications for opioid use disorder. Other major awards include $55.7 million for Project Advancing Wellness and Resiliency in Education (AWARE) grants supporting school-based mental health programs, $40.6 million for the National Child Traumatic Stress Initiative’s Community Treatment and Service Centers, and $34.7 million for First Responders-Comprehensive Addiction and Recovery Act grants that train first responders to distribute FDA-approved opioid overdose reversal medications. Additional funding streams cover mental health awareness training ($22 million), integration of primary and behavioral healthcare ($13.7 million), community overdose prevention ($11 million), and treatment, recovery, and workforce support ($10.5 million), among other programs rounding out the 15 total opportunities.
CMS Rescinds Fast-Track Review for Section 1115 Medicaid Demonstration Extensions
On July 7, the Center for Medicaid and CHIP Services (CMCS) issued a bulletin rescinding its July 2015 guidance that established a “fast track” federal review process for extensions of certain Medicaid and Children’s Health Insurance Program (CHIP) demonstrations authorized under section 1115 of the Social Security Act, along with the application templates that accompanied that process. Going forward, CMS says it will continue reviewing all demonstration renewal applications under the standard statutory requirements in section 1115, rather than through the expedited pathway.
The change stems from the One Big Beautiful Bill Act (H.R.1), which added a new budget neutrality certification requirement to section 1115, effective January 1, 2027. Under this new provision, the Secretary cannot approve, amend, or renew a Medicaid section 1115 demonstration unless the CMS Chief Actuary certifies that the demonstration is not expected to increase federal expenditures beyond what they would otherwise be without it, a role the Office of the Actuary has not previously played in demonstration review. CMS noted that this new certification requirement, along with the broader need to evaluate demonstrations for consistency with H.R.1, has substantially changed the timeline needed for reviewing extension applications, making the prior fast-track approach no longer workable.
CMS Releases ACO REACH Model Impact Evaluation
The Centers for Medicare and Medicaid Services (CMS) Innovation Center, in conjunction with NORC at The University of Chicago, released an evaluation of ACO REACH’s benefits and savings impact during its first four performance years. The ACO REACH program is designed to shift Medicare risk-sharing from the fee-for-service (FFS) model typically seen in Original Medicare to accountable, value-based care. The program is composed of three categorizations: Standard ACOs, which are experienced serving Original Medicare; New Entrant ACOs, which are new to serving this population; and High Needs ACOs, which serves those Original Medicare enrollees who have high or complex care needs.
The evaluation found varied progress. Standard ACOs achieved no net change in cumulative gross spending, while New Entrant and High Needs ACOs saw significant cumulative gross spending reductions, aligning with the hypothesis that sicker, higher-cost populations offer greater opportunity for savings. Across all three ACO types, however, net Medicare spending actually increased (0.8% in plan year 2023) once CMS’s shared-savings and bonus payouts were included. This means that incentive payments to ACOs outpaced the spending reductions achieved. The CMS Innovation Center Models are implemented to improve quality of care without increasing costs or maintain quality of care while reducing Medicare spending, neither of which have been shown in interim reports since the ACO REACH Model launched in 2023.
Quality of care improved across the board and care patterns shifted as expected, with significant reductions in ambulatory, acute, and post-acute utilization and higher specialty and professional-service spending. Results also varied by organizational structure and beneficiary risk profile: IDS/hospital system ACOs tended to increase emergency department (ED) and post-acute utilization rather than decrease it, while networks of individual practices fared better. Those with more chronic conditions saw the largest spending reductions, and beneficiaries without dual eligibility, disability, or social risk saw the greatest reductions in ED visits and hospital stays. Finally, the model continues to see more ACOs, larger networks, and higher safety-net facility participation rates, but still faces implementation difficulties that CMS and ACOs will need to address going forward.
U.S. Preventative Services Task Force Meeting Postponed Again Amid Ongoing Membership Changes
The Department of Health and Human Services (HHS) postponed the U.S. Preventive Services Task Force’s (USPSTF) planned July meeting until late August, citing the large number of nominations and the time needed to select new members. This delay is the fourth postponement of a USPSTF meeting, and the Task Force has not met in-person since March of 2025. The 16-member Task Force typically meets three times a year to issue recommendations on preventive services, which can trigger Affordable Care Act requirements for insurers to cover those services without patient cost-sharing.
Since his confirmation at the start of the second Trump administration, HHS Secretary Robert F. Kennedy Jr. removed the USPSTF’s two vice chairs in May Additionally, the terms of five other members ended in January, leaving seven seats vacant. Secretary Kennedy said he intends to make changes to the panel and increase the frequency and transparency of its meetings. The Supreme Court’s 2025 decision in Kennedy v. Braidwood Management confirmed the Secretary’s authority to appoint and remove Task Force members and reject recommendations. Under a delegation of authority issued by Secretary Kennedy, the Agency for Healthcare Research and Quality director will manage the panel’s daily operations and approve routine recommendations, while non-routine recommendations can be elevated to the Kennedy for review.
Federal Medicaid Reimbursement Set to Resume for Planned Parenthood Clinics
Planned Parenthood clinics regained eligibility for federal Medicaid reimbursement for non-abortion services as of July 4, when a one-year restriction enacted through the One Big Beautiful Bill Act (H.R. 1) expired. Although the Hyde Amendment already bars federal Medicaid funding for nearly all abortions, the provision blocked payments to Planned Parenthood and other clinics that provide abortions in addition to other non-abortion care. Planned Parenthood Action Fund and Planned Parenthood Federation of America said the policy contributed to nearly 30 clinic closures, all in counties with limited contraceptive access, and two-thirds of the clinic closures were in rural, medically underserved, or primary care shortage areas. The groups also reported a 25% decline in Medicaid patient visits compared to the prior year.
The expiration will again allow states that used state-only funds to sustain affected providers to receive federal Medicaid matching funds. Still, anti-abortion groups and some House Republicans are seeking a longer restriction through future reconciliation legislation.
Congressional Action
340B Policy Activity Accelerates Across Congress and CMS
Recent federal activity has placed the 340B Drug Pricing Program under renewed scrutiny as lawmakers and regulators consider significant changes to the program’s structure and reimbursement. Representatives Scott Peters (D-CA-50) and John Joyce (R-PA-13) recently introduced the bipartisan SECURE 340B Act, which would establish new patient eligibility and covered-entity standards while adding transparency, reporting, and oversight requirements. The bill is a response to Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Bill Cassidy’s (R-LA) discussion draft of the 340B Drug Pricing Integrity and Affordability for Patients Act, a more comprehensive reform proposal that would make changes to patient eligibility, contract pharmacy arrangements, manufacturer discount mechanisms, and reporting requirements, in addition to codifying a 340B rebate program. Together, the proposals reflect growing bipartisan interest to increase transparency and oversight of the program. Both bills remain in the early stages of the legislative process, and legislators have differing approaches on how to improve the 340B program. Comments on the legislative discussion draft are due by August 28. Email all comments to 340bforpatients@help.senate.
At the same time, the Centers for Medicare & Medicaid Services (CMS) proposed changes to 340B reimbursement in the Calendar Year 2027 Hospital Outpatient Prospective Payment System (OPPS) proposed rule. CMS would reduce payment to hospitals and ambulatory surgical centers for drugs acquired through the 340B program from average sales price (ASP) minus 22.5% to ASP minus 33.4%, a change the agency estimates would reduce Medicare drug payments by approximately $4.55 billion and beneficiary cost sharing by approximately $1.15 billion in the first year. The proposal is part of a broader package of outpatient payment reforms that also includes a 2.4% increase in OPPS payment rates and expanded site-neutral payment policies for certain services. The proposed rule is open for public comment through August 31, 2026.
Judicial Action
Supreme Court Fails to Take Up FDA Preemption Case
Last week, the Supreme Court of the United States declined to take on a case about drug compounding and Food and Drug Administration (FDA) preemption of state law. The case, Zyla Life Sciences v. Wells Pharma, asks whether states can pass their own rules about pharmacy compounding (mixing of custom medications) even when the FDA has already addressed it. By failing to hear the case, the court leaves unanswered a federalism question on drug regulation that will remain contested and inconsistent across jurisdictions for the foreseeable future. This creates compliance uncertainty for pharmacies and manufacturers operating in multiple states. It also opens the door for states to establish policies on drug and health regulation any time they think the FDA‘s policies are insufficient, as seen in Texas’s suit against Kenvue over Tylenol labeling and pregnancy-related autism warnings. With this Supreme Court decision, it becomes easier for states (or even private lawsuits) to push these kinds of demands rather than waiting for the FDA to act and has implications beyond just drug compounding, including food additives, flavored e-cigarettes, and drug labeling.
Save the Date: 2026 Annual Conference
HealthCare Roundtable 22nd Annual Conference
November 4-6, 2026
The Mayflower Hotel
Washington, D.C.
