McDermott+ Check-Up – July 18, 2025

THIS WEEK’S DOSE

• OBBBA implementation begins. While the administration focuses on implementing the new law, some lawmakers are already discussing adjustments to health provisions in the One Big Beautiful Bill Act (OBBBA).
• Congress approves recissions package. The $9 billion package includes cuts to foreign aid and public broadcasting.
• House Energy and Commerce Health Subcommittee holds legislative hearing. The committee considered proposals related to the public health workforce, rural health, and over-the-counter medicines.
• Senate HELP Committee considers HHS assistant secretary nomination. The Senate Health, Education, Labor, and Pensions (HELP) Committee questioned US Department of Health and Human Services (HHS) assistant secretary nominee Brian Christine, MD.
• Senate HELP Committee holds hearing on benefits for independent workers. Senators examined challenges independent contractors face when trying to access health benefits.
• CMS releases CY 2026 Medicare PFS proposed rule. In the calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) proposed rule, the Centers for Medicare & Medicaid Services (CMS) proposes adjustments and methodologies related to physician payment, as well as telehealth updates and a new mandatory model.
• CMS releases CY 2026 Medicare OPPS proposed rule. The Medicare Hospital Outpatient Prospective Payment System (OPPS) proposed rule includes proposals related to the inpatient only list, the 340B program, and site neutral payments.
• CMS updates 1115 demonstration guidance. The new guidance revises policies related to continuous eligibility and workforce initiative demonstrations.
• Judge overturns Biden-era rule on medical debt. A federal judge ruled that the administration does not have the statutory authority to prevent medical debt from being used in credit reports.

CONGRESS

OBBBA implementation begins. OBBBA’s health provisions have varying effective and compliance dates, ranging from the date of enactment (July 4, 2025) to 2028. The administration needs to implement many of the provisions via new guidance or regulation. Stakeholders and lawmakers are beginning to pursue potential changes to the statute and are preparing to closely monitor and influence the administration’s implementation-related decisions.

Some lawmakers have already begun to act. Sen. Hawley (R-MO), who was an outspoken critic of Medicaid cuts during the reconciliation process but ultimately voted for the bill, introduced legislation to repeal many of OBBBA’s key health provisions, including the provider tax and state directed payment policies. S. 2279, the Protect Medicaid and Rural Hospitals Act, would also expand the rural health transformation fund. This is likely the first of many efforts to lessen the impact of the OBBBA’s Medicaid provisions. Seeking to further restrict access to Medicaid beyond what was included in OBBBA, Rep. Steube (R-FL) and Sen. Paul (R-KY) introduced H.R. 4384, the Excluding Illegal Aliens from Medicaid Act, which would reintroduce provisions from the original House-passed reconciliation package that reduce federal Medicaid matching funds for states that use their own funds to extend Medicaid to certain immigrants. These bills highlight the fact that although Congress has acted one way, it can still reverse course in the future. That will be the goal of many healthcare stakeholders as implementation moves forward over the next several years.

M+ will host a webinar to discuss OBBBA’s implications on July 24, 2025. Register here.

Congress approves rescissions package. In a 51 – 48 vote in the Senate and a 216 – 213 vote in the House, Congress agreed to rescind $9 billion of previously appropriated funds for foreign aid and the Corporation for Public Broadcasting. This includes rescissions of funding from health programs within the US Department of State and the US Agency for International Development (USAID), including $500 million in global health USAID funding. The Senate amended the White House’s original request in order to protect $400 million in President’s Emergency Plan for AIDS Relief funding from being rescinded. Sens. Murkowski (R-AK) and Collins (R-ME) and Reps. Turner (R-OH) and Fitzpatrick (R-PA) joined Democrats in opposing the bill.

House Energy and Commerce Health Subcommittee holds legislative hearing. US Food and Drug Administration (FDA) and Health Resources and Services Administration (HRSA) officials testified in front of the committee, highlighting the need for sustained funding, regulatory transparency, and workforce development to meet growing healthcare demands, especially in geriatrics, rural health, and over-the-counter drug innovation. Republicans emphasized the need to reauthorize the over-the-counter monograph drug user fee amendments and expand telehealth and workforce programs to address provider shortages in underserved areas. Democrats raised concerns about proposed budget cuts to HRSA and FDA and advocated for programs such as Healthy Start and newborn screenings to address health disparities and maternal/infant mortality. For summaries of the legislation being considered, read the committee’s hearing memo.

Senate HELP Committee considers HHS assistant secretary nomination. Brian Christine is an Alabama-based urologist with a practice focused on men’s sexual health. He ran for Alabama state senate in 2022. During the hearing, Christine emphasized his commitment to the Make America Healthy Again initiative and Secretary Kennedy’s goal of addressing chronic disease. Democrats focused on the impacts of OBBBA and HHS restructuring, as well as Christine’s views on vaccines and COVID-19. Republicans focused on Christine’s experience as a physician and discussed rural healthcare, gender dysphoria, tribal health, and vaccines. The committee will vote on his nomination next week.

Senate HELP Committee holds hearing on benefits for independent workers. During the hearing, witnesses highlighted the lack of affordable healthcare benefits for independent contractors. Democrats emphasized the lack of access to affordable healthcare, social security, and retirement planning, and Republicans expressed support for legislation to protect independent workers’ benefits.

ADMINISTRATION

CMS releases CY 2026 Medicare PFS proposed rule. Highlights from the proposed rule include:

• Conversion factor (CF) update: The proposed CY 2026 CF is $33.5875 (3.8% increase) for physicians who meet certain participation thresholds in advanced alternative payment models, and $33.4209 (3.3% increase) for other clinicians.
• Efficiency adjustment: CMS proposes a new adjustment of -2.5% in CY 2026 to certain non-time-based codes, including those describing procedures, radiology services, and diagnostic tests.
• Practice expense (PE) methodology: CMS proposes a significant change to the PE methodology by reducing the portion of indirect PE allocated to facility-based services beginning in CY 2026.
• Telehealth: The rule proposes to effectively make all services on the Medicare Telehealth Services List permanent and would expand permanent flexibilities around virtual direct supervision.
• Merit-based Incentive Payment System (MIPS): CMS proposes policies aimed at providing stability to the program, including setting the MIPS performance threshold at 75 points through the CY 2028 performance period/2030 MIPS payment year. The quality payment program fact sheet can be found here.
• Medicare Shared Savings Program (MSSP): The proposed rule includes a suite of changes aimed at increasing participation and program integrity, including adjustments to beneficiary assignment thresholds, refinements to quality reporting requirements; protections against cyberattacks, and updated financial benchmarking and reconciliation methodologies. The MSSP fact sheet can be found here.
• New mandatory Ambulatory Specialty Model: CMS proposes to launch a new mandatory alternative payment model for heart failure and low back pain starting on January 1, 2027, and running for five performance years through December 31, 2031. The fact sheet can be found here.
• Requests for information (RFIs): CMS solicits feedback on future policy priorities and whether the PFS adequately supports prevention and management of chronic disease.

Comments are due September 12, 2025. A CMS press release can be found here, and the agency’s fact sheet can be found here. The M+ data dashboard can be found here.

CMS releases CY 2026 Medicare OPPS proposed rule. Key takeaways from the proposed rule include:

• Inpatient only (IPO) list: CMS proposes to eliminate the IPO list in CY 2026 with a transitional period of three years, a policy that the first Trump administration previously attempted.
• 340B: CMS proposes to increase the annual reduction to the OPPS conversion factor for non-drug items and services from 0.5% to 2% effective January 1, 2026, and shorten the period of reductions from 16 years to six years.
• Site neutral payments: CMS proposes to expand site neutral payments to drug administration services furnished by excepted off-campus provider-based outpatient departments (with an exemption for rural sole community hospitals).
• Ambulatory surgical center (ASC) covered procedures list: CMS proposes to expand the list by revising its criteria and adding 547 procedures, including 271 codes that CMS proposes to remove from the IPO list.
• Skin substitutes: Consistent with its proposal in the Medicare PFS, CMS proposes to unpackage skin substitutes and pay for them separately as incident-to supplies.
• ASC payments: CMS proposes to continue to apply a productivity-adjusted hospital market basket update to ASC payments for CY 2025.
• Diagnostic radiopharmaceuticals: CMS proposes to maintain its policy of separately paying for high-cost diagnostic radiopharmaceuticals whose per day cost exceeds the annually adjusted threshold.
• Market-based MS-DRG data collection: CMS again proposes to use the reported median payer-specific negotiated charge by MS-DRG from Medicare Advantage plans in a market-based MS-DRG relative weight methodology.
• Quality reporting programs: CMS proposes updates to the outpatient, ASC, and rural emergency hospital quality reporting programs, and solicits input on the development of future quality measure concepts related to well-being and nutrition.
• RFIs: CMS solicits feedback on future policy priorities, including a more systematic site-neutral payment policy and appropriate payment methodology for software as a service.

Comments are due September 13, 2025. A press release from CMS can be found here, and the agency’s fact sheet is here. The M+ data dashboard can be found here, and the registration link for our webinar on the proposed rule is here.

CMS updates 1115 demonstration guidance. Section 1115 of the Social Security Act gives CMS authority to approve experimental, pilot, or demonstration projects that are likely to assist in promoting the objectives of the Medicaid program. The updates to the guidance came in two letters:

• Continuous eligibility: The first letter states that CMS does not anticipate approving new or extending existing section 1115 demonstrations that allow for expanded continuous eligibility beyond what is required by federal law. Federal law requires states to provide 12 months of continuous eligibility for children and gives states the option to provide 12 months of continuous eligibility for the postpartum period. Under the Biden administration, CMS approved many 1115 demonstrations to provide 12-month continuous eligibility to other adults and to provide multi-year continuous eligibility to children. CMS is concerned that these 1115 demonstrations keep ineligible individuals enrolled and divert state and federal financial resources from eligible individuals. CMS will conduct outreach to states with existing expanded continuous eligibility Section 1115 demonstrations to note that this is time limited. Those states must notify affected beneficiaries whose continuous eligibility periods will end and conduct a renewal for individuals if they have not had a renewal within the last 12 months.
• Workforce initiatives: The second letter states that CMS does not anticipate approving new or extending existing Section 1115 demonstrations that test workforce initiatives such as student loan repayment and workforce training programs that recruit and retain providers. CMS states that it has approved such 1115 demonstrations in five states since 2022, totaling more than $1 billion in federal funding. CMS will allow existing demonstrations to run their course.

COURTS

Judge overturns Biden-era rule on medical debt. The rule would have removed medical debt from credit reports. A US district judge ruled that the administration exceeded its statutory authority and violated the law on permissible purposes of consumer reports. Instead, the Consumer Financial Protection Bureau (CFPB) can “encourage” creditors to use other categories of information. In April 2025, the Trump administration dropped CFPB’s defense of the rule and joined the credit industry in challenging it.

BIPARTISAN LEGISLATION SPOTLIGHT

QUICK HITS

• CMS announces steps to reduce duplicate enrollees. The agency stated that 2.8 million Americans are potentially enrolled in two or more Medicaid/Affordable Care Act Exchange plans. To address this, CMS will provide the relevant list of duplicate enrollees to states and state-based exchanges, as well as conduct outreach to certain duplicate enrollees.
• CMS announces participants in sickle cell payment model. Thirty-three states; Washington, DC; and Puerto Rico will voluntarily participate in the Cell and Gene Therapy Access Model, which seeks to test outcomes-based payments for sickle cell disease treatments in Medicaid. Read the press release here and the model webpage here.
• President Trump signs the HALT Fentanyl Act into law. The bill permanently classifies fentanyl derivatives as Schedule 1 substances in an effort to address fatal drug overdoses.
• CMS Innovation Center holds office hour on WISeR model. The Wasteful and Inappropriate Service Reduction (WISeR) model, beginning January 1, 2026, aims to leverage enhanced technologies to improve the prior authorization process and reduce fraud, waste, and abuse from low-value services.
• GAO recommends HHS evaluate research effectiveness. A US Government Accountability Office (GAO) report found that HHS has not yet evaluated the impact of the department’s comparative effectiveness research on health outcomes.
• ASTP/ONC writes about direct secure messaging among hospitals. A new blog post from the office of the Assistant Secretary for Technology Policy/Office of the National Coordinator for IT (ASTP/ONC) discusses the launch of DirectTrust and its impact on interoperability.
• House Republicans voice support for USTR actions on pharmaceuticals. Reps. Buchanan (R-FL) and Arrington (R-TX) led a letter from 35 House Republicans that applauds US Trade Representative (USTR) Greer’s RFI on most-favored-nation drug pricing.
• MedPAC releases 2025 data book. In the book, the Medicare Payment Advisory Commission (MedPAC) provides data on Medicare spending, demographics of the Medicare population, beneficiaries’ access to care, quality of care, and more.

NEXT WEEK’S DIAGNOSIS

Congress is in session next week. The House Ways and Means Health and Oversight Subcommittees will hold a joint hearing on Medicare Advantage, and the House Energy and Commerce Oversight Subcommittee will hold a hearing on the organ procurement and transplant system.

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