Welcome to another round of PYA Washington Updates from PYA’s Washington Update Task Force. Less than three weeks remain in 2026, and only 49 days remain until another partial government shutdown, absent Congressional action.
With Congress gridlocked and key deadlines approaching, federal agencies are moving forward on health coverage policy, Medicaid eligibility requirements, payment models, HSAs, and hospital drug pricing.
ACA Subsidies
Yesterday, the Senate failed to adopt a Democratic bill that would have extended the enhanced premium tax credits for three additional years and a Republican bill that would have replaced tax credits with health savings account contributions for people with high-deductible plans. Both bills won majority support but did not meet the 60-vote threshold needed to avert a filibuster. Absent something just short of a miracle, that means the enhanced premium tax credits will disappear at the end of the year and that health insurance exchange customers will pay, on average, more than twice as much after subsidies for their coverage next year, according to a KFF analysis.
Speaker Johnson is planning House debate on a healthcare package due to be released today, which will likely include expansion of health savings accounts, association health care plans, reforms to the pharmacy benefit manager industry, and price transparency – but no extension of the expiring tax credits. There is talk that moderate Republicans will try to set up an amendment vote to add an extension of the enhanced premium tax credits. Additionally, two GOP representatives have launched discharge petitions to force an extension vote.
Medicaid Work Requirements
OBBBA requires states with expanded Medicaid coverage to implement Medicaid work requirements (CMS uses the term “community engagement requirements”) by January 1, 2027. Beginning on that date, a member of the Medicaid expansion population (an adult earning up to 138% of the Federal Poverty Level who does not otherwise qualify for Medicaid) will be eligible for Medicaid coverage only if the individual (a) devotes at least 80 hours per month to working in a job, engaging in community service, or participating in a work program (or any combination of the three), or (b) meets one of the statutory exceptions to the work requirement.
On Monday, CMS published guidance for states regarding implementation of the work requirement. The bulletin focuses on (1) the types of “reliable information” an individual must present to demonstrate compliance with the work requirement and thus gain or maintain Medicaid eligibility, (2) the steps a state must take if an applicant or beneficiary fails to present reliable information, and (3) required state outreach activities. It also details the process by which a state can secure federal funds to cover some of the costs of implementing work requirements and/or request up to a two-year extension of the effective date by demonstrating good faith efforts to implement work requirements and/or receive federal funds to implement work requirements.
MAHA ELEVATE
Yesterday, the CMS Innovation Center announced another voluntary alternative payment model, the Make America Healthy Again: Enhancing Lifestyle and Evaluating Value-based Approaches Through Evidence (MAHA ELEVATE) model. The model will provide approximately $100 million to fund three-year cooperative agreements for up to 30 proposals focused on whole-person functional or lifestyle medicine approaches to care, including psychological, nutritional, and physical interventions. Interventions tested in MAHA ELEVATE will inform future Original Medicare coverage determinations or potential future CMS Innovation Center models designed to improve beneficiary health and reduce health care costs.
Proposals must incorporate nutrition or physical activity as part of the design. Three awards will be earmarked for interventions that address dementia.
Cooperative agreements will be awarded in two rounds for two separate cohorts — one starting in 2026 and the second in 2027. The CMS Innovation Center intends to release the Notice of Funding Opportunity in early 2026 for the first cohort, with a launch date of September 1, 2026.
IRS Guidance on HSAs
On Tuesday, the IRS issued Notice 2026-05, implementing several provisions from OBBBA relating to HSA eligibility and usage: (a) telehealth and remote care, an individual can continue to access telehealth and remote care services before meeting their HDHP deductible while retaining eligibility to contribute to HSAs; (b) bronze and catastrophic plans, beginning January 1, 2026, both types of health plans, regardless of how they are purchased, will qualify as HDHPs for HSA purposes; and (c) direct primary care, also beginning January 1, individuals enrolled in approved direct primary care service arrangements may contribute to HSAs and use those funds tax-free to pay DPC fees.
CMS Outpatient Drug Acquisition Cost Survey (ODACS)
As promised in the 2026 Hospital Outpatient Prospective Payment System Final Rule, CMS is launching ODACS this month to determine future Medicare payments for 340B drugs. As you’ll recall, CMS previously reduced such payments, but the Supreme Court ruled the agency could not do so in the absence of hospital drug acquisition cost survey data. All PPS hospitals are expected to register on the CMS survey website by December 31 (preferably by December 19, if possible). The reporting system will go live on January 1, hospitals must submit their responses covering the period July 1, 2024, to June 30, 2025, by no later than March 31. While CMS expects all PPS hospitals to participate in ODACS, the consequences of non-participation are unclear at this point.
PYA Webinar Series: 2026 Medicare Physician Fee Schedule Final Rule
On Wednesday, PYA presented the second part of a two-part webinar series on the 2026 MPFS Final Rule. Access the slides and a recordings of the both webinars here.
Please do not hesitate to contact us if you have any questions regarding these latest developments. You can also continue to check PYA’s website for updates.
