While significant healthcare policymaking in Congress has become sporadic and uneven, the executive branch, led by the Centers for Medicare and Medicaid Services (CMS), has filled the void by driving near constant change to key programs. It is an open question whether this executive-centric approach to healthcare policy, which emerged across multiple Democratic and Republican administrations, will deliver the desired results over the long-term.
A selected inventory of CMS’s 2026 policy announcements related to Medicare, Medicaid, and the Affordable Care Act (ACA) attest to its growing reach:
- On July 14, CMS released a 715-page proposed rule setting physician fees for 2027. Among other things, the proposed rule announced a multi-year plan to replace the existing coding manual, which is controlled by the American Medical Association, with a new, to-be-determined alternative. CMS regularly uses the annual physician rule to advance adjustments affecting multiple categories of clinicians and provider entities. This year, the proposed rule included significant changes to promote enrollment in Medicare Accountable Care Organizations (ACOs).
- Earlier this year, CMS released its regular annual proposals affecting payments for inpatient hospital care (575 pages) and outpatient services (298 pages). It also finalized its 2027 rules for Medicare Advantage plans (218 pages).
- On July 7, CMS’s previously-announced ACCESS (Advancing Chronic Care with Effective, Scalable Solutions) model, which is testing the use of information technology in the management of chronic diseases, commenced. A separate six-state demonstration of technology-assisted prior authorization screens became operational earlier this year.
- In May, CMS proposed tightening special “state-directed” Medicaid payments for hospitals and other entities. Separately, CMS promulgated an interim final rule for the work requirement provisions of the 2025 reconciliation law. In both cases, some states contend CMS is going beyond what Congress authorized, and a lawsuit is now pending regarding the work requirements.
- Also in May, CMS finalized a rule governing the 2027 enrollment year for the ACA insurance marketplaces. As with the Medicaid rules, many states argue CMS is acting arbitrarily and outside of federal law. A suit challenging CMS’s 2025 ACA rules is still pending.
CMS’s transformation from hands-off claims processor into powerful regulator has been decades in the making. When Medicare and Medicaid were being debated, Congress needed to appease doctors to get the bill passed. Consequently, Medicare was written to be a passive insurance plan that would pay for services without looking over the shoulders of the practitioners. The processing of claims was even contracted out to private companies. It took more than a decade after Medicare and Medicaid were implemented for the Health Care Financing Administration, later renamed CMS, to emerge as a separate entity from the Social Security Administration.
HCFA’s power grew when Congress realized in the 1970s that a no-questions-asked approach to payment would cause a budget crisis. Medicare’s administrators were tasked with writing new formulas for paying for care that would be less inflationary.
CMS’s role expanded further with the growth of Medicaid and the enactment of premium subsidies for individual coverage in the ACA.
Complexity is central to CMS’s power. The rules setting Medicare payments for hospital care, physician services, Medicare Advantage plans, and much else are thick with reporting mandates, data collection standards and requirements, special adjustments and exceptions, and compliance checks. Individual firms and even entire industries can rise or fall based on the changing details of the various funding formulas. On the flip side, CMS struggles to keep up with its vast mandate. States and private companies have frequently exploited payment loopholes across multiple years before the agency has noticed what is happening.
In a modern health system, expansive executive discretion may be unavoidable, but Congress might still consider whether law changes might lessen the need for constant rulemaking.
As an example, instead of relying on CMS to write opaque payment terms, Congress could tie rates to competitive bidding, such as with Medicare Advantage (MA) plans. Much of the complexity in MA is associated with using patient data to determine what the plans should be paid. With competitive bidding, a more transparent formula set in statute would make some of the current rulemaking adjustments less important.
In Medicaid, states have taken advantage of the matching system used to divide up program costs to push more of the burden onto federal taxpayers. Congress could end these practices by moving to fixed, annually-indexed federal per capita payments by eligibility category in lieu of the current formula. With less opportunity for states to game the rules, the federal government might be convinced to dial back its micromanagement of the program.
There are pros and cons to both legislative and executive discretion in healthcare policymaking. Narrow interests can be successful in both settings, and inaction could mean missed opportunities. The objective should be a self-improving system that does not need perpetual intervention from either elected branch of government.