Health Care Watch: February 1, 2026
The following Federal Health Policy (FHP) Strategies Weekly Health Care Watch provides a summary of legislative and regulatory health care activities from January 26 – February 1 Where available, hyperlinks are included to the relevant documents. Please let us know if you have any questions or would like additional information on the items below.
LEGISLATIVE UPDATE
Government Funding
On January 29, an agreement was reached between the White House and Senate Democrats on compromise legislation to fund five departments, including the Department of Health & Human Services (HHS), while providing a two-week funding extension of Department of Homeland Security (DHS), including funding Immigration Customs and Enforcement (ICE), while further guardrails for ICE are negotiated. The bill also includes bipartisan health policy provisions related to Medicare payment policies, including a two-year extension of telehealth flexibilities and pharmacy benefit manager (PBM) reforms. This compromise bill passed the Senate on January 30. The House is not expected to consider the legislation until February 2, setting the stage for a partial, short-term shutdown. Government funding for the six Departments will lapse, without action, on February 1.
Enhanced ACA Subsidies
On January 29, Sen. Bernie Moreno (R-OH) presented a “final offer” to Senate Democrats to revive the enhanced Affordable Care Act (ACA) premium tax credits that expired at the end of 2025. The proposal would extend the subsidies for one year before phasing out over the next two years, allow enrollees to convert coverage to federally funded Health Savings Accounts (HSAs) after the extension period, place income caps on eligibility for the enhanced subsidies, impose a minimum $5 monthly premium payment, bar eligibility for individuals not lawfully present in the United States, extend the ACA open enrollment period through March 31, and add penalties for fraud, fund cost-sharing reduction (CSR) subsidies and require audit to ensure states are not using these funds for abortion coverage. Sen. Jeanne Shaheen (D-NH) stated that Democrats have “serious concerns” about the proposal, specifically the abortion provision.
On January 29, the Kaiser Family Foundation (KFF) released a study, based on Centers for Medicare & Medicaid Services (CMS) data, finding that approximately 23 million people enrolled in ACA coverage in 2026, about 1.2 million fewer enrollees than in 2025. Enrollment increased in the 20 states and Washington, D.C. that operate their own ACA marketplaces, where about 7.2 million people enrolled in 2026 compared with roughly 7 million the year before, which may reflect some of these states using additional state funds to mitigate premium amounts after the enhanced subsidies lapsed.
House
On January 27, Rep. Vern Buchanan (R-FL) announced that he will retire at the end of his current term. Rep. Buchanan is currently the Chairman of the House Ways & Means Health Subcommittee.
On January 27, House Ways & Means Committee Chairman Jason Smith (R-MO) and Oversight Subcommittee Chairman David Schweikert (R-AZ) sent letters to Montefiore Medical Center and the University of Chicago Medical Center seeking documents related to organ transplants performed on foreign nationals, citing December 2025 New York Times reporting and the Committee’s oversight of tax-exempt hospitals, organ procurement organizations (OPOs), and Medicare reimbursement practices. The Committee questioned whether the hospitals’ practices comply with community benefit standards. The lawmakers requested information by February 10, including Medicare reimbursements, contracts with foreign governments, transplant volumes and pricing by citizenship status from 2020–2026, and total revenue from foreign national transplants, warning that failure to comply could result in subpoenas.
Senate
On January 26, it was reported that President Trump’s nominee for Surgeon General, Dr. Casey Means, is scheduled to appear virtually before the Health, Education, Labor, and Pensions (HELP) Committee for her confirmation hearing on February 25.
On January 28, Sens. Elizabeth Warren (D-MA), Richard Blumenthal (D-CT), Ed Markey (D-MA), and Angela Alsobrooks (D-MD) sent a letter to HHS Secretary Robert F. Kennedy, Jr. raising concerns about proposed changes to the Vaccine Injury Compensation Program (VICP). The letter detailed the involvement of the Secretary and his family in vaccine injury litigation and potential conflicts of interest. The lawmakers requested details on the scope, transparency, and oversight of potential reforms to the federal program, which compensates rare vaccine-related injuries while supporting vaccine supply stability.
On January 28, CMS Administrator Dr. Mehmet Oz met with Finance Committee Republicans to discuss drug pricing and the administration's new health care framework, which includes a most favored nation (MFN) drug pricing policy.
On January 29, Sens. Richard Durbin (D-IL), Peter Welch (D-VT), and Elizabeth Warren (D-MA) sent a letter to HHS Office of Inspector General (OIG) Inspector General T. March Bell raising concerns about the agency’s January 27 guidance on applying the federal Anti-Kickback Statute (AKS) to direct-to-consumer (DTC) prescription drug sales tied to the forthcoming TrumpRx website. The senators questioned whether existing manufacturer DTC platforms and affiliated telehealth arrangements comply with OIG safeguards. The lawmakers requested responses by February 15, seeking clarification on OIG oversight, advertising standards, telehealth fraud risks, potential conflicts of interest, and communications between OIG, the White House, and outside entities during development of the guidance.
REGULATORY UPDATE
On January 24, CMS released its 2025 Medicare Fee-for-Service (FFS) Supplemental Improper Payment Data, reporting a national payment accuracy rate of 93.45% and an improper payment rate of 6.55%, as measured through the Comprehensive Error Rate Testing (CERT) program. The report found that improper payments were most frequently driven by insufficient documentation, medical necessity errors, and incorrect coding, with Skilled Nursing Facilities (SNFs), Hospital Outpatient services, Hospice, and Inpatient Rehabilitation Facilities (IRFs) identified as the largest contributors by dollar amount. Projected improper payments totaled $4.3 billion for SNFs, $3.7 billion for Hospital Outpatient services, $1.7 billion for Hospice, and $1.6 billion for IRFs, with error rates varying by claim type and clinical setting. CMS noted that the improper payment rate reflects claims submitted between July 1, 2023, and June 30, 2024, and includes an adjustment for Part A to Part B rebilling consistent with prior years’ methodology.
On January 24, HHS issued notices temporarily pausing approximately $5 billion in public health grants supporting state and local public health workforce capacity and data modernization efforts. The grants were restored later the same day. According to HHS, the pause was implemented to conduct an internal review of funding use.
On January 27, CMS announced the selection of 15 prescription drugs for the third cycle of the Medicare Drug Price Negotiation Program, including the first drugs payable under Part B to be included in the process. CMS also announced one additional drug selected for renegotiation. The selected drugs accounted for approximately $27 billion in combined Medicare Part B and Part D spending during the most recent measurement period. Negotiated prices are scheduled to take effect in 2028.
On January 27, CMS released the calendar year 2027 Medicare Advantage and Part D Advance Notice, proposing a net average payment increase of 0.09%. Among other policies, CMS proposes that diagnoses from audio-only services and unlinked chart review records be excluded from the calculation of risk scores. Under the notice, the annual deductible would increase to $700 and the out-of-pocket threshold to $2,400 for 2027. CMS also proposes updates to the Part D (RxHCC) risk adjustment model to reflect Maximum Fair Prices (MFPs) for negotiated drugs selected for Initial Price Applicability Year (IPAY) 2026. To account for differences in coding between MA and fee-for-service, CMS proposes to reduce MA risk scores by 5.9% in 2027. A fact sheet can be found here. Comments on the proposals are due by February 25.
On January 27 HHS formally withdrew a Biden-era guidance which outlined pharmacy obligations under federal civil rights laws regarding the stocking and dispensing of abortion-related medications. Under the policy change, pharmacists may decline to stock or dispense the medications without risking federal funding. Withdrawal of the rule shifts decision-making authority to individual pharmacies and pharmacists.
On January 28, HHS announced the appointment of 21 new members to the Interagency Autism Coordinating Committee under Secretary Kennedy. The committee is responsible for coordinating federal autism research activities and advising the federal government on autism-related policy priorities.
On January 28, the Trump administration informed Gavi, the Vaccine Alliance, that future funding from the United States would be contingent on the organization developing and initiating a plan to phase out vaccines containing the preservative thimerosal. HHS said it would withhold remaining and future funding until such a plan is in place. In response, Gavi stated that any changes to its vaccine portfolio would require approval from its board and be guided by scientific consensus.
On January 28, CMS proposed a rule to strengthen federal oversight of OPOs, updating standards for upcoming recertification cycles to improve patient safety and increase the recovery and transplantation of viable organs. The proposal would refine performance measures, clarify and deter unsafe medical practices, enhance accountability for underperforming OPOs, and remove regulatory barriers to new OPO certification. CMS said the rule complements ongoing modernization efforts led by HHS and the Health Resources and Services Administration (HRSA) to improve transparency, safety, and trust in the national organ transplant system. A fact sheet can be found here. Comments on the proposed rule are due by March 31.
On January 29, HHS announced the appointment of a new Chair and 10 new public members to the Advisory Council on Alzheimer’s Research, Care, and Services, established under the National Alzheimer’s Project Act (NAPA). Through NAPA, HHS coordinates efforts to accelerate research, improve care, and strengthen long-term services and supports individuals living with dementia and their families.
On January 29, the Department of Labor issued a proposed rule requiring pharmacy benefit managers (PBMs) serving ERISA self-insured group health plans to disclose comprehensive compensation data to plan fiduciaries. Under the proposal, PBMs must provide initial and semiannual disclosures itemizing all direct and indirect compensation, including manufacturer rebates, spread pricing, copay claw-backs, and the net cost of each drug on the formulary. If finalized, the new requirements would apply to plan years beginning on or after July 1, 2026. A fact sheet can be found here. Comments on the proposed rule are due by March 31.
On January 29, CMS released an Advance Notice of Proposed Rulemaking titled Ensuring Safety through Domestic Security with Made in America Personal Protective Equipment and Essential Medicine Procurement by Medicare Participating Hospitals. The notice seeks public comment on approaches to encourage Medicare-participating hospitals to prioritize domestically manufactured personal protective equipment and essential medicines, including potential hospital designations, payment adjustments, and quality reporting measures. A fact sheet can be found here. Comments are due by March 30.
On January 29, CMS announced that 10 Medicaid eligibility and enrollment technology vendors have voluntarily pledged more than $600 million in no-cost or discounted products and services to help states implement Medicaid community engagement requirements enacted under One Big Beautiful Bill (OBBBA). The commitments are intended to support system modernization, automated data verification, and beneficiary outreach as states prepare for the January 1, 2027, implementation deadline, while generating savings for states and taxpayers. A fact sheet can be found here.
On January 29, CMS finalized a rule addressing higher health care related taxes on Medicaid managed care organizations (MCOs). The rule implements statutory changes enacted in the OBBBA, and prohibits disproportionate taxation of Medicaid business, blocks indirect or opaque tax structures, and establishes transition periods through CY 2026 or state FY 2027-2028 depending on waiver status. CMS estimates the targeted arrangements previously generated more than $24 billion annually for states and says the policy will restore Medicaid program integrity and refocus spending on beneficiaries. A fact sheet can be found here.
On January 30, the Department of Education’s Office of Postsecondary Education issued a proposed rule to implement student loan changes enacted under OBBBA. Among the rule’s many proposals, Master of Science in Nursing (MSN) and Doctor of Nursing Practice (DNP) degrees would no longer be classified as “professional degrees” causing a lowering of the borrowing limit from $50,000 to $20,500 annually, and from $200,000 to $100,000 in aggregate. A fact sheet can be found here. Comments are due by March 2.
WHITE HOUSE
On January 27, the Trump administration asked a federal court to pause a lawsuit filed by Louisiana seeking nationwide restrictions on the abortion pill, mifepristone, citing a safety review by the Food & Drug Administration (FDA). In its filing, the Department of Justice (DOJ) stated that proceeding with the case could affect regulatory and scientific review processes. A hearing in the case is scheduled for February 24.
On January 29, the White House has postponed the launch of TrumpRx, which was originally expected to take place on January 30. While officials did not clarify why the event was moved or when it will be rescheduled, HHS Secretary Kennedy stated at a Cabinet meeting on January 29 the initiative would likely be released “sometime probably in the next 10 days.”
On January 29, a federal judge ordered the Office of Management and Budget (OMB) to publicly disclose additional details related to agency “spend plans” on its public apportionment database. The order followed lawsuits filed by Citizens for Responsibility and Ethics in Washington (CREW) and Protect Democracy, which challenged OMB’s use of undisclosed spend plans it incorporated by reference in legally binding apportionment footnotes. According to CREW, OMB included undisclosed spend plans in at least 131 apportionment documents approved between March and September 2025.
On January 29, President Trump issued an Executive Order launching the White House Great American Recovery Initiative to coordinate a national response to substance use disorder (SUD). The initiative will be co-chaired by HHS Secretary Kennedy and Kathryn Burgum, Senior Advisor for Addiction Recovery, and will include senior officials from multiple federal agencies. The order directs the initiative to improve coordination across federal programs, increase awareness and access to treatment and recovery services, align prevention and recovery efforts across health, criminal justice, housing, and workforce systems, and engage states, tribal nations, and community-based organizations. A fact sheet can be found here.
RULES AT THE WHITE HOUSE OFFICE OF MANAGEMENT & BUDGET (OMB)
Pending Review
CMS
HHS Notice of Benefit and Payment Parameters for 2027 (CMS-9883); Proposed Rule, 11/14/25
Amending the Indirect Hold Harmless Threshold of Health Care-Related Taxes (CMS-2452); Proposed Rule, 12/31/2025
Administrative Simplification: Adoption of Standards for Health Care Attachment Transactions and Electronic Signatures (CMS-0053); Final Rule, 01/09/26
Interoperability Standards and Prior Authorization for Drugs (CMS-0062); Proposed Rule; 01/16/2026
Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH) (CMS-6098); Notice; 01/16/2026
Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals; the Long-Term Care Hospital Prospective Payment System; and FY 2027 Rates (CMS-1849); Proposed Rule; 01/22/2026
Independent Dispute Resolution Operations (CMS-9897); Final Rule; 01/29/2026
FDA
Evaluating the Safety of Antimicrobial New Animal Drugs with Regard to their Microbiological Effects on Bacteria of Human Health Concern; Guidance for Industry; Notice; 7/10/25
Post approval Pregnancy Safety Studies; Guidance for Industry; Availability; Notice; 8/21/25
New and Revised Draft Q&As on Biosimilar Development and the Biologics Price Competition and Innovation Act; Draft Guidance for Industry; Availability; Notice; 11/26/25
New Clinical Investigation Exclusivity (3-Year Exclusivity) for Drug Products: Questions and Answers; Draft Guidance for Industry; Availability; Notice; 12/01/25
Substances Generally Recognized as Safe; Proposed Rule; 12/01/25
Medical Devices with Indications Associated with Weight Loss--Premarket Considerations; Guidance for Industry and Food and Drug Administration Staff; Availability; Notice; 12/18/25
General Considerations for the Use of New Approach Methodologies; Draft Guidance for Industry; Availability; Notice; 01/09/25
Responding to FDA Form 483 Observations at the Conclusion of a Drug CGMP Inspection: Draft Guidance for Industry; Availability; Notice; 01/27/2026
HEARINGS
House
Energy & Commerce Subcommittee on Oversight & Investigations
Common Schemes, Real Harm: Examining Fraud in Medicare and Medicaid
February 3, 2026, 10:30am EST; 2360 Rayburn House Office Building
Senate
Health, Education, Labor & Pensions Committee
Modernizing the National Institutes of Health: Faster Discoveries, More Cures
February 3, 2026, 10:00am EST; 430 Dirksen Senate Office Building
Witness: Dr. Jayanta Bhattacharya, Director, National Institutes of Health (NIH)
REPORTS
Office of Inspector General (OIG)
On January 27, the HHS OIG issued new guidance clarifying how pharmaceutical manufacturers may offer lower-cost prescription drugs via DTC programs while remaining compliant with the AKS. The guidance outlines conditions under which manufacturers may sell drugs directly to cash-paying patients when the drugs are not billed to Medicare, Medicaid, or other federal health care programs and are not tied to referrals or future purchases. On the same date, the OIG also issued an RFI seeking input on whether any additions or modifications are needed to the AKS and Beneficiary Inducements Civil Monetary Penalty provisions for the DTC programs.
Government Accountability Office (GAO)
On January 29, the GAO reissued a report examining NIH’s efforts to ensure animal welfare and improve the reproducibility and translatability of animal research it conducts or funds. The report found that while the NIH has policies and oversight mechanisms in place to address animal welfare and has taken steps to promote rigor and transparency in research, it has not fully implemented best practices to assess whether those efforts have led to measurable improvements. The GAO recommended that the NIH define short-term, measurable goals and collect evidence to evaluate the effectiveness of its actions to enhance reproducibility and translation of animal research to human health outcomes, recommendations with which the agency concurred.
ADDITIONAL POLICY NEWS
On January 23, the Center for Reproductive Rights filed a lawsuit against the Trump administration alleging selective enforcement by the U.S. Department of Justice of the Freedom of Access to Clinic Entrances Act. The Act prohibits blocking access to abortion clinics, pregnancy resource centers, and houses of worship. The lawsuit challenges recent federal guidance limitingenforcement of the law, and seeks documents related to how the enforcement policy was developed. The Center for Reproductive Rights is asking a federal judge to determine whether enforcement decisions were influenced by external advocacy groups.
On January 25, the New York State Nurses Association announced that it reached agreements with the Mount Sinai Health System and New York-Presbyterian Hospital to fully fund projected increases in nurses’ health insurance costs. Under the agreement, nurses covered by the union’s health benefits plan will not face increased out-of-pocket expenses in the upcoming contract period, while plan trustees work to identify cost savings that do not reduce benefits. The development addresses a key issue in ongoing labor negotiations and brings the parties closer to finalizing new contracts.
On January 26, the American Academy of Pediatrics (AAP) released its 2026 childhood and adolescent immunization schedule, continuing to recommend routine vaccines to protect against 18 diseases based on longstanding reviews of vaccine safety, disease trends, and effectiveness in the United States. The updated schedule maintains existing recommendations and provides minor clarifications, while differing in several areas from a recently updated schedule issued by the Centers for Disease Control and Prevention (CDC). The AAP stated that its guidance is intended to offer a consistent, evidence-based resource for health care providers and families.
On January 26, the American Hospital Association (AHA) sent a letter to HRSA asking it to use enforcement action, including civil monetary penalties, to prevent Lilly from implementing a new policy that would require hospitals participating in the 340B Drug Pricing Program to submit claims data for all dispensations of the company’s drugs regardless of setting. The AHA said the policy would create costly, administrative burdens for safety-net hospitals, while Lilly stated that the data collection would improve 340B compliance and transparency.
On January 27, the advocacy group Public Citizen filed a lawsuit against the Trump administration to compel the disclosure of MFN drug pricing agreements reached with Pfizer and Lilly. The suit, filed in the U.S. District Court for the District of Columbia, argues that HHS and the Department of Commerce failed to respond to Freedom of Information Act (FOIA) requests submitted in October and November regarding the terms of these deals.
On January 29, New York secured a nine-month extension of its MCO tax, allowing the state to collect about $1 billion in additional revenue for the FY2026 budget after CMS granted a transition period under previous guidance issued for states regarding the implementation of new federal requirements on provider taxes. The extension applies to taxes that were enacted and imposed prior to July 4, 2025, and provides states additional time to unwind or adjust existing financing structures while CMS completes rulemaking.