(Jan. 29, 2026) - When Congress nears the endgame of a fiscal year's federal budget process, any contentious item can threaten to derail deals both parties in Washington have made on everything else. The recent events in Minneapolis have become a central point of debate, with Democrats and Republicans seeking shifts in the Department of Homeland Security budget.
Every federal government department's 2026 budget, including the Department of Health and Human Services', has been agreed to by negotiators on Capitol Hill and the White House. The outlier is the Department of Homeland Security. At this point, Republicans want to include DHS funding in a single bill alongside other federal departments that fund all government activities for the fiscal year, while Democrats are unwilling to vote for any bill containing DHS funding until they reach an agreement on policy changes at Immigration and Customs Enforcement.
This deadlock is looming against a deadline tomorrow, Jan. 30, 2026, when many government agencies will run out of funding at midnight and face another temporary shutdown. The stakes are high, and it is unclear who presently has the most leverage to make the other side blink.
On Wednesday afternoon and evening, Senate negotiators discussed the possibility of passing a bundle of full-year budgets for all departments except DHS, while including a short-term continuing resolution for DHS that would force further immediate discussions on the future and scope of ICE's nationwide operations. This is tricky since such modifications to the current bill would have to be returned to the House of Representatives for another vote, where its future would be anything but certain.
Realistically, however, the HHS budget for 2026 is complete and contains many positive provisions for hospitals. Our main requests this year were:
- To eliminate ACA Disproportionate Share Hospital cuts; these were eliminated through Oct. 1, 2027.
- To include various "extenders" of current policy: the Medicare-Dependent Hospital and Low-Volume Hospital programs were extended by one year, telehealth flexibilities by two, and hospital-at-home by five.
- To include FLEX and SHIP funding, both of which were zeroed out in the President's budget: the overall FLEX budget was increased by $10 million to $74.27 million, and SHIP was increased by $2 million to be funded at $22.94 million.
The budget also includes various reforms to pharmacy benefit managers. PBMs would be prohibited from having their compensation in Medicare Part D from being tied to the drug manufacturer’s list price and require CMS to track payment trends to pharmacies and pharmacy inclusion in PBM networks. Additionally, PBMs would be required to pass on all rebates and discounts to plan sponsors and must report semi-annually on drug spending and other determinations.
Unfortunately, the agreement also contains a provision that inches closer to site-neutral payments by requiring all off-campus hospital outpatient departments to be assigned a separate unique identification number from their provider as a condition of payment under Medicare or group health plans, and to submit an attestation that the off-campus HOPD is compliant with current provider-based regulations. Specifically, as of Jan. 1, 2028, hospitals must, for each of their off-campus provider-based departments:
- Obtain and bill under an NPI separate from its parent provider.
- Submit an initial attestation for each of its off-campus provider-based departments attesting that it is compliant with the current provider-based regulations.
- Submit another attestation within a timeframe specified by HHS.
We will be monitoring this closely in the fiscal year 2027 appropriations round to ensure this doesn't blossom into a vehicle for site-neutral payment language.
The situation in Washington is very fluid, and while we're encouraged by HHS's standing in the overall budget bill, we will continue to message to our congressional delegation the importance of getting it across the finish line.
The American Hospital Association has shared an advisory regarding the impacts if government agency funding expires on Jan. 30.