On February 3, 2026, Congress finalized federal funding for fiscal year (FY) 2026, with the House passing the Consolidated Appropriations Act (CAA), 2026, with a vote of 217-214, following Senate approval last week. The president signed the CAA () shortly thereafter. The law provides full-year appropriations for the Departments of Health and Human Services (HHS), Housing and Urban Development, Labor, and several other departments.
This year鈥檚 HHS funding bill is notable not only for what it includes, but also for what it omits. It restores or maintains funding for key public health and research agencies previously proposed for elimination in the president鈥檚 FY 2026 , extends several healthcare programs, and contains a significant package of pharmacy benefit manager (PBM) reforms. All of this activity comes as the Administration new grant programs and policy efforts related to its signature priorities.
In this article, we review the major funding and policies approved in the HHS spending bill. We also address key considerations for healthcare organizations as they anticipate downstream funding and policy developments and develop advocacy initiatives for federal FY 2027 bills.
HHS Funding Levels and Direction
The bill provides $116.8 billion for HHS, an increase of $210 million over FY 2025, and rejects large-scale structural reorganizations proposed in the president鈥檚 FY 2026 budget. This provision preserves funding for the Agency for Healthcare Research and Quality (AHRQ), Centers for Disease Control and Prevention (CDC), Health Resources & Services Administration (HRSA), and the Substance Abuse and Mental Health Services Administration (SAMHSA)
Table 1. HHS Agency Funding Highlights, FY 2026
| Agency | FY 2026 Funding | (+/-) Compared with FY 2025 |
| Administration for Strategic Preparedness and Response (ASPR) | $3.7 billion | +$58 million |
| CDC | $9.2 billion | level funding |
| Centers for Medicare & Medicaid Services (CMS), administrative expenses only | $3.7 billion | level funding |
| HRSA | $8.9 billion | +$415 million |
| National Institutes of Health (NIH) | $48.7 billion | +$929 million |
| SAMHSA | $7.4 billion | +$65 million |
The bill also extends mandatory funding for community health centers, special diabetes programs, the National Health Service Corps, and Teaching Health Center Graduate Medical Education.
PBM Reforms in the Package
In one closely watched area of federal policymaking, the FY 2026 package includes a substantial set of PBM-related reforms that largely mirror the bipartisan package negotiated but not enacted in December 2024. These reforms have implications across Medicare Part D, commercial insurance, and employer-sponsored plans.
The legislation contains the following PBM reforms:
- Prohibits PBMs from deriving聽remuneration聽linked to drug prices for聽Medicare-covered Part D drugs聽
- Restricts spread pricing in Medicaid,聽eliminating聽a major driver of PBM revenue聽
- Requires contractual transparency, mandating that PBMs clearly define pricing terms in agreements with Part D plan sponsors聽
- Adds new PBM reporting obligations, including drug price reporting and rebate disclosures聽
- Requires 100聽percent聽passthrough of rebates in ERISA-regulated plans for new, renewed, or extended contracts beginning聽30 months聽after enactment聽
- Expands audit rights for plan sponsors聽
- Codifies the 鈥渁ny willing pharmacy鈥� requirement for Medicare plan sponsors聽
These provisions position 2026 as a consequential year for PBM regulation, increasing transparency, strengthening plan leverage, and heightening HHS oversight.
Healthcare Extenders and Program Reauthorizations
The bill includes a broad set of Medicaid, Medicare, and public health program extenders, affecting providers, patients, states, and managed care plans.
Medicaid
- Postpones reductions聽in the聽Disproportionate Share Hospital (DSH)聽allotments聽until FY 2028聽
- Changes聽the聽DSH cap calculation聽to聽broaden which patient costs count toward Medicaid shortfall聽
- Requires states to聽develop and implement a process to聽allow certain out-of-state pediatric providers to deliver services without聽additional聽screening for three years聽
- Removes age limits on Medicaid鈥檚 Ticket to Work program, allowing adults older than age聽65 to聽participate聽and requires state compliance by January 1, 2028聽
- Establishes new maternity care reporting requirements聽for rural hospitals, with dedicated federal funding聽for hospitals聽and states to聽comply with聽the reporting聽
Medicare
Congress extends several key programs and payment provisions, including:
- Telehealth flexibilities through December 31, 2027聽
- Incentive payments for participation in eligible alternative payment models through payment year 2028 (for performance year 2026) and applies an adjustment amount of 3.1 percent for 2028聽
- Acute Hospital Care at Home waivers through 2030聽
- Low-volume and Medicare-dependent hospital payment adjustments聽
- The聽1.0 work geographic practice cost index floor used in the calculation of payments under the Medicare physician fee schedule through December 31, 2026聽
- Add-on payments for ambulance services聽
- Continuation of Part D coverage for certain antivirals and modifications to hospice payment caps聽
Behavioral Health Policy
The appropriations bill聽was聽finalized聽as the聽administration聽聽new funding and policy initiatives聽to聽support behavioral health, crisis services, workforce expansion, and youth mental health鈥攅fforts mirrored in SAMHSA鈥檚 increased appropriations.聽
SAMHSA鈥檚 $7.4 billion budget includes:
- $1.6 billion聽for State Opioid Response grants聽
- $1.01 billion聽for the Mental Health Block Grant聽
- $535 million for the 988 Suicide and Crisis Lifeline聽
Considerations for Stakeholders
Federal funding and policy developments affect state budget dynamics as many states are now releasing 2026鈥�2027 budget proposals as well as the operational and growth plans of healthcare organizations and partners.
A few key takeaways from the FY 2026 funding bill include:
- Federal appropriations signal聽congressional and聽administration priorities and have聽downstream聽impact on upcoming rounds of grant cycles, including聽SAMSHA and HRSA聽awards.聽
- The approved funding and certain policy extensions provide operational stability and reduce near-term fiscal pressure, such as the further delay of Medicaid DSH cuts. The extra time will allow healthcare entities to prepare for future reductions and plan for financial sustainability.聽
- Agency and program funding emphasize oversight, program integrity, and聽compliance. In addition,聽fraud and program integrity聽priorities are聽woven into聽certain聽new聽policies聽and program聽extensions,聽including聽PBM reforms, flexibility for pediatric care across state borders,聽and rural maternity cost reporting requirements,聽among others.聽
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