Trump Budget Proposal Targets HHS, Medicaid Financing Tools, and Public Health Programs: The Trump administration’s FY2026 budget proposal calls for a one-third cut to HHS discretionary spending, including a 40 percent reduction to NIH and a 44 percent cut to the CDC. The proposal would eliminate key programs supporting rural hospitals, maternal health, chronic disease prevention, and HIV services. At the same time, lawmakers are considering limits on state provider taxes, which help hospitals secure federal Medicaid matching funds. If enacted, the move could reduce hospital funding by an estimated $600 billion over 10 years.
Key Takeaways: Hospitals face multiple financial risks, including the loss of federal research grants and reduced Medicaid support. Health systems should assess exposure to provider taxes, model funding disruptions, and begin engaging with state Medicaid leaders and policymakers.
Executive Order Revives Drug Pricing Reform and 340B Changes: President Trump signed a new executive order focused on lowering drug costs, increasing pricing transparency, and revising how Medicare negotiates with drug manufacturers. The order also calls for changes to the 340B program and directs agencies to explore site-neutral payment reforms and greater disclosure of PBM-consultant relationships. However, hospital leaders are divided about the changes. The Federation of American Hospitals called the EO “an important step forward” to adjust Medicare outpatient hospital drug payments for 340B discounts, aiming to lower patient cost-sharing and increase fairness in drug payment. In contrast, America’s Essential Hospitals warned the EO would “devastate essential hospitals and the patients they serve” by imposing “significant Medicare payment cuts” that threaten access to care for underserved populations, countering the EO’s stated intent.
Key Takeaways: Hospitals should monitor upcoming rulemaking on 340B pricing and Medicare drug negotiations. Pharmacy and finance teams may need to adjust revenue forecasts and prepare for shifts in outpatient reimbursement models.
Federal Missteps and Mixed Messaging Undermine Outbreak Response: The CDC delayed issuing provider guidance during the current measles outbreak, which has surpassed 700 cases. At the same time, the agency’s viral hepatitis lab was closed, leaving a gap in national disease surveillance.
Key Takeaways: Hospitals should prepare to lead on outbreak education, reinforce vaccine trust, and ensure their own response protocols are current. With limited federal coordination and conflicting public messaging, local systems may need to take a more visible and proactive role.
AHA Pushes for Tariff Exemptions as Supply Pressures Mount: Despite a temporary 90-day pause on country-specific tariffs, hospitals continue to face procurement challenges and rising costs for imported medical devices and PPE. The American Hospital Association is advocating for healthcare-specific exemptions to avoid further strain on systems already operating under fixed reimbursement rates.
Key Takeaways: Supply chain and finance teams should evaluate tariff exposure – particularly given its implications on managed care contracts – adjust procurement timelines, and plan for continued cost pressures. These risks should be factored into budgeting, managed care negotiations, and capital planning discussions.
On the Horizon
Medicaid Reconciliation Bill in Progress – Following adoption of the FY 2025 budget resolution, congressional committees are now drafting a reconciliation bill that could reshape Medicaid financing. Lawmakers must identify $880 billion in health program savings, with proposals likely to include capped federal funding, work requirements, and stricter eligibility checks. While the resolution claims to preserve Medicaid benefits, any reduction in federal matching funds could shift costs to states and put pressure on safety-net hospitals. Stakeholders should prepare for policy changes that may impact coverage, reimbursement, and long-term financial planning.
