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June 12, 2025 – As discussed in last week’s Regs & Eggs blog post, the US Department of Health and Human Services (HHS) recently released additional budget documents to support the department’s fiscal year (FY) 2026 discretionary request. HHS released the FY 2026 Budget in Brief that gives an overview of the budget request, and individual HHS offices and agencies, including the Centers for Medicare & Medicaid Services (CMS), put out congressional justifications (CJs) for their discretionary budget requests.
CMS’s CJ describes several budget requests, including the discretionary program management and Health Care Fraud and Abuse Control (HCFAC) accounts. CMS uses HCFAC funding to support efforts to curb fraud, waste, and abuse across its programs – a major priority for this administration. While exploring the HCFAC budget request is a worthwhile endeavor, I’m going to solely focus on the program management request here.
CMS historically has used program management funding to support many of its statutory responsibilities, such as:
The program management budget is by no means the largest within HHS (it pales in comparison to the National Institutes of Health, for example), but it nonetheless is extremely important to consider, as it has a direct effect on CMS’s ability to smoothly and efficiently operate programs that millions of people rely on daily.
Here are some highlights of the CMS program management FY 2026 budget request:
Total Funding
CMS requests $3.464 billion in FY 2026, a $672.591 million decrease from FY 2025 enacted levels. CMS’s program management budget is traditionally divided into four buckets:
In the FY 2026 budget request, CMS proposes to roll up the first three buckets into one “program administration” line item
Funding in Millions
| FY2024 | FY2025 | FY2026 | Difference between FY 2026 and FY 2025 | |
| Program administration* | $3,724.648 | $3,739.648 | $3,022.391 | -$717.257 |
| Survey and certification | $412.334 | $397.334 | $442.000 | +$44.666 |
| Total | $4,136.982 | $4,136.982 | $3,464.391 | -$672.591 |
*There is no program administration budget in FY 2024 or FY 2025, but the amounts shown here represent the combined program operations, research, and federal administration funding levels for comparison purposes.
One of the largest line items in the program operations (now program administration) budget is funding to support Medicare Administrative Contractors (MACs) in processing Medicare fee for service (FFS) Part A and B medical claims and durable medical equipment (DME) claims for traditional Medicare. MACs also enroll providers in the Medicare program, handle provider reimbursement services, process first-level appeals, respond to provider inquiries, and educate providers about the program. CMS requests $588.8 million, a $261.3 million decrease compared to FY 2024 levels (CMS does not provide FY 2025 levels in the CJ for this and many other activities). CMS expects the MACs to process 1.2 billion claims in FY 2026, 22 million more claims than projected in FY 2025 and 45 million more than FY 2024. CMS states that MACs will still be able to perform all their duties despite decreased funding because the budget “reflects efficiencies gained by descoping non-statutory workload and optimizing the level of effort.”
CMS requests $53 million, an increase of $5.5 million over FY 2024 levels, to ensure that Medicare’s payment systems – including the physician fee schedule and all the prospective payment systems – are accurate and updated appropriately each year through rulemaking. The budget also would support updating and modernizing the Medicare FFS payment system, including expanding “telehealth and home infusion therapy for Medicare and Hospice beneficiaries” and developing “analytics to identify and test alternative data sources to support the development of Medicare payment rates.”
CMS requests $21 million, an increase of nearly $20 million over current levels, to support the next round of DME competitive bidding. Once the policies for the next round of DME competitive bidding are established through rulemaking (timing to be determined), CMS would use the additional funding to update information technology systems, educate stakeholders on the bidding program, and perform other tasks such as bidder registration and bid solicitation and evaluation.
CMS is responsible for developing policies, maintaining operational systems, and conducting oversight and auditing activities to run the Part C and Part D programs, which include Medicare Advantage plans, prescription drug plans, and other types of private plans. CMS performs a variety of functions to administer these programs, including “obtaining actuarial estimates, reviewing bids from the prescription drug and Medicare Advantage plans, approving new plan applicants for the new contract year, reviewing formularies and benefits, monitoring current plan performance, reconciling prior year plan payments, and supporting low- income beneficiaries.”
Although CMS recognizes that the number of beneficiaries enrolled in private Medicare plans continues to grow, the agency requests a $7.2 million decrease in funding for FY 2026 compared to FY 2024 ($69.7 million compared to $76.9 million). CMS states that it has “undertaken steps to reduce costs, streamline operations, and reduce redundancies, including reduced operational funding needs by terminating work supporting rescinded Executive Orders, descoping unmandated workloads, and reducing frequency for some workstreams (certain surveys and data collection).”
CMS requests $129.6 million to support the Medicaid and CHIP programs, a $58.9 million decrease compared to FY 2024 levels. Much of the requested funding would be used to update Medicaid data and IT systems, including improving the quality, accessibility, and use of Transformed Medicaid Statistical Information System (commonly referred to as T-MSIS) data. While CMS does not explain the $58.9 million reduction in funding or specify which contracts or activities would be impacted, the agency states that the investments the budget “reflect an effort to consolidate systems, create more efficient workflows, improve transparency and accountability, and increase access to data for decision making all geared toward ultimately improving outcomes for beneficiaries and the states that partner with CMS.”
CMS requests $11.6 million to support the market reforms and other private insurance requirements that originated from the ACA. However, CMS would not use this funding to support the operation of the ACA Exchanges – and CMS states that it is not requesting any discretionary funding for that activity. Unlike previous years, when CMS used some of the program management discretionary budget to operate the Exchanges, the agency now assumes that other sources of funding, such as user fees and the discretionary HCFAC account, can cover all operational costs. The total requested Exchange budget (funding for reviewing plan bids, conducting eligibility and enrollment, conducting consumer information and outreach, and many other functions) is $2.1 billion, a $520 million decrease from the FY 2024 level of $2.63 billion.
CMS is responsible for helping Medicare beneficiaries understand their benefits and coverage options. Through the National Medicare Education Program (NMEP), CMS mails “Medicare & You” handbooks annually to every Medicare beneficiary and supports the 1-800-MEDICARE call center that answers questions from beneficiaries. For FY 2026, CMS requests $284 million for the NMEP, a reduction of $72.1 million compared to FY 2024 levels. The budget assumes that other sources of funding can be used to mail the handbook to every eligible beneficiary (as required by law), which CMS estimates to be 53 million people. Beneficiaries can opt to receive an electronic copy instead of a hard copy, but only 6% do so. Mailing the handbook every year is expensive, and previous administrations have contemplated alternatives (such as sending an electronic version by default and allowing beneficiaries to opt in to receive a hard copy or mailing the handbook to beneficiaries only every other year). In the CJ, CMS explicitly states that it does not intend to change the current handbook mailing policy.
Another perennial issue is the average wait time for beneficiaries who call the 1-800-MEDICARE call center with a question. Call center funding supports staff answering phone calls, and in general, more funding leads to shorter wait times. CMS’s budget request supports an average wait time of five minutes for the estimated 25 million calls the center expects to receive in FY 2026 (CMS does not state in the CJ what the average wait time is).
CMS is responsible for operating many quality initiatives, most notably the Medicare Shared Savings Program (the national accountable care organization program) and the Quality Payment Program (the major Medicare quality reporting and performance program for clinicians). CMS requests $95 million, a $25.1 million reduction of from FY 2024 levels, to support these two programs and to create the data sets used to generate the Star Ratings published on the Medicare Plan Finder. CMS does not describe the $25.1 million cut in detail, but states that the agency “has adjusted its focus by descoping work in accordance with recent Executive Orders, discontinuing non-essential workloads, and prioritizing resources to enhance health outcomes and support value-based care programs.”
Under the planned HHS reorganization, CMS expects to start operating the 340B program, which HRSA currently runs. CMS requests $12.2 million for the program in FY 2026, the same amount of funding that HRSA currently designates for it. This funding would be included within the program administration budget line item, like all other CMS programmatic costs. CMS states that it would use the funding to “continue efforts to improve program oversight and integrity by providing technical assistance to grantees and covered entities, performing eligibility checks and annual recertifications, conducting audits, and maintaining the critical Office of Pharmacy Affairs Information System (OPAIS) that underpins 340B operations.” CMS also states that the funding will support 22 full-time equivalents (FTEs) who work on the program.
Speaking of FTEs, CMS plans to support 4,259 FTEs in FY 2026, 133 fewer than FY 2025 (4,392 FTEs) and 647 fewer than FY 2024 (4,906 FTEs). While most of these FTEs are funded from the CMS program management account, CMS also uses other funding sources that Congress has granted over the years, as well as user fees, to support FTEs. FTEs funded through other sources must work on activities that align with the funding’s statutory purpose. For example, CMS funds more than 500 FTEs from the CMS Innovation Center’s $10 billion appropriation initially provided under the ACA. Those FTEs can only work on Innovation Center models and activities.
CMS already announced the elimination of certain FTE positions as part of HHS’s restructuring plan. Although that decision could help explain the significant decrease in FY 2025 FTEs relative to FY 2024, CMS does not provide additional context in the CJ about the reduction from FY 2025 to FY 2026. Therefore, it is unclear what impact this reduction will have on CMS operations.
CMS requests a significant increase in funding for its survey and certification budget, from $397 million in FY 2025 to $442 million in FY 2026. This budget line supports state or accredited organization surveys and certifications of nursing facilities and other long-term care facilities to ensure that Medicare and Medicaid certified healthcare providers meet minimum quality standards. In addition to routine surveys, CMS’s state and private partners conduct investigations that stem from direct complaints. Complaints are categorized into four levels of severity: Immediate Jeopardy (IJ), Non-IJ High (NIJH), Non-IJ Medium, and Non-IJ Low (NIJL).
Survey frequency for certain types of facilities, including nursing, home health, and hospice facilities, are dictated by federal law. CMS has historically dedicated the majority of this budget item to ensure that the statutorily mandated surveys are conducted. The agency has noted in previous years, however, that the amount of funding Congress appropriates is insufficient to cover 100% of the required surveys. Even the FY 2026 request, which is $44 million above current levels, would only fund about 65% of the surveys for statutory facilities and projected complaints in all facility types at IJ and Non-IJ High levels. The budget also allows for a small percentage of surveys for non-statutory facilities with higher beneficiary risks. Although CMS clearly states that the FY 2026 budget, like the previous funding levels before it, would not support 100% of surveys, the agency argues that its budget would move the survey and certification program in “a positive direction and increase quality and safety across the country.”
It is clear from the program management request that CMS believes it can find significant efficiencies in current contracts, reduce overall staff, and shift costs to other funding sources – and still carry out all of its important responsibilities. In other words, CMS aims to carry out its critical mission to serve the 170 million people who rely on the programs that the agency oversees, while trying to be a good steward of taxpayer resources. Congress will ultimately determine whether CMS’s request struck the right balance between the two goals, as it gets to enact the final FY 2026 funding level for the CMS program management budget account.
Until next week, this is Jeffrey saying, enjoy reading regs with your eggs.
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