Health Policy Reforms in Final FY2026 Budget

Action: On February 3, Congress passed the “minibus” appropriations package. It did not extend enhanced subsidies for health care plans purchased on the Marketplace but keeps funding for core Federal health agencies largely intact; extends several COVID-era policies; and includes sweeping policy reforms, particularly toward drug benefit intermediaries, that have bipartisan support and clear relevance to businesses offering employee health insurance programs.

Trusted Insights for What’s Ahead^®

• For FY 2026, Congress largely maintained funding toplines for major health agencies at roughly the same levels as FY 2025, rejecting the Administration’s proposed cuts to discretionary spending. The package provides total funding for the Department of Health and Human Services at $116.8 billion. It funds key agencies and programs including the National Institutes of Health ($48.7 billion), the Centers for Disease Control ($9.1 billion), Community Health Centers ($1.86 billion), and the Substance Abuse and Mental Health Services Administration ($7.4 billion).¹
• The package also extends some COVID-era programs, including Medicare telehealth flexibilities through December 2027 and the Acute Hospital Care at Home waiver through September 2030.²
• The package includes reforms targeting pharmacy benefit managers (PBMs), intermediaries that manage prescription drug benefits for insurers, employers, and government programs. The reforms would delink PBM compensation in Medicare Part D from drug list prices, expand prescription drug price transparency for employer-sponsored plans, require CMS to define and enforce “reasonable and relevant” PBM contract terms, and strengthen Federal oversight of pharmacy reimbursement and network participation, including tracking payments to “essential retail pharmacies,” a new category for pharmacies situated in medically underserved areas.³
• The largest PBMs process an estimated 80% of all US prescription claims annually; Congress has intensified scrutiny of how their pricing practices, rebate structures, and market concentration contribute to higher drug costs.⁴ Pharmacy groups and patient advocates have largely welcomed the changes as important transparency and accountability measures that could lower costs.⁵
• What this means for business: While Congress sidestepped some of more politically fraught health care debates, including the expired enhanced Affordable Care Act premium tax credits, the PBM reforms may influence business negotiations with insurers in 2026 and beyond.
• Policymakers are taking a firmer stance on health care cost growth, a shift already evident in CMS’s proposed near-flat Medicare Advantage rate increase for 2027 and House hearings on affordability. This trend may continue across insurers, providers, drug manufacturers, and other intermediaries as Washington leans more heavily on oversight and fiscal discipline.⁶
• A key question for employers is how Federal payment restraint and new oversight will impact the commercial market. Insurers may push for higher rates to reflect lower payments for Federal health programs. Meanwhile, employers will likely seek to moderate plan pricing to reflect lower systemic costs and to expand transparency beyond drug pricing to other health care services.

Endnotes

1. Senate Committee on Appropriations. FY26 LHHS Conference Bill Summary. January 2026. https://www.appropriations.senate.gov/imo/media/doc/fy26_lhhs_conference_bill_summary.pdf ?

2. Office of Congressman Buddy Carter. “Carter Celebrates Passage of His Key PBM Reforms to Lower Costs for Patients.” U.S. House of Representatives, January 2026. ‘https://buddycarter.house.gov/news/documentsingle.aspx?DocumentID=16283 ?

3. Bipartisan Policy Center. “PBM Reform Gains Momentum in Congress.” January 2026. https://bipartisanpolicy.org/blog/pbm-reform-gains-momentum-in-congress/ ?

4. Federal Trade Commission. Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs. FTC Report. 2024. https://www.ftc.gov/system/files/ftc_gov/pdf/pbm-report.pdf ?

5. American Pharmacists Association. “APhA Applauds PBM Transparency and Accountability Measures Included in FY26 Minibus.” February 2026. https://www.pharmacist.com/Advocacy/Issues/PBM-Reform ?

6. Centers for Medicare & Medicaid Services. Medicare Advantage and Part D Rate Announcement (Advance Notice context), 2026–2027 cycle. https://www.cms.gov/medicare/health-drug-plans/medicare-advantage ?