Executive Summary  

• On January 22, the House of Representatives passed the Consolidated Appropriations Act, 2026 (H.R. 7148) to fund numerous agencies; the bipartisan bill also includes temporary “extenders” of health care programs, waivers, and moratoria, some of which are set to expire on January 30.  
• The legislation also introduces new, but previously considered health policies, including broad reforms to pharmacy benefit managers, new requirements for Medicare reimbursement, and authorizations for several public health initiatives.  
• This insight reviews the legislation’s “extenders” and the other policies that could have far-reaching implications for Medicare, Medicaid and the broader health care sector.

Introduction  

On January 22, the House of Representatives passed the Consolidated Appropriations Act, 2026 (H.R. 7148). The “minibus” combines several spending bills with additional standalone legislation from authorizing committees, funding many agencies until the end of the fiscal year. As in prior appropriation cycles, the legislation packages temporary “extenders” of health care programs, waivers, and moratoria, some of which are set to expire on January 30.  

While H.R. 7148 contains a multitude of provisions that address Medicare, Medicaid, and the Food and Drug Administration, it notably includes a nearly two-year extension of Medicare telehealth flexibilities, a five-year extension of hospital-at-home waivers, and a one-year extension of funding for community health centers. The legislation also introduces many new policies, including broad reforms to pharmacy benefit managers (PBMs), new requirements for Medicare reimbursements, and authorizations for several public health initiatives. Notably, many of these policies were previously considered under past legislation and now must gain enough support to pass the Senate’s 60-vote threshold.  

While some of the wide-reaching legislation’s amendments make only minor revisions to laws governing long-standing institutions, others could have profound, undetermined effects on the health care industry, impacting both government-supported programs and the private sector. This insight provides an overview of key health care sections featured in the House legislation ahead of a potential upcoming vote in the Senate.

Extensions of Programs, Waivers, and Moratoria  

H.R. 7148 includes more than 60 provisions in its “Health Care Extenders” section (Division J). This analysis identified 21 sections that temporarily extend programs, waivers, and moratoria relating to the operation of Medicaid, Medicare, and other federal or state programs. In tandem with these extensions, the bill also streamlines enrollment for out-of-state Medicaid/CHIP providers, increases payment incentives for Medicare providers using alternative payment models, and reauthorizes several public education programs administered by the Department of Health and Human Services (HHS).  

Public Health Programs 

Division J reauthorizes several public health programs administered by the Human Resources and Services Administration. Specifically, the legislation allocates $4.6 billion to Community Health Centers (CHCs) for the remainder of fiscal year (FY) 2026, along with roughly $1.2 billion in bridge funding through December 31. These funds support a nationwide network of more than 1,500 CHC facilities delivering primary care services to low-income and uninsured patients. To help mitigate workforce challenges affecting CHCs and other health care providers, the bill also extends funding for the National Health Service Corps (NHSC) and Teaching Health Centers Graduate Medical Education (THCGME) programs. The NHSC would receive nearly $440 million through December 31, 2026, to support scholarships and student loan repayments for primary care physicians working in Health Profession Shortage Areas. Similarly, THCGME programs, which train medical residents in rural and underserved areas, would receive $225 million for FY 2026, with annual funding increases of $25 million through FY 2029.  

Medicaid Disproportionate Share Hospital Allotments  

The legislation includes a provision that would extend the moratorium on scheduled reductions of disproportionate share hospitals (DSH) allotments immediately upon enactment. Federal law requires state Medicaid programs to provide supplemental payments to qualified DSHs, used to help offset the costs of delivering care to Medicaid and uninsured patients. Beginning in 2014, the Affordable Care Act mandated a gradual reduction of these DSH allotments based on the forecast that fewer Americans would require uncompensated care. Congress has since repeatedly delayed these cuts, however, fearing millions of Americans would lose access to essential care. With an impending $24 billion reduction in state Medicaid funding to DSHs over the next two fiscal years, H.R. 7148 authorizes a further delay of the planned allotment reductions until September 30, 2028. This temporary extension of the moratoria ensures sustained Medicaid funding for safety-net hospitals in all 50 states.  

Medicare Telehealth Waivers 

Originally authorized during the COVID-19 public health emergency, Medicare telehealth waivers allow all beneficiaries to receive care administered via remote methods – such as live video conferencing and audio-only communications – from an expanded list of health care providers. With widespread utilization of these waivers, previous legislative updates also established Federally Qualified Health Centers and Rural Health Clinics as eligible “distant site” providers, enabling them to bill Medicare regardless of whether virtual methods are used. In addition to extending telehealth waivers through December 31, 2027, H.R. 7148 introduces new requirements for telehealth reimbursement and transparency. More precisely, the bill would require the HHS secretary to establish unique billing codes or modifiers in instances when Medicare providers contract any third-party platforms to deliver telehealth services.  

Hospital-at-Home Waivers 

Acute Hospital Care at Home (AHCAH) waivers allow eligible hospitals to treat patients requiring acute-level care in their own homes through a combination of in-person and virtual visits. Last year, more than 400 hospitals nationwide used these waivers, treating both Medicare patients and those covered by other plans. Along with extending AHCAH waivers through September 30, 2030, H.R. 7148 appropriates $2.5 million to the Centers for Medicare and Medicaid Services to conduct a study comparing the quality and cost of hospital-at-home care against traditional inpatient hospital care. The results of this study would inform Congress on whether the program should be modified or made permanent. Furthermore, a separate section in the bill enables Medicare patients to receive cardiopulmonary rehabilitation care at home or via telehealth services through January 1, 2028, temporarily waiving the requirement that patients are physically present in an outpatient facility.

New Policies  

While H.R. 7148 integrates traditional health care extenders, it also enacts programs through new authorizing language not traditionally found in appropriations packages. Some of these regulatory changes are discussed below, providing important context for evaluating their potential impact on existing government programs and commercial health care markets.

PBM Reforms 

Of the new policies included in this legislation, the most notable pushes to address long-standing concerns related to pharmacy benefit managers. Three sections in the bill introduce broad reforms to PBMs and their affiliates by amending laws governing Medicare Part D and the Employee Retirement Income Security Act (ERISA). One new provision would require PBMs contracted with Medicare prescription drug plans (PDPs) to enter binding agreements that limit their compensation to only “bona fide service fees.” These contracts would effectively delink PBM remunerations from a drug’s list price. The bill clarifies, however, that certain incentive payments would remain permissible, provided such payments are a “flat dollar amount” consistent with a fair market value determined by the HHS secretary. Moreover, the legislation stipulates that PBMs must pass through 100 percent of all rebates, discounts, and price concessions negotiated with drug manufacturers directly to Medicare PDPs.  

As in past efforts to reform PBMs, H.R. 7148 also mandates several transparency measures for PBMs contracted with employer-sponsored health insurance policies. Starting 30 months after enactment of the bill, PBMs would be required to periodically disclose pricing information – including all rebates negotiated with drug manufacturers – directly to plan sponsors and HHS. This information would expose any instances of PBMs charging health plans more than what they paid to the pharmacy for the same medication. Moreover, reports showing a sizeable difference between the gross and net price of each drug on plan formularies would be used to enforce the 100- percent rebate pass-through requirement. For PBMs integrated with their own mail-order or specialty pharmacies, the bill also mandates that such organizations report any benefit design parameters that encourage or require health plans to fill prescriptions exclusively at those pharmacies, a provision intended to identify self-steering practices.

Finally, the amendments to ERISA require that PBMs and their affiliates remit 100 percent of fees and rebates negotiated with manufacturers directly to contracted health plans within 90 days of the end of each financial quarter. The plans’ fiduciaries would be responsible for conducting independent audits of PBM financial records to verify these rebate pass-throughs; however, the bill provides a “safe harbor” for plans that take reasonable steps to ensure PBM compliance. Organizations acting within this safe harbor would be exempt from any civil monetary penalties imposed by the Department of Labor.

Prescription Drugs  

Language in H.R.7148 advances federal efforts to address health care access and affordability by amending laws governing both PDPs and prescription drug coverage. Notably, the bill would extend existing Medicare cost-sharing subsidies for low-income beneficiaries covered under the “Extra Help” program through plan year 2027, maintaining copayments caps of $1 for generic drugs and $3 for brand-name drugs. Beginning in plan year 2028 and each subsequent year, however, the bill mandates a reduction of copayments to $0 for generic drugs, while retaining a $3 copayment for preferred brand-name drugs, adjusted annually for inflation. This amendment is intended to promote Medicare Part D drug benefits for low-income seniors.  

To improve pharmacy access for all Medicare Part D beneficiaries, the bill would require PDPs to allow any pharmacy to participate in their networks if the pharmacy meets “standard contract terms and conditions.” Effective on the first of January 2029, all PDP contract terms and conditions would have to adhere to  “reasonable and relevant” standards established by HHS and informed by input gathered through a public comment process. To ensure that such contract standards are enforced, the provision would establish a reporting mechanism, allowing pharmacies to notify HHS of any nonpliant PDPs subject to civil monetary penalties. 

Food and Drug Administration 

Title VI of Division J specifically amends laws governing the Food and Drug Administration (FDA). The bill implements provisions from the Mikaela Naylon Give Kids a Chance Act, which aims to accelerate therapies indicated for children with cancers and rare diseases. Section 6601 requires sponsors of drugs and biologics targeting forms of cancer to study each molecule’s pharmacological effect in children, regardless of whether the molecule is originally indicated for use in adults. The bill directs the FDA to issue draft guidance on the recommendations for these studies – including expectations for data on safety, dosing, and efficacy – within 12 months of the bill’s enactment.  

A separate provision of the bill reauthorizes the Rare Pediatric Disease Priority Review Voucher program until September 30, 2029. The program, which lapsed in 2024, allows the FDA to award transferable vouchers to sponsors of novel drugs and biologics indicated for rare pediatric diseases, shortening the agency’s product review timeline by about four months. Notably, recipients may redeem these vouchers to obtain priority reviews for other categories of drugs or biologics under development.  

Other FDA-focused reforms in the bill are intended to promote generic drug competition and modify standards for certain drug patent exclusivity. Section 6703 requires the FDA to provide more detailed feedback to sponsors of rejected generic drug applications, including exact information on how the sponsor can alter the drug’s formulation to achieve brand-name comparability. By streamlining the development and approval process, this provision may encourage greater industry investment in generic medicines. Another section revises how Orphan Drug patent exclusivity is applied, changing the standard for patent protection from drugs for the “same disease of condition,” to the “same approved use or indication within such rare disease or condition.” This technical change allows generic competitors to market previously patent-protected drugs designated under orphan status for new uses or patient populations.   

Hospitals 

The legislation introduces several amendments that permanently modify how certain hospitals receive payments from Medicare and state Medicaid programs, specifically through updates to reimbursement standards for “off-campus” hospital outpatient departments (HOPDs) and new rules for calculating DSH payment adjustments. Section 6225 of the bill codifies site neutrality in some instances and mandates that, beginning January 1, 2028, Medicare plans cease reimbursement for services provided at “off campus” sites unless the hospital provider has established a unique National Provider Identifier from the main hospital campus. Moreover, these HOPDs would be required to submit a formal attestation verifying that each off-campus site meets federal integration standards. These provisions may lay the groundwork for future initiatives to enact site-neutral Medicare reimbursements.  

Working in tandem with the delay to scheduled DSH allotment reductions, the bill authorizes a methodological change to how hospital-specific payment limits are calculated. Effective immediately upon enactment, the law would allow eligible DSHs to include the costs of treating Medicaid beneficiaries dually enrolled in Medicare or another health plan, provided the hospital can demonstrate an incurred aggregate financial loss on those services. By modifying this calculation, safety-net hospitals can effectively increase the maximum payment allotment they are eligible to receive from state Medicaid programs. To support this transition, the bill authorizes states a one-time option to use any unspent DSH allotments, dating back to FY 2022, to fund payments for hospitals that adopt this new payment adjustment model.   

Rural Health Care 

Certain provisions in the bill explicitly provide financial assistance to rural health care facilities and their providers. Most notably, section 6201 extends increased inpatient hospital payment adjustments for qualifying low-volume hospitals through September 30, 2027. Although the provision is not limited to rural hospitals, the expanded eligibility criteria for these higher Medicare payments – which are also separately reauthorized by H.R. 7148 – primarily benefit hospitals in more sparsely populated areas. Additionally, the legislation extends the Medicare-Dependent Hospital (MDH) program through January 1, 2027, maintaining specialized reimbursement rules for small rural hospitals with at least 60 percent of their admissions attributable to Medicare patients. The MDH program allows eligible hospitals to receive an additional payment if their historic costs from previous years were higher than what the hospital would have otherwise received under the Medicare inpatient prospective payment system.