A 2026 Medicare Reform Agenda

In 2025, the Trump administration advanced meaningful Medicare payment reform to address numerous distortions created by long-standing, misguided government policies. Today, we are releasing a policy brief co-authored by Demetrios Kouzoukas, who ran the Center for Medicare from 2017 through 2021, and Jackson Hammond, that reviews major Medicare regulatory reforms finalized in 2025 and outlines a targeted agenda for reforms CMS should consider in in 2026 rulemaking. This brief follows a virtual Medicare event on January 27 between Demetrios and the current Center for Medicare head, Chris Klomp.

I start today’s newsletter with an overview of the key items in the Medicare policy brief. Then, I discuss the launch of TrumpRx to expand direct-to-consumer drug access and benefit millions of American patients. I then highlight a new Prognosis showing the county-level Obamacare enrollment fraud in Florida—the state with the highest number of improper enrollees—and close with the House Judiciary Committee’s latest actions investigating Obamacare enrollment fraud.

Medicare Payment Reforms in 2025

In 2025, CMS started to move some Medicare payments toward expanded choice and competition, reducing several long-standing government distortions in the process. Key accomplishments include:

• Site-neutral payment reforms. CMS began phasing out the inpatient-only list, expanded the ambulatory surgical center covered procedures list, and adjusted physician payment calculations to address outdated assumptions about practice expense differences between independent physicians and physicians employed by a facility. Together, these changes reduce government-created consolidation incentives, lower costs for taxpayers and beneficiaries, and allow site-of-care decisions to be driven by clinical judgment rather than payment differentials.

• More market-informed payment policies. CMS finalized policies to collect Medicare Advantage (MA) price data to improve fee-for-service rates for inpatient hospitalizations, strengthened hospital price transparency requirements, adjusted physician payment to address government incentives that decrease the availability of primary care physicians, and took steps to reform MA and Part D Star Ratings.

• Improving drug pricing and consolidation incentives. CMS announced it will initiate a hospital drug acquisition cost survey for drugs acquired at a discount through the 340B Drug Pricing Program, and it equalized drug administration payments across outpatient hospital and physician office settings.

• Targeting waste, fraud, and abuse. CMS shut down runaway skin substitute payments that had driven spending growth of more than 4,000 percent, moving to a flat amount expected to reduce spending on skin substitutes by 90 percent and save seniors over $130 a year in Medicare premiums.

How CMS Can Improve Medicare in Its 2026 Rulemaking

CMS should build on the significant Medicare payment reforms advanced in 2025 by further strengthening consumer choice and continuing to unwind longstanding payment distortions. Key areas of focus should include:

• Further advancing site-neutral payment reform. Despite the successes, Medicare continues to pay more for identical services based solely on where care is delivered, which encourages hospital consolidation and leads to higher costs for taxpayers and beneficiaries. Where services are commonly delivered across hospital outpatient departments and other settings like ambulatory surgical centers or physician offices, CMS should consider equalizing payments by applying the lower of the overlapping rates.
• Building on the strengths of Medicare Advantage. CMS could analyze whether to adopt residence-based benchmarking so MA payments reflect the costs incurred by other enrollees in their home market rather than where care happens to be delivered. CMS should take steps to move toward informed active choice so beneficiaries more intentionally choose between MA and traditional Medicare rather than defaulting into fee-for-service. At the same time, CMS should reduce unnecessary administrative micromanagement—particularly in marketing and network rules—that adds unnecessary costs and inhibits consumers’ choices.
• Relying on market signals where possible. Such reforms could include using MA price data to inform fee-for-service rates, advancing additional measures related to payment for 340B drugs to reduce government-created consolidation incentives and excessive drug spending, and modernizing Part D to allow more flexible, value-based formulary design. These steps would further chip away at the opaque cost-plus formulas used by Medicare and move payments toward real-world market pricing.
• Enhancing program integrity and quality oversight. CMS should consider addressing the consequences of uncapped cost-plus spending by expanding prior authorization in high-fraud and high-utilization areas.
• Empowering individuals and reducing regulatory duplication. CMS should consider realigning Medicare to direct health care resources by refocusing disproportionate share payments, addressing wage index distortions, reducing federal regulation that is duplicative of state regulation, identifying circumstances where it may be desirable to enable greater consumer control over payments and contracting, and codifying competition and choice over centralized administrative control.

TrumpRx—Advancing Direct-to-Consumer Reforms 

The launch of TrumpRx represents a step toward restoring transparency and patient agency in prescription drug pricing. Rooted in Most-Favored-Nation pricing agreements, the direct-to-consumer (DTC) platform provides patients with upfront access to substantially discounted prices on 43 branded drugs from participating manufacturers, including treatments for obesity, respiratory conditions, infertility, and menopause.

For uninsured individuals and patients operating outside traditional insurance arrangements, TrumpRx offers immediate relief from the opaque and often inflated pricing dynamics that dominate the third-party payer system. It may also improve access to drugs that insurers frequently exclude or tightly restrict, such as obesity medications and fertility treatments.

TrumpRx highlights the value of transparent, upfront pricing. Patients can see prices directly, compare options, and access discounts without navigating rebate structures, formulary exclusions, or back-end negotiations that obscure costs and limit choice.

At the same time, TrumpRx operates within—and is constrained by—the existing insurance architecture. The discounts TrumpRx promotes are from list prices, which are much higher than what is typically paid. Purchases made through the platform generally do not count toward deductibles or out-of-pocket limits, limiting its utility for many insured patients. In addition, some discounted drugs have generic alternatives available at substantially lower prices.

To fully realize the promise of transparent, consumer-driven drug pricing, policymakers should pursue complementary reforms to reduce third-party distortions that limit the effectiveness of DTC models. Even so, TrumpRx moves the ball in the right direction with transparent pricing and direct access that can bypass entrenched middlemen and deliver real benefits to patients harmed by the status quo.

Staggering Obamacare Enrollment Fraud in Florida—at the County Level

A new Paragon Prognosis by Niklas Kleinworth estimates improper enrollment in the Obamacare exchanges at the county level in Florida. The analysis builds on Paragon’s prior research documenting exceptionally high enrollment among individuals reporting income between 100 and 150 percent of the federal poverty level—the exact income range that qualifies for the largest subsidies. Using the same core methodology developed in The Greater Obamacare Enrollment Fraud, the analysis compares county-level exchange enrollment data with Census and American Community Survey estimates of the people plausibly eligible for fully subsidized coverage.

In some Florida counties, there are well above 7 times more exchange enrollees reporting income between 100 and 150 percent FPL compared to the number of individuals likely eligible. Counties with the most egregious disparities include Bradford, Broward, Columbia, Gadsden, Miami-Dade, Monroe, Orange, and Suwannee.

House Judiciary Subpoenas Eight Insurers on ACA Enrollment Fraud

On February 10, the House Judiciary Committee issued subpoenas to eight health insurance companies after they failed to comply with the Committee’s previous requests for information related to Obamacare subsidy fraud and their anti-fraud measures. As a reminder, Obamacare subsidies go directly to insurers, which benefit from improper and phantom enrollment because it means more money in their coffers. As Paragon has documented, improper enrollment in the ACA exchanges surged to an estimated 6.4 million enrollees in 2025, with insurers collecting tens of billions in subsidies for enrollees who never used their plans—including those fraudulently enrolled without their knowledge.

In December, the Judiciary Committee requested information   about these companies’ fraud prevention practices following a federal judge’s August ruling that struck down key anti-fraud provisions of CMS’s 2025 program integrity rule and a GAO report revealing the ease of ineligible enrollees receiving subsidies and more than $21 billion in unreconciled ACA subsidies in 2023.