May 2025 marked a consequential month in U.S. healthcare policy. In a single wave of announcements, the Centers for Medicare & Medicaid Services (CMS) released new draft guidance for drug price negotiations, expanded audit initiatives in Medicare Advantage, and introduced operational changes impacting everything from telehealth rules to hospice payments.
While individually significant, these updates collectively signal a broader strategic intent: to tighten oversight, modernize processes, and redirect value across the healthcare delivery and financing landscape. For payers and providers, staying ahead of these shifts isn’t just a matter of compliance—it’s a competitive imperative.
In this article we'll unpack the most impactful changes, contextualize them with current data, and identify the operational implications for stakeholders across the Medicare ecosystem.
CMS released draft guidance for the third cycle of the Medicare Drug Price Negotiation Program in May 2025, targeting implementation for 2028. This cycle will expand the program to include drugs under Medicare Part B for the first time, alongside Part D drugs. Up to 15 high-cost drugs will be selected for negotiation in 2026, with their negotiated Maximum Fair Prices (MFPs) taking effect Jan 1, 2028.
The guidance emphasizes improved transparency in the negotiation process and prioritizes drugs that drive high Medicare spending, while aiming to minimize negative impacts on pharmaceutical innovation. CMS is soliciting public comments through June 26, 2025, to refine the guidance and ensure it delivers greater value for beneficiaries and taxpayers. Healthcare payers should anticipate further price concessions on costly therapies, and providers may eventually see lower out-of-pocket costs for patients on negotiated drugs once these prices take effect.
For Calendar Year 2025, CMS finalized several significant updates to opioid treatment services under Medicare. Key changes for OTP providers include:
Telehealth Flexibility: OTPs can conduct periodic patient assessments via audio-only telehealth (phone calls) when video is unavailable (with authorization by SAMHSA/DEA), making it easier to follow up with patients in remote or resource-limited settings. Also, the initial methadone treatment intake can be done via two-way video (telehealth) if an in-person evaluation isn’t feasible and the provider can adequately assess the patient remotely.
Enhanced Payment for SDOH Assessment: CMS updated payments to reflect the additional effort of screening for social determinants of health (SDOH) during intake and periodic assessments. OTPs will be reimbursed for conducting SDOH risk assessments as part of opioid use disorder treatment when medically necessary. This change recognizes the extra clinical work involved in addressing housing, transportation, or other social factors affecting treatment adherence.
New Services and Medications: OTPs can now receive Medicare payment for a new injectable buprenorphine formulation on a weekly or monthly basis, expanding medication options for opioid use disorder maintenance therapy. CMS also created new add-on billing codes for supportive services such as care coordination, patient navigation, peer recovery support, and introduced coverage for Nalmefene hydrochloride nasal spray for emergency treatment of opioid overdose. Additionally, OTP claims must include an opioid use disorder diagnosis code to ensure billing aligns with coverage requirements.
These changes collectively strengthen opioid treatment by leveraging telehealth, addressing patients’ social needs, and broadening the scope of reimbursable services. Payers should prepare for slight increases in OTP claim complexity and volume as providers adopt these new codes, and providers in turn should capitalize on the flexibilities to improve patient access and outcomes.
CMS is modernizing the Clinical Laboratory Improvement Amendments (CLIA) program by transitioning away from paper-based notifications. Laboratories and providers that perform lab testing must switch to electronic fee coupons and CLIA certificates by March 1, 2026. After that date, CMS will cease mailing paper fee coupons and certificates, meaning labs that haven’t enrolled in electronic delivery could miss critical certification updates.
To facilitate this transition, CMS outlined two ways labs can opt in to electronic notifications:
Email Your State Agency: Contact your state CLIA agency (by email) and request to receive CLIA fee notices and certificates electronically. The state agency can set your lab up for email delivery of future CLIA documents.
Submit an Updated CLIA Application: Fill out an updated CLIA Application for Certification (Form CMS-116) and check the option to receive electronic notifications via email. Submitting this form will officially enroll the lab in CMS’s e-notification system.
Labs in states without CLIA exemptions should take action well before the 2026 deadline to ensure uninterrupted compliance. By embracing electronic documents, laboratories can benefit from faster communication (no postal delays) and fewer paper processing burdens. For payers, this shift could eventually streamline verification of lab certifications, since digital records are more readily accessible and up-to-date.
In May 2025, CMS released its annual update to the Medicare Provider Payment and Utilization Public Use Files (PUFs), adding calendar year 2023 data. These provider-level datasets give payers and providers detailed insights into service volume and payments across Medicare fee-for-service and Part D. Notably, the update includes:
Medicare Physician and Other Practitioners Data – a dataset summarizing the services and procedures provided by physicians and other healthcare professionals to Medicare Part B (FFS) beneficiaries. This file lets stakeholders analyze utilization patterns and average payments by specialty, geography, and CPT code for 2023.
Medicare Part D Prescriber Data – a dataset detailing prescription drugs that individual providers prescribed under Part D in 2023, including counts of prescriptions and total drug costs. This sheds light on prescribing trends, such as the most commonly prescribed medications and variations in prescribing behavior across regions.
Both datasets are accessible and support transparency initiatives by allowing health organizations to benchmark and identify trends. For example, a payer might use the Physician & Practitioners file to compare referral patterns or identify high-cost service areas, while providers could reference Part D prescribing data to inform formulary decisions or peer comparisons. The release of 2023 data enables more current analysis, replacing the previous 2022 data, and supports data-driven policy or contracting decisions in the Medicare space.
Outside of Medicare policy, there are important billing process updates for providers using the standard CMS-1500 claim form, particularly in the context of workers’ compensation claims. The New York State Workers’ Compensation Board (WCB) issued guidance to reduce administrative frictions and improper billing objections:
Separate Forms for Separate Claims: Providers are advised not to combine multiple patient claims into one correspondence when seeking payment decisions. If a provider has multiple outstanding claims (for example, unpaid medical bills for different patients or dates of service), each claim should be submitted with its own form/request rather than bundling them together. Submitting individual CMS-1500 forms per claim ensures each is processed and adjudicated without confusion or delay.
Payer Objections Must Include EOBs: Payers (insurers) who object to a medical bill must file their objection on the official forms — Form C-8.1B for legal objections (e.g. claiming treatment is not work-related or authorized) or Form C-8.4 for valuation/fee schedule objections — and they must attach the Explanation of Benefits (EOB)/Explanation of Reimbursement with the objection. Since November 2021, the WCB mandates that all such objections be submitted simultaneously to the Board with supporting EOB documentation; failing to include the EOB can render the objection invalid and result in the bill being deemed payable in full. This policy is meant to curb “improper” objections where payers might otherwise delay or avoid payment without adequate justification.
To help providers adapt to these requirements, the WCB has increased educational outreach. In fact, CMS-1500 electronic submission will be mandatory in NY’s workers’ comp system starting August 1, 2025, and the Board is hosting webinars (with recorded YouTube videos) throughout summer 2025 to guide providers through the new process. By moving to electronic form submission and enforcing strict rules on objections, regulators aim to expedite payments and limit frivolous denials. Healthcare providers should ensure their billing staff are aware of these state-level rules, as compliance will directly affect reimbursement timelines. Payers, in turn, need to tighten their internal processes to include all required documentation when disputing a bill, or risk automatic liability for the charges.
Medicare Advantage (MA) plans are facing significantly intensified oversight. CMS announced a new “aggressive audit strategy” in May 2025 to crack down on improper payments in MA, reflecting concerns over years of possible overbilling. Under this strategy, CMS will audit every eligible Medicare Advantage contract annually going forward, a dramatic expansion from the previous practice of auditing only a subset of plans each year. Beginning immediately, all MA organizations can expect their risk coding and payments to be reviewed for each payment year.
Crucially, CMS is also investing resources to clear a backlog of past audits. The agency plans to complete all remaining Risk Adjustment Data Validation (RADV) audits for payment years 2018 through 2024 by early 2026. This accelerated timeline addresses the current lag – prior to this initiative, the last major recovery of MA overpayments dated back to a 2007 audit. Meanwhile, evidence suggests overpayments have been substantial: Medicare Advantage plans may have been overpaid by an estimated $17 billion to $43 billion per year, according to federal estimates and MedPAC, and earlier sample audits found about 5–8% of payments were improper. The financial stakes are therefore very high for both the government and MA insurers.
To execute this expanded audit scope, CMS is dramatically scaling up its audit workforce and tools. The agency will deploy advanced analytics and increase its team of medical coders from 40 to roughly 2,000 by September 2025 to review medical records and verify diagnoses at an unprecedented scale. Figure: MA Audit Coding Workforce Expansion (2014 vs 2025) below illustrates the planned jump in audit staffing, which is aimed at expediting the identification of unsupported diagnoses and recoupment of improper payments.
CMS plans to expand its audit coding workforce from 40 coders to 2,000 by late 2025 to support the enhanced Medicare Advantage RADV audits. This 50-fold increase in personnel underscores the scale of oversight being applied to MA contracts.
For MA plan providers and sponsors, this aggressive audit posture means greater scrutiny of documentation and risk-coding practices. Payers should brace for audit findings on all their contracts – potentially leading to repayment demands if diagnoses billed to Medicare are not supported by patients’ medical records. Providers participating in MA networks might also see plans invest more in compliance checks or provider education to ensure diagnoses are properly documented. In summary, CMS’s message is clear: it intends to “faithfully execute its duty to audit” MA plans and safeguard taxpayer dollars, even as it continues to encourage Medicare Advantage’s role in providing coordinated care.
CMS has updated its telehealth policy to clarify the use of audio-only versus video calls for Medicare services in the post-PHE landscape. Thanks to provisions in the Consolidated Appropriations Act, Medicare beneficiaries can continue to receive certain non-behavioral telehealth services via audio-only telephone (voice calls) through September 30, 2025. This extension means that for the time being, if a Medicare patient is at home and cannot use or does not consent to video technology, practitioners may furnish the service over the phone and still bill it as telehealth. This flexibility applies to medical telehealth visits beyond just mental health (which already had separate statutory allowances), helping to maintain access for patients who lack smartphones or broadband, or are not comfortable with video chats.
After September 30, 2025, however, the rules will tighten. CMS has finalized a permanent definition of “interactive telecommunications system” that will continue to allow audio-only telehealth only under specific conditions. In other words, starting October 1, 2025, Medicare will only reimburse audio-only telehealth for non-behavioral services if the patient is located at home and is either unable or unwilling to use video, and if the practitioner furnishing the service is capable of video. In all other cases, an audio-video connection will be required for telehealth services (aside from certain mental health services where Congress separately permitted audio-only). This policy balances the goal of broad access with the recognition that video is clinically preferable when available.
For providers, this means now is the time to encourage patients to utilize video platforms for telehealth whenever possible and to prepare for re-imposing some limitations on audio-only visits after the deadline. Telehealth utilization surged during the pandemic, and these continuing flexibilities through late 2025 allow a gradual transition rather than an abrupt cutoff. Payers should communicate with their network clinicians about these upcoming changes – for example, claims for audio-only telehealth evaluation and management codes will no longer be reimbursed starting in 2025, except under the narrow circumstances defined by CMS. Overall, the extension through September 2025 preserves convenient access in the short term, while the post-2025 rules aim to ensure telehealth remains effective and used appropriately in the long term.
In April 2025, CMS proposed the Fiscal Year 2026 Hospice Wage Index and Payment Rate update, which would modestly increase hospice payments. Under the proposal, Medicare hospice payment rates would rise by 2.4% in FY 2026, which equates to an estimated $695 million more in aggregate payments compared to FY 2025. This 2.4% net increase reflects a 3.2% market basket update (projected hospice cost inflation) minus a 0.8 percentage point productivity adjustment, as required by law. For hospices that fail to report quality data, the payment update would be reduced by 4 percentage points, resulting in effectively a -1.6% adjustment for those providers– a strong incentive to comply with Hospice Quality Reporting Program requirements.
What does a 2.4% bump mean in practical terms? CMS provided an example: the statutory aggregate hospice cap (the upper limit on total payments per patient that a hospice can receive in a year) would increase from $34,465.34 to $35,292.51 for the 2025–2026 cap year under this rule. Hospices would thus have a slightly higher ceiling before they must repay excess payments, reflecting the higher payment rates. While a 2.4% update is below the current general inflation rate, it continues the trend of market-basket based payment growth for hospice care. By comparison, the final FY 2025 hospice payment update was a 2.9% increase, so FY 2026’s proposed update is a bit smaller, likely due to expectations of productivity gains and slower cost growth.
Additionally, the proposed rule includes some important clarifications for hospice providers: it would explicitly allow a physician member of the hospice interdisciplinary team to recommend hospice admission (aligning practice with existing certification rules), and it specifies that the required face-to-face encounter attestation must include the clinician’s signature and date. CMS is also using the rule to seek information from stakeholders via a Request for Information (RFI) on ways to streamline hospice regulations and reduce administrative burdens, in line with an executive order on deregulation. Hospice organizations and payers may want to submit comments on these proposals before the rule is finalized (likely later in 2025).
If the 2.4% rate increase is approved, payers should update their hospice payment rates for FY 2026 accordingly, and hospices should budget for slightly higher reimbursements, while ensuring compliance with quality reporting to receive the full update.
In April 2025, CMS finalized the Medicare Advantage (MA) and Part D payment policies for Calendar Year 2026—and the news was better than expected for MA plans. Instead of the modest 2.2% increase initially projected earlier in the year, payments will rise by an average of 5.06% in 2026. That adds up to more than $25 billion in extra funding for MA plans.
What changed? CMS updated its calculations with more recent data, which raised the effective growth rate from 5.93% to 9.04%. That shift significantly boosted the expected revenue increase.
Here’s a quick snapshot of what that looks like:
| Payment Update Factor | Advance Notice (Initial) | Final Rate Announcement |
|---|---|---|
| Effective Growth Rate | 5.93% | 9.04% |
| Expected Average Revenue Change | +2.23% | +5.06% |
This bigger-than-expected bump means MA plans will likely have more financial flexibility in 2026. They might use the extra funds to:
Offset rising medical costs
Offer more generous member benefits (like dental, vision, or in-home services)
Enhance care management and value-based programs
Or simply maintain margins in a challenging cost environment
At the same time, CMS is pushing forward with some important policy changes. 2026 marks the final year of the transition to a new risk adjustment model, which fine-tunes how plans are paid based on members’ health conditions. CMS is also phasing out the indirect medical education (IME) adjustment, which will remove graduate medical education costs from MA benchmark calculations starting in 2026.
While the financial news is positive, MA organizations should keep an eye on compliance. Audit scrutiny and risk model changes are still very much in play. But overall, the strong payment update reflects continued federal support for the Medicare Advantage program—now serving more than 30 million beneficiaries—and offers plans an opportunity to invest in growth, care quality, and member experience.