Senate, House release diverging HHS budget proposals for FY26 (updated-2)

Note: This article was updated Sept. 16 with news about a short-term continuing funding resolution and Sept. 10 with new numbers for some provisions in the House appropriations bill.

Sept. 16 update

Republicans in the House are focusing on a short-term continuation of FY25 federal funding as the most direct route to avoiding a partial government shutdown that would start Oct. 1. A bill released today would keep federal operations fully funded through Nov. 21.

The bill includes the same healthcare provisions that appeared in continuing resolutions (CRs) of recent years, ensuring six-week extensions of funding for graduate medical education, community health centers, the National Health Service Corps, ambulance add-on payments and the Special Diabetes Program.

In addition, an $8 billion cut to Medicaid disproportionate share hospital payments for FY26 would be delayed for the duration of the new CR. Supplemental payments for low-volume hospitals and Medicare-dependent hospitals would continue.

Waivers allowing for expanded Medicare coverage of telehealth and acute-care hospital-at-home programs would be sustained as well.

It is not certain that even the CR will be approved in time to avoid a shutdown. Republicans in the Senate need the votes of at least seven Democrats, and the latter party has been insisting that the CR include a year-long extension of the Affordable Care Act enhanced subsidies to avoid the looming expiration of those credits at the end of 2025.

The newly released CR includes no such provision, but preliminary work reportedly has begun on a separate bill authorizing a subsidy extension.

Original story

Republican-led appropriations committees in both chambers of Congress recently published HHS budget proposals for FY26, revealing differences both with each other and relative to a blueprint put out earlier this year by the White House.

Of the three drafts, the White House recommends the biggest cuts to HHS, from $126 billion in FY25 ($113 billion after current-year recissions) to $94.7 billion next year. The House came in at $108 billion and the Senate at $116.6 billion.

The sides will aim to unify in time to pass a budget before a large share of federal funding expires Sept. 30. Republicans need at least seven Democratic votes in the Senate to avoid a partial government shutdown, which helps explain why some combination of the House and Senate drafts is more probable to emerge than the version the White House submitted.

Democrats on the Senate Appropriations Committee joined with Republicans in a 26-3 vote to advance the combined Labor, HHS and Education budget bill to the full chamber for consideration. The House committee has not yet voted on its counterpart bill, and numerous changes are possible as part of the markup process preceding the vote.

Notably, neither congressional bill endorses the dramatic HHS restructuring included in the White House’s proposal.

HRSA provisions

One area where the House bill is more generous than the Senate’s is in the rural hospital flexibility grants overseen by the Health Resources and Services Administration (HRSA). The House proposes awarding $74.3 million in FY26, compared with $66.3 million as directed by the Senate. These grants are part of a longstanding program that is distinct from the $50 billion rural hospital funding mechanism launched by the FY25 budget reconciliation bill known as the One Big Beautiful Bill Act.

HRSA funding to support the healthcare workforce would drop by $21 million (from $1.4 billion) in the Senate’s bill and $38 million in the House version.

Maternal and child health grants, an area of stakeholder concern amid reports of increasing closures of hospital OB-GYN units in under-resourced communities, would decline by roughly $10 million (from $1.17 billion) in the Senate’s bill and by $185 million in the House bill.

A HRSA subagency called the Office of Pharmacy Affairs (OPA), which administers the 340B Drug Pricing Program, is slated to carry over FY25 funding levels at $12.2 million, per the Senate’s budget. The committee also included language encouraging HRSA to safeguard providers’ ability to apply 340B savings to drugs dispensed at contract pharmacies, in the wake of manufacturer actions to curtail the policy in recent years.

The House bill does not refer to 340B or to OPA more broadly. Meanwhile, the White House has said 340B oversight should shift from HRSA to CMS. (Update: An expanded draft of the House bill includes funding for OPA. See below.).

NIH cuts mitigated

The National Institutes of Health (NIH) was subject to the biggest cut in the White House budget, losing nearly 40% of its funding with plans to consolidate 27 individual institutes into eight.

Both houses of Congress are inclined to retain the status quo. NIH’s FY25 budget of $48.3 billion would drop by only $300 million in the House proposal and would increase by $400 million according to the Senate’s plan. The Senate includes small raises for NIH institutes conducting research on cancer, diabetes and kidney disease, neurological disorders, allergies and infectious diseases, pediatric health, aging-related issues and mental health.

In addition, the upper chamber retained language prohibiting a cap on reimbursement for indirect costs incurred as part of research activity. NIH in February sought to establish a 15% cap, drawing outcries from stakeholders including academic medical centers.

A legal challenge resulted in an injunction preventing the cap from taking effect. Various stakeholders have launched a collaborative effort to come up with a new system for subsidizing indirect research costs.

The Senate’s bill also encourages the National Institute of Child Health and Development to support research on the increasing closures of hospital OB-GYN units and the impact the trend could have on rural communities.

Medicare and Medicaid funding

For CMS, the Senate authorizes roughly $250 million more for program management than the House would, with the former keeping proposed expenses flat year-over-year at $3.6 billion (primary Medicare and Medicaid allocations are based on mandatory disbursements and not subject to the discretionary appropriations process).

Among the CMS initiatives proposed in the Senate bill, although not with specific funding allocations, are:

• Reporting on how the agency is addressing maternal health outcomes, including by optimizing the Birthing Friendly Hospital criteria
• Providing operational support to critical access hospitals (CAHs) that have lost their CAH designation within the past two years or face the prospect of losing it, and starting the process of developing a new payment system to better support rural hospitals
• Providing recommendations on ways to improve the Medicare disproportionate share hospital (DSH) payment formula to help hospitals better anticipate changes that affect reimbursement
• Enforcing the requirement for hospitals to provide stabilizing care to patients in emergency situations, regardless of ability to pay
• Apportioning graduate medical education (GME) slots for hospitals in markets designated as health professional shortage areas by specifically prioritizing facilities in rural areas and those associated with Historically Black Medical Schools
• Applying the updated (and generally more lenient) Stark Law standards for the definitions of commercially reasonable and fair market value when enforcing regulations on physician hiring
• Promoting amputation prevention services for patients with peripheral artery disease
• Supporting the availability of clinical technology (e.g., ultraviolet respirators) that can reduce the prevalence of healthcare-associated infections

The House would give CMS $180 million to spend on managing Medicare hearings and appeals — $16 million less than the Senate, which would carry over the FY25 allocation.

Public health provisions

Some of the biggest differences between the two congressional bills would apply to the CDC and its programs. (Update: An expanded draft of the House bill includes more funding programs such as immunization and respiratory disease prevention and environmental health. See below.)

For example, funding for immunization and prevention of respiratory disease would drop by $6 million (from $919 million) in the Senate bill but would be slashed by more than $680 million under the House blueprint. The House allocates more money to a separate fund designed to guard against a potential influenza pandemic, at $315 million, compared with the Senate’s $308 million.

The Senate would trim $10 million (from $1.4 billion) in funding for activities to prevent HIV, viral hepatitis and tuberculosis, while the House proposes a more than $1 billion reduction by eliminating HIV prevention and research funding.

Allocations for the National Center for Chronic Disease Prevention and Health Promotion would decline by $5 million (from $1.43 billion) as the Senate proposes but by nearly $700 million if the House version holds sway. Funding for the National Center for Environmental Health would stay flat (at $243 million) in the Senate bill but drop by more than $60 million in the House bill.

Funding to support the healthcare industry’s capacity to respond to public health emergencies stemming from natural disasters or man-made circumstances (e.g., chemical or nuclear weapons attacks) would decline from $938 million to $933 million based on the Senate’s bill and to $913 million as provided by the House.

One increase in both bills is for prevention of emerging and zoonotic diseases, with recommended raises of $14 million in the House bill and $3 million in the Senate’s draft.

Other provisions

In the Senate bill, the Substance Abuse and Mental Health Services Administration (SAMHSA) would stay flat relative to FY25, at $7.4 billion. The House proposes to cut $300 million, including $150 million in funding for substance use treatment and $108 million for mental health services.

The Senate would provide SAMHSA with $8 million to dispense as grants to hospitals and emergency departments as part of a continuing initiative to find viable pain-management alternatives to opioids. No such disbursement is currently included in the House bill. (Update: A detailed version of the House bill includes the same sum as the Senate proposes for the grant program.)

Funding would be zeroed out for HHS’s Agency for Healthcare Research and Quality (AHRQ) under the House bill, while the Senate allocates $345 million, or $24 million less than the FY25 enacted amount. The White House has proposed ending AHRQ as a stand-alone agency and assigning its core functions to a new Office of Strategy.

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Sept. 10 update

The House Appropriations Committee conducted a markup of the legislation, largely keeping the healthcare funding provisions unchanged. The bill then passed the committee on a partisan 35-28 vote, queuing it up for the full chamber to consider.

With much work to be done within the GOP and between the parties to agree on final appropriations, there increasingly is a feeling on Capitol Hill that Congress will have to agree on a short-term continuing resolution (CR) to avoid a partial government shutdown starting Oct. 1. A CR would maintain FY25 funding levels.

One new provision resulting from the markup process would prevent CMS from implementing a pilot model to institute prior authorization for some services in traditional Medicare.

Additional details were released about the House bill, including that HRSA’s Office of Pharmacy Affairs would be funded at $12.2 million, the same level as the Senate proposes and the same as in FY25.

CDC funding to address immunization and respiratory diseases would be boosted by a transfer from HHS’s Prevention and Public Health Fund (PPHF) and would total $931 billion, actually surpassing what the Senate proposed.

Similarly, a transfer from the PPHF would increase funding for the National Center for Environmental Health, resulting in a proposed net decrease of $10 million from FY25. The National Center for Chronic Disease Prevention also would incur a lesser reduction than originally drafted, with an adjusted decrease of $274 million.

As part of HRSA funding, the committee designated $2 million to study the issue of rural hospital closures and the potential to repurpose closed facilities for community needs.

The committee also included language urging CMS to establish a reclassification mechanism for hospitals in the lowest quartile of the area wage index (AWI), specifically for such hospitals located near a high-AWI labor market.