Site-neutral payment emerges as Medicaid savings tool in GOP reconciliation plan

Congressional Republicans are touting healthcare competition and consumer choice, along with expanded site-neutral payment, in a preliminary framework for a second reconciliation bill.

The Republican Study Committee in the U.S. House of Representatives put forth ideas geared toward healthcare policies, home prices, energy prices, credits for stay-at-home parents and more, along with proposals to cut spending across the government.

One of those cost-cutting measures, per the document, would “impose site-neutral payment requirements on hospital billing in the Medicaid program.” The projected savings from that provision is $172 billion over 10 years, adding to estimated federal Medicaid spending cuts of $900 billion stemming from provisions in the 2025 reconciliation bill known as the One Big Beautiful Bill Act (OBBBA).

Other proposed reforms seek to revamp the health insurance infrastructure through steps such as increasing the availability of individual plans outside the Affordable Care Act (ACA) marketplaces and expanding the breadth of health savings accounts. There also are provisions to address drug prices and Medicaid program integrity, while a transparency provision would require insurers to “disclose out-of-network access to low-cost providers, enabling patients to pay cash rates for care and see the doctor they want.”

The early framework appears to target less healthcare spending than the OBBBA. The listed proposals don’t include rumored ideas such as slashing Medicaid payments to expansion states to equal the federal share paid to cover non-expansion enrollees.

As seen with the OBBBA, a reconciliation bill allows legislation to pass the Senate with a simple majority rather than needing to reach the 60-vote threshold. To be included, provisions must have a direct impact on federal spending or revenue.

Hospital and provider revenue implications

Site-neutral payment, which has gained traction as a policy in 2026, and other conceptual steps to reduce healthcare spending were highlighted during the House Budget Committee’s Jan. 21 hearing on affordability.

Republicans criticized the ACA and the status quo, rebuffing the arguments of Democratic committee members that the ACA enhanced subsidies should be extended. Looking to move beyond that debate, several GOP committee members turned the focus to the cost of care delivery.

“I hope we can talk about the delivery of care and the runaway cost to just the delivery — not the Obamacare market, not the private insurance market, but delivery of care in general,” said Jodey Arrington (R-Texas), chair of the Budget Committee. “Site-neutral. PBMs [pharmacy benefit managers]. There are plenty of big plays to run [where] I think there is common ground.”

Improving healthcare affordability “requires lowering the cost of medical services themselves by addressing consolidation, banning facility fees, fixing payment distortions and rebalancing risk in Medicare [Advantage] plan markets,” Joel White, president of the Council for Affordable Health Coverage, which promotes market-oriented healthcare solutions, said during his testimony.

Hospital advocates can be expected to push back against the notion of eliminating facility fees. In a 2025 fact sheet, the American Hospital Association (AHA) said banning the fees in reimbursement for outpatient services would cut hospital revenue by anywhere from $3 billion to $180 billion over 10 years, depending on the scope of the policy.

“Facility fees are increasingly used to cover the true cost of providing physician services, which hospitals do by subsidizing physicians’ pay above the underpayment that they are reimbursed from both public and private payers,” the AHA stated.

Consolidation, competition and market power

Both parties see healthcare consolidation as an issue to address. White said 97% of both hospital and Medicare Advantage (MA) plan markets meet the federal definition of concentrated, and such markets correlate with 30% higher prices and higher health plan premiums.

On healthcare pricing, “There at a certain point is nothing you can do if there is [only] one hospital in town,” said Benedic Ippolito, PhD, senior fellow with the American Enterprise Institute.

Rep. Becca Balint (D-Vt.) wondered why the Antitrust Subcommittee of the House Judiciary Committee is not taking a closer look at the issue. Arrington, the Budget Committee chair, replied that there is bipartisan agreement on the topic.

“We ought to huddle up at some point and figure out where we can deal with Big Medicine monopolies in pharma, hospital, insurance — the whole gambit,” Arrington said.

Providers seeking to justify mergers on the basis of improved care coordination or financial stability may face an increasingly difficult regulatory environment if Congress follows through on some of the talking points. However, there also needs to be broad reform to regulations, White said.

Policies over the last 15 years “replaced market competition with mandates, administrative pricing and regulatory complexity,” White said. “Those policies rewarded size and compliance, not value or efficiency, and they triggered massive consolidation in markets. Large insurers and hospital systems responded exactly as the incentives encouraged. They got bigger, they gained market power and they raised prices.”

Medicare Advantage and utilization management concerns

Witnesses at the hearing also cited concerns about MA plans, saying risk adjustment and coding practices are driving excessive federal payments that could be trimmed without substantively affecting benefits.

“The biggest challenge there is simply making sure that when you send checks to those insurance companies, you send them a reasonable amount and you don’t give them an incentive to play games with coding behavior and the like,” Ippolito said.

Another issue discussed was low-value care in traditional Medicare, as seen in geographic variation in spending on low-value services.

“Traditional Medicare does a really poor job of constraining the use of even really low-value healthcare,” Ippolito said. “That’s a great area to try and target.”

Policies to address such issues could result in increased efforts at utilization management, as seen in the new Wasteful and Inappropriate Service Reduction (WISeR) six-state pilot.

Some legislators are concerned about the impact of AI as deployed in that model. A bill introduced in January would halt the ongoing implementation of WISeR and prohibit similar models.

“There’s no transparency, or little transparency [in WISeR],” Rep. Greg Landsman (D-Ohio), who sponsored the bill, said during a hearing earlier this month. “The big pieces here are the financial incentive model [for participating tech companies] that no one knows what’s in it. And then the lines of code that will be deciding whether or not somebody gets healthcare, which is insane.”

It remains to be seen whether the bill can get enough bipartisan support to advance.

“The WISeR model does not change Medicare coverage policy, but will focus on ensuring that for a set of nonemergency services, seniors are getting safe, effective and appropriate care,” said Rep. Morgan Griffith (R-Va.), chair of the House Energy and Commerce Committee’s Health Subcommittee.