Trump’s FY27 HHS budget proposal outlines cuts, operational changes

President Donald Trump’s healthcare budget proposal for FY27 emphasizes Making America Healthy Again (MAHA) priorities and slashes operational costs within HHS.

At $111.1 billion, total HHS funding would decrease by $15.8 billion, or $12.5%, relative to FY26. When counting onetime recissions, the effective cut would be nearly $23 billion (from $112.3 billion in FY26 to $89.5 billion in FY27), or more than 20%.

Amid widespread cutbacks, funding would increase in a few areas, including chronic disease prevention, primary care, behavioral healthcare, and nutrition and environmental health. Among agencies and programs in line for increases would be the Indian Health Service, including for electronic health record modernization; food safety and other inspections at the Food and Drug Administration; and the Center for the Strategic National Stockpile.

The document describes the administration’s priorities but is merely a starting point for what will be negotiated in Congress leading up to the Oct. 1 start of the new fiscal year. Looming midterm elections will provide the backdrop for that debate.

CMS funding changes and program integrity focus

The bulk of Medicare and Medicaid funding is through mandatory allocations and not subject to the annual appropriations process. Among discretionary disbursements, CMS would receive a $35 million increase for healthcare fraud and abuse control.

“CMS will ramp up oversight of key Medicaid programs by expanding audits and investigations and establishing new processes to support law enforcement and recover the overpayment of funds,” the budget document states.

Program management activities at the agency would lose $437 million year over year. Some of the remaining funding would be geared toward digital initiatives promoting standardized Medicare beneficiary identity verification processes, modernized provider directory systems, and interoperable data exchange between CMS and external health technology solutions.

“CMS has identified critical infrastructure gaps that fragment the healthcare experience and limit effective program administration, including insufficient identity verification for Medicare beneficiaries accessing Medicare.gov and largely manual provider identity validation processes when obtaining a National Provider Identifier and enrolling in Medicare, as well as constrained interoperability and data-sharing infrastructure,” the budget document states.

Key initiatives within the agency also would aim to strengthen oversight of provider quality and safety, with a particular emphasis on nursing homes and hospices.

HRSA’s Office of Pharmacy Affairs, which oversees the 340B Drug Pricing Program, would shift to CMS, a change that could mean more of a cost management focus for 340B.

A funding increase from $12.2 million to $20.5 million would allow for stepped-up 340B oversight of both manufacturers and participating providers, per the budget document, while “greater in-house drug-pricing resources and expertise will streamline processes.”

NIH and CDC funding reductions

All National Institutes of Health (NIH) centers except the National Cancer Institute would incur funding reductions as part of an overall decrease of nearly $3.5 billion. Proposed for elimination are the National Institute on Minority Health and Health Disparities, the Fogarty International Center, and the National Center for Complementary and Integrative Health, while the institutes for drug abuse and alcohol abuse would be combined.

It’s a less drastic set of reforms than proposed for FY26, when the idea was to consolidate the NIH’s 27 centers into eight. Congress ultimately bypassed the proposal.

The budget request also seeks to cap indirect research costs at 15% of the amount payable through each NIH grant. A federal court prohibited HHS from implementing that policy, and an appeals court upheld the ruling in January, meaning any such change now requires congressional authorization. To enhance transparency and administrative simplification, a larger share of grants would be paid upfront instead of distributed over multiple years.

The CDC’s budget would drop by $484 million despite increases for programs to prevent emerging and zoonotic diseases and for general disease surveillance and data analysis.

Cuts would affect funding to prevent viral hepatitis, sexually transmitted diseases and tuberculosis. There would be a nearly $800 million cut to HIV prevention, and the Prevention and Public Health Fund would be eliminated, with focus shifting to core infectious disease surveillance.

The proposed Administration for a Healthy America

For the second consecutive year, the White House seeks to combine several HHS agencies into a new Administration for a Healthy America (AHA), which would be tasked with implementing MAHA priorities.

The new agency would encompass most initiatives currently overseen by the Health Resources and Services Administration, the Substance Abuse and Mental Health Services Administration and several CDC programs.

Areas of focus within AHA would include primary care, maternal and child health, mental and behavioral health, HIV/AIDS, the healthcare workforce, and more. The budget proposes to fund AHA with $14.7 billion, or $8.6 billion less than the various programs received for FY26, when Congress nixed HHS’s recommendation to create the new agency.

Among the programs proposed for elimination are some of HRSA’s provider workforce initiatives, amounting to a reduction of $626 million, including termination of certain grant programs for rural hospitals. The five-year, $50 billion Rural Health Transformation Program, which is not subject to the annual appropriations process, could be used to help fill in gaps.

Provider workforce programs also would retain $788 million in budgeted funding, including $130 million for the National Health Service Corps and $129 million for behavioral health workforce education and training that would focus on the integration of behavioral health into primary care.

New oversight for Medicare claims appeals

Another agency proposed to debut in FY27 is the Assistant Secretary for Civil Rights and Appeals, which would combine the Office for Civil Rights, Medicare’s Departmental Appeals Board (DAB), the Office of Medicare Hearings and Appeals and several others.

For Medicare claims appeals, funding would shift to address the backlog at the DAB Medicare Appeals Council (Level 4 appeals), which had 10,645 pending appeals at the end of FY25.

Reviews by administrative law judges (Level 3 appeals) are a lesser funding priority because a longstanding backlog has been cleared, the budget proposal states.