Trump Administration Proposes One-Third Cut to HHS Budget with Major Agency Restructures
The Trump administration's draft fiscal year 2026 budget proposal aims to reduce the U.S. Department of Health and Human Services (HHS) budget by approximately one-third, signaling significant cuts to federal health programs. This proposal reflects a strategic shift in healthcare and social service priorities with implications for various agencies and programs under HHS oversight. Notably, the Centers for Medicare & Medicaid Services (CMS) has requested an increase in mandatory funds for Medicare Administrative Contractors to support enhanced provider cost report audits, highlighting ongoing efforts to improve payment integrity under the Affordable Care Act provisions.
The proposal pushes for greater transparency from CMS regarding hospital cost report audits, responding to concerns about cost accuracy that affect reimbursement calculations under prospective payment systems. Additionally, oversight of the 340B drug pricing program is slated to move from the Health Resources and Services Administration (HRSA) to CMS, introducing potential operational changes for hospitals reliant on 340B savings amid existing regulatory complexities.
Substantial funding reductions are proposed for the National Institutes of Health (NIH) and the Centers for Disease Control and Prevention (CDC), with NIH’s budget decreasing by about 40% and a restructuring that consolidates several institutes. CDC funding would be cut nearly in half, eliminating key programs addressing domestic HIV, chronic diseases, and public health initiatives targeting obesity, diabetes, smoking cessation, and heart disease. These cuts could have a marked effect on public health infrastructure and research capacity.
The budget also anticipates lower enrollment in federal health exchanges due to the scheduled expiration of enhanced Affordable Care Act subsidies by the end of 2025 unless legislative action extends them. A new $20 billion Administration for a Health America (AHA) would be established, consolidating functions from existing agencies but also cutting several rural health programs and workforce development initiatives previously managed by HRSA.
The Food and Drug Administration (FDA) budget is maintained to preserve its statutory authority to collect industry fees critical to expediting drug and device safety reviews. The proposal emphasizes balancing the federal budget through realigning federal and state responsibilities, reducing federal spending, and eliminating programs deemed inefficient. Overall, the budget draft signals a considerable restructuring and reduction of federal health agencies and programs, with significant implications for healthcare providers, payers, and public health services across the United States.