2027–2028 healthcare policy forecast: What will impact health systems most and how to prepare 

Policymakers are moving beyond annual reimbursement updates to challenge historical norms for offsetting rising medical costs and funding innovation:  

• Under H.R. 1, restrictions on provider taxes constrain states’ ability to finance Medicaid, while new caps on state-directed payments limit reimbursement to hospitals and other providers. Together, these changes will reduce states' flexibility to sustain current Medicaid funding and provider payment levels.

  KFF estimates that at least 37 states have hospital state-directed payments that could be reduced under the new limits. While major reductions will phase in beginning in late 2027 and 2028, states will need to determine how to respond, including whether to replace lost financing, redesign Medicaid payments, or allow reductions to flow through to providers. The magnitude of the impact on health systems will depend heavily on states’ existing financing arrangements and the choices they make.

• Medicare is also expanding site-neutral payment policies, narrowing reimbursement differences across outpatient settings. The Centers for Medicare & Medicaid Services (CMS) finalized lower payments for certain imaging services in off-campus hospital departments that will begin in 2027, building on similar changes to drug administration payments in 2026.
• CMS is actively adjusting the 340B program. In 2027, the agency will reduce Medicare payment for 340B-acquired drugs to average sales price (ASP) minus 28%, offset by higher payments for other outpatient services. The net impact will vary by each health system’s service mix. CMS also accelerated a separate reduction in payments for non-drug outpatient services, increasing it from 0.5% to 2% in 2027. A planned 340B rebate model could create additional cash flow constraints and administrative demands.
• States are taking more direct approaches to commercial healthcare costs through rate caps, reference-based pricing, facility-fee restrictions, and broader hospital pricing oversight, including within merger and acquisition review. For example, Delaware's 2026 law establishing Medicare-based hospital payment limits for commercial coverage beginning in 2028 illustrates the direction of these policies.

While affordability is a common rationale, the effects of these policies are not interchangeable. Reducing government spending or provider payments does not necessarily reduce the underlying cost of delivering care or make care more affordable for patients.  

For health systems, the cumulative effect of these changes may be more consequential than any individual policy, particularly where financial performance depends on multiple forms of supplemental funding, payment differentials, or commercial rate growth. Leaders will need to quantify their exposure and assess where existing cost structures must change to remain financially sustainable. 

Changes in public coverage support, eligibility requirements, and insurance market economics are creating different pressures across Medicaid and the individual market, including the ACA Marketplace. These developments increase the risk of coverage loss and disruption, with consequences for patients, health plans, and providers: 

• Under H.R. 1, new Medicaid work and community-engagement requirements and more frequent eligibility verification begin in 2027. The law’s Medicaid provisions are projected to increase the number of uninsured people by 7.5 million by 2034, reflecting both new requirements and the challenges of documenting or verifying continued eligibility.

  The magnitude and timing of these losses will depend heavily on state implementation—namely, how they direct and resource systems, processes, and outreach to support redetermination and enrollment. Democratic control of Congress could also reopen debate over certain eligibility provisions or create opportunities for targeted changes, although significant revisions to H.R. 1 would require bipartisan agreement and presidential approval.

• The ACA Marketplace faces a different set of pressures. Enhanced premium tax credits expired at the end of 2025, raising net premiums for many enrollees and contributing to lower enrollment in 2026. Marketplace enrollment fell by 2.6 million (12%) between February 2025 and February 2026, with declines smaller in states that offset some of the lost federal assistance. Separately, federal enrollment-integrity enforcement has led to subsidy terminations and coverage cancellations, adding another source of coverage disruption and uncertainty.

  Democratic gains in Congress increase the likelihood that restoring enhanced subsidies will return to the legislative agenda, although the scope and prospects for an agreement remain uncertain. Whether Congress acts, whether states maintain or expand their own support, and how insurers respond will shape local coverage affordability and stability.

These developments do not represent one uniform coverage-loss story. Their implications extend beyond the number of insured individuals to the stability of coverage arrangements, access to providers, and continuity of care. Medicare Advantage illustrates this distinction: Health plan exits and network changes can disrupt access to care even when beneficiaries remain insured. 

More broadly, as health plans respond to changing policy requirements and market economics, the adjustments they make (e.g., product design, market participation, networks) can have implications for health system finances and patient access. 

These pressures will be particularly consequential in markets with significant Medicaid or Marketplace populations and limited alternative coverage options. Health systems will need to anticipate how coverage losses and changes in insurance market participation may affect their payer mix, financial performance, and patients’ access to care. They should use that understanding to engage health plans early on market participation and network changes, and work with community partners to protect access and continuity of care for patients most at risk of disruption. 

While other elements of the ACA have been reshaped by political shifts, the movement toward value-based payment has continued across administrations. For example, in 2026, CMS estimated that 14.3 million Medicare beneficiaries receive care coordinated through accountable care organizations (ACOs), up from 13.7 million in 2025.  

The current administration is continuing to pursue models that reward better outcomes, coordinated care, and lower spending. This is not a wholesale shift away from fee-for-service, which will remain central to healthcare reimbursement for the foreseeable future. Rather, payment reform is advancing incrementally through testing, refinement, and expansion of models: 

• New Medicare initiatives are extending payment reform in different directions, including TEAM, which introduces mandatory accountability for cost and quality across surgical episodes for select hospitals; the nationwide expansion of mandatory joint replacement episode payments beginning in 2028; and ACCESS, which tests outcomes-based payment for technology-supported chronic care and has attracted numerous new entrants, including digital-native providers.
• The $50 billion Rural Health Transformation Program (RHTP) offers a different kind of learning lab. While time-limited federal funding will not resolve the underlying economics of rural healthcare, state-led investments in regional partnerships, shared clinical capabilities, and technology-enabled care support experimentation with new approaches to care delivery. The challenge will be translating these investments into lasting improvements, supported by viable financing arrangements beyond the program, particularly as broader Medicaid reductions put additional pressure on rural providers.

These initiatives create opportunities to test new approaches and build evidence of what works. Yet their reach and financial impact remain uneven. Operating alongside traditional fee-for-service, new payment models can introduce competing incentives and complexity and create an uneven financing environment. Policy support for new models persists, but incentives are not yet sufficiently aligned or scaled to support broader care-model transformation. 

For health systems, the opportunity is to engage selectively. New payment models and transformation funding can provide a means to test approaches aligned with strategic priorities, demonstrate clinical and economic value, and build a stronger case for broader adoption.  

AI is moving beyond documentation and administrative support into more direct roles in care delivery and clinical workflows. As these tools increasingly draw on electronic health records and patient-specific information, opportunities to improve care and augment a constrained clinical workforce are expanding, along with the stakes for clinical safety, oversight, and accountability. 

Two central tensions are shaping AI regulation and will continue in the coming years: the push to accelerate innovation while maintaining safeguards and oversight, and the division of authority between federal and state governments:  

• The Department of Health and Human Services’ (HHS’s) October 2026 HTI-5 final rule illustrates the push to accelerate innovation. Although narrower than initially proposed, the final rule eliminated certain transparency and risk-management requirements for predictive decision support tools in certified health IT. Commenters raised concerns that these changes could weaken patient safeguards and shift greater responsibility for evaluating AI tools to health systems.

• The federal-state divide presents a different challenge. The federal government has sought to preempt state AI regulation in favor of a more uniform national framework, but thus far has had limited success. In the meantime, states are pursuing different approaches to regulating clinical AI, both establishing safeguards and creating opportunities to test more autonomous applications.

  For instance, California recently enacted laws aimed at preserving clinicians’ independent judgment when using clinical decision support tools and requiring developers and health systems to identify potential bias. Utah, meanwhile, has authorized narrowly defined pilots for certain AI-driven prescribing activities, subject to phased physician oversight and performance monitoring. These examples illustrate the increasingly varied regulatory expectations and opportunities for clinical AI innovation across states.

  Democratic control of Congress could bring greater scrutiny of AI safety and accountability, but differing perspectives on the scope of federal regulation and the role of states may make it difficult to establish a more uniform national framework.

Health systems need to navigate this evolving environment before regulatory policies fully settle. As AI moves into more consequential clinical roles, health systems will need to make their own judgments about where and how to use it safely. Regulatory compliance and vendor assurances alone are not substitutes for health system oversight. Leaders will need to identify applications with meaningful clinical and operational value, establish clear accountability, and monitor safety and effectiveness as their use expands. 

Beyond these four broad directions, several other policy developments warrant attention, with implications that will vary across health systems and markets. Among these developments are: 

• Public health and clinical care policy. Federal and state approaches to vaccination, chronic disease prevention, and access to selected services (including reproductive and gender-affirming care) continue to evolve. Recent ballot measures and changes in state political leadership could further reshape policies in these areas, with implications for clinical guidance, access to services, and provider requirements.
• Federal agency priorities and capacity. Continued changes in federal health agency organization and staffing, alongside greater emphasis on fraud, waste, and abuse, could affect the pace and consistency of policy implementation and regulatory oversight. Democratic control of Congress will also bring greater scrutiny of federal health agencies and their policy and enforcement decisions, potentially influencing administrative priorities and compliance requirements for health systems.
• Federal research funding. Uncertainty around National Institutes of Health (NIH) appropriations, grant funding, and indirect-cost policies could have significant implications for academic health systems, particularly those with substantial federally funded research programs. The new Congress will have a greater role in shaping funding priorities and negotiating future appropriations.

Taken together, these policy directions point to sustained pressure on health systems, even as policymakers continue to test new approaches to financing and delivering care. 

Healthcare affordability will remain prominent in the political debate leading into the 2028 presidential election, as policymakers face competing pressures to contain public and private healthcare spending, improve affordability and access to coverage and care, and encourage new models of care delivery. These objectives are not always aligned, and policies intended to advance them may create additional pressures on health systems without necessarily making care more affordable for patients.