Avalere outlines major federal health policy developments expected through the end of 2025, including Medicare Part D formulary changes, drug pricing negotiations, and ongoing PBM scrutiny under the Trump administration. While focused primarily on Medicare, the piece touches on broader regulatory trends around drug pricing and benefit management that affect Medicaid managed care operations and state policy planning. The analysis provides context for understanding how federal pharmaceutical policy changes may influence Medicaid managed care contracting and formulary strategies.

Federal legislation enacted in July 2025 introduces mandatory work requirements, accelerated eligibility redeterminations, and immigration status restrictions expected to affect 7.8 million Medicaid enrollees by 2034. The law also restricts states' use of provider taxes to finance their Medicaid programs, forcing significant changes to state funding strategies and managed care operations. MCOs will face new compliance obligations around work requirement verification, more frequent eligibility reviews, and dual market impacts as disenrolled members shift to exchange coverage.

Avalere analyzes emerging state and federal legislation that would restrict or ban PBM ownership of pharmacies, following Arkansas's pioneering but contested prohibition. For Medicaid MCOs—which contract with PBMs for pharmacy benefits and must ensure adequate network access—these reforms could force restructuring of pharmacy relationships, potentially affecting network adequacy, pharmacy reimbursement models, and the vertical integration strategies that many health plans have pursued to control pharmacy costs.

Avalere examines how federal policy changes—including OBBBA Medicaid cuts, Medicare Part D redesign, and MFN pricing—are forcing pharmaceutical manufacturers to recalibrate market access strategies based on shifting payer mix across therapeutic areas. The analysis suggests Medicaid enrollment declines could push patients into commercial or uninsured coverage, affecting manufacturer uptake dynamics and requiring MCOs and state Medicaid programs to actively engage manufacturers to maintain therapeutic area prioritization. Manufacturers may need to redesign patient support programs and channel strategies as Medicaid's share of coverage for certain drugs contracts.

Analysis of 2018-2022 Medicare Part D claims reveals growing pharmacy spending for beneficiaries in home and community-based settings, while nursing facility spending declined. This trend mirrors the broader shift in long-term services and supports delivery that Medicaid managed care organizations are navigating, particularly as states expand HCBS waivers and MCOs increasingly coordinate pharmacy benefits for dually eligible members receiving LTSS in non-institutional settings.

Independent pharmacies are struggling with financial viability driven in part by declining reimbursement rates across government payers including Medicaid, alongside Medicare and commercial plans. The analysis examines how pharmacy closures are creating access deserts that disproportionately affect vulnerable populations, with pharmacies adapting through expanded services like home delivery and vaccination programs. For Medicaid MCOs, pharmacy network adequacy and access remain critical compliance considerations as independent pharmacies face consolidation pressure.

Twenty-nine states and DC have enacted laws regulating AI use in healthcare as of August 2025, with prior authorization restrictions being a primary focus that spans Medicaid, Medicare Advantage, and commercial plans. These laws often prohibit AI from serving as the sole basis for coverage denials or require licensed physicians to make final adverse determinations, directly affecting how managed care organizations structure their utilization management programs. The regulatory landscape continues to evolve with at least 10 states considering additional AI-related healthcare legislation.

Reported plans to dismiss all USPSTF members raise concerns about politicization of preventive care recommendations that underpin coverage requirements under the ACA and Medicaid. Medical societies warn that disrupting the Task Force's evidence-based process could destabilize access to screenings and preventive services including cancer detection, HIV prevention, and maternal mental health interventions. Since USPSTF recommendations trigger mandatory coverage requirements for Medicaid managed care plans, changes to the Task Force's composition and methodology could reshape preventive care obligations and plan benefits.

The administration's reported plan to dismiss all USPSTF members and reconstitute the panel could fundamentally alter preventive care coverage mandates that apply to Medicaid managed care organizations. Because ACA requirements tie no-cost preventive service coverage to USPSTF 'A' and 'B' grade recommendations, changes to the Task Force's composition and methodology could affect MCO benefit design, coverage obligations, and access to services like cancer screenings and PrEP. The move mirrors recent changes to ACIP that have already influenced vaccine policy across public programs.

The One Big Beautiful Bill Act (OBBBA) introduces new restrictions on state provider taxes, a critical financing mechanism used by all states except Alaska to draw down federal Medicaid matching funds. The changes will force states to restructure how they fund Medicaid programs, with direct consequences for MCO rate-setting, provider reimbursement levels, and benefit coverage. Medicaid managed care organizations should prepare for potential state budget pressures that could impact capitation rates and contract terms as states scramble to replace lost federal matching dollars.

Avalere's updated 50-state survey documents how biosimilar substitution statutes vary across jurisdictions in authorization requirements, notification protocols, and dispensing conditions. For Medicaid managed care plans operating across multiple states, these statutory differences create compliance complexity in pharmacy benefit management, formulary design, and provider education. The report provides a reference tool for MCO pharmacy teams navigating interchangeable biosimilar policies that directly affect prior authorization workflows and member access.

Coverage of anti-obesity medications, particularly GLP-1 receptor agonists, varies significantly across payer types, with Medicaid programs showing particularly restrictive policies despite a growing pipeline of over 40 products and projected market growth to $150 billion by 2030. The analysis examines how differences between commercial, Medicare, and Medicaid coverage create access disparities, with implications for state Medicaid programs navigating budget pressures alongside federal policy efforts to expand access. Medicaid managed care plans face particular challenges balancing long-term value against immediate cost concerns as member uptake increases.

USPSTF's A and B grade recommendations mandate coverage without cost sharing under the ACA for both commercial and public insurers, including Medicaid programs. The piece outlines how diagnostics developers and biopharmaceutical companies can strategically engage with USPSTF through new topic nominations or existing topic reconsiderations to influence preventive care coverage policies. While focused primarily on the evidence generation and USPSTF engagement process, the coverage mandate implications extend directly to Medicaid managed care organizations' benefit design and compliance obligations.

Avalere examines how the end of Medicaid continuous enrollment led to 10 million disenrollments in 12 months, creating vaccine access barriers despite IRA protections, with state-by-state variation complicating national assessment. The analysis warns that new federal requirements under the One Big Beautiful Bill Act—including six-month eligibility redeterminations and work requirements—will likely worsen coverage churn and vaccination gaps. MCOs and state programs face intensifying challenges in maintaining preventive care continuity as enrollment volatility increases under the new policy environment.

Avalere estimates that research funded by the Special Diabetes Program has generated over $50 billion in federal healthcare savings through technologies like continuous glucose monitors and automated insulin delivery systems used by Medicare, Medicaid, and VA beneficiaries. The analysis focuses on direct medical cost reductions from improved diabetes management and reduced complications, with Medicaid representing one of three major public payers benefiting from these innovations. The findings have implications for how states and MCOs assess value from diabetes management technologies and clinical interventions.

The Centers for Medicare & Medicaid Services and CDC have announced over 400 new ICD-10-CM diagnostic codes taking effect October 1, 2025, including codes for diabetes remission, multiple sclerosis progression, and various other conditions. These coding changes will affect claims processing, documentation requirements, and reimbursement methodologies for Medicaid managed care plans that rely on encounter data and risk adjustment. MCOs will need to update systems, train providers, and adjust coding workflows ahead of the October implementation date.

The Advisory Committee on Immunization Practices was reconstituted with new members appointed by HHS Secretary Kennedy, signaling potential shifts in vaccine policy that could affect coverage mandates. Since ACIP recommendations trigger first-dollar coverage requirements across insurance programs including Medicaid, changes in the committee's direction could impact formulary requirements, preventive care mandates, and cost structures for Medicaid managed care plans. The piece examines how the committee's new composition may influence immunization schedules that directly affect MCO coverage obligations.

The Trump administration's proposed elimination of AHRQ's independent structure and $129 million budget cut threatens the USPSTF's ability to produce evidence-based preventive care recommendations. Because Medicaid managed care plans are required to cover USPSTF Grade A and B services without cost-sharing under the ACA, disruption to this process could create coverage uncertainty and compliance challenges for MCOs. The reorganization raises concerns about the independence and capacity of the evidence review process that drives mandatory preventive benefit design across commercial and public insurance.

The administration is shifting away from behavioral health integration and parity enforcement through changes at CMMI, potential weakening of mental health parity requirements, and proposed cuts to SAMHSA and CDC. These policy changes could significantly affect how Medicaid managed care plans structure behavioral health benefits, enforce parity, and participate in value-based models. The proposed FY 2026 budget cuts to SAMHSA ($1.1B reduction) and consideration of dissolving the agency altogether would directly impact state Medicaid behavioral health infrastructure and MCO programming.

CMS released draft guidance for the 2028 cycle of Medicare drug price negotiations under the Inflation Reduction Act, expanding eligibility to include Part B drugs for the first time and proposing a single maximum fair price across Part B and Part D. While focused on Medicare policy, these negotiated prices have downstream implications for Medicaid managed care organizations through potential impacts on best price calculations and supplemental rebate agreements. The guidance also refines manufacturer exclusion criteria and seeks comment on how to evaluate therapeutic alternatives.