The Trump administration on May 30 proposed a 25% discretionary funding reduction and a major reorganization for the Department of Health and Human Services (HHS) in its fiscal year (FY) 2026 Budget in Brief. Following the May 2 release of the president’s skinny budget, the budget proposes $95 billion in FY 2026 discretionary funding, down from $127 billion in FY 2025.
HHS Reorganization
The budget proposes sweeping structural changes across the department that aim to streamline operations and eliminate duplicative programs, including:
- Reducing HHS operating divisions from 28 to 15
- Closing five regional offices
- Centralizing administrative functions
- Reducing staffing levels to 90% of pre–COVID-19 levels
- Ending or downsizing 5,000 contracts
New Administration for a Healthy America
The budget creates a new agency, the Administration for a Healthy America (AHA), by consolidating:
- The Health Resources and Services Administration (HRSA)
- The Substance Abuse and Mental Health Services Administration
- The Office of the Assistant Secretary for Health
- The National Institute for Environmental Health Sciences
- Select Centers for Disease Control and Prevention programs
The AHA would receive $14 billion in discretionary funding to support programs focused on chronic conditions, primary care, maternal and child health, mental health, environmental health, the health workforce, and policy oversight.
Centers for Medicare & Medicaid Services (CMS)
The budget cuts CMS by $674 million from FY 2025 levels, primarily through reductions to program management and administrative accounts. CMS asserts these cuts will not affect core Medicare or Medicaid operations.
The budget also:
- Prioritizes fraud prevention efforts, increasing funding for the Health Care Fraud and Abuse Control Program by $41 million to $1.69 billion in total
- Proposes $68.3 million for medical review programs, including prior authorization, signaling an emphasis on utilization controls
Transfers administration of the 340B Drug Pricing Program from HRSA to CMS, maintaining flat funding at $12.2 million—the same level as FY 2025The association will continue to provide updates as Congress and the administration begins the appropriations process to fund the government.
Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.
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