SMART Health Care Act Proposes Medicare Tweaks: Eyes Lower Drug Costs, Site-Neutral Hospital Pay, and Rural Care Boost by 2026

The "Stopping Medicare Abuses to Restore Trust in Health Care Act," or "SMART Health Care Act" for short, is on the table, proposing several notable adjustments to how Medicare operates. If this bill moves forward, we're looking at changes like using two years of your health data to calculate Medicare Advantage plan payments starting in 2026, aiming to pay the same price for certain hospital outpatient services regardless of the setting, and potentially lowering what you pay for some prescription drugs. It also revisits rules for doctor-owned hospitals in rural areas and plans to send more funds to skilled nursing facilities. Essentially, it's trying to fine-tune Medicare, aiming for some cost controls while boosting support in other spots.

Two Years of Data: A New Formula for Medicare Advantage?

First up, if you're one of the millions on a Medicare Advantage plan, how the government pays your insurance company is set for a tweak. Section 2 of the bill mandates that starting in 2026, Medicare will use two years of your diagnostic data for its risk adjustment calculations – that's the formula used to pay plans more for sicker patients. Think of it like your car insurance looking at a longer driving history; the idea is that more data gives a truer picture of health needs. This change to Section 1853(a)(3)(C)(iii) of the Social Security Act could mean more accurate payments to plans, which proponents hope might lead to more stable benefits or discourage plans from trying to attract only the healthiest enrollees.

Same Service, Same Price? Hospital Outpatient Pay Gets a Makeover

Ever get a bill for a procedure at a hospital-owned clinic and wonder why it costs more than at an independent doctor's office, even for the same service? Section 3 of this bill wades into that, pushing for what's called "site-neutral payments." It proposes that Medicare should generally pay the same rate – typically the lower physician office rate under Section 1848 of the Social Security Act – for certain services provided in on-campus hospital outpatient departments. For Medicare patients, this could translate to lower co-pays for some specialist visits or minor procedures. This part of the bill amends Section 1833(t)(21) of the Social Security Act and also notes that some current payment exceptions will end on January 1, 2026. It's important to note, though, that many rural hospitals, like critical access or sole community hospitals, would be exempt from these specific on-campus payment changes, so the main impact would likely be on larger, often urban or suburban, hospital systems.

More Local Care? Easier Path for Physician-Owned Hospitals in Rural Spots

Access to specialized medical care can be a real challenge in rural America. Section 4 of the SMART Health Care Act tries to address this by adjusting the rules for physician-owned hospitals. It clarifies the criteria under the Stark Law (which governs physician self-referrals via Section 1877(d) of the Social Security Act). Specifically, if a hospital provides substantially all of its designated health services to folks living in a rural area (as defined in section 1886(d)(2)(D)), it can more readily qualify for the "rural provider" exception. The aim here is to potentially make it easier for doctors to invest in and operate hospitals in underserved communities, which could mean more healthcare options closer to home for people living outside big cities. How "substantially all" gets defined will be key to its real-world impact.

Passing on the Savings: A New Deal on Drug Prices for Some Medicare Patients

Here’s a big one for your wallet: prescription drug costs. Certain hospitals and clinics participate in the 340B Drug Pricing Program, which lets them buy outpatient drugs at a significant discount. Section 5 of this bill wants to make sure Medicare patients see those savings. It amends Section 340B(a)(5) of the Public Health Service Act to require these 340B "covered entities" to charge patients no more for a covered outpatient drug than what the entity actually paid for it, after all discounts and rebates are factored in. The Secretary of Health and Human Services would need to set up a mechanism to ensure compliance and publicly report the amounts these facilities pay and receive for these drugs (under section 1395l(t)(14)(A)(iii)). If this works as planned, it could mean a noticeable drop in out-of-pocket expenses for prescriptions you get from these specific 340B providers.

More Funds for Nursing Homes: What It Means for Care Quality

Finally, skilled nursing facilities (SNFs) – often called nursing homes – are slated for a financial boost under Section 6. The bill proposes to increase their Medicare payments by an additional 2 to 5 percentage points starting in fiscal year 2025. This change amends Section 1888(e)(6) of the Social Security Act, which is linked to the SNF Quality Reporting Program. The hope is that more funding could help these facilities improve the quality of care, invest in better staffing, or upgrade their environments. Of course, the big question will be whether these extra dollars translate directly into better experiences for residents, or if they primarily bolster facility budgets without a proportional rise in care standards. That will likely depend on the strings attached and how closely outcomes are monitored.