The Nickel-a-Glove Question: Medicare Is Finally Asking the Right Thing About American-Made PPE

CMS's new proposal would pay hospitals extra for domestic gloves, gowns, and respirators. As someone who built one of the plants this policy is meant to save, here's what it gets right — and what it still misses.

Buried on page 41985 of the July 7 Federal Register, inside a proposed rule otherwise devoted to outpatient payment rates, CMS is asking a question I've waited six years for the federal government to ask: should Medicare pay hospitals more when they buy American-made PPE and essential medicines? Not "should we fund glove factories." Not "should we stockpile." Should the largest payer in American healthcare recognize, in reimbursement, that domestic supply costs more — and pay the difference.

I founded United Safety Technology, one of the BARDA-backed ventures that tried to stand up domestic nitrile glove manufacturing after COVID. That effort is now winding down, and the press has rendered its verdict on the whole program: Bloomberg's July feature put it bluntly — almost $1 billion later, the US still can't make a medical glove at scale. Roughly $850 million in federal awards went to six companies. The US consumes about 120 billion nitrile gloves a year and still makes about 1% of them.

The postmortems mostly blame execution. Having lived it, I'll tell you what actually killed the program: we financed supply and never built demand. The plants could be engineered. What could not be engineered was a customer willing to commit to volume at a price that reflected domestic costs — roughly twice the imported price. No committed offtake means no bankable revenue; no bankable revenue means no plant survives its ramp.

That's why this obscure section of a Medicare payment rule matters more than any of the headlines. For the first time, federal policy is aimed at the demand side. It deserves serious engagement — and serious scrutiny.

From brainstorm to blueprint

In January, CMS issued an advance notice — the "Made in America PPE and Essential Medicines" ANPRM — floating three loose concepts: a "Secure American Medical Supplies" designation for hospitals, a separate Medicare payment, and a hospital quality-reporting measure tied to domestic purchasing. It was a request for ideas, with no numbers attached.

The July proposed rule (CMS-1850-P, Section XXII) shows CMS actually listened to the comments. Two of the three concepts are gone: the agency says it is "no longer exploring, at this time" the designation or the quality measure, because commenters "favored voluntary, non-budget-neutral payment approaches over quality measures or payments tied to hospital designations." What remains is one mechanism, now specified in surprising detail: a voluntary payment adjustment under the inpatient payment system — potentially funded with new money rather than redistributed from other hospital payments.

The specifics, straight from the rule text:

A defined product list with per-unit premiums. Three PPE categories qualify: N95-type filtering facepiece respirators at a $0.38 differential per item, isolation gowns at $0.82, and nitrile exam gloves at $0.05 — per glove. Eighteen essential medicines (sterile injectables and generic antibiotics with US production) carry two-tier differentials depending on whether just the finished dose, or both the finished dose and the active ingredient, are made domestically.

A workable definition of "domestic." PPE would follow the Make PPE in America Act standard — with one exception that tells you CMS did its homework: because there is effectively no domestic nitrile butadiene rubber, gloves made in the US from foreign NBR would still qualify. That is the correct call. Demanding a fully domestic input chain on day one would define the category out of existence.

An eligibility infrastructure. Manufacturers would attest annually to HHS; the government would publish a public file of qualifying products by NDC or device identifier. Only listed products get paid — a real answer to hospitals' complaint that they can't reliably identify domestic products today.

A spending cap. CMS floats a maximum annual aggregate — "$500 million or $1 billion" — allocated across hospitals by Medicare inpatient-day share.

Comments are due August 31, 2026 (docket CMS-2026-2344 on regulations.gov).

What CMS got right

Give the agency credit for three things.

First, it moved the intervention to the right end of the supply chain. The 2020–2022 approach subsidized construction and hoped purchasing would follow. It didn't. Paying for verified domestic purchases — output, not intentions — is the correct architecture.

Second, the standardized differential design is thoughtfully gaming-resistant. CMS proposes fixed, annually updated premiums rather than manufacturer-reported prices, explicitly to avoid "opportunistic price reporting" and manipulation. A new entrant knows exactly what the premium is worth before pouring concrete.

Third, CMS is candid about its own track record. The rule concedes that the existing N95 reimbursement policy — the closest precedent — has seen almost no uptake: fewer than 100 hospitals nationwide reported the data needed to claim it for FY 2024. Part of the reason is the product itself: that policy covers surgical N95 respirators, which outside a pandemic are a small, specialized purchase — nothing like the universal, everyday consumption of nitrile gloves. When the line item is that small, most hospitals conclude the extra tracking work isn't worth it and simply ignore the program. So the N95 experience is not the poster child for how this broader program will fare — but it is a warning worth heeding: participation has to be made as easy as possible for hospitals that are already overburdened, or even a well-designed premium will go unclaimed.

Where it falls short

The math only covers Medicare's slice. This is the detail most coverage has missed. The payment reimburses only the Medicare inpatient share of the premium — and CMS's own worked example shows how small that is. A hospital that buys one million respirators, 300,000 of them domestic, incurs $114,000 in domestic premiums. Under the cost-report approach, its payment is $11,400. The hospital still absorbs roughly 90% of the cost of doing the right thing. CMS acknowledges commenters told it exactly this — that the agency "would need to pay beyond the IPPS and OPPS shares of the additional costs in a non-budget neutral manner to shift purchasing," possibly requiring Congress. Unless the final design confronts that gap, uptake will look like the N95 policy: a well-intentioned adjustment nobody uses.

A reimbursement rule is not an offtake contract. Here is the manufacturer's-eye view. To finance a glove line, you need revenue a lender will underwrite. A per-unit premium that exists at the pleasure of annual rulemaking — adjustable every year, reversible by any future administration — is not that. CMS's own comment file says the quiet part: commenters emphasized that "long-term, committed contracting arrangements (for example, 2- to 3-year or longer arrangements)" are what actually expand the manufacturing base. The payment adjustment can be the fuel, but committed multi-year purchasing — by hospitals, GPOs, and federal buyers — is the engine. The rule should be explicit about how it induces contracts, not just transactions.

Is a nickel the right number? CMS's differentials are "derived from public comments, prior discussions with manufacturers, and Federal procurement data," and the January ANPRM cited ASPR's finding that domestic gloves run roughly 1.5 to 3 times the imported price. Whether $0.05 per glove truly bridges that spread depends on where import prices sit and where a domestic line's costs land at realistic utilization — numbers I spent years living with. CMS is inviting exactly this input, and manufacturers should give it with specificity, because a differential set too low delivers all of the administrative burden with none of the demand shift.

The tracking burden is real. The claims-based approach requires hospitals to bill new codes for domestic gloves, gowns, and respirators; the cost-report alternatives require allocation formulas built from cost-report worksheets. Hospitals told CMS in the ANPRM round that they struggle to identify domestic products at all. If claiming the payment costs more in administrative effort than it returns — see again: fewer than 100 hospitals on the N95 policy — the program fails quietly.

What happens next

CMS closes this comment period on August 31. The rule contains a direct solicitation that I hope every domestic manufacturer, hospital supply chain leader, and GPO answers: the agency wants data on "current domestic production capacity, manufacturers' ability to expand output, expected expansion timelines, and barriers to scaling production."

I'd summarize my own answer this way. Capacity was never the hard part — the industry demonstrated it can build lines. The barrier to scaling is, and has always been, the absence of committed demand at a price that reflects domestic cost. This proposal is the first federal mechanism aimed at that barrier. It is also, in its current form, too small a signal to finance a plant: Medicare's fractional share of a nickel a glove, capped, claimable through paperwork most hospitals won't do.

The fix isn't to abandon the mechanism — it's to finish it. Pay a share large enough to change purchasing behavior, or pair the adjustment with procurement vehicles that can sign multi-year commitments. Publish the eligibility file and keep the differentials standardized. And design the claiming process so a hospital can participate without hiring a consultant.

We already ran the experiment where America funded glove factories without funding glove customers. It cost about a billion dollars and produced a Bloomberg headline. This rule is the beginning of the second experiment — the right one. It's worth getting the details right.

Sources: CY 2027 OPPS/ASC Proposed Rule (CMS-1850-P), Section XXII, 91 FR 41985–41996 (July 7, 2026); Made in America PPE and Essential Medicines ANPRM (CMS-1516-ANPRM), 91 FR 3851 (Jan. 29, 2026); CMS Fact Sheet on the CY 2027 OPPS/ASC Proposed Rule (July 2, 2026); Bloomberg, "Why It's So Difficult to Produce 100% American-Made Medical Gloves" (July 7, 2026); Becker's Hospital Review, "$850M later, US medical glove production still lags" (July 7, 2026); public comment docket CMS-2026-2344 at regulations.gov.

Dan Izhaky · July 18, 2026 · Originally published on LinkedIn · All writing · Next: Uncle Sam’s Shopping Spree: How Centralizing Purchases Could Change Your Next Doctor’s Visit