The Centers for Medicare and Medicaid Services awarded two major contracts on May 29, 2026, for the ClaimsCore program to modernize Medicare's claims processing infrastructure — one of the largest civilian IT modernization efforts in recent memory. HealthEdge Software received a $1.15 billion firm-fixed-price contract and Peraton received an $826 million firm-fixed-price contract. The two firms will compete for individual task orders against these base contract vehicles throughout the program's performance period, creating sustained competition intended to drive continued innovation and performance accountability from both contractors over the life of the modernization program.
ClaimsCore is CMS's initiative to replace the existing Medicare Fee-for-Service claims processing systems, which were originally developed in the 1960s and continue running on COBOL-based mainframe infrastructure. These legacy systems have processed hundreds of billions of dollars in Medicare claims over six decades, but their age creates significant maintenance burdens, limits the ability to implement new payment models and policy changes, and introduces fragility risks that have only grown as the original development workforce has retired. ClaimsCore aims to replace these systems with modern cloud-based, API-enabled claims processing infrastructure capable of supporting Medicare's evolving payment models and policy requirements.
Scale and Complexity of Medicare Claims Processing
The scope of Medicare claims processing is extraordinary. The Medicare Fee-for-Service program processes approximately one billion claims annually across Parts A and B, representing roughly $500 billion in annual payments to hospitals, physicians, skilled nursing facilities, and other healthcare providers across the United States. Even minor disruptions to claims processing create immediate cash flow crises for providers, making reliability and operational continuity paramount considerations in any modernization strategy. CMS has been explicit that ClaimsCore must maintain continuous claims processing throughout transition from legacy systems — a constraint ruling out any single-cutover replacement approach and requiring careful phasing and parallel operation strategies that significantly complicate the technical challenge.
Replacing a system of this scale is technically formidable. Medicare claims processing embeds extremely complex business rules reflecting decades of statutory requirements, regulations, coverage determinations, and payment methodologies. These rules are currently implemented in millions of lines of COBOL code, often without comprehensive documentation, and must be correctly replicated or deliberately modified in the new system. The risk of introducing payment errors during migration is significant, with consequences ranging from improper payments triggering Office of Inspector General scrutiny to systematic underpayments creating provider dissatisfaction and potential legal challenges.
HealthEdge brings commercial insurance claims processing software to the federal space. The company's HealthRules product line is widely used among commercial and Medicaid managed care plans, giving CMS access to a platform with substantial real-world operational history at significant transaction volumes in the commercial market. Peraton brings extensive federal systems integration experience, including deep familiarity with government health IT infrastructure, federal data security requirements under FISMA, and the regulatory environment governing federal health program data systems. The combination of a commercial software platform and a federal integrator represents a hybrid approach CMS has favored in other modernization efforts.
Competitive Task Order Structure
The dual-award structure for ClaimsCore reflects a deliberate CMS acquisition strategy designed to sustain competition throughout the program's life. By awarding base contract vehicles to two qualified contractors rather than selecting a single awardee, CMS creates ongoing competition for individual task orders that is intended to maintain pricing discipline and performance incentives across the program's multi-year execution. Each task order issued under ClaimsCore will be competed between HealthEdge and Peraton, with the winner executing that specific work scope. This approach gives CMS ongoing leverage to favor the contractor demonstrating superior performance, pricing, and responsiveness on successive task orders.
For both contractors, the task order competition model means that the base contract award is only the beginning of the competitive effort. Revenue realization depends entirely on winning individual task orders against the other awardee, requiring sustained investment in technical capability, competitive pricing, and program execution performance. Neither firm can treat the base contract award as a guaranteed revenue stream. This structure also creates meaningful teaming and subcontracting opportunities — both HealthEdge and Peraton will need specialized subcontractors supporting specific aspects of ClaimsCore task orders, particularly for the health IT, cloud migration, and security engineering components of the modernization effort.
The firm-fixed-price structure of both base contracts is notable given the complexity of the underlying work. CMS's decision to use FFP rather than cost-reimbursable vehicle types signals the agency's view that work scope is sufficiently defined to support fixed-price pricing, placing cost risk squarely on the contractors for any cost growth during performance. This structure creates strong incentives for efficient execution and rigorous cost estimation, but also requires that both contractors have robust cost models, experienced program management teams, and sufficient financial reserves to absorb unexpected technical challenges without defaulting to cost growth that would undermine the program's economics.
What It Means for Contractors
The ClaimsCore awards carry important implications across the government IT market. First, the contracts confirm that CMS is executing large-scale modernization at a pace that will require substantial subcontracting throughout the program's performance. Both HealthEdge and Peraton will need partners across cloud services, security engineering, data migration, health IT standards, and program management. Small and mid-sized IT firms with relevant expertise — particularly FedRAMP-authorized cloud service providers and firms with experience in health IT interoperability standards like HL7 and FHIR — should actively engage with both prime contractors as subcontracting opportunities emerge.
Second, HealthEdge's win demonstrates that agencies are willing to bring commercial health IT platforms into the federal space rather than building entirely custom government systems — a trend that favors software firms with proven commercial references over traditional federal systems integrators working from scratch. Companies that have built commercial healthcare platforms should recognize that federal customers like CMS represent viable markets if the platforms can be configured and secured to federal standards, and that capturing a large federal reference site like Medicare creates powerful commercial credibility.
Third, the legacy modernization market across civilian agencies represents a large and growing opportunity. Agencies ranging from Social Security Administration to Veterans Affairs to Treasury face similar pressures to replace aging COBOL and mainframe systems while maintaining operational continuity. Contractors who develop genuine expertise in government modernization — combining technical depth in legacy systems, cloud migration, data conversion, and change management — are building capabilities with sustained multi-year demand across multiple federal customers.
