Sellers Dorsey Digest

Federal Updates

News

Over 700 NIH Grants Axed Across the Nation

• Following the layoffs at the National Institute of Health (NIH), as of April 18, the agency has suspended hundreds of health grants at universities across the US. According to a list published by HHS, approximately 789 grants have been cut so far, with many having supported research into a broad variety of topics, including vaccinations, Alzheimer’s disease, cancer, and heart disease. As a result, impacted researchers have suspended clinical trials, including trials related to increasing vaccination rates for children, STI prevention drugs, and reducing vaping and smoking rates in young adults.

While health experts worry about the implications that funding cuts will cause more generally, there is heightened fear surrounding the impact on biomedical research in rural healthcare. 23 states in the US and Puerto Rico were previously eligible for the NIH’s Institutional Development Award (IDeA) program, which was established in 1993 to support states and territories that historically had low levels of NIH funding to address the needs of medically underserved communities through biomedical research such as rural communities. So far, 15 IDeA eligible states have been affected by the NIH grant terminations. Additionally, an order from HHS Secretary RFK Jr. calls for suspensions of any new grants to certain universities, explicitly naming Columbia, Harvard, Brown, Northwestern and Cornell (Inside Health Policy, April 18; Miami Herald, April 20).

Supreme Court Considers Fate of No-Cost Preventative Care in ACA Case

• On Monday, the U.S. Supreme Court heard oral arguments in Braidwood Management v. Kennedy, a case that could end the Affordable Care Act’s (ACA) requirement for insurers to provide preventive healthcare at no-cost to enrollees. The plaintiffs, a group of Texas-based conservative employers, argue that covering services like PrEP, a pre-exposure medication to help prevent HIV violates their religious beliefs and that the U.S. Preventive Services Task Force (USPSTF) lacks proper constitutional authority. The Trump administration is defending the ACA mandate and is focused on persevering executive authority.

A ruling against the ACA could eventually allow insurers to charge for services like cancer screenings and contraception. While the 5th Circuit previously limited free coverage, ruling that certain preventative services like PrEP for HIV could be excluded based on the plaintiff’s religious objections, its decision only impacted the plaintiffs.   The Supreme Court’s decision, expected by June, could have nationwide effects. During arguments on April 21, the Administration defended the USPSTF, taking the position that the USPSTF’s recommendations are constitutional based on the Secretary’s authority to fire task force members (Health Payer Specialist, April 21; Modern Healthcare, April 21; Politico Pro, April 21).

⇒ From Our Viewpoint

At the heart of this case is a challenge to the authority of the U.S. Preventive Services Task Force (USPSTF), an independent panel of medical experts that issues evidence-based recommendations on preventive care. The plaintiffs argue that USPSTF members must be subject to presidential appointments and Senate confirmation, raising broader questions about the role and legitimacy of independent experts in federal policymaking. While it may seem surprising, the Trump administration has sided with the Biden administration, to defend the ACA’s preventative care mandate. Instead of focusing on access to care, Trump officials argue that future presidents should have authority to appoint members of the USPSTF, which would allow executive branch greater control over covered services.

This case fits into a larger pattern of legal and administrative efforts under the Trump administration that seek to limit the authority of independent agencies and commissions. The outcome could weaken established structures designed to keep key health decisions rooted in science and insulated from political influence. The public health implications are significant. USPSTF recommendations serve as the basis for no-cost coverage of services such as mammograms, colonoscopies, and HIV prevention medication, benefits used by over 150 million Americans. If the Court rules against the government, insurers may gain the ability to reinstate cost-sharing or remove coverage for these essential services over time.

Federal Regulation/Guidance

Democratic Attorneys General Submit Comment Opposing CMS Proposed Rule on Marketplace Integrity and Affordability

• A coalition of Democratic Attorneys General (AGs) submitted a 53-page comment letter in opposition to CMS’ proposed rule published on March 19. The AGs contend that the proposed rule undermines the Affordable Care Act’s goals of making healthcare affordable through Marketplace plans and unfairly shifts the cost to states. The AGs also allege that the rule would impede state decision-making authority in designing Marketplace plans and enrollment and would discriminate against certain groups of people by barring gender-affirming care and limiting access for individuals in the Deferred Actions for Childhood Arrivals (DACA) program. CMS projects that between 750 thousand and 2 million individuals would lose healthcare coverage if the proposed rule were implemented. However, the agency cited the need to protect consumers against unauthorized enrollments and establish safeguards for taxpayer funding as reasons to reverse previous policies and institute more stringent limits on the Marketplace. The public comment period for the proposed rule ended on April 11, a week short of the 30-day comment period typically required under the Administrative Procedures Act (Inside Health Policy, April 21).

Leaked HHS Budget Document Signals Possible Program Cuts

• Details from a leaked budget document dated April 10 provide a preview into potential cuts HHS is proposing within the agency. This document, known as a ‘passback,’ is a working draft for discussion between HHS and the Office of Management and Budget (OMB). In this version, HHS plans to recommend cuts of 30% for decision-making by Congressional appropriators. This draft includes plans to set aside about $20B for the Administration for a Healthy America (AHA), which will consist of the Office of the Assistant Secretary for Health (OASH), Health Resources and Services Administration (HRSA), Substance Abuse and Mental Health Services Administration (SAMHSA), Agency for Toxic Substances and Disease Registry (ATSDR), and National Institute for Occupational Safety and Health (NIOSH). Aligning with the administration’s move to refocus priorities, many HRSA, CDC and OASH programs may be at risk of termination, such as those focusing on rural health, certified community behavioral health centers, Head Start, and training for a variety of health professional fields (Inside Health Policy, April 16; Inside Medicine, April 16).

White House Budget Draft Proposes Expanding Hospital Audits

• Also included in the leaked draft of the White House’s proposed fiscal 2026 budget is an expansion of audits of hospital cost reports, which play a key role in determining Medicare reimbursement, as well as some Medicaid payment mechanisms. The Office of Management and Budget (OMB) is asking the Centers for Medicare and Medicaid Services (CMS) for details on current audit spending, how many reports are audited and what additional resources would be needed to increase management. This move is intended to ensure Medicare payments accurately reflect actual hospital costs. Some hospital advocates worry that increased auditing could delay payments and create additional administrative strain. At the same time, the administration is questioning the effectiveness of current contractors handling Medicare claims and audits, suggesting the system may undergo further changes (Modern Healthcare, April 17).

CMS Submits Proposed Rule on Healthcare Related Taxes for Office of Information and Regulatory Affairs (OIRA) Review

• On April 19, CMS submitted a rule, “Medicaid Program: Health Care-Related Taxes” (CMS-2448), to the Office of Information and Regulatory Affairs (OIRA) for review. Although proposed rule language is not yet available, the Fall 2024 Unified Regulatory Agenda, a list of regulatory actions administrative agencies plan to undertake over the coming months, describes the purpose of the rule as “updat[ing] existing regulations that govern the process for States to obtain a waiver of the statutory requirements that health care-related taxes are broad based and uniform to ensure that taxes passing the statistical test are generally redistributive.” Review by OIRA may take up to 90 days and generally must occur before an agency publishes a rule in the Federal Register (Reginfo.gov, April 19; Reginfo.gov, April 19).

⇒ On Our Radar

CMS previously indicated a regulation of this nature could be in the works. In January 2024, CMS issued an approval and companion letter to California’s request for changes to its MCO tax structure. (See https://www.dhcs.ca.gov/Documents/CA-MCO-Tax-Waiver.pdf) The companion letter indicates that CMS does not believe that California’s MCO tax meets the “generally redistributive in nature” requirements, but that because it meets the B1/B2 statistical test, they have approved it. CMS went on to state that it intends to develop and propose new regulatory requirements to address this issue, and states will need to be compliant with any new regulations.

State Updates

News

Rhode Island Governor Proposes Increased Fiscal Transparency in Health Systems

• Rhode Island Governor Dan McKee submitted a budget amendment to the General Assembly on April 18, which would require healthcare providers to submit quarterly financial reports to the state. The governor aims to improve fiscal oversight of the state’s healthcare system, as hospitals, nursing facilities, Community Behavioral Health Clinics, FQHCs, and more would be required to submit quarterly financial reports to the state. This amendment follows recent and sudden healthcare provider closures and layoffs in the state and is intended to be an “early-warning” mechanism that prevents patients from experiencing sudden losses in healthcare access. The move comes as a recommendation from the state’s Health Care System Planning Cabinet, established through an Executive Order from the Governor in 2024 (WPRI, April 18; RI Governor’s Newsroom, April 18).

Arkansas Bans PBMs from Owning Pharmacies in the State

• Governor Sanders of Arkansas signed House Bill 1150 on April 16, which bans Pharmacy Benefit Managers (PBMs) operating in the state from owning pharmacies starting January 1, 2026. This is the first law in the country to prohibit PBMs from owning pharmacies, citing the lack of competition and potential to raise pharmaceutical prices. The law allows for a 90-day exemption, expiring in September 2027, for pharmacies that dispense orphan drugs or other limited prescriptions. Arkansas has previously taken action against PBMs. In August 2024, the state issued over $1M in fines against four PBMs and last week the state attorney general joined other AGs in a letter urging Congress to take legislative action against PBMs over anticompetitive practices. The Pharmaceutical Care Management Association (PCMA) opposed the legislation and prior to its passage warned that the bill may cause patients to lose access to needed prescription drugs. The PCMA also warned about the loss of specialty pharmacies for patients with complex medical conditions, who may rely on the pharmacy’s management and monitoring tools (Fierce Healthcare, April 21).

California Fills $2.8B Medicaid Gap to Protect Coverage for 15 Million Residents

• California Governor Gavin Newsom signed a bill to close a $2.8B budget gap in the state’s Medicaid program, ensuring continued coverage for 15 million people, including immigrants, through June. This legislation helps address a $6.2B Medicaid budget gap, due in part to the state’s recent expansion of healthcare to all low-income adults, regardless of immigration status. The expansion, launched last year, has cost $2.7B more than expected due to higher than projected enrollment. California officials state their initial projections were based on only one month of data. While Governor Newsom and other state leaders are committed to maintaining coverage, they acknowledge the need for future budget cuts and difficult decisions, especially with potential Medicaid cuts that may be made at the federal level (MSN, April 15).

Indiana Gov Signs “Healthy Again” Executive Order Package

• On April 15, Indiana Governor, Mike Braun, signed an extensive Executive Order (EO) package containing nine EOs supporting the state’s “Make Indiana Healthy Again” initiative modeled after the Trump Administration’s federal initiative:
  • Executive Order 25-52: Promoting Long-Term Growth and Flourishing for Hoosiers on the Supplemental Nutrition Assistance Program by Workforce Encouragement
  • Executive Order 25-53: Increasing State Accountability Through Supplemental Nutrition Assistance Program Asset Verification
  • Executive Order 25-54: Informing Federal Lawmakers on Enabling Entrepreneurial Administration of Supplemental Nutrition Assistance Program Benefits by the States
  • Executive Order 25-55: Making Indiana Healthy Again by Enhancing Nutrition in the Supplemental Nutrition Assistance Program
  • Executive Order 25-56: Making Indiana Healthy Again by Increasing Consumer Transparency Related to Food Dyes and Additives
  • Executive Order 25-57: Making Indiana Healthy Again by Developing a Comprehensive Diet-Related Chronic Disease Plan
  • Executive Order 25-58: Making Indiana Healthy Again by Increasing Hoosier Access to Local Foods
  • Executive Order 25-59: Making Indiana Healthy Again by Promoting the Health and Wellness of Hoosier Students
  • Executive Order 25-60: Assuring Prudent Use of Taxpayer Funds by Ensuring Integrity in the Indiana Medicaid Program

Through these executive orders, Indiana will shift their focus to prioritizing preventative health measures towards chronic illness, revitalizing the SNAP program, promoting student wellness and nutrition, increasing self-sufficiency, and increasing integrity within Medicaid spending. EO 25-60 requests that the Family and Social Services Administration (FSSA) provide a report on improper payments in the Medicaid program; revise eligibility requirements to no longer accept self-attestation of income, residency, or age; and more frequently review common sources of eligibility data to find changes that would result in an eligibility review for Medicaid enrollees. The HHS Secretary, Robert F. Kennedy Jr., and CMS Administrator, Mehmet Oz, were reportedly both in attendance at the signing of the Executive Orders to pledge their support (Indiana Gov, April 15).

SPA and Waiver Approvals

SPAs

• Eligibility
  • Rhode Island (RI-25-0003, effective January 1, 2025): Updates the Medically Needy Income Levels and State Supplementary Statements to align with federal guidance, by implementing a 2.4% increase to cost-of-living.
• Payment
  • Kansas (KS-25-0004, effective January 1, 2025): Authorizes the integration of behavioral health and primary care through the Collaborative Care Model (CoCM) as a treatment benefit available to all Medicaid beneficiaries with a mental health, behavioral health, SUD, or psychiatric condition if deemed medically necessary by an individual’s primary care provider.
  • Pennsylvania (PA-25-0005, effective January 19, 2025): Creates an additional class of Disproportionate Share Hospital (DSH) Payments to eligible Medicare Advantage acute care general hospitals to promote comprehensive inpatient healthcare.
• Services
  • Kansas (KS-25-0005, effective January 1, 2025): Permits the utilization of Partial Hospitalization Programs (PHP) and Intensive Outpatient Programs (IOP) for mental health diagnoses focused on eating disorder care.

Sellers Dorsey Updates

News

WEBINAR | Technology, Innovation, and the Safety Net

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