Sellers Dorsey Digest

Federal Updates

NEWS

Summary of Proposed FY2026 Federal Health Budget Changes in President’s “Skinny Budget”

• President Donald Trump’s fiscal year 2026 “skinny budget” proposal outlines significant shifts in federal healthcare funding. The budget includes major cuts to key health agencies and a push to give states more control over spending, which critics argue could increase disparities in health funding and services. This proposal represents a recommendation from the White House as Congress considers its FY26 budget.

Key healthcare proposals include:

• $97B cut from the National Institutes of Health (NIH), eliminating minority health funding and reorganizing the agency. Retain $27B for research.
• $5.4B increase to the Department of Veterans Affairs for medical care and electronic health record modernization.
• $3.5B cut from the Centers for Disease Control and Prevention (CDC), consolidating disease prevention programs.
• $1.73B cut from Health Resources and Services Administration (HRSA), impacting HIV prevention, maternal and child health, and workforce programs.
• $1.07B cut from the Substance Abuse and Mental Health Services Administration (SAMHSA).
• $674M cut from Centers for Medicare and Medicaid Services (CMS) Program Management.
• $500M added to the new Make America Healthy Again (MAHA) Initiative, focusing on lifestyle, nutrition, and distributing food boxes from domestic farmers.
• $240M cut from the Administration for Strategic Preparedness and Response (ASPR) Hospital Preparedness Program.
• $180M cut from the HHS Office on Women’s Health, Office of Minority Health, and the Sexual Risk Avoidance and Teen Pregnancy Prevention Programs.
• $129M cut from the Agency for Healthcare Research and Quality (AHRQ). (White House, May 2; Fierce Healthcare, May 2).

House Republicans Struggle to Reach Consensus on Medicaid Reconciliation Bill

• House Republicans are still grappling with how to proceed with a reconciliation bill that aims to find $880B in savings under the jurisdiction of the House Energy & Commerce Committee, which oversees Medicaid. The markup of the Energy & Commerce Committee’s section of the bill, initially scheduled for May 7, has been delayed to at least the following week, with further delays possible if House leadership and the White House cannot bring together the divided factions. Caucus members argue that the reconciliation bill should be used to fundamentally restructure Medicaid, pushing for structural changes like equalizing payments between traditional and expansion populations, limiting states’ use of provider taxes, and enhancing eligibility verification. As the markup approaches, advocacy groups and Democrats are ramping up pressure on Republicans, running ad campaigns and organizing efforts to protect Medicaid and influence key lawmakers (Inside Health Policy, May 2).

Aetna to Leave ACA Market Place Next Year

• On May 1, CVS Health announced that its health insurance unit, Aetna, will be leaving the ACA marketplace in 2026. Following its decision to implement a $2B cost-cutting plan for its Medicare Advantage, Medicaid, and commercial health plans, the payer determined that health insurance exchanges were not a worthwhile investment. In 2024, Aetna experienced an average net loss of about 8% within 16 of the 17 states they were active in, as well as a 96% medical loss ratio (MLR). While it is unclear if other marketplace payers will follow suit, experts worry about the impact the federal government’s spending reductions may have on healthcare programs, as well as the pending expiration of enhanced premium tax credits at the end of 2025, if Congress does not choose to renew them (Modern Healthcare, May 2).

Federal Legislation

Trump Administration Looks to Implement Policy for Price Matching for Drug Payments, but for Medicaid Exclusively

• Following President Trump’s signing in April of an executive order that aims to lower prescription drug prices, on May 2, a White House Official released a statement that the administration would be considering a “most favored nation” (MFN) policy for the Medicaid program exclusively and is urging congressional Republicans to include such in their domestic policy package. The MFN policy would tie drug payments to the lowest prices that wealthy foreign countries pay. Advocates in the field worry that due to the exclusion of Medicare, the policy will not significantly bring down drug prices. There is also unease amongst Republican leaders and disagreement from pharmacy lobbyist groups, who suggest the policy could harm patients and point to PBMs as the root of the high prices (Inside Health Policy, May 2).

State Updates

NEWS

States Consider How to Handle “Trigger Laws”

• Currently, 40 states and DC have extended Medicaid to adults without disabilities through the Affordable Care Act (ACA). Among them, nine states have “trigger laws” in place that would discontinue expansion services if funding were cut/federal match rate is reduced, while three additional states are considering adding similar clauses. As Congressional budget reconciliation discussions around potential reductions in FMAP continue, Democratic state legislators are looking for ways to either remove or somehow cushion potential impacts from trigger laws. Currently, the federal government pays states for 90% of costs for the expansion population, and states cover the remaining 10% of costs. Therefore, funding cuts may cause gaps in coverage that states will struggle to close. North Carolina is among the states pushing to soften trigger laws, with HB 653, which looks to reduce the FMAP percentage from 90% to 65%. However, the bill’s sponsor, Representative Julia Greenfield (D) acknowledges that passage is unlikely (Modern Healthcare, May 5).

Indiana Governor Signs Bill Authorizing Medicaid Work Requirements, Other Policies

• Indiana Governor Mike Braun signed more than 50 bills into law on May 2, including Senate Bill 2. The newly enacted bill creates work requirements for enrollees under the state’s Healthy Indiana Plan (HIP). These beneficiaries must work or volunteer for at least 20 hours a week, but the proposal provides some exceptions to these requirements. The state will need to seek federal approval to institute work requirements. The bill will also require the state’s Medicaid agency, the Family and Social Services Administration (FSSA), to report certain data on fraud, waste, and abuse to the Medicaid oversight committee; present an annual report to the budget committee on the enforcement of the Medicaid five-year look back period for eligibility; makes changes to the requirements regarding the advertisement of the Medicaid program; and require that FSSA more frequently review data that may impact a beneficiary’s Medicaid eligibility and enrollment. This follows a large package of executive orders signed on April 15, publicized as “Make Indiana Healthy Again,” which included the directive to strengthen eligibility reviews (Indiana Capital Chronicle, May 2).

Alabama Governor Signs Bill to Help Tackle the State’s Maternal Health Crisis

• On May 1, Governor Kay Ivey (R-AL) signed into law SB 102, which would provide presumptive eligibility for Medicaid to pregnant women for 60 days if their provider determines coverage is warranted.  This bill aims to reduce coverage delays, providing earlier access to necessary services within the first trimester, leading to better health outcomes for both mothers and their children (Alabama, May 2).

Arizona Expands Medicaid Payer Contracts After Appeals

• Arizona’s Medicaid program has revised its contract awards for payers covering the aged, blind, and disabled population. Initially, only Bridgeway Health Solutions and Arizona Physicians IPA were awarded contracts, but after appeals from other payers, the decision was revisited. The revised contract now includes Mercy Care and Banner-University Care Advantage, joining the previously awarded payers. The five-year, $1.6B contracts will be effective on October 1, 2025. This revision followed appeals from the excluded bidders and led to a one-year extension of the contracts for incumbents (Health Payer Specialist, May 5).

North Carolina Lawmakers Advance Several Healthcare Bills

• The North Carolina General Assembly (NCGA) has made progress on four bills related to the healthcare system the state: House Bill 434, Senate Bill 403, Senate Bill 600, and Senate Bill 445. HB 434, also called The Care First Act, is a comprehensive healthcare reform bill which aims to streamline prior authorizations, increase transparency, and improve timely access to care. HB 434 passed the House by a near-unanimous vote and has moved to the Senate. Next, SB 403 would authorize the implementation of federally approved Medicaid work requirements, as described in the previous legislation that created the Medicaid expansion program in December 2023. SB 403 would also require the state’s Medicaid agency to report on any funding needs to implement work requirements. SB 403 passed the Senate 34-12 and has moved to the House where it sits in committee with a companion bill, HB 491. Another Medicaid-related bill before the NCGA is SB 600, a Medicaid Agency Omnibus bill with four major parts: extending federal authority for Medicaid eligibility determinations through the federal Marketplace until June 2028; simplifying enrollment for formerly incarcerated individuals into Medicaid managed care; aligning provider screening with federal regulations for those who were previously exempt from fingerprinting; and clarifying changes to the Medicaid subrogation statute to reflect changes when the state moved to managed care in 2021. Finally, SB 445 passed the Senate unanimously to provide temporary regulatory relief for hospitals in designated disaster zones. The bill now sits in the House (The Carolina Journal, May 2).

SPA and Waiver Approvals

Waivers

• Alabama
  • On April 30, Alabama received approval from CMS to extend its 1115 waiver, “Alabama Plan First.” With this extension approval, the state will continue to provide family planning and tobacco cessation services to eligible individuals for 12 months of continuous eligibility, limited to women ages 19 through 55 with income up to 141% of the federal poverty level (FPL) who are not otherwise eligible for Medicaid; and men age 21 or older with income up to 141% of the FPL who are not otherwise eligible for Medicaid. In accordance with State Medicaid Director Letters #10-013, #14-003, and #16-008, the agency has revised the state’s request and identified sexually transmitted infection and disease (STIs/STDs) screenings diagnosis services as family planning-related services in Alabama’s waiver. The demonstration is effective through September 30, 2030 (CMS.gov, April 30).
• Florida
  • On April 30, Florida received approval from CMS to extend its 1115 waiver, “Florida Medicaid Family Planning Waiver.” With this extension approval, Florida will continue to provide family planning services and family planning related services to women who are not otherwise enrolled in Medicaid or CHIP and meet other eligibility criteria. Eligibility for the demonstration is limited to 24 months, with a maximum of two 12-month continuous eligibility periods, after the loss of Medicaid coverage, subject to an annual redetermination. Individuals are eligible for the demonstration and a new 24-month coverage period upon each loss of Medicaid state plan eligibility. In accordance with State Medicaid Director Letters #10-013, #14-003, and #16-008, the agency has revised the state’s request and identified sexually transmitted infection and disease (STIs/STDs) screenings and diagnosis services as family planning-related services in Florida’s waiver. The demonstration is effective through June 30, 2030 (CMS.gov, April 30).
• Georgia
  • On April 30, the state received approval from CMS for its amendment to its 1115 waiver, “Planning for Healthy Babies.” In accordance with State Medicaid Director Letters #10-013, #14-003, and #16-008, the agency has revised the state’s request and identified sexually transmitted infection and disease (STIs/STDs) screenings as a family planning service and STI/STD diagnosis services as a family planning-related service in Georgia’s waiver. The demonstration is effective through December 31, 2029 (CMS.gov, April 30).
• Mississippi
  • On April 30, the state received approval from CMS for its amendment to its 1115 waiver, “Mississippi Family Planning.” In accordance with State Medicaid Director Letters #10-013, #14-003, and #16-008, the agency has revised the state’s request and identified sexually transmitted infection and disease (STIs/STDs) screenings as a family planning service and STI/STD diagnosis services as a family planning-related service in Mississippi’s waiver. The demonstration is effective through December 31, 2027 (CMS.gov, April 30).
• Montana
  • On April 30, the state received approval from CMS for its amendment to its 1115 waiver, “Montana Plan First.” In accordance with State Medicaid Director Letters #10-013, #14-003, and #16-008, the agency has revised the state’s request and identified sexually transmitted infection and disease (STIs/STDs) screenings as a family planning service and STI/STD diagnosis services as a family planning-related service in Montana’s waiver. The demonstration is effective through December 31, 2028 (CMS.gov, April 30).
• Oregon
  • On April 30, the state received approval from CMS for its amendment to its 1115 waiver, “Oregon Contraceptive Care.” In accordance with State Medicaid Director Letters #10-013, #14-003, and #16-008, the agency has revised the state’s request and identified sexually transmitted infection and disease (STIs/STDs) diagnosis services as a family planning-related service in Oregon’s waiver. The demonstration is effective through December 31, 2028 (CMS.gov, April 30).
• Washington
  • On April 30, Washington state received approval from CMS to extend its 1115 waiver, “Washington Family Planning Only Program.” This approval extends the demonstration, which offers a benefit package limited to family planning and family planning related services with 12 months of continuous eligibility and supplies, including contraception, counseling and education related to contraception, lab tests, and vasectomies to certain eligible individuals who are not otherwise enrolled in Medicaid or CHIP. In accordance with State Medicaid Director Letters #10-013, #14-003, and #16-008, the agency has revised the state’s request and identified sexually transmitted infection and disease (STIs/STDs) screenings and  diagnosis services as family planning-related services in Washington’s waiver. The demonstration is effective through June 30, 2030 (CMS.gov, April 30).
• Wyoming
  • On April 30, the state received approval from CMS for its amendment to its 1115 waiver, “Wyoming Pregnant By Choice.” In accordance with State Medicaid Director Letters #10-013, #14-003, and #16-008, the agency has revised the state’s request and identified sexually transmitted infection and disease (STIs/STDs) diagnosis services as a family planning-related service in Wyoming’s waiver. The demonstration is effective through December 31, 2027 (CMS.gov, April 30).

SPAs

• Payment SPAs
  • New Mexico (NM-25-0001, effective February 1, 2025): Increases the reimbursement rate for the Family Infant Toddler (FIT) program.
  • North Carolina (NC-25-0004, effective January 1, 2025): Establishes cost-based reimbursement methodology for select medications that are provided within professional outpatient and hospital inpatient or outpatient settings, such as cell and gene therapies.
• Service SPAs
  • Washington (WA-25-0001, effective July 1, 2025): Establishes Certified Peer Support Specialists and trainees as Rehabilitative Behavioral Health service providers.

Preprints

• Arizona (Effective October 1, 2024): Renews a uniform increase provided by the eligible public safety net hospital established by the state for inpatient and outpatient hospital services for the rating period covering October 1, 2024 through September 30, 2025, incorporated into the capitation rate through a separate payment term.
• Arizona (Effective October 1, 2024): Renews a uniform percentage increase established by the state for Differential Adjusted Payments (DAP) program eligible providers for the rating period covering October 1,2024 through September 30, 2025, and incorporated in the capitation rate through a risk-based adjustment.
• Massachusetts (Effective January 1, 2024): Renews a uniform increase established by the state for eligible inpatient and outpatient hospital services for the rating period covering January 1, 2024 through December 31, 2024, incorporated into the capitation rates through a separate payment term.

Sellers Dorsey Updates

On-Demand Webinar: How Health Plans Can Strengthen the Child and Family Welfare System

• Watch this expert-led webinar exploring how managed care organizations can better serve children in foster care and those with complex needs. Learn about policy shifts, trauma-informed care, and strategies for improving outcomes through stronger collaboration between healthcare and child welfare systems.

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Gary Jessee in Fireside Chat: Fixing Care for High-Need Dual Populations

• Don’t miss Sellers Dorsey Senior Vice President of National Consulting, Gary Jessee, in a timely fireside chat on Monday, May 12 at 1:30 PM ET. He’ll join experts from ATI Advisory and Isaac Health to explore innovative solutions for improving care and lowering costs for high-need dual eligibles.

Register Today