Sellers Dorsey Digest

Federal Updates

NEWS

House Votes to Advance Budget Reconciliation Bill

• Early Thursday morning, the House voted 215-214 to pass their budget reconciliation text. In the last week, lawmakers made changes to key Medicaid provisions to sway fiscal hardliners to vote for the text, like moving up the effective dates for work/community engagement requirements to no later than December 31, 2026 and, capping new state-directed programs (submitted to CMS after enactment date) in non-expansion states to 110% of Medicare and capping new programs in expansion states to 100% of Medicare. Current state directed programs in all states would be grandfathered in at current payment amounts. No further changes were made to preliminary text for provider taxes/generally redistributive requirements provisions. The bill will now advance to the Senate where it is expected that the lawmakers will make many attempts to amend the language. The House Budget Committee advanced the reconciliation bill late on May 18, despite ongoing uncertainty over Medicaid provisions and resistance from some lawmakers seeking higher cost savings. The bill went to the House Rules Committee early Wednesday morning, where lawmakers later voted 8 to 4 to move the budget to the House floor after nearly 26 hours of deliberation. (Inside Health Policy, May 19; Politico, May 22; Politico, May 22).

Sellers Dorsey will release an updated summary of Medicaid-related provisions later this week. Read the summary.

RFK Jr. Offers Insights to His Vision for Agency During Congressional Hearings

• On Wednesday, May 14, HHS Secretary Robert F. Kennedy Jr. appeared for congressional hearings in the House Appropriations Committee and the Senate Health, Education, Labor, and Pensions (HELP) Committee that were, at times, marked by contentious exchanges between the Secretary and lawmakers. Kennedy noted his interest in improving cybersecurity and health information technology while also describing ways telehealth and artificial intelligence could be used to treat patients outside of hospitals or other healthcare facilities, particularly in rural and underserved areas. Kennedy also highlighted the important role CMS Administrator Dr. Mehmet Oz will play in implementing these AI and telehealth policies in CMS. Likewise, at a separate conference on May 13, Dr. Oz stated that he wants CMS to work with the private sector to expand the use of health technology. The importance of technology within HHS has become even more clear with the issuing on May 16, of a Request for Information (RFI) by CMS on ways to increase and improve the use of health information technology (NPR, May 15; Inside Health Policy, May 14).

⇒ From Our Viewpoint^[i]

The HHS Secretary made statements that begin to paint a clearer picture of the administration’s vision for the agency when viewed alongside other recent policy releases. The Center for Medicare and Medicaid Innovation (CMMI) also recently released a statement detailing the new vision of the Innovation Center, which includes an emphasis on evidence-based prevention services, individual health, and choice and competition for consumers. CMMI proposes to support these goals by leveraging value-based care, chronic disease management, and devices and technology, all against the backdrop of rooting out and preventing fraud, waste, and abuse in government programs. These stated objectives must be considered in conjunction with the administration’s proposed budget cuts to HHS. Trump’s proposed FY2026 budget would reduce the agency’s budget by $33.3B, a 26.2% reduction from FY2025, including reductions to CMS funding. It is important to note that the administration is also focused on deregulating the industry with the aim of encouraging these individual choices and fostering innovation in healthcare.

_{[i]Donald Trump’s fiscal 2026 budget proposal includes steep cuts to health funding; CMS Innovation Center Strategy to Make America Healthy Again | CMS; RFK Jr. stands by overhaul of HHS in combative House and Senate hearings : NPR; RFK Vows To Revolutionize Telehealth, Use AI For Some Tests, Routine Care In Underserved Areas | InsideHealthPolicy.com}

HHS Implements Plan to Align U.S. Drug Prices with Global Standards

• On May 20, 2025, the U.S. Department of Health and Human Services (DHHS) announced immediate steps to implement President Trump’s Executive Order, “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients.” Led by President Trump, the DHHS Secretary Robert F. Kennedy Jr., and Centers for Medicare and Medicaid Services (CMS) Administrator Dr. Mehmet Oz, the initiative aims to reduce drug prices to be in line with prices in other markets. If drug manufacturers fail to comply, the administration plans to take further regulatory actions to ensure, in the administration’s view, that Americans no longer assume disproportionate portions of global drug costs (HHS.gov, May 20).

Summary of the Executive Order:

• • Drug makers must match U.S. brand-name drug prices (without generics or biosimilars) to the lowest in OECD countries with GDP per capita ≥ 60% of the U.S.
  • The order targets foreign discounts that lead Americans to subsidize global drug profits.
  • The Department of Commerce and the U.S. Trade Representative must act against countries that force below-market drug pricing.
  • HHS must support programs for Americans to buy drugs directly at Most Favored Nation prices.
  • If pharmaceutical manufacturers do not align U.S. prices with lowest available in OECD countries within 30 days, HHS must begin rulemaking and explore importing cheaper drugs under Section 804(j) of the Federal Food, Drug, and Cosmetic Act (FDCA).
  • The Department of Justice (DOJ) and the Federal Trade Commission (FTC) will enforce antitrust laws against anti-competitive drug pricing.
  • The Food and Drug Administration (FDA) may revoke approvals of unsafe, ineffective, or improperly marketed drugs.

Senate Finance Committee Finalizes HHS Nominations

• On May 15, the Senate Committee on Finance announced successful committee votes on two key nominations for leadership positions within HHS, James O’Neill for Deputy Secretary and Gary Andres for Assistant Secretary. Both nominees have extensive experience in health policy, with O’Neill having formerly served as an HHS official during the George W. Bush Administration and Andres’ as former Staff Director of the House Energy & Commerce, Ways & Means and Budget Committees (Committee on Finance, May 15; Inside Health Policy, May 15).

Federal Regulation/Guidance

HHS Publishes Notice of Federal Guidance Removals as Part of the Deregulatory Plan

• On May 14, the DHHS published a notification on the Federal Register, on behalf of Secretary Robert F. Kennedy Jr., regarding the agency’s intent to rescind four previously released guidance documents on the basis that they no longer align with the DHHS’ mission for a Healthier America. Included in the removal are guidance documents relating to substance use-disorder treatments, COVID-19 funding and related health resources, and discrimination on the basis of gender-identity. As directed by President Trump last month, there will not be a public comment period for this or other regulations that are misaligned with current federal priorities (Federal Register, May 14; Inside Health Policy, May 16; Politico, April 10).

Trump Admin to Review Mental Health Parity Final Rule

• According to a court filing from earlier this month from the Department of Justice (DOJ), the Trump Administration does not intend to enforce certain regulations under the Mental Health Parity and Addiction Equity Act (MHPAEA). In September 2024, several departments under the Biden Administration finalized a rule which aimed to strengthen MHPAEA, which requires insurers to cover mental health services on par with physical health benefits meaning behavioral health services cannot be more restrictive than physical health services, by mandating that group plans offer services for mental health and substance use disorder (SUD). This legislation built upon the first Mental Health Parity Act signed by President Bill Clinton in 1996. The Biden administration was hopeful that the regulation would close certain loopholes and bolster patient protections around treatment limits, prior authorization, and step therapy that remained after the 2008 legislation. However, the ERISA Industry Committee (ERIC) filed a suit against the agencies in mid-January, arguing that they exceeded their authority in the prior administration. Now, the DOJ has asked the District of Columbia District Court to suspend the litigation while it works to facilitate a review process where it will determine whether the final rule should be modified or rescinded (Fierce Healthcare, May 13).

Federal Studies and Reports

OIG Recommends CMS Track Whether States Return Federal Share of Managed Care Remittances

• In a May report, the federal Office of Inspector General (OIG) found that CMS does not have procedures in place to track whether states return the correct federal share of remittances from managed care organizations (MCOs). When MCOs fail to meet a state’s minimum medical loss ratio standards, the state can require the MCO to refund the state, who should then refund CMS the federal share of that remittance. OIG found that CMS does not have procedures in place for remittances and recommends CMS develop such procedures and also pursue refunds from states that have failed to return the federal share from remittances. CMS concurred with the OIG’s recommendations (OIG, May 13).

State Updates

NEWS

Hawaii Governor to Pursue Social Impact Bonds to Address Homelessness

• Hawaii Governor Josh Green (D-HI) hopes to use Medicaid funds to back social impact bonds aimed at increasing housing and reducing homelessness. The state saw the largest increase in homelessness in the country from 2019 to 2024 while consistently facing the highest housing prices. The state also experienced the catastrophic Maui wildfires in 2023. However, Governor Green needs approval from the state legislature and the Trump Administration to use Medicaid dollars in this way. Hawaii currently operates 1115 waivers that include provisions to assist with homelessness and other health-related social needs (HRSN). However, the Trump Administration has since notified state officials that it will not approve or renew these types of waivers while in office. Governor Green stated that Hawaii saved 73% on Medicaid spending when someone was able to find housing versus being homeless, including the cost of rent (Health Payer Specialist, May 16).

Colorado Governor Signs Bill to Further Research on State Implementation of a Universal Healthcare System

• On May 14, Governor Jared Polis (D-CO) signed SB25-045 into law, which requires the Colorado School of Public Health to conduct research and draft legislation to implement a universal healthcare system that the legislation says will aid the state in achieving more affordable and comprehensive healthcare. Researchers will be required to consider the prioritization of comprehensive health benefits, fair drug prices and provider payments, and the prohibition of deductibles and co-payments. The school must also report financial estimates relating to the cost of operating this type of system and necessary incentives and financial implications. The bill creates a healthcare analysis collaborative group to advise the School of Public Health during their analysis. Key stakeholders that must be invited to participate in the collaborative include members of advocacy groups for healthcare consumers, historically marginalized communities, and rural health stakeholders. The School of Public Health must select a draft model by July 1, 2025, and submit its findings to the general assembly by December 31, 2026 (Becker’s Payer Issues, May 16; Colorado General Assembly, May 14).

Massachusetts Limits Healthcare Deductible and Co-Pay Increases

• Massachusetts is introducing new regulations to slow the increase of healthcare deductibles and co-pays, limiting their growth to the rate of medical inflation starting in January 2026. This move follows recent legislation aimed at making healthcare more affordable amid a nearly 23% rise in deductibles over two years, which has added over $200 in costs per patient. State leaders emphasize that controlling these expenses is crucial since deductibles and co-pays have been rising faster than wages, impacting families’ ability to afford care. This policy builds on broader efforts by Governor Maura Healey and Lieutenant Governor Kim Driscoll’s administration to reduce healthcare costs, including prescription drug caps and expanded healthcare coverage programs (Mass.gov, May 15).

Connecticut Governor Signs Declaration Urging Legislators to Approve Deficiency Appropriations for the State’s Medicaid Program

• On May 19, Governor Ned Lamont (D-CT) signed a declaration urging the General Assembly to adopt the necessary legislation (HB 6863) that would keep the state’s Medicaid program funded for FY2025. The Department of Social Services, the agency that administers Medicaid, has reported a $284M deficit that would hinder its ability to reimburse providers on time, which could lead to enrollees losing access to healthcare and financial penalties for the state in the long run. The Governor urges the assembly to pass HB 6863 and allot the agency with the necessary funds in order to ensure continuity of healthcare services for the Medicaid population (CT, May 19; WFSB Hartford, May 19).

SPA and Waiver Approvals

Waivers

• New York
  • On May 6, 2025, New York submitted a request to amend its Medicaid Redesign Team (MRT) 1115 waiver to implement a new demonstration program for the state’s Medicaid Buy-In Program for Working People with Disabilities (MBI-WPD). To help more working individuals with disabilities qualify for Medicaid, the amendment requests authority to implement an 1115 demonstration to become the new MBI-WPD program. New York aims to assist these individuals in obtaining employment without concern over losing Medicaid coverage. The state is also requesting to increase the number of allowable days for backfill payments in the Career Pathways Training (CPT) Program, from two days per week up to five days per week to accommodate more intensive training programs. The federal public comment period will be open from May 20 through June 19.

SPAs

• Eligibility
  • Tennessee (TN-25-0002, effective January 1, 2025): Creates a new classification of medical needy individuals and extends coverage to children who were adopted from state custody who do not otherwise qualify for adoption assistance.
  • Connecticut (CT-25-0012, effective January 1, 2025): Maintains the new income standards for the state’s optional state supplement program.
• Payment
  • Maryland (MD-24-0015, effective September 1, 2025): Updates Evaluation and Management (E&M) payment methodology to reflect 97.6% of the Medicare rate across all program areas and 93% to 100% of the Medicare rate change for covered E&M procedure codes 99202-99499. Additionally, removes language referring to federal coverage of COVID-19 vaccines and administration.
  • Ohio (OH-25-0001, effective January 1, 2025): Updates non-institutional payment schedules for 2025.
  • Pennsylvania (PA-25-00015, effective April 1, 2025): Adds clarifying language for the state’s process of the approval of enrollments with a retroactive billing date.
  • Washington (WA-25-0011, effective January 1, 2025): Updates the payment methodology for certain Home and Community Based Services (HCBS).
• Services
  • California (CA-24-0031, effective January 1, 2025): Updates language to clarify Behavioral Health Treatment (BHT) as a covered service under EPSDT and allowed supervisors of paraprofessionals.
  • Colorado (CO-25-0001, effective July 1, 2025): Reinstates Prior Authorization Request (PAR) requirements for Home Health services.
  • Maryland (MD-25-0001, effective January 3): Waives the Four Walls requirement, relating to allowable Medicaid services to be delivered, for outpatient mental health clinics.
  • Ohio (OH-25-0002, effective January 1, 2025): Updates the Comprehensive Primary Care (CPC) and CPC for Kids programs for CY2025.
  • Ohio (OH-25-0003, effective January 1, 2025): Updates the Comprehensive Maternal Care (CMC) program for CY2025.
  • Oklahoma (OK-25-0006-A, effective January 1, 2025): Expands eligibility for the Hospice Benefit for all Medicaid members, if they meet the needed criteria.
  • Vermont (VT-25-0005, effective February 15, 2025): Eliminates caps on Physician Office Visits, Home Visits, and Nursing Facility Visits.
  • Wisconsin (WI-25-0001, effective February 1, 2025): Updates provider qualifications for Group P Targeted Case Management (TCM) services, or child care coordination services.

Sellers Dorsey Updates

Impact Watch: How Proposed Policy Changes Could Impact Various States

• As Congress considers changes that could reduce federal funding for Medicaid, states are actively assessing the potential impact on their healthcare systems, communities, and economies. To illustrate these potential effects, we’ve highlighted key findings from recent state analyses.

Explore the Impacts

Sellers Dorsey Welcomes Phil Burrell as Managing Director of Healthcare Finance and Quality

• Phil Burrell, MHA, M.Eng., will lead and expand our Medicaid financing and quality strategies, supporting clients across the country in strengthening healthcare access, delivery, and outcomes. Phil is a seasoned Medicaid finance leader with more than 15 years of experience in healthcare systems engineering, policy, and data analytics.

Learn More About Phil

Gary Jessee Featured in HIT Consultant Q&A

• Sellers Dorsey Senior Vice President, National Consulting, Gary Jessee, sat down with HIT Consultant to discuss what makes Medicaid the most innovative program in healthcare today.

Read the article