Issue #245
Sellers Dorsey Digest
July 17, 2025
Federal News
Federal Judge Voids Rule Removing Medical Debt from Credit Reporting
On July 11, US District Judge Sean Jordan reversed the Biden Administration’s Consumer Financial Protection Bureau (CFPB) rule from January. The rule aimed to remove $49B in medical debt from 15 million people’s credit reports. The rule also set a precedent to disallow lenders from utilizing medical devices as collateral and utilizing medical information as their basis for decisions regarding loans. In his decision, Judge Jordan opined that the rule exceeded the Bureau’s authority and conflicts with the 2003 amended Fair Credit Reporting Act (The Hill, July 12; CNN, July 15).
CMS Announces Medicaid Cell and Gene Therapy Access Model
On July 15, the Centers for Medicare and Medicaid Services (CMS) announced it had selected 33 states, DC and Puerto Rico, to participate in a new Cell and Gene Therapy (CGT) Access Model to test outcomes-based payments for treating sickle cell disease. The selected states and territories account for the largest share of Medicaid beneficiaries living with this condition, at 84%. Through this model, the agency seeks to increase access to gene therapy services to improve health outcomes for individuals living with rare and severe diseases. Participating states will test if administering an outcomes-based agreement (OBA) for cell and gene therapy can improve the Medicaid population’s access to cutting-edge therapies to improve patient health outcomes and eventually reduce healthcare costs and related burdens on the program. This model marks the first initiative where CMS will directly negotiate with pharmaceutical manufacturers on behalf of state agencies. The agency plans to provide $9.55M per state to help with implementation, outreach, and data monitoring. The voluntary program has already begun, and participants will be asked to start by January 2026 (CMS, July 15; CMS, N/A).
Bill Introduced to Extend Hospital at Home Care Through 2030
On July 10, 2025, Chair of the Health Subcommittee on Ways and Means Congressman Vern Buchanan introduced the bipartisan Hospital Inpatient Services Modernization Act. Buchanan is leading this effort alongside Representatives Lloyd Smucker (R-PA) and Dwight Evans (D-PA), with Senators Tim Scott (R-SC) and Raphael Warnock (D-GA) also supporting. The bill would extend the Hospital at Home program originally launched by CMS in 2020 to allow hospitals to continue providing acute care to eligible patients in their homes through 2030. The program has demonstrated cost savings and improved patient outcomes by reducing hospital stays and related complications. The legislation also requires the Department of Health and Human Services (HHS) and CMS to conduct a comprehensive study comparing home-based and inpatient care on quality, safety, and patient satisfaction, with the goal of establishing formal regulations for the program. Over 200 hospitals in 34 states, including 23 in Florida, currently participate in the program. The American Hospital Association supports the bill, which aims to maintain access to this alternative model of care (Congressman Vern Buchanan, July 10).
New HHS Guidance Limits Federal Program Eligibility to Legal Residents
On July 10, 2025, the U.S. Department of Health and Human Services (HHS) announced a policy update designed to align eligibility for its programs with federal law. HHS officially withdrew a 1998 interpretation of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) that had allowed certain federal benefits to be accessed by individuals without legal immigration status. Under the revised policy, outlined in a notice, several HHS programs, including Head Start and some behavioral health services, substance use prevention services, and family planning initiatives, are newly classified as federal public benefits. As a result, eligibility for these programs will be limited to U.S. citizens and legal immigrants. According to HHS, this change is expected to expand access for eligible Americans, including through freeing up an estimated $374M in additional Head Start services annually. The policy takes effect immediately and is subject to a 30-day public comment period (HHS, July 10).
- From Our Viewpoint:
HHS’ decision to expand the definition of “federal public benefits” could have significant implications for healthcare and social services providers and the individuals for whom they provide care. Such organizations may be required to develop policies and procedures, and possibly implement systems changes, in order to comply, which could be a significant cost.
Many of the newly included programs are designed to provide preventive care and ongoing treatment for mental health and substance use disorders. Restricting access to these programs could lead to more undocumented immigrants being unable to seek lower acuity care at clinics and instead seeking care in emergency departments and other higher acuity settings. This could increase the burden of uncompensated care to hospitals and other providers and emergency Medicaid and uncompensated care costs to states.
Don’t have time to read the full policy? Sellers Dorsey experts summarized everything you need to know. Explore our summary.
CMS Releases Proposed 2026 Medicare Physician Fee Schedule Rule
On July 14, CMS released its proposed rule updating the Medicare Physician Fee Schedule, designed to improve care quality for Medicare beneficiaries while reducing unnecessary spending. The proposal focuses on better chronic disease management, significant reductions in spending on skin substitutes, and a new payment model targeting specialty care for conditions like heart failure and lower back pain. Medicare Part B claims data highlights spending on skin substitutes has increased from $256M in 2019 to over $10B in 2024, partly due to high prices and limited clinical evidence supporting some products. CMS plans to change how these products are reimbursed, expecting to reduce related spending by nearly 90% without compromising patient access. To enhance patient outcomes, the proposal removes ten quality measures that did not directly improve patient health and adds five new measures focused on preventing chronic diseases, including diabetes screening.
It also expands access to the Medicare Diabetes Prevention Program, providing beneficiaries with free coaching and support to help delay or prevent Type 2 diabetes. The proposal also introduces the Ambulatory Specialty Model, a mandatory payment system set to begin in 2027. CMS says the model will encourage specialists to focus on early intervention, improve communication with primary care providers, and reduce avoidable hospitalizations for chronic conditions, running through 2031. Additional changes include improving payment accuracy across care settings, making some COVID-era telehealth flexibilities permanent, expanding coverage for digital mental health tools, and adjusting payment conversion factors for clinicians participating in advanced alternative payment models starting in 2026 (CMS, July 14).
Department of Labor Pulls Proposed Rule Aimed at Securing Equal Pay for Workers with Disabilities
On July 7, the Department of Labor (DOL) withdrew the proposed rule aiming on phasing out employer’s abilities to obtain 14(c) certificates to pay workers with disabilities a subminimum wage, under the federal minimum of $7.25/hr. Several states across the US have begun to phase out the practice, with some states reporting increases in employment and labor participation. In its rationale for withdrawal, the DOL argued that removal of the certificates will instead cause unemployment and underemployment for individuals with disabilities (Disability Scoop, July 10; Disability Scoop, December 2024).
CMS Releases Proposed CY2026 Outpatient Medicare Payment Rate Rule
On July 15, CMS released a proposed rule for CY 2026 regarding updates to Medicare payment methodology and policies for hospital outpatient and services provided by ambulatory surgical centers (ASC) under the Hospital Outpatient Prospective Payment System (OPPS). Key provisions in the proposed rule include:
- In alignment with President Trump’s Executive Order 14221, the proposed rule looks to strengthen Hospital Price Transparency (HPT) by requiring hospitals to disclose distribution of prices, the usage of electronic data interchange (EDI) 835 electronic remittance advice (ERA) transaction data, follow standardized methodology, have applicable payer-specific negotiated charges readily available, and reduce the civil monetary penalty by 35% for noncompliance.
- Increase OPPS payment rates for hospitals that meet quality reporting requirements by 2.4% and update ASC rates with a 2.4% increase.
- Sunset the inpatient only (IPO) list over a 3-year period, to allow for more procedures to be performed in outpatient service sites and shorten recovery time. In CY2026, CMS aims to remove 285 procedures, most of which are musculoskeletal related.
- Revise the ASC Covered Procedures List (ASC CPL), by eliminating five general exclusion criteria, adding 276 procedures, and transferring 271 IPO sunset procedures to the ASC CPL.
- Updates to Medicare payment rates for partial hospitalization program (PHP) services.
- Revise the current hospital quality star rating system, Rural Emergency Hospital Quality Reporting (REHQR) Program, Hospital Outpatient Quality Reporting (OQR) Program, and Ambulatory Surgical Center Quality Reporting (ASCQR) Program.
In addition, the agency also seeks public input from the public through a request for information (RFI) regarding opportunities to reduce regulatory burden and streamline regulations (CMS, July 15; Becker’s Hospital Review, July 15).
State Updates
Virginia Clinics Prepare for Rise in Uninsured Patients Following Medicaid Cuts
Free and charitable clinics across Virginia are anticipating an increase in demand as more than 300,000 residents may lose health coverage under President Trump’s recently passed One Big Beautiful Bill Act (OBBBA) according to the S. Congress Joint Economic Committee. At the Bradley Free Clinic in Roanoke, VA, Executive Director Janine Underwood says they’re already at capacity, now serving over 4,000 patients, up from 1,200 before the pandemic. The clinic is one of 21 that began accepting Medicaid after Virginia expanded the program in 2019. Statewide, about 30,000 of the 110,000 patients seen in these clinics each year are currently covered by Medicaid. With limited funding and staffing, clinic leaders say they may be unable to keep up with a sudden influx of uninsured patients as they wait for further analysis of the bill’s full effects (WVTF, July 14).
OBBBA Leaves Rural Residents in Oregon at Increased Risk
Following President Trump’s signing of the OBBBA, Oregon lawmakers worry about the law’s implications across different sectors, including public safety, environment, and healthcare. Key issues include the expectation that the state will need to spend about $100M in order to implement a system to comply with Medicaid work requirements. Furthermore, 11 of the state’s 33 rural hospitals may face closure. This is a substantial worry as these closures would greatly affect access to care, and exacerbate conditions as emergency care rates increase, due to the lack of preventive care and access to local hospitals with some having to drive two to three hours for visits (KLCC, July 11).
SPAs and Waivers
Waivers:
1115(a)
- On June 30. 2025, Illinois submitted a request to extend its 1115 demonstration waiver, “Illinois Continuity of Care and Administrative Simplification,” by five years. The extension would continue the following authorities: authorities: waiver of hospital presumptive eligibility for 18 months; and allowing the state to re-enroll Medicaid beneficiaries into their prior managed care organization (MCO) when the Medicaid beneficiary submits late redetermination paperwork and is within 90 days of disenrollment. The state requests new authority to allow the state to treat out-of-state address changes as reliable based on information from the United States Postal Service (USPS) National Change of Address (NCOA) database and MCOs if the MCO has received information directly from or verified the information with the beneficiary. This would allow the state to send a termination notice to the updated out-of-state address as the beneficiary would no longer meet the state residency requirement. The beneficiary would retain appeal rights and would be reinstated into coverage if there was an error. The federal public comment period is open from July 16, 2025, through August 15, 2025.
- On June 25, 2025, Kentucky submitted an application for a new section 1115 demonstration waiver to refer eligible individuals in the Medicaid expansion eligibility group, which includes able-bodied adults without dependents who have been enrolled in the Commonwealth’s medical assistance program for more than twelve (12) months, to the Kentucky Education and Labor Cabinet’s Department of Workforce Development (DWD) to provide information about available job placement assistance programs. The federal public comment period will be open from July 10, 2025, through August 9, 2025.
- On June 30, 2025, Maine submitted a request to extend its Substance Use Disorder Care Initiative 1115 demonstration waiver. Additionally, the state seeks to change the name of the demonstration from “Maine Substance Use Disorder Care Initiative” to “Maine’s Whole Person Care Waiver” and to include additional services. The proposed services include: 1) Contingency Management; 2) Transitions of Care Incentive Payments; 3) Pre-Release Medicaid Services for Justice-Involved Individuals; 4) three Health Related Social Needs (HRSN) initiatives, Food is Medicine (FIM), Recuperative Care, and Structured Recovery Housing Services; 5) Traditional Healing Therapies for Native Americans; and 6) authorization to provide reimbursement for clinically appropriate services that are otherwise approvable under the Medicaid state plan, delivered to individuals aged 21-64 with serious mental illness (SMI) who are short-term residents in facilities that meet the definition of an IMD. The federal public comment period will be open from July 10, 2025, through August 9, 2025.
- On June 27, 2025, Oklahoma submitted a request to extend its Medicaid section 1115 demonstration waiver, “Oklahoma Institutions for Mental Disease Waiver for Serious Mental Illness/Substance Use Disorder Demonstration.” This demonstration aims to provide access to mental health and substance use treatment by allowing Medicaid coverage and reimbursement for inpatient treatment services provided to eligible adults with SMI/SUD, ages 21-64, within IMDs. Through the extension of this demonstration, Oklahoma aims to continue improving access to quality behavioral health care to support the overall health of individuals diagnosed with SMI and/or SUD and improve outcomes and accessibility of SMI/SUD treatment services in a cost-effective manner. The federal comment period will be open from July 11, 2025, through August 10, 2025.
- On June 23, 2025, South Carolina submitted an application for a new 5-year 1115 demonstration waiver to offer Medicaid coverage for adults ages 19-64 who qualify under the parent caretaker relative (PCR) group with incomes between 67 to 100 percent of the Federal Poverty Level (FPL). This proposal includes community engagement requirements for individuals eligible for this demonstration. The federal public comment period will be open from July 10 to August 9, 2025.
- On June 30, 2025, Utah submitted a request to amend its Medicaid Reform 1115 Demonstration to provide benefits available under Medicaid but not provided by individuals’ minimum essential coverage to qualified individuals who have minimum essential coverage and have a disability. The state is also requesting to shift all Medicaid dental services for children under age 21 and pregnant and postpartum women from managed care to a fee for service model in partnership with the University of Utah School of Dentistry (UUSOD) and their associated statewide provider network. The federal public comment period will be open from July 10, 2025, through August 9, 2025.
- On July 3, 2025, Utah submitted a request to amend its Medicaid Reform 1115 demonstration waiver. The amendment would add a community engagement work requirement for the Medicaid expansion population. Women who are pregnant or within the twelve-month postpartum period, those who are physically or mentally unable to meet the requirements, and parents or members of a household with the responsibility to care for a dependent child age 13 and under, are among those populations exempted from the requirement. The federal public comment period will be open from July 16, 2025, through August 15, 2025.
SPAs:
Services
- American Samoa (AS-25-0001, effective January 1, 2025): Authorizes an exemption for requirements in § 1902(a)(84)(D) of the Social Security Act, based on the territory’s unique local conditions.
- South Dakota (SD-25-0003, effective January 1, 2025): In compliance with §5121 of the Consolidated Appropriations Act of 2023, establishes targeted case management (TCM) services for eligible juveniles under 21 and former foster care individuals ages 18-26 and establishes a fee-for-service (FFS) reimbursement methodology.
Payment
- Colorado (CO-24-0039, effective September 11, 2024): In accordance with House Bill 22-12-78, adds Comprehensive Community Behavioral Health providers and Essential Behavioral Health safety net providers and makes them eligible for cost-informed reimbursements.
- Hawaii (HI-24-0008, effective January 1, 2025): Implements third party liability requirements under the Consolidated Appropriations Act of 2022 and the Gallardo v. Marstiller ruling.
- Oregon (OR-24-0025, effective January 1, 2025): Updates payment methodology of inpatient hospital psychiatric services provided in a diagnostic-related group (DRG) hospital.
