Issue #256
Sellers Dorsey Digest
October 2, 2025
Federal News
Government Shutdown Begins as CR Stalls in Final Hours
With Congress gridlocked over a Continuing Resolution (CR), a government shutdown began on Tuesday night. The crux of the issue remains the extension of enhanced Affordable Care Act premium tax credits (EPTCs), with Democrats demanding that the CR include financing to extend the subsidies beyond the end of the year while Republicans are generally seeking a clean, seven-week CR to get to the end of the calendar year. Democrats emphasized how expiring tax credits will drastically raise the cost of healthcare coverage for around 20 million Americans and further burden the healthcare system, citing the reconciliation bill passed this summer that significantly alters the Medicaid program. Although some Republicans have shown interest in creating a new version of the EPTCs, potentially altering income limits and certain benefits, the CR negotiations ended in a stalemate. President Trump met with Democratic leaders on Monday September 29, but no resolution was reached (Inside Health Policy, September 25; Politico, September 30).
CMS Workforce Plan Released for Shutdown
HHS released its FY2026 shutdown plan on September 29, detailing that just over 3,300 CMS staff would continue to work if appropriations lapse on October 1. This includes about 50% of all staff who are funded by mandatory spending or other sources. Many activities will continue despite a government shutdown, including administering Medicare and Medicaid, federal marketplace activities like eligibility verification, and fraud, waste, and abuse efforts. The document states that there are enough federal funds to cover the cost of Medicaid through Q1 of FY2026, which ends on December 31, 2025. CMS also plans to retain enough staff to ensure that CHIP payments are sent to states. However, federal oversight of contractors and the regulatory process will cease in a shutdown. Any national or community outreach from CMS would be slowed down or stopped entirely. The White House Office of Budget and Management has indicated that agencies should consider additional reductions in force (RIF) notices for employees to further align the executive branch with President Trump’s priorities. This differs from previous government shutdowns that furloughed government employees without pay but reinstated them once appropriations were made (Inside Health Policy, September 29).
Medicare Advantage and Part D Plans to Remain Stable in 2026
On September 26, CMS announced that Medicare Advantage and Part D premiums, benefits, and plans are expected to remain stable in 2026. Both parts of the Medicare program are expected to see a decline in average premium costs from 2025 to 2026. MA plan premiums are expected to decrease by $2.40, reaching $14 per month for enrollees in 2026. Standalone Part D premiums are expected to decrease by $3.81, reaching $34.50 per month in 2026. For enrollees in MA plans, prescription drug rebates should lower costs to $11.50 a month, a decrease of $1.82. Projected enrollment in the MA program for 2026 is 34 million, a slight decrease from 34.9 million in 2025. Over 99% of Medicare enrollees will have access to an MA plan in 2026, with 97% having access to 10 or more plans despite a minor decrease in the total number of available MA plans. However, CMS anticipates that MA enrollment will remain robust despite projections from the plans. Medicare Open Enrollment is set to begin on October 15 and will run through December 7 (CMS.gov, September 26).
Healthcare Sector Employment Remains High Amidst Federal Oversight on Immigration and Medicaid
Despite the tightening of federal immigration policy and impending Medicaid cuts, employment in the healthcare sector remains high, with economists noting that “growth in this sector is driving the economy.” From January to August of this year, the healthcare sector accounted for 232,000 new jobs. Many worry, however, that increased federal oversight of immigration and reduced federal Medicaid spending may dampen job growth in the industry, which draws heavily on immigrant labor. 2023 Census data shows that 5% of health care workers were not US Citizens and 18% of Americans in the field were born abroad. The looming Medicaid cuts are expected to increase burden on hospitals and community clinics but also have the potential to impact on the job market. Although the overall jobs impact is not yet clear, in California alone, experts estimate a reduction in 217,000 healthcare jobs (KFF Health News, September 30).
HHS and CMS Submit Drug Pricing Pilot Program
On September 25, the HHS and CMS submitted draft regulations to the White House Office of Management and Budget that would create the Global Benchmark for Efficient Drug Pricing (GLOBE) Model, a new drug pricing pilot program. The pilot follows pharmaceutical companies failing to meet the 30-day deadline to lower drug prices set by Trump’s executive order in May. President Trump subsequently sent letters to 17 pharmaceutical companies in July calling for aligning US prices with those of other developed countries, setting a voluntary compliance deadline of September 29. While the HHS and CMS have declined comment on the pilot, it is believed to be similar to President Trump’s 2020 Most Favored Nation (MFN) Model, which sought to align Medicare drug payments with low prices in similar countries. Additionally, federal agencies are looking into creating a government-run health platform, called TrumpRx, that consumers could use to find discounted pharmaceutical drug prices (Inside Health Policy, September 25; Reuters, September 25; Politico Pro, September 29).
CMS Issues SMDL on Medicaid Managed Care Payments for Emergency Services Provided to Undocumented Immigrants
On September 30, CMS issued a State Medicaid Director Letter (SMD # 25-003) updating states on a change in statutory interpretation regarding Medicaid managed care payments for emergency services rendered to immigrants without legal status. CMS interprets section 1903(v) of the Act to disallow Federal Financial Participation (FFP) for emergency services rendered to immigrants without legal status provided under capitated Medicaid managed care payments. The agency reiterated its position that FFP is only available for actual, rendered care and services that are necessary for the treatment of an emergency medical condition, barring this population from being considered in risk-based contracts or administrative spending. This includes the development of risk-based capitation rates, directed payments, in lieu of services and settings, any prospective costs in non-risk contracts, or primary care case management services. CMS provided states with two options to claim FFP for emergency medical services provided to immigrants without legal status: provide coverage for this population through fee-for-service only, or contract with Prepaid Inpatient Health Plans and Prepaid Ambulatory Health Plans on a non-risk basis where no costs for this population are considered in prospective payments or administrative spending. In cases where a state elects to cover additional services for this population with state-only funds, it must utilize a “separate and distinct” contract with any managed care plans that provide these services. Understanding the time needed to implement any changes to program operations, CMS does not expect to take enforcement action before the start of the first rating period beginning on or after September 30, 2026 (Medicaid.gov, September 30).
State News
Ohio Medicaid Director’s Impending Departure
On September 18, Governor Mike DeWine (R-OH), announced that Medicaid Director Maureen Corcoran will be leaving her post on October 31, 2025. Corcoran has served as Medicaid Director since 2019 and worked on various projects, including an initiative to increase transparency and pharmacy reimbursements. The governor has not made any further statements on why Corcoran is departing from the agency or who will be her successor (Ohio Governor, September 18; Ohio Capital Journal, September 19).
Utah Halts Medicaid Work Requirements Waiver in Light of H.R.1
Utah has decided to withdraw its Medicaid work requirements waiver after the passage of H.R.1, which establishes national work requirements beginning in 2027. Utah’s proposal would have applied to expansion adults ages 19 to 59 who were not exempt, requiring them within three months of enrollment to register for work, complete training, and apply for a minimum of 48 different jobs. The federal law applies to all non-exempt adults under 65 and requires monthly reporting, though both include similar exemptions such as for parents of young children, veterans with disabilities, Indigenous Americans, and those who are pregnant or medically frail. Other states with pending waivers, including Arkansas, Ohio, Iowa, South Carolina, Montana, and Arizona, are still weighing whether to move forward with their versions, with Arkansas planning to amend its application once federal guidance is issued. As described in a GAO report released in September, Georgia remains the only state currently operating a work requirements program, which will run through 2026, but enrollment has been lower than expected and federal officials are working with the state to prepare for the national standards that take effect in 2027 (Inside Health Policy, September 26).
SPAs and Waivers
SPAs
- Eligibility SPAs
- Connecticut (CT-25-0019, effective April 1, 2025): Updates income and resource standards for MED-Connect (Medicaid for Employees with Disabilities).
- Payment SPAs
- Kansas (KS-25-0016, effective June 30, 2025): Updates the definition of “carve out drugs” as select pharmaceuticals that are greater than or equal to one hundred thousand in drug costs within 365 days.
- Kentucky (KY-25-0006, effective April 1, 2025): Adds payment methodology for Rural Emergency Hospital (REH) services.
- New Hampshire (NH-25-0011, effective May 1, 2025): Adds payment methodology for ambulatory non-transport services.
- New York (NY-25-0029, effective April 1, 2025): Adds a 4% rate modifier for certain EPSDT early intervention services for children who live in rural and underserved areas.
- New York (NY-25-0037, effective April 1, 2025): Extends additional medical assistance payments for state and county hospitals until March 31, 2028. Additionally, in accordance with the FY2026 Enacted Budget, discontinues the Indigent Care Pool (ICP) for public general hospitals operated by New York City Health and Hospital, which will provide $113.4M in total global cap savings, $5.7M of which is state share.
- South Carolina (SC-25-0008, effective April 1, 2025): Adds information about the estate recovery undue hardship waiver requirements.
- Services SPAs
- Arizona (AZ-25-0001, effective January 1, 2025): Provides an exemption to the four walls clinical service requirement for services provided by the Indian Health Service (IHS) and Tribal facilities and adds optional exceptions for behavioral health clinics and rural clinics.
- Connecticut (CT-25-0024, effective July 1, 2025): Establishes coverage and reimbursement changes for adolescents with substance use disorders (SUD), at certain ASAM levels of care.
- Utah (UT-25-0012, effective July 1, 2025): Adds criteria for targeted case management (TCM) services for early childhood aged children.
State Directed Payment Preprints
- Pennsylvania (Effective January 1, 2025): Renews a uniform percentage increase for inpatient and outpatient services for qualifying classes of hospitals for the rating period covering January 1, 2025, through December 31, 2025, incorporated in the capitation rates through a separate payment term.
- Pennsylvania (Effective January 1, 2025): Renews a uniform percentage increase for inpatient and outpatient hospital services for the rating period covering January 1, 2025, through December 31, 2025, incorporated in the capitation rates through a separate payment term.
- New Jersey (Effective July 1, 2025): Renews a perinatal episode of care pilot established by the state for the rating period covering July 1, 2025, through June 30, 2026, incorporated into the capitation rates through a risk-based rate adjustment and separate payment terms.
- Illinois (Effective January 1, 2024): Amends a uniform dollar increase for nursing facilities based on quality weighted Medicaid days for the rating period covering January 1, 2024, through December 31, 2024, incorporated in the capitation rates through a separate payment term.
- California (Effective January 1, 2025): Renews a uniform dollar increase for inpatient and outpatient services provided by eligible network children’s hospitals for Children’s Hospital Supplemental Payment (CHSP) for the rating period covering January 1, 2025, through December 31, 2025, incorporated in the capitation rates through a separate payment term.
- Kansas (Effective January 1, 2025): Renews a uniform increase for outpatient hospital services provided by Border City Children’s Hospitals and Large Public Teaching Hospitals for the rating period covering January 1, 2025, through December 31, 2025, incorporated in the capitation rates through a separate payment term.
- District of Columbia (Effective October 1, 2024): Establishes a uniform percentage increase for inpatient and outpatient hospital services for the rating period covering October 1, 2024, through September 30, 2025, incorporated in the capitation rates through a separate payment term.
- New York (Effective July 1, 2024): Establishes a uniform dollar increase for eligible inpatient hospital and outpatient hospital services at Government general hospitals, other than those operated by the State of New York or the State University of New York, located in a city with a population of over one million for the rating period covering April 1, 2024, through March 31, 2025, incorporated in the capitation rates through a separate payment term.
- Mississippi (Effective July 1, 2025): Renews a uniform percentage increase and performance improvement initiative payments established by the state for inpatient hospital services, outpatient hospital services, and rural emergency hospital services for the rating period, July 1, 2025, through June 30,2026, incorporated into the capitation rates through a separate payment term.
- Michigan (Effective October 1, 2024): Renews a uniform increase established by the state for primary care and specialty physician services provided by practitioners employed or under contract with approved public entities, for the rating period covering October 1, 2024, through September 30, 2025, incorporated in the capitation rates through a separate payment term.
- North Carolina (Effective July 1, 2025): Renews a uniform dollar increase and minimum fee schedule for home and community-based services and behavioral health outpatient services established by the state for the rating period covering July 1, 2025, through June 30, 2026, incorporated in the capitation rates through a risk-based rate adjustment.
- New York (Effective April 1, 2025): Renews a Uniform increase for inpatient and outpatient services delivered by qualifying financially distressed hospitals for the rating period, April 1, 2025, through March 31, 2026, incorporated into the capitation rates through a separate payment term.
- Illinois (Effective January 1, 2025): Renews a uniform increase established by the state for inpatient and outpatient services at eligible Illinois hospitals for the rating period covering January 1, 2025, through December 31, 2025, incorporated in the capitation rates through a separate payment term.
- New Hampshire (Effective July 1, 2025): Renews a uniform dollar increase for inpatient discharges and outpatient visits to qualifying critical access hospitals for the rating period covering July 1, 2025, through June 30, 2026, incorporated in the capitation rates through a separate payment term.
- New York (Effective April 1, 2025): Renews a uniform increase for Sole Community Hospitals as established by the state for outpatient services for the rating period, April 1, 2025, through March 31, 2026, incorporated into the capitation rates through a separate payment term.
- Washington (Effective January 1, 2025): Renews a uniform increase established by the state for qualified licensed professionals employed by a state university owned or operated hospital or affiliated practice, state owned and operated school of dentistry, or public hospital district for the rating period covering January 1, 2025, through December 31, 2025, incorporated in the capitation rates through a separate payment term.
- Oregon (Effective January 1, 2025): Renews a uniform increase established by the state for inpatient and outpatient hospital services provided by Diagnosis-Related Group (DRG) hospitals for the rating period covering January 1, 2025, through December 31, 2025, incorporated in the capitation rates through a separate payment term.
- Oregon (Effective January 1, 2025): Renews a uniform increase established by the state for inpatient and outpatient hospital services provided by Rural Type A/B hospitals for the rating period covering January 1, 2025, through December 31, 2025, incorporated in the capitation rates through a separate payment term.
- Kansas (Effective January 1, 2025): Renews a uniform increase for inpatient and outpatient services for critical access hospitals and general hospitals for rating period January 1, 2025, through December 31,2025, incorporated in the capitation rates through a separate payment term.
- 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.
Most Read - September
CMS Launches Rural Health Transformation Program Website
On September 2, CMS launched a new public website for the Rural Health Transformation Program. The site indicates that the application for program funding will become available in mid-September through the grants.gov platform. Additionally, the website outlines CMS’ strategic goals for the program, which include make rural America heathy again, sustainable access, workforce development, innovative care, and tech innovation (CMS, September 2). Read full issue >
CMS Senior Advisor Announces Redetermination Policy Guidance Releasing in December
At a session at last week’s Medicaid Health Plans of America (MHPA) conference, CMS Senior Advisor Grant Thomas revealed that the agency intends to issue a rule implementing the H.R. 1 requirement around redetermining Medicaid expansion beneficiaries’ eligibility every six months. The rule would become effective on December 31, 2026, per statutory requirements. Additionally, Grant expressed that CMS would look to MCOs to help during the implementation process of work requirements to aid in educating their enrollees on the redetermination process (Inside Health Policy, September 12). Read full issue >
OMB Releases Unified Agenda, Details Regulation on Medicaid and Medicare
The Office of Management and Budget released its Spring 2025 Unified Agenda on September 4, outlining the regulatory plan for the second Trump Administration. The Department of Health and Human Services is slated to promulgate several rules over the remainder of the year. This includes several rules on Medicare, including the annual fee schedule update and changes to the CMS innovation center models. Another regulation scheduled to be published is a final rule regarding electronic transactions and file attachments for prior authorizations, which faced criticism from stakeholders. The agenda includes regulations implementing provisions in H.R. 1, passed earlier this year, and updates to 1115 waiver budget neutrality, enrollment procedures, provider taxes, and Medicaid managed care state-directed payments (Modern Healthcare, September 15). Read full issue >
Projected Financial Impact of Medicaid Work Requirements on U.S. Hospitals
A Commonwealth Fund analysis estimates that Medicaid work requirements, if implemented nationwide by 2027, would place additional financial pressure on hospitals in expansion states. The study projects that operating margins could decline by roughly 12% to 14% as more people lose coverage and hospitals face higher levels of uncompensated care. Safety net and rural hospitals are expected to be most affected, with safety net facilities facing margin reductions of up to 30% and rural hospitals, many already at risk of closure, seeing losses that could further limit services. The report highlights that these financial strains may reduce access to care in some communities and shift costs onto privately insured patients. While proponents of the policy view work requirements as a way to limit public spending, hospital groups and other stakeholders caution that the changes could destabilize the healthcare system (Fierce Healthcare, September 19). Read full issue >
Kennedy Highlights Rural Health, Avoids ACA Credit Question
Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. testified before the Senate Finance Committee on September 4, focusing on the administration’s new Rural Health Transformation Program. He described it as a major federal investment in rural hospitals, earning support from several Republican senators, though Democratic Senator Bernie Sanders stated it represents a net reduction in funding. The Secretary and Democratic lawmakers sparred over his choice to remove the head of the Centers for Disease Control and his shake-up of the Advisory Committee on Immunization Practices (ACIP), which now has an entirely new membership, with many members sharing RFK Jr.’s skepticism of vaccines. Some Republican Senators did broach the controversial vaccine topic with Secretary Kennedy, highlighting President Trump’s success with Operation Warp Speed and the effectiveness of the COVID-19 vaccine. Finally, Kennedy did not provide a definite position on extending the enhanced Affordable Care Act tax credits, which are set to expire at the end of the year. Insurers are pressuring Congress to act before fall premium notices go out to avoid higher costs for consumers. Moderate Republicans have proposed a one-year extension, and the administration has introduced a hardship exemption allowing some consumers to enroll in catastrophic coverage if the credits lapse. Democrats pressed Kennedy on higher Medicare Part B and Part D premiums from subsidy cuts, but he didn’t explain how seniors might be affected, instead pointing to program oversight efforts (Inside Health Policy, September 4; Fierce Healthcare, September 4). Read full issue >
