Issue #268
Sellers Dorsey Digest
January 8, 2026
Federal News
CMS Announces Awards for the Rural Health Transformation Program
On December 29, 2025, CMS announced the awards for the Rural Health Transformation (RHT) Program. In accordance with federal statute, $25B will be distributed equally among all approved states and $25B will be allocated based on scores from the states’ applications. The $50B sum will be allocated over five years, with $10B available each year through 2030. All 50 states applied to receive funding, and all states were awarded funding, ranging from $147M in New Jersey to $281M in Texas for the first year of the program. The median amount of funding awarded by CMS is $201M. Common themes among states’ plans to improve rural health include increasing access to care through innovative methods, supporting and expanding the rural health workforce, improving infrastructure and technology capacity, and testing new value-based models of care (CMS.gov, December 29, 2025).
Sellers Dorsey experts created a high-level summary of the RHT Program awards to provide a clear look at each state’s initiatives and the funds they were awarded for Year 1. Explore our summary here.
CMS Launches Office of Rural Health Transformation
On December 29, 2025, CMS announced the formal establishment of the Office of Rural Health Transformation (ORHT) within the Center for Medicaid and CHIP Services to lead implementation of the $50B RHT Program, created earlier in 2025 under President Trump’s Working Families Tax Cut legislation (Public Law 119-21). The new office will oversee the state implementation of approved RHT plans, provide technical assistance, coordinate federal–state partnerships, and ensure program oversight and accountability throughout the five-year initiative, which runs through September 30, 2031. CMS announced approved state awardees the same day, and ORHT will now guide states as they work to strengthen rural health systems, expand sustainable access to care, modernize rural health infrastructure, and advance innovative care models aimed at delivering lasting improvements for rural communities (Medicaid, December 29).
CDC Makes Cuts to Recommended Vaccines
On January 5, the CDC made significant changes to the immunization schedule, effective immediately. The new schedule will continue to recommend vaccines for certain diseases, such as whooping cough, measles, and polio for all children, but moves to recommend immunization against Hepatitis A (12 months), Hepatitis B (at birth and 6 months), Rotavirus (2 months), Influenza (annual), COVID-19 (annual), Meningococcal Disease (16 years), and Respiratory Syncytial Virus (at birth) to high-risk groups or post-consultation with a health provider. The Trump Administration views these changes as aligning with international consensus and promoting informed consent and transparency within the healthcare system. Among the countries that the CDC studied prior to this decision was Denmark, where vaccinations were omitted due to financial burden on the government, not because of safety concerns. Many health professionals worry about the possible impact of the reduced vaccines on overall vaccination rates (New York Times, January 5).
HHS Suspends Access to Federal Childcare and Family Assistance Funding in Five States
On January 6, 2026, the U.S. Department of Health and Human Services (HHS) froze access to certain federal childcare and family assistance funds for California, Colorado, Illinois, Minnesota, and New York due to concerns about widespread fraud and misuse in state-administered programs. The freeze affects three programs overseen by the Administration for Children and Families (ACF): the Child Care and Development Fund (nearly $2.4B), Temporary Assistance for Needy Families ($7.35B), and the Social Services Block Grant ($869M). HHS said the action is intended to protect taxpayer dollars and ensure funds are used lawfully for eligible families. ACF also raised concerns that benefits may have been improperly provided to individuals not eligible under federal law. Until a compliance review is completed, the five states must submit a justification and receipt of documentation to the appropriate agency before any payments are released. ACF has also activated its Defend the Spend system nationwide and launched a new fraud reporting portal at childcare.gov (HHS, January 6).
CMS Releases Proposed Rule for Model to Reduce Medicare Part B Drug Prices
On December 23, CMS released a proposed rule for the Global Benchmark for Efficient Drug Pricing (GLOBE) Model. The 5-year model is set to launch on October 1, 2026, and will work to modify the current calculation of Part B inflation rebate amounts by using international drug prices to develop a benchmark. Through the GLOBE model, CMS seeks to lower out-of-pocket costs while preserving quality of care. CMS reports that Americans currently pay as much as three times more than what other developed countries pay for certain Medicare Part B drugs. The proposed rule’s public comment period is currently open until February 23, 2026 (CMS, December 23).
Overview of the CMS BALANCE Model
CMS has announced the BALANCE Model (Better Approaches to Lifestyle and Nutrition for Comprehensive hEalth), a new voluntary Innovation Center model designed to expand access to select GLP-1 medications for Medicare and Medicaid beneficiaries. The model aims to address obesity and related chronic conditions by testing whether CMS-negotiated pricing and standardized coverage terms with participating drug manufacturers, which are currently limited or excluded for weight loss indications, can reduce costs and improve access to these therapies. Under BALANCE, CMS will negotiate prices on behalf of participating state Medicaid agencies and Medicare Part D plans, with Medicaid participation beginning in May 2026 and Part D plan participation starting in January 2027. The model will be tested through December 2031 to evaluate impacts on health outcomes, medication affordability, and program spending. Manufacturers interested in participating must respond to the BALANCE Request for Applications (RFA) by January 8, 2026 (CMS, December 29).
CMS, Departments of Labor and the Treasury Propose Changes to Payer Price Transparency Regulations
On December 19, 2025, CMS, along with the Department of Labor and the Department of the Treasury, released a proposed rule titled “Transparency in Coverage.” The proposed rule would revise the current payer price transparency regulations from 2020 with the aim of improving accessibility, standardization, and readability of the data. Based on internal assessments and stakeholder feedback, the proposed rule would reduce the number and size of machine-readable files that group health plans and health insurance issuers must provide to show in-network rates. To increase readability, payers would also exclude unlikely provider-rate combinations and publicly provide their methodology for preparing the file as well as submit a new “Utilization File” for each in-network rate file that includes all providers who submitted and received reimbursement for at least one claim within a 12- month period.
The proposed rule would also lower the 20-claim threshold for the Allowed Amount Files to 11 claims, require aggregated data by insurance type, increase the reporting period from 90 days to six months, and expand the lookback period from 180 days to nine months. The Departments propose that the rule take effect 12 months after publication of the final regulations in the Federal Register. The federal public comment period for the proposed rule remains open on the Federal Register until February 23, 2026 (CMS.gov, December 19).
CMS Releases SHO Letter on Child and Adult Core Set Changes
On December 30, 2025, CMS issued a State Health Official letter (SHO # 25-005) to update the Child and Adult Core Health Care Quality Measurement Sets for 2026 and 2027. The agency noted that it plans to take an increased focus on the Core Set measures that address major chronic conditions and make measurable improvements in health outcomes. Notably, there are four measures related to immunizations that CMS removed from the 2026 Child and Adult Core Sets: the Childhood Immunization Status (CIS-CH), Immunizations for Adolescents (IMA-CH), Prenatal Immunization Status: Under Age 21 (PRS-CH), and Prenatal Immunization Status: Age 21 and Older (PRS-AD) measures will not be required.
CMS notes that states can voluntarily report on these measures to maintain longitudinal data while the agency explores alternative immunization measures. The agency plans to develop new measures that capture information about vaccine education on choice, safety, and side effects, and alternative vaccine schedules. CMS plans to explore how religious exemptions from vaccination can be accounted for in the dataset. CMS also strongly discouraged states from using immunization measures in value-based payment arrangements. For 2027 reporting, there are no new additions to the Child Core Set, but the Adult Core Set will have two new voluntary measures: Evaluation of Hepatitis B and C (EHBC-AD) and Adults with Diabetes – Oral Evaluation (DOE-AD). Two measures are being removed. The Medical Assistance with Smoking and Tobacco Use Cessation (MSC-AD) will be removed from the Adult Core Set and the Asthma Medication Ratio (AMR-CH and AMR-AD) will be removed from both the Child and Adult Core Sets. Both Prenatal and Postpartum Depression Screening and Follow-up measures will remain provisional for 2027.
With the removal of the tobacco use cessation and asthma measures, CMS will require that the 2028 Annual Core Set Workgroup address these areas, given the prevalence of both conditions in Medicaid and CHIP beneficiaries. The 2027 Core Sets may be updated pending Workgroup recommendations on these topics. Finally, the agency notes that it has identified alternative data sources from the CDC and Agency for Healthcare Research and Quality’s CAHPS Database that will be used to calculate certain measures on behalf of states to reduce the burden of reporting (Medicaid.gov, December 30, 2025).
CMCS to Not Take Enforcement Action on Medicaid Interest Advisory Group Until CY2029
On December 23, the Center for Medicaid and CHIP Services (CMCS) released an informational bulletin stating that it does not intend to take any enforcement action against states with respect to the deadline for the Medicaid interest parties’ advisory group to convene and prepare recommendations until CY2029. Formally, under 447.203(b)(6)(iv), the advisory group was required to meet every two years and subsequently publish its recommendations within one month. This CIB instead states the flexibility to convene when it best suits them, in order to comply with revised Medicaid Advisory Committee (MAC) and new Beneficiary Advisory Council (BAC) requirements. (Medicaid, December 23; CMS, December 23)
Overview of CMS Guidance on Medicaid and CHIP Eligibility During Incarceration
On December 23, 2025, CMS issued a CMCS Informational Bulletin interpreting changes made by the Consolidated Appropriations Act of 2024, which prohibits states from terminating Medicaid or CHIP eligibility solely because an individual is incarcerated in a public institution, effective January 1, 2026. CMS explains that this policy change builds on existing Medicaid regulations governing inmates of public institutions under 42 CFR §§ 435.1009–435.1010, which continue to limit federal Medicaid payment for most services provided during incarceration, while requiring states to preserve eligibility status rather than disenrolling individuals.
The bulletin directs states to adopt eligibility or benefit suspension approaches consistent with Medicaid eligibility and renewal requirements at 42 CFR § 435.916, including processes to identify incarceration events, provide timely notices and fair hearing rights under 42 CFR Part 431, Subpart E, and ensure prompt reinstatement of full coverage upon release. CMS also clarifies how incarceration affects household composition and residency determinations for eligibility purposes, outlines implications for managed care capitation payments during periods of suspension, and addresses CHIP state plan requirements, including coverage for pregnant individuals and the interaction with continuous eligibility for children and extended postpartum coverage during incarceration (CMS, December 23).
Trump Administration Moves to Pull Back on Previous Administration’s Health IT Policies
On December 29, HHS released two proposed rules to revise and withdraw certain health IT provisions previously proposed by the Biden Administration. The former proposals intended to improve data-sharing capabilities and strengthen patient privacy standards, but were unable to pass a final rule before President Trump took office. Both proposed rules call for the alignment of Health IT policies with President Trump’s Executive Order 14192 to alleviate regulatory burdens. As of December 29, non-finalized provisions published by the Biden Administration on August 5, 2024 have been withdrawn. Through ASTP/ONC Deregulatory Actions to Unleash Prosperity (HTI-5), HHS re-examined the previous administration’s HTI-2 proposed rule provisions and, of the current 60 certification criteria in effect, intends to remove 34 criteria and revise seven criteria within the certification program. HHS opines that the changes will reduce burden and costs for HIT developers and clinicians, as well as maintain conformity to certification requirements. One of the proposed revisions would fully remove the AI “model card” requirements, which was previously introduced by the Biden Administration to strengthen transparency for clinical decisions support tools to lower possible bias and incorrect decisions by the AI. HTI-5 is currently open for public comment until February 27, 2026. (Federal Register, December 29; Federal Register, December 29)
Overview of GAO Findings on Medicare-Funded Graduate Medical Education Residency Positions
A December 2025 Government Accountability Office’s (GAO) report examines the initial distribution of the 1,000 new Medicare funded physician residency positions authorized under Section 126 of the Consolidated Appropriations Act of 2021, which permanently increased hospitals’ caps on Medicare supported graduate medical education positions to help address physician shortages. As of September 2025, CMS had distributed 600 of the 1,000 positions across three application cycles, with approximately half of the hospitals that applied receiving at least one new residency slot. The report notes that most awarded positions went to urban hospitals and were frequently designated for primary care training. GAO also describes how Medicare finances residency training within hospital cap limits, summarizes characteristics of hospitals that received positions compared to those that did not, and highlights stakeholder feedback on the benefits of additional residency slots, including expanded training capacity and improved access to care. The report further identifies challenges related to CMS’s allocation process, including concerns about how shortage prioritization affects applicants and the financial and operational barriers hospitals face when expanding residency programs (GAO, December 22).
State News
GA Considers Changes to Improve Waiver Waiting List
Georgia’s Department of Behavioral Health and Developmental Disabilities (DBHDD) has started discussions around new recommendations to restructure the agency’s waiting list for a Medicaid waiver. The waiver provides services to people with disabilities, but, as of March 2025, has a waiting list of over 7,800 individuals. The proposal would modify the current waiting list into three tiers, distinguishing between people with urgent needs, those who are expected to need services in the next one to five years and beyond. The advisory council that made the recommendation also suggested that the DBHDD create a new waiver for individuals with disabilities who do not qualify for existing waiver programs and implement a new assessment tool to support better data collection. Two other states, Louisiana and Pennsylvania, have created tiered systems for their waivers that prioritize individuals with urgent needs (Georgia Recorder, January 2).
SPAs and Waivers
Waivers
- 1115(a)
- Michigan
- On December 17, 2025, Michigan submitted a request to extend its Flint Michigan 1115 demonstration. The state seeks approval of a five-year extension of the program with no changes. The waiver provides coverage and services to children up to age 21 and pregnant women impacted by lead exposure from the Flint water system. The federal public comment period is open through February 6, 2026.
- Michigan
SPAs
- Payment SPAs
- North Dakota (ND-25-0028, effective October 1, 2025): Maintains the two percent rate increase for 1915(i) services.
- Services SPAs
- Kentucky (KY-25-0012, effective October 1, 2025): In alignment with Section 1905(a)(29) of the Social Security Act, makes coverage of Medication Assisted Treatment (MAT) coverage permanent by removing the sunset date.
- Michigan (MI-25-0018, effective October 1, 2025): In alignment with Section 1905(a)(29) of the Social Security Act, makes coverage of Medication Assisted Treatment (MAT) coverage permanent by removing the sunset date.
- Mississippi (MS-25-0019, effective October 1, 2025): In alignment with Section 1905(a)(29) of the Social Security Act, makes coverage of Medication Assisted Treatment (MAT) coverage permanent by removing the sunset date.
- Rhode Island (RI-25-0016, effective October 1, 2025): In alignment with Section 1905(a)(29) of the Social Security Act, makes coverage of Medication Assisted Treatment (MAT) coverage permanent.
- Tennessee (TN-25-0008, effective October 1, 2025): In alignment with Section 1905(a)(29) of the Social Security Act, makes coverage of Medication Assisted Treatment (MAT) coverage permanent.
Most Read - December
CMS Releases CIB on Medicaid Community Engagement Requirements
On December 8, CMS released an Information Bulletin (CIB) regarding the new community engagement requirements in the Medicaid program as required by H.R. 1. The CIB provides an overview of the statute including populations that must comply with the requirements, who is excluded, and certain exceptions that are allowed under the law. Throughout the guidance, the agency explained the requirements in plain language. CMS offered one area of interpretation in this preliminary guidance: After enrollment, applicable individuals must meet community engagement requirements for at least one month before their eligibility redetermination, with states having the ability to require more months of compliance. CMS stated that it interpreted the law to mean that states can permit but may not require individuals to demonstrate compliance in consecutive months. However, states have the authority to verify compliance with community engagement requirements more frequently between redeterminations. The agency noted that further guidance on certain topics like MCO involvement and reliable data sources for compliance verification will be forthcoming. CMS must provide additional guidance through formal rulemaking by June 2026 (CMS.gov, December 8). Read full issue >
State Budgets Face Long-Term Pressure Under H.R.1 Funding Shifts
Federal policy changes in the H.R.1 bill will leave states covering a larger share of Medicaid and SNAP administrative costs. The new requirements increase staffing, eligibility work, and public communication needs, creating budget pressures that states did not plan for during their current budgeting cycles. Medicaid officials reported that reducing provider rates or cutting core services is not a realistic response, especially because cuts to preventive or behavioral health care often lead to higher spending when medical or behavioral conditions worsen. The reduction in federal SNAP administrative reimbursement adds another budget challenge, with some states already identifying substantial gaps. Budget analysts cautioned that rainy-day funds cannot support ongoing obligations created by these federal changes. Long-term financing approaches will be necessary to manage the sustained shift in cost responsibility from the federal government to the states (Inside Health Policy, November 26). Read full issue >
MACPAC December 2025 Meeting
Considerations for Implementing Community Engagement Requirements
- States will soon be required to implement community engagement requirements for certain populations as required by HR 1. MACPAC staff conducted stakeholder interviews shortly after the passage of the budget reconciliation bill to elucidate key considerations for policy implementation. From the stakeholder interviews, MACPAC identified that states and other organizations sought additional clarification from CMS around definitions, the verification and exceptions process, and monitoring and evaluation of community engagement requirements. Interviewees also noted that there were many costs associated with implementing community engagement requirements, especially around IT and systems changes. During an expert panel discussion on the topic, a CMS official indicated that MCOs would be able to assist states in notifying beneficiaries of the upcoming changes. In January 2026, MACPAC staff will present more information about opportunities for monitoring the implementation of community engagement requirements.
State and Federal Tools for Ensuring Accountability of Medicaid Managed Care Organizations
- The majority of states and the District of Columbia contract with managed care organizations, with 73% of all Medicaid beneficiaries being enrolled in a managed care plan. MACPAC staff continued their research into the use of managed care accountability tools and described themes from stakeholder interviews about the use of accountability tools, procurement and contract requirements, and CMS oversight and guidance. Findings from the interviews suggest that procurement can be the first step in establishing plan expectations, with incentives being preferred over penalties to improve performance and create positive change. States noted that sanctions can be challenging to implement. Stakeholders also expressed that CMS could provide additional resources and guidance to assist states in procurement practices and sanction policies. Finally, MACPAC staff also provided an analysis of Managed Care Program Annual Reports which found that average sanction amount varies by the type of intervention and that the majority of reported sanctions were resolved within three months.
- On December 11, MACPAC staff presented findings on transitions from child to adult Medicaid coverage for Children and Youth with Special Health Care Needs (CYSHCN), drawing on analysis of the Transformed Medicaid Statistical Information System (T-MSIS) and stakeholder interviews. The work examined how eligibility transitions intersect with other age-based changes, including the age-18 Supplemental Security Income (SSI) redetermination and the shift from child-only to adult Section 1915(c) home- and community-based services (HCBS) waivers. The analysis identified patterns of coverage transitions and gaps in enrollment during the move from child to adult Medicaid and highlighted factors affecting Medicaid redeterminations and HCBS waiver transitions. The presentation also outlined key challenges and policy considerations for state Medicaid agencies related to continuity of coverage during these overlapping transitions.
Participants in AI Project Targeting Medicare Fraud, Waste, and Abuse at CMS Announced
On Tuesday, November 25, Centers for Medicaid and Medicare Services (CMS) Administrator Dr. Mehmet Oz announced the ten participants in the agency’s artificial intelligence project that was announced in August. The “Crushing Fraud Chili Cook-Off Competition” participants will move into the second phase where they will utilize their machine-learning models to analyze Medicare claims data and identify trends and variances. Abt, Amida, basys.ai, CORMAC, Hilltop Institute, KPMG, Milliman, MindPetal, Stanford and UCSF, and Visual Connections will now have access to CMS data to develop their models with a “best in show” software solution being announced on December 15. The program will use Medicare data from 2022 to 2024 on fee-for-service hospice, Part B, and durable medical equipment claims, randomly sampling 5% of Medicare beneficiaries. The Chili Cook-Off program aims to identify and reduce fraud in Medicare, particularly around upcoding, false billing, and services not rendered to patients (Inside Health Policy, November 25). Read full issue >
HHS Releases Department-Wide Artificial Intelligence Strategy
On December 4, 2025, the U.S. Department of Health and Human Services (HHS) released its new AI Strategy outlining how the Department will integrate artificial intelligence (AI) across its operations, workforce, research, and public health programs. The plan aims to increase efficiency, support innovation, and improve health outcomes while aligning with federal AI directives. The strategy centers on five priorities: governance and risk management, modern infrastructure, workforce development and burden reduction, high-quality research, and modernization of care and public health delivery. Bipartisan lawmakers expressed support, noting AI’s potential to expand access, improve diagnoses, and lower costs when implemented responsibly. A key feature is the “OneHHS” approach, which brings agencies such as CDC, CMS, FDA, and NIH into a unified AI framework to streamline workflows and strengthen cybersecurity. HHS notes that this strategy focuses on internal federal use of AI and represents an early step toward deeper future collaboration with private-sector partners (HHS, December 4). Read full issue >
