Following Judge Lance Walker of the Maine District Court’s ruling in favor of the hospital groups suing HHS, on January 7, the US First Circuit Court of Appeals sustained the suspension of the 340B pilot program that was previously set to go into effect on January 1, 2026. The pilot would require hospitals to pay the full price for 340B drugs and related costs at the time of the sale and to meet data reporting mandates to receive the rebates thereafter. Many safety-net hospitals and clinics depend on the 340B drug pricing program to continue serving their communities, and have argued that the implementation of the pilot could cause irrevocable harm due to financial constraints. The Trump Administration has since appealed the decision (Bloomberg Law, December 29; Healthcare Dive, January 5).
On Thursday, January 8, the House passed legislation that would extend the Enhanced Premium Tax Credits (EPTCs) for three years. The EPTCs expired at the end of December. There were 17 House Republicans who voted with Democrats to pass the bill 230 to 196. The bill now heads to the Senate, where leadership has indicated that the bill will not pass. However, it appears that there is now more bipartisan interest in creating a solution that may be similar to Representative Fitzpatrick’s previous bill which extended the EPTCs, but included several measures to curb potential fraud, waste, and abuse. Additionally, Republican members of Congress may want to see additional protections against federal funds being used for abortions under ACA plans (The Hill, January 8; Inside Health Policy, January 8).
The House Energy and Commerce subcommittee on health discussed legislation (H.R. 6361) that would prohibit CMS from implementing its new model, Wasteful and Inappropriate Service Reduction (WISeR). WISeR would utilize artificial intelligence to conduct prior authorization reviews on certain services under Original Medicare. This follows Senate Democrats’ legislation from December that would statutorily prevent CMS from implementing the model. During the hearing, lawmakers expressed concerns about the model and the use of AI that may deny care to Medicare enrollees. Representative Greg Landsman of Ohio highlighted that the program may create a conflict of interest between the private companies that will operate the AI model, as they could see financial gains from denying care. Though a markup of the bill has not yet been scheduled, lawmakers may consider new restrictions on the WISeR model as they work towards a new healthcare package ahead of the January 30 Continuing Resolution deadline (Inside Health Policy, January 8).
The Office of Management and Budget (OMB) has signed off on a proposed Department of Labor (DoL) rule regulating Pharmacy Benefit Managers (PBMs) under health plans that fall under the Employee Retirement Income Security Act (ERISA). The Department began developing the rule following President Trump’s executive order last April, highlighting his intention to lower prescription drug prices and increase price transparency for PBMs. The rule, titled, “Improving Transparency in the Pharmacy Benefit Manager Fee Disclosure,” could include proposals related to spread pricing and utilization management reporting (Inside Health Policy, January 12).
Starting in 2027, Medicaid expansion enrollees ages 19 to 64 will have to prove that they meet the new community engagement requirements or qualify for an exemption as a condition of eligibility for Medicaid. However, it remains to be seen how the “medically frail” exemption will be defined. Health Affairs notes that the text of H.R. 1 slightly expands previous definitions of medically frail outlined in federal regulation by stating that individuals can be exempt from community engagement requirements by having “a serious or complex medical condition” instead of “serious and complex.” This subtle change can give states greater flexibility to offer exemptions to individuals who would not otherwise fall into an exempted subcategory. Notably, data show that 34% of individuals under Medicaid report having a disability, while only about 10 to 12% qualify for coverage through a disability determination. Research from George Washington University and LeadingAge LTSS Center at UMass Boston highlights that this population has a significant percentage of chronic health concerns.
Using data from the 2022 Health and Retirement Study, researchers reviewed working-age adults aged 50 and over who were not working or working less than 80 hours per month and were financially eligible for Medicaid but had no known disability or limitation in performing activities of daily living. Among this population, two-thirds of individuals had two or more chronic health conditions, and compared to similar individuals who were working, this population was more likely to utilize healthcare services. Non-working older adults were more likely to be admitted to the hospital, take prescription drugs regularly, and have more doctor’s visits. The authors recommend that to receive exempted status, this population be identified by the presence of one or more serious chronic conditions using previous diagnoses or through the substantially higher use, or projected use, of healthcare services compared to other, older working-age adults (Health Affairs, January 12).
Going into the 2026 legislative session, Idaho lawmakers have signaled their interest in potentially repealing Medicaid expansion. Medicaid expansion was approved by a ballot measure in 2018, with coverage beginning in 2020. The renewed interest in repealing Medicaid expansion comes as the state has a projected deficit of $600M to $1B heading into FY2027. Additionally, Idaho’s DOGE committee has recommended reversing coverage. However, many stakeholders are adamantly opposed to repealing Medicaid and are highlighting downstream costs that would come back to the state if a reversal were passed. Governor Little expressed concern over repealing Medicaid expansion, highlighting that there would be many unintended consequences. However, he stopped short of stating that he would veto any legislation passed that would repeal Medicaid expansion (Idaho Capital Sun, January 12; Idaho Capital Sun, November 25, 2025).
On January 8, Judge Yates of the Michigan Court of Claims ruled that the state’s proposal to move to competitive procurement system would violate the Mental Health Code by restricting Michigan’s Community Mental Health Service programs from contracting with service providers. The $6B proposal has reduced the number of regions the programs operate in and was set to begin in October 2026. Judge Yates is ordering Michigan to address the complaints and come up with a new proposal that would ensure compliance with state law and preserve the allocation of Medicaid funds to care providers. If the state fails to do so, the court may pursue injunctive relief (Michigan Advance, January 9).
On January 9, CMS released a Notice of Opportunity for a hearing regarding Minnesota’s alleged fraud, waste, and abuse (FWA) within its Medicaid program. CMS finds the state’s policies and oversight as noncompliant with Section 1902(a)(64) of the Social Security Act and federal regulations regarding Program Integrity in Medicaid (42 CFR Part 455). Minnesota is required to request a hearing within five days of receiving the notice, and no more than 30 days to have a hearing scheduled. In the notice, CMS also requires a state to review and resubmit a comprehensive corrective action plan (CAP) that addresses its plans to augment the Prior Authorization program, provider training and education, managed care oversight, and surveillance and utilization review. CMS indicates it will defer federal financial participation (FFP) for several high-risk service categories until the state submits a CAP that satisfies the guidelines it has laid out (Federal Register, January 9).
West Virginia state agencies and the judiciary have been directed by the Morrisey administration to plan for 2% budget reductions as the state prepares for significant declines in federal funding. Agencies were also advised not to seek additional state funds to replace lost federal dollars. The guidance comes as West Virginia, the nation’s most federally dependent state, is expected to lose substantial federal support for programs such as Medicaid and the Supplemental Nutrition Assistance Program. Governor Patrick Morrisey said the administration is focused on identifying efficiencies and managing long-term budget challenges, while advancing a proposal to reduce the state personal income tax. KFF estimates the state could lose up to $1B annually in healthcare funding once Medicaid and Affordable Care Act changes are fully implemented, and the Department of Education reported a more than $12M reduction in federal funding this fiscal year. Agencies said budget planning is ongoing and that any program changes will be communicated after the governor releases his budget proposal (West Virginia Watch, January 12).
