On January 13, Substance Abuse and Mental Health Services Administration (SAMHSA) sent letters to over 2,000 mental health and substance use disorder programs across the United States, notifying them of grant terminations, effective immediately. SAMHSA stated that cut programs did not align with the agency’s current priorities. Bipartisan efforts and public pressure from affected organizations, advocates, and allied associations pushed the HHS to reinstate the $2B in SAMHSA funds the very next day. If not reinstated, the cuts could have caused disruptions in access of vital care services for thousands of Americans. (Fierce Healthcare, January 15)
On January 15, the White House released a healthcare reform package called ” The Great Healthcare Plan,” detailing the administration’s plan to lower drug prices and insurance premiums, maximize price transparency, and hold insurance companies accountable by requiring publication of additional data on healthcare costs and service denial rates. The plan did not explicitly address plans for ACA premium tax credits and instead calls for ceasing sending insurance companies taxpayer-funded subsidy payments and for the funds to instead be given directly to eligible beneficiaries to purchase a plan of their choice. Other key components include transitioning from using industry terminology to plain English, allowing for more pharmaceutical drugs to be available for over-the-counter purchase, and funding a cost-sharing reduction (CSR) program that could potentially save taxpayers $36B. The administration calls on Congress to pass legislation to enact the plan (Inside Health Policy, January 15; White House, January 15).
The Senate is currently in recess until later this month, leaving the ACA premium tax credits unresolved. On January 8, the House passed a bipartisan three-year extension of the expired subsidies. However, there are several policy measures that have hindered the negotiation process in the Senate. Republican lawmakers are seeking additional protections against fraud, waste, and abuse in the ACA Marketplace and new language that reiterates the ban on federal funding to provide abortions in health plans sold on the Exchange. Senator King of Maine noted that he expects a draft version of extension shortly after the Senate reconvenes on January 26. Notably, open enrollment for the Marketplace in most states ended on January 15. Only eight states have extended open enrollment through the end of the month. Data released from CMS on the ACA Marketplace shows that open enrollment is down from 24.17 million in January 2025 to 22.77 million as of January 3, 2026 (Inside Health Policy, January 15; Health Payer Specialist, January 16; CMS Newsroom, January 17, 2025; CMS Newsroom, January 12; Health Payer Specialist, January 14).
UnitedHealthcare has announced a pilot program in Oklahoma, Idaho, Minnesota and Missouri designed to support rural hospital providers. Under the pilot, UnitedHealthcare’s Medicare Advantage plans will accelerate payment timeframes for providers by 50% over a six-month period. The insurer will work closely with providers during this period to evaluate the impact of the pilot (Fierce Healthcare, January 14).
On January 20, the House Appropriations Committee released a final appropriations bill, which included a bipartisan healthcare package with $116.6B in discretionary funding to the HHS. The bill would provide multi-year funding extensions for vital programs and community health centers, pharmacy benefit manager reforms, delay DSH cuts, and extend Medicare telehealth flexibilities. The package comes just 10 days before the January 30 continuing resolution deadline, which would have otherwise disrupted care for millions of Americans. Key provisions include a 3.1% incentive payment extension for alternative payment models (APMs) through 2028, extensions of Medicare telehealth flexibilities through December 2027, and funding extensions for community health centers, graduate medical education programs, and National Health Service Corps. Items that were previously on the table but not included within the package were extensions for enhanced ACA premium tax credits, blockage of CMS’ WISeR prior authorization model, and comprehensive site-neutral payment policies (Inside Health Policy, January 20; American Hospital Association, January 20).
Medicaid and CHIP Payment and Access Commission (MACPAC) released an issue brief in January describing how states approached the implementation of a provision under the American Rescue Plan Act (ARPA) that provided a temporary increase in Home and Community-Based Services (HCBS) spending. States were required to design and submit a spending plan for these additional funds for CMS approval and were required to expend the funds by March 2025. MACPAC’s study resulted in five key findings: (1) CMS had limited time to develop and disseminate operation guidance to states; (2) states had limited time to develop spending plans; (3) many states were unable to expend their ARPA funds by the deadline, and some requested extensions; (4) ARPA did not include evaluation measures for the enhanced funding program, limiting potential lessons learned; and (5) states plan to sustain some of their initiatives after initial funding expired (MACPAC, January 15).
A recent study shows that, in 2024, healthcare spending in the United States reached $5.3T, surpassing economic growth. This is due, in part, to the increased demand for healthcare in 2023 and 2024, as usage of physician care, clinical services, prescription drugs, and hospital care has grown. The insurance landscape has also seen shifts, with a 92.5% peak in the overall population with insurance coverage in 2023, followed by a steady decline to 91.8% in 2024. This activity is coupled with a decline in Medicaid enrollment and moves to marketplace and employer-sponsored private health insurance, which has ultimately led to increased federal spending (Health Affairs, January 14).
Delaware’s Attorney General Kathy Jennings filed a lawsuit against several pharmaceutical companies and PBMs on January 12. The state’s Department of Justice alleges that PBMs and drug manufacturers have colluded to increase the price of insulin and other diabetic care products over the last 15 years, naming Novo Nordisk, Eli Lilly, ExpressScripts, CVS Health, Caremark, Optum, and several other companies. The suit alleges that PBMs have given preferential treatment to manufacturers who pay the highest price for drugs, artificially raising prices and cutting off competition that may lower costs for consumers.
In turn, attorneys for the state allege that this practice lowers patients’ access to prescription drugs as more affordable formulas are dropped from coverage. Under the Delaware Consumer Fraud Act and the Delaware Deceptive Trade Practices Act, the state is seeking a permanent injunction to prevent the companies from engaging in “unfair and deceptive” business practices. Delaware’s suit claims that PBMs and drug manufacturers have committed fraud totaling millions of dollars each year against the state, via its state employee health plan, and patients residing in the state; the lawsuit also requests restitution to the state and consumers (Spotlight Delaware, January 14).
A Republican lawmaker in Missouri has proposed a ballot measure that would add Medicaid community engagement requirements to the state Constitution. Lawmakers noted that the state will have to implement community engagement requirements regardless of any ballot initiative. However, lawmakers expressed that a constitutional change will ensure that it is more difficult to reverse the policy if the requirements change in the future. Representative Darin Chappell proposed the constitutional amendment in a House Committee meeting and believes that the change would bring cost savings to Missouri.
Representative Chappell’s proposal would require the Department of Social Services (DSS) to verify eligibility with community engagement requirements three months prior to application, but did not prescribe how often the Medicaid agency should verify eligibility after enrollment. Democratic lawmakers in Missouri have pushed back, alleging that the fiscal note for the constitutional amendment does not account for the full cost of the changes. If the proposed constitutional amendment does pass the state legislature, Missouri residents will still need to vote on the ballot initiative in order for it to go into effect. DSS requested $137M for FY2027 to implement community engagement requirements as outlined in law. Additionally, Governor Kehoe’s proposed budget for FY2027 does not allocate more positions within the DSS to perform eligibility determinations (Missouri Independent, January 16).
In New Hampshire, lawmakers passed legislation in the FY2026 budget that will require certain Medicaid enrollees to pay premiums in order to receive coverage starting in July 2026. Enrollees who are at 100% or higher of the federal poverty level (FPL) will be charged a monthly premium, ranging from $60 to $270, depending on family size and FPL. On January 13, Medicaid officials reported during a Senate hearing that charging premiums could result in upwards of $23M in FY2027 but are uncertain of the cost of updating current payment systems within the agency. However, additional concerns are rising from other state officials and lawmakers. These officials note that while H.R. 1 will require cost sharing for certain services starting in October 2028, it caps costs at $35 per service.
This leaves New Hampshire officials concerned that this would prevent the state from collecting established premiums. The state’s director of Medicaid enterprise management told the New Hampshire Bulletin that the Department of Health and Human Services is in conversations with CMS to determine, what, if anything, the state needs to modify. Democratic lawmakers are opposing the premium collections entirely, citing the financial burden for low-income families and claim that the state should not waste money on a system that will be barred by federal law in the near future (New Hampshire Bulletin, January 20; New Hampshire Bulletin, January 15).
Facing a budget deficit of nearly $500M, Nebraska Governor Jim Pillen is looking to reduce state spending by 0.4% in the current fiscal year and by 1.4% in FY2027, with cuts totaling $495M. The largest target for the proposed cuts is the Department of Health and Human Services, which would stand to lose about $152M. According to the state budget administrator, many of these cuts would be covered by staffing adjustments, increases to federal funding, and “replacing expensive contracts” by bringing more functions in-house. Proposed cuts also include a $14.1M reduction to one of the state’s waiver programs serving the aged and disabled population (Nebraska Examiner, January 15).
In order to address the state’s projected budget deficit, amounting to $40.3M this fiscal year and $555.2M in FY2027, Idaho Governor Brad Little is recommending that the Idaho Legislature make significant cuts, about $45M, to the state’s Medicaid program. Included within the proposed cuts are rate reductions and cutting vital services such as adult vision, dental, audiology services, case management support, hospice services, and home and community-based services. Many of the services that the Governor is looking to cut are optional under federal regulations. Those who oppose the Governor’s proposals point out that cutting essential programs will exacerbate costs for the state in the future. Similarly, in 2011, the state saw emergency room costs skyrocket following the state’s decision to cut Medicaid dental coverage for adults post-Great Recession, which was later reversed (Idaho Capitol Sun, January 8; Idaho Capitol Sun, January 14).
As state governors begin to release budget proposals for the upcoming fiscal year, many will be faced with several competing financial priorities, particularly around health and human services. As states begin to feel the impacts of reduced federal Medicaid funding under H.R.1, governors and budget directors will be looking to tap into rainy day funds and other reserves, increase revenue through new taxes, or reduce Medicaid and other healthcare spending to balance their budgets. When it comes to Medicaid spending reductions, one of the first targets, as we see in Idaho’s budget proposal, is the slate of optional Medicaid services many states elect to fund.
Services like adult vision and dental are not included as mandatory Medicaid services under federal law and can be a target for cost containment, while other services, such as inpatient hospital services and most services for children, are mandatory and cannot be fully cut. As states consider such cuts, it is important for policymakers to balance short-term savings against potential long-term costs. This is particularly true around home and community-based services, another optional benefit that states could consider for reductions and cuts. As states move into formal budget development and negotiations, Sellers Dorsey will be closely watching how states approach decisions around reduced federal funding.
In this episode of Coffee with a Colleague, Sellers Dorsey Managing Director Katie Renner Olse sits down with Senior Vice President Gary Jessee to discuss Medicaid’s central role in serving children and families and the opportunity to better connect healthcare, child welfare, behavioral health, and other family‑serving systems. Drawing on decades of experience, Gary reflects on the challenges of siloed systems, rapid policy change, and overburdened agencies.
