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Schools at the Center of Care: How Medicaid, Child Welfare, and Community Partners Can Transform Behavioral Health Outcomes for Children and Families

Issue #298

Sellers Dorsey Digest

August 6, 2026

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HCBS ADvancing States Webinar | Gary Jessee
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The Value of Accurate HCBS Assessments in Minimizing FWA

States are working to deliver high-quality home and community-based services (HCBS) while managing limited resources. Accurate assessments are essential for minimizing fraud, waste, abuse, strengthening program integrity, and improving outcomes for members. On August 12 at 3 PM (ET), join Sellers Dorsey Senior Vice President of National Consulting, Gary Jessee, as he moderates a discussion with ADvancing States, Centene, and QCSS Health on practical tools and strategies that leading organizations use to improve assessment consistency and HCBS program management.
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Federal News

HRSA Announces New 340B Pilot Program

On July 31, the Health Resources and Services Administration (HRSA) announced their revised 340B Rebate Model Pilot Program. HRSA released an RFI in February, after their initial pilot implementation was blocked to allow for public input. A federal judge issued a preliminary injunction and blocked the initial pilot in December, citing possible violations of the Administrative Procedure Act, as there could be significant impacts on hospitals and vulnerable populations they serve. Following that decision, the agency remarked that it would consider stakeholder feedback in the pilot design moving forward. Under this new pilot program, qualifying drug manufacturers will have a voluntary pathway to provide 340B ceiling prices with rebates instead of upfront discounts for certain covered outpatient drugs. The agency is shifting to a claims-based rebate approach to improve 340B transaction transparency and prevent potential discount duplications. Despite this, the American Hospital Association (AHA) is actively looking into options to put a stop to the new pilot. Eligible manufacturers who are interested in participating must submit rebate plans by August 24, 2026.

On August 5, the Senate 340B Bipartisan Working Group introduced the “Supporting Underserved and Strengthening Transparency, Accountability, and Integrity Now” (SUSTAIN) 340B Act to reform the current program while preserving patient access. The bill would also require any HHS pilot programs to be sunset within one year and transition to the clearinghouse established under the legislation. If the act is passed as written, it would disallow the agency to implement the new pilot. Sellers Dorsey has prepared a summary of the new pilot program, available here (Essential Hospitals, January 2; HRSA, July 31; Healthcare Dive, July 31; Moran Senate, August 5).

CMS Finalizes FY2027 Hospice Payment Methodology and Introduces New Fraud Monitoring System

On July 30, CMS finalized the hospice pay bump for fiscal year (FY) 2027 at 2.3%. This is lower than the 2.6% that was previously finalized in 2026 and the 2.4% that was proposed by the agency earlier this year. Estimates tout that the pay increase will bring Medicare hospice payments up by $755M compared to FY2026. The final rule also updates the aggregate hospice cap, increasing the maximum reimbursement per hospice from $35,361.44 for FY2026 to $36,174.75 for FY2027. In addition to the payment changes, CMS Administrator Mehmet Oz announced a new fraud-flagging system, called Service and Spending Variation Index (SSVI). Oz alleges that some hospices have enrolled non-terminally ill beneficiaries, have upcoded routine services, or Medicare for high-cost treatments, pointing to inappropriate utilization or inadequate care. SSVI will score hospices based on nine claims-based measures with a score from zero through 16. Higher scores represent higher potential for fraud, noncompliance, or inappropriate utilization. Additionally, if hospices do not submit adequate data, the agency will institute potential payment reductions beginning no earlier than FY2028 (Inside Health Policy, July 30).

Court Allows Medicaid Work Requirement Rule to Proceed

CMS’ interim final rule on Medicaid work requirements will remain in effect while a legal challenge from 25 states and Washington, D.C., moves forward. The states argued that CMS exceeded the statute by adding an “ability to work” test for the medically frail exemption and created costly implementation challenges ahead of the January 1, 2027, deadline. The plaintiffs alleged that their concerns are more immediate because states must notify beneficiaries about the new requirements by August 31. Judge Richard Stearns nevertheless found that the states had not shown irreparable harm, noting that Congress set the implementation timeline, not CMS, and that the federal government will reimburse 90% of eligible system development costs. The ruling does not address the merits of the lawsuit, and the states may renew their request for an injunction if the case remains unresolved at the end of 2026 or if the Trump administration does not separately delay implementation (HealthCare Dive, July 31; Inside Health Policy, July 30).

CMS Releases Toolkit to Help States Manage ABA Services

CMS released a new toolkit for states to assist with applied behavior analysis (ABA) therapy service monitoring and oversight. The toolkit does not mandate any new requirements and is intended to help states address concerns about increased expenditures, clinical practice inconsistencies, and potential fraudulent providers. Some recommendations from CMS include instituting prior authorization thresholds, tracking clinical outcomes, and introducing time and duration limits for services. According to the agency, ABA spending in Medicaid and CHIP increased by 421% between 2021 and 2025. Over the same period, the number of children with an autism spectrum disorder diagnosis receiving ABA services increased by 67%. (Fierce Healthcare, August 4; The New York Times, August 4).

State News

Indiana to Expand Medicaid Coverage of GLP-1 Medications

Indiana will participate in the federal BALANCE model to expand Medicaid coverage of GLP-1 medications for obesity. Under the model, federal funding and manufacturer discounts will reduce the monthly cost to Indiana Medicaid to $85.16 per beneficiary, compared with the full $245 per month cost. Participating manufacturers will also provide lifestyle support services as part of the treatment approach. The Indiana Family and Social Services Administration, which oversees Medicaid coverage for 1.9 million residents, will administer the program, although eligibility requirements and the implementation timeline are still being finalized (Indiana Capital Chronicle, July 30).

Nebraska Begins Medicaid Work Requirement Reviews

The first Medicaid coverage losses tied to Nebraska’s work requirements took effect Aug. 1, with the state estimating that about 200 expansion enrollees were disenrolled. The state expects to confirm compliance or exemptions automatically for about 74% of enrollees using income and health care data. However, roughly 30,000 of the more than 70,000 people subject to the requirements may still need to submit additional information, making eligibility verification and medical frailty exemptions key implementation challenges (Becker’s Hospital Review, August 3).

ARHOME Waiver Extension Denied

A spokesperson with the Arkansas Office of the Governor confirmed that the state’s 1115 waiver renewal request has been denied by CMS. On Tuesday, CMS reported that the waiver is currently under review. The Arkansas Health and Opportunity for Me (ARHOME) waiver provides coverage to low-income adults aged 19 to 64 covered by Medicaid expansion by using Medicaid funds to purchase private health insurance coverage through participating insurers. It was adopted by the legislature in 2013 and reauthorized earlier this year. The governor’s spokesperson indicated that the waiver submission was not compliant with the new budget neutrality requirements from H.R. 1. The waiver is set to expire on December 31, 2026.

The state is discussing short-term extension options with CMS, and the Department of Human Services shared that changes will be coming to the Medicaid expansion program in the future. Absent an 1115 waiver, Arkansas could consider moving to a traditional fee-for-service program or begin contracting with managed care organizations to maintain coverage for its Medicaid expansion population, currently over 200,000 individuals (KARK, July 31; Arkansas Advocate, August 4).

Two MD Officials Leave as the State Transitions to AHEAD Model Implementation Mode

Health Services Cost Review Commission (HSCRC) Chair Joshua Sharfstein and Executive Director Jon Kromm announced that they were both stepping down at the commission’s July meeting prior to Maryland’s shift from the previous Total Cost of Care hospital rate setting model to the new Achieving Healthcare Efficiency through Accountable Design (AHEAD). The two were heavily involved in negotiations to produce the new model, with both the Biden and Trump administrations. Current Principal Deputy Director William Henderson will take over as interim Executive Director until a new chair is named (Maryland Matters, August 3).

Montana Continues Early Medicaid Work Requirement Implementation

Montana is one of three states implementing Medicaid work requirements ahead of the January 1, 2027, federal deadline, with enrollees required to submit monthly documentation beginning July 1. However, eligibility will not be reviewed until each beneficiary’s next redetermination, which advocates say has contributed to confusion about when coverage could be affected and to increased demand for assistance. The state plans to hire 59 additional Medicaid staff to process documentation and confirm compliance. Montana has not yet released data on compliance, exemptions, or the number of beneficiaries determined to be out of compliance (Inside Health Policy, August 3).

SPAs and Waivers

Waivers

  • 1115(a)
    • Virginia
      • On July 31, CMS approved a five-year renewal of Virginia’s 1115 waiver titled “Building and Transforming Coverage, Services, and Supports for a Healthier Virginia.” The state receives authority to provide substance use disorder treatment services in an institution for mental diseases to eligible beneficiaries; extend Medicaid eligibility to former foster care youth under age 26 who aged out of care in a different state or tribe; and sunset the High Needs Support portion of the waiver. Virginia receives new authority to receive federal financial participation for providing Medicaid services to eligible individuals with a serious mental illness in an IMD. The waiver is effective August 1, 2026, through December 31, 2031.

SPAs

  • Administrative
    • Texas (TX-26-0003, effective July 2, 2026): Further clarifies Medicaid Estate Recovery Program (MERP) eligibility requirements to ensure proper recover of long-term costs, updates outdated terminology and increases minimum amounts subject to recovery under MERP.
  • Services
    • Louisiana (LA-26-0007, effective October 1, 2026): Transitions the pharmacy benefit program from the previous supplemental drug rebate agreement with Prime Therapeutics to instead participate in the Sovereign States Drug Consortium (SSDC) Medicaid multi-state purchasing pool.
    • North Carolina (NC-26-0002, effective July 1, 2026): Expands eligible provider types and covered services under school-based services. Additionally clarifies state compliance with audit standards and updates related payment methodologies.
  • Payment
    • Kansas (KS-25-0001, effective January 1, 2025): Updates payment methodology for the Medicaid Indirect Medical Education (IME) factor to include large public state teaching hospitals.
    • Nevada (NV-25-0034, effective October 1, 2025): Updates payment methodology for accredited university training clinics, with diem rates for the provision of behavioral services, including screening, assessment, psychotherapy, evaluation and management services.

Most Read - July

Federal Court Pauses Key ACA Marketplace Rule Provisions

A Maryland federal court temporarily paused eight provisions of a CMS rule that would have changed ACA marketplace enrollment and plan requirements beginning July 20. The lawsuit was brought by Chicago, Baltimore, Columbus, Pima County, Arizona, Doctors for America, and the Main Street Alliance, which argued the rule would create new barriers to coverage and increase uncompensated care costs. The blocked provisions include tighter subsidy and income verification requirements, broader access to catastrophic coverage, changes to bronze plan cost sharing, revised network adequacy standards, and the elimination of standardized plan requirements.

CMS has defended the changes as necessary to reduce fraud and strengthen program integrity, although the agency estimates that up to 2 million people could lose coverage under the rule. In pausing the provisions, the court found the plaintiffs were likely to succeed on the merits of their claims and could face irreparable harm if the policies took effect. The decision comes as ACA marketplace enrollment has declined from 22.2 million in 2025 to 19.2 million as of February 2026. The administration is expected to appeal, while similar restrictions enacted in federal law remain scheduled for 2028 (Fierce Healthcare, July 17; Healthcare Dive, July 17).

Read the full issue >

NJ Legislature Passes Bill to Assist Residents in Meeting Community Engagement Requirements

The New Jersey legislature passed Bill A3883 on June 30 to help residents meet the new community engagement requirements for Medicaid. The bill requires the Governor’s Office of Volunteerism to work with the Department of Human Services (DHS) and the Department of Labor and Workforce Development (DLWD) to expand the state’s volunteer resources and ensure that the information is easily accessible to individuals enrolled in SNAP and NJ FamilyCare. The bill also appropriates $100K to the Office of Volunteerism and $50K each to DHS and DLWD to help with implementation.

Finally, the bill would require both departments to establish a system to support the tracking of work activities and participation, including the number of volunteer and community service hours accumulated by SNAP applicants and beneficiaries, with the goal of collaboratively administering the SNAP Employment and Training Program. The governor has not yet signed the bill into law (New Jersey Monitor, June 1; NJ Legislature, n.d.).

Read the full issue >

Missouri Passes Expansive Healthcare Bill, Expanding Access and Affordability Policies

On July 13, Missouri Governor Mike Kehoe signed House Bill 2372 into law, a wide-ranging bill that aims to improve healthcare access and affordability, including many policies targeting maternal and reproductive health. The legislation will expand the state’s doula services under Medicaid, covering 16 visits throughout pregnancy, birth, and postpartum. Previously, coverage was restricted to six visits. Medicaid beneficiaries under the Show Me Healthy Babies program will also be able to access free childbirth education classes. Individuals with private insurance will be able to receive an annual supply of contraceptives starting January 1. Additionally, private insurers will be required to cover blood pressure monitoring equipment for pregnant and postpartum individuals.

Finally, the law will broaden the scope of Missouri’s Pregnancy-Associated Mortality Review Board to include tracking the level of prenatal and postnatal care received by those who died during birth or postpartum, studying the state’s maternal healthcare deserts, and making recommendations to address the racial inequities in maternal mortality. According to Governor Kehoe, HB 2372 is a key aspect of the state’s Rural Health Transformation Program (Missouri Independent, July 13).

Read the full issue >

Trump Administration Seeks Dismissal of Lawsuit Challenging Medicaid Work Requirement IFR

Ahead of the July 28 hearing in the lawsuit that states filed against the Trump Administration regarding the imposition of a “medically frail” exemption and the disallowance of presidential national emergency declarations to count as short-term hardship exemptions for the upcoming Medicaid work requirements, the administration submitted a brief on July 15 in opposition of the plaintiffs’ motion for a preliminary injunction and for the court to dismiss the charges. The plaintiffs ask the court to block certain components of the Interim Final Rule (IFR) ahead of the looming August 31 statutory deadline to inform their beneficiaries. The administration argues that Congress delegated authority to define medical frailty to CMS, and that determining how states can grant short-term hardship also comes under their purview. In the meantime, CMS continues to collect comments on the IFR through July 31 (Inside Health Policy, July 21).

Read the full issue >

Arkansas Begins Soft Launch of Medicaid Work Requirements

Arkansas has begun its “soft launch” of Medicaid’s new community engagement requirements ahead of the January 1, 2027, effective date. The Department of Human Services (DHS), which administers the state’s Medicaid program, will test its automated process for verifying eligibility and compliance with the new policies during this soft launch period. At an enrollee’s redetermination, the automated process will review wage data, information from other state agencies and programs, medical claims, diagnosis data, and more to determine compliance with community engagement requirements. Following this, the enrollee will receive a notice that details if they meet the requirements.

No disenrollments or penalties will occur before January 1, 2027, even if an enrollee is deemed noncompliant. In May 2026, around 210,000 individuals were enrolled in ARHOME, the state’s Medicaid expansion program. DHS estimates that around 20%, or 42,000 individuals, will lose Medicaid coverage when the community engagement requirements go into effect (Arkansas Advocate, July 6).

Read the full issue >

Sellers Dorsey Updates

Schools at the Center of Care: How Medicaid, Child Welfare, and Community Partners Can Transform Behavioral Health Outcomes for Children and Families

Nearly 1 in 5 students rely on school-based behavioral health services, making schools a critical access point for early identification and prevention. Our latest issue brief explores how stronger coordination among education, Medicaid, child welfare, and community partners can expand access, strengthen prevention, and improve outcomes for children and families. Learn how schools can serve as a bridge to behavioral health support and find actionable strategies for state agencies and policymakers.
Read the Issue Brief

Coffee with a Colleague: D-SNP Integration for Health Plans and How to Bridge the Medicare-Medicaid Gap

CMS and states are accelerating efforts to integrate Medicare and Medicaid. Health plans now face new expectations to move beyond traditional D-SNP models and deliver coordinated care for dual-eligible members. In our recent Coffee with a Colleague, Sellers Dorsey Senior Director Joe McGrath talks with former health plan executive Karen Brach to break down where organizations are facing challenges in bridging Medicare and Medicaid, and why aligning provider incentives is a key factor for successful integration.
Watch the Video

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