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In collaboration with:
April 17, 2025
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Spotlight
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In recent weeks, the House and Senate both passed H.Con.Res. 14, the FY 2025 budget resolution. The resolution sets up an informal May 9 deadline for congressional committees to act on the resolution’s instructions, which include $880 billion in spending reductions for the House Energy and Commerce Committee, which has jurisdiction over Medicaid. Potential Medicaid changes that could be included in a reconciliation bill include:
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Policies That Reduce Medicaid Outlays
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Eliminate ARPA 5% FMAP Bump for New Expansion
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Allow States the Option to Impose Work Requirements
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Limit Provider Taxes to 5% of Provider Revenue (Current Law=6%)
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Repeal Biden Administration Medicaid Regulations
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Reverse Executive Action Expanding State-Directed Payments
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Reduce match on Expansion Population from 90% to normal FMAP
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Per Capita Caps (on the entire program or Expansion only)
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Note: A discussion of potential Medicaid policies are included in an issue brief from Leavitt Partners and GIH. These estimates are based on analysis from the Congressional Budget Office & CFRB. All policies can be adjusted for higher or lower savings amounts.
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GIH Funding Partners have published resources about Medicaid's effects on states, including a recent KFF article, "Putting $880 Billion in Potential Federal Medicaid Cuts in Context of State Budgets and Coverage," and Commonwealth Fund's interactive maps detailing how Medicaid helps each state and exploring congressional district enrollment by eligibility group. An upcoming KFF webinar will unpack claims about Medicaid fraud and abuse and places them in a larger context.
Other potential policies could include rescinding funding from the Prevention and Public Health Fund, as well as Medicare site neutral payments or Medicare Advantage targeted reductions. The FY 2025 budget resolution also sets up the end of July as an informal deadline for the House and Senate to pass a reconciliation bill. However, this timeline could be impacted by the Congressional Budget Office’s estimate that the U.S. will hit the debt ceiling sometime between May and September of this year.
Although the House and Senate are both in recess for two weeks, significant work will continue during this time to identify and draft policies to meet the budget resolutions directives while ensuring Republicans have enough votes to pass a reconciliation bill. In drafting this legislation, congressional and committee leaders will have to address various priorities from Republican members. Fiscal hawks in the House, who had been vocal about their opposition to the Senate resolution due to insufficient spending reductions, cited assurances that they received from Senate Majority Leader John Thune (R-SD) and Speaker Johnson that spending cuts of at least $1.5 trillion would be achieved.
Grantmakers should consider engaging on reconciliation legislation impacting Medicaid, as described in the recent Issue Brief from Leavitt Partners and GIH: “Overview of Potential Medicaid Changes in 2025 Budget Reconciliation Bill.”
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Health and Human Services Updates
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In April, the U.S. Department of Health and Human Services (HHS) commenced a reduction-in-force (RIF) of nearly 10,000 federal employees, intended to bring the overall HHS staffing levels down from 82,000 to 62,000, in combination with other efforts. A March 27 HHS announcement said the layoffs would impact 18 percent of the Centers for Disease Control and Prevention (CDC), 15 percent of the Food and Drug Administration (FDA), 6 percent of NIH, and 4 percent of the Centers for Medicare & Medicaid Services (CMS), and that the reorganization “will centralize core functions such as Human Resources, Information Technology, Procurement, External Affairs, and Policy.” Reports and social media posts suggest that RIF notices appear to have affected communications, Freedom of Information Act (FOIA) compliance, equal opportunity employment, and policy functions. Other programs related to health equity, minority health, mental health and substance use disorders, and chronic conditions were also reportedly impacted by layoffs. Senate HELP Committee Chair Bill Cassidy (R-LA) and Ranking Member Bernie Sanders (I-VT) sent a letter to HHS Secretary Robert F. Kennedy, Jr., inviting him to testify at a hearing titled, “An Update on the Restructuring of the Department of Health and Human Services” on April 10, though the hearing did not occur and a new date has not yet been announced; Kennedy’s lack of responsiveness to this invitation is considered highly unusual.
Grantmakers should watch for additional details from HHS on which offices and activities may be under different leadership or may be prioritized or de-emphasized in the restructuring. These changes can inform future funding priorities for the department, as well as areas in which there could be decreased emphasis at the federal government level. Grantmakers in Health and Leavitt Partners will also be providing an issue brief in late April with additional information on the RIFs and reorganizations.
On April 10, Secretary Kennedy outlined several major health initiatives during a Cabinet meeting, including an "autism research effort" and progress on the Making America Healthy Again (MAHA) agenda. Secretary Kennedy announced plans for what he described as “a massive testing and research effort,” involving hundreds of scientists to determine the cause of autism by September. According to a recent report published by STAT News, many prominent autism researchers are skeptical of the timeline and the real purpose of the study.
Separately, Kennedy highlighted recent policy changes at the state level in Utah and Arizona. New legislation in Utah bans the addition of fluoride to public drinking water, bans certain dyes and chemical additives in public school meals, and places restrictions on the use of Supplemental Nutrition Assistance Program (SNAP) benefits for purchasing soda. Legislation passed in Arizona, the Arizona Healthy Schools Act, prohibits public schools from serving “ultra-processed foods.”
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At the end of his first week at CMS, Administrator Mehmet Oz shared his agenda and vision for the agency:
- Implementing President Trump’s Executive Order on Transparency to provide patients with clear and accurate health care cost information.
- Streamlining access to life-saving treatments by equipping providers with better information about their patients and holding them accountable for health outcomes.
- Identifying and eliminating "waste, fraud, and abuse" that impacts vulnerable patients and taxpayers.
- Focusing on prevention, wellness, and chronic disease management across CMS programs.
Following the announcement of his agenda, Administrator Oz sent a letter to state Medicaid agencies regarding gender reassignment surgeries and hormone treatments in minors. In the letter, CMS notes several Medicaid requirements, including requirements that payments are consistent with “efficiency, economy, and quality of care,” prohibitions on federal funding for “coverage of services whose purpose is to permanently render an individual incapable of reproducing,” and obligations for states under their drug utilization review (DUR) programs to ensure that prescribed drugs are “appropriate, medically necessary, and are not likely to result in adverse results.” The letter and press release also note the treatment approaches of other countries, such as the United Kingdom, Sweden, and Finland.
CMS also sent a letter to states notifying them that the agency will no longer approve new or extend existing requests of section 1115 authority for federal funding for designated state health programs (DSHP) and designated state investment programs (DSIP). Since 2005, CMS has approved federal DSHP funding for several states under the section 1115 waiver authority. In 2022, the agency began implementing several parameters and limitations for DSHP approvals, such as time-limited duration of federal funding for the program. CMS has now determined that DSHPs and DSIPs were funded entirely without federal Medicaid funds prior to their approvals, and that federal DSHP and DSIP funding is not integral to a section 1115 demonstration. The agency alleged that these programs are not directly tied to services provided to Medicaid beneficiaries and cited an increasing cost to the federal government without proportional state contribution. The letter further notes that CMS will conduct direct outreach to states with DSHP and DSIP authority and continue to support innovative 1115 demonstrations that promote the objectives of Medicaid. Grantmakers should work with state Medicaid programs to identify and understand state programs that will be impacted by this change (and when) and consider other funding opportunities for the activities.
Rounding out a busy week at the agency last week, CMS also released several proposed rule changes setting payment rates for Medicare providers in FY 2026. The proposed changes increase payments for inpatient, long-term care, rehabilitation, and psychiatric hospitals, as well as skilled nursing facilities.
In several of the proposed rules, CMS proposes to remove various health equity or social determinant of health (SDOH) related measures from quality reporting and value-based purchasing programs, as well as reporting measures related to health care worker compliance with COVID-19 vaccination. If finalized, these policies could result in fewer health care entities screening their patients for social needs. Comments on these proposed rules are due by June 10, 2025.
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On April 9, the White House announced several presidential actions, including a memorandum titled “Directing the Repeal of Unlawful Regulations,” which instructed federal agencies to repeal regulations deemed unlawful under recent Supreme Court rulings. This directive claims to aim to reduce regulatory burdens, enhance economic growth, and reinforce constitutional governance by ensuring that federal regulations align with current legal standards and Supreme Court interpretations. Stakeholders should watch for the recission of current regulations, potentially including regulations related to Medicaid, FDA, and other health and human services programs.
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