Sellers Dorsey Digest

Federal Updates

NEWS

Lack of Clarity Regarding HHS Reinstatement of Some Terminated Employees

• On April 3, HHS Secretary RFK Jr. announced the agency’s intention to reinstate some employees who were inadvertently terminated from last week’s cuts. The Secretary has been aiming to reduce the HHS workforce to lower costs and streamline workflows and admitted that approximately 20% of the recent cuts were in error. On April 4, a source shared with Politico that “no such plan is in the works.” Offices like CMS, FDA, CDC, and others have been impacted by the layoffs, with some leadership departing amid the restructuring. Last week, many offices and programs like the CDC tobacco control program, HHS Office of Infectious Disease and HIV Policy, and the Administration for Community Living faced substantial cuts or were entirely shuttered or reorganized (Fierce Healthcare, April 4; Politico, April 4; STAT, April 7) .

Senate HELP Committee Requests Appearance from RFK Jr., Potentially Delayed

• On April 1, Senators Cassidy and Sanders requested that RFK Jr. appear before the Senate HELP Committee on April 10. The Senators are seeking additional information following the mass terminations and budget cuts across HHS’ offices. Earlier this year, RFK Jr. agreed to appear before the Senate HELP Committee on a regular cadence in exchange for Senator Cassidy’s confirmation vote for the HHS Secretary position. However, the Secretary has not yet confirmed his appearance and reports have surfaced that the hearing is likely to be postponed for several weeks. The Senate is taking a two-week break at the end of this week and is due back on April 28 (STAT, April 7; Fierce Healthcare, April 4).

DOGE Orders CMS to Cut $2.7B in Contract Spending

• Pursuant to EO 14222, DOGE on March 31 sent an email to CMS staff requesting recommendations on how the agency’s plan to reduce contract spending by $2.7B by COB April 3, with final contract decisions and calculated savings to be submitted by April 18. The email stated that the cost savings could be applied in FY2025 or as cost avoidance in FY2026. Once the decision is made and sent to the Assistant Secretary for Financial Resources (ASFR), the Office of Acquisitions and Grant Management must execute the necessary contract terminations within 15 days and descopes within 60 days. This requirement follows the mass layoffs across HHS, with about 300 employees being cut from CMS (Inside Health Policy, April 8).

Oz Takes Charge of CMS Amid Cuts and Reform Plans

• On April 3, the Senate confirmed the appointment of Dr. Mehmet Oz, a former heart surgeon and TV personality, as the Administrator for the Centers for Medicare and Medicaid Services (CMS). Dr. Oz is entering this role as the Trump administration has cut around 300 CMS positions to restructure operations. Officials insist Medicare and Medicaid services will not be impacted. While Dr. Oz has supported Medicare Advantage and tech-driven care like telehealth and AI, he has acknowledged problems like prior authorization and did not take a position on potential Congressional Medicaid cuts during his confirmation hearing. Aligned with U.S. Department of Health and Human Services (HHS) Secretary RFK Jr., Oz supports a “Make America Healthy Again” vision focused on wellness and reform (Inside Health Policy, April 3; AP News, April 3).

Elder Care Providers Worry Federal Shake-Up Could Slow Critical Services

• As the federal government moves forward with a major restructuring of the Department of Health and Human Services (HHS), which includes plans to lay off approximately 20,000 employees, providers of the PACE (Program of All-Inclusive Care for the Elderly) are expressing concern. They fear the changes could delay the launch of new centers and hinder older adults’ access to vital care, which helps them stay in their communities rather than move to nursing homes. PACE, which has grown significantly and now serves more than 80,000 people, faces challenges with slow Medicaid processing times and uncertain center openings. Providers are calling for faster approvals and less restrictions, fearing financial risks without clear guidance from Centers for Medicare & Medicaid Services (CMS) (Modern Healthcare, April 7).

Senate Advances Revised Budget Framework for Reconciliation

• On Saturday, April 5, the Senate approved a new framework for a multi-trillion-dollar budget plan focused on national defense, energy, and tax policy. The vote passed 51-48, driven along party lines, and advances Trump’s domestic agenda. The revised budget plan extends the 2017 Tax Cuts and Jobs Act and creates new tax cuts, totaling over $5T. Additionally, the Senate’s plan raises the US debt limit by $5T, ahead of the CBO’s predicted default in late summer. Other spending in the budget includes $175B for border enforcement and $150B for national defense. Differences between the House and Senate budget plans remain, leaving potential challenges ahead to reconcile the two as some Republicans remain divided on the amount of budget cuts needed (WUNC, April 5).

Federal Regulation/Guidance:

CMS Finalizes Medicare Advantage and Part D Rule

• CMS issued a final rule on April 4, 2025, “Contract Year 2026 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly (CMS-4208-F).” The final rule is set to be published in the Federal Register on April 15, 2025.

The final rule:

• • Makes changes to Medicare Advantage (MA) and Part D plans as well as codifies aspects of the Inflation Reduction Act (2022) and other IRA-related provisions.
  • The agency is finalizing a requirement to restrict MA health plans’ ability to reopen and modify previously approved hospital decisions on the basis of information gathered after the approval. Inpatient admission decisions can only be modified for error or fraud.
  • CMS is also finalizing three provisions intended to prevent MA appeal loopholes that negatively impact providers and enrollees.
  • Other provisions in the final rule include updates to risk adjustment data; guidance to streamline information for dual eligibles; and clarity on non-allowable Special Supplemental Benefits for the Chronically Ill (SSBCI).
  • The IRA and IRA-related provisions in the final rule include the codification of no-cost sharing for adult vaccines recommended by the Advisory Committee on Immunization Practices under Part D.
  • The final rule also codifies the requirement that insulin products not apply to Part D deductibles, including a capped cost-sharing amount.
  • CMS is finalizing the Medicare Prescription Payment Plan to provide enrollees the option to pay out-of-pocket costs for prescription drugs in monthly payments over the year instead of one lump sum.
  • Other provisions in the final rule include timely submission requirements for Prescription Drug Event Records and Medicare Transaction Facilitator Requirements for Network Pharmacy Agreements.
  • CMS is not finalizing some provisions, including mandating annual analyses of health equity in MA plan utilization management policies and procedures; guidelines for Artificial Intelligence to ensure equitable access to services; and the Medicaid and Part D coverage of weight loss drugs like GLP-1s.
  • On April 7, 2025, CMS released a corresponding rate announcement that payments to MA and Part D plans are expected to increase by 5.06%, resulting in more than $25B in funding to these insurers in 2026 (CMS, April 4; Becker’s Payer Issues, April 7).

⇒ From Our Viewpoint^[i]

This is the first rule finalized by CMS under the new Administration, though it was proposed in December 2024 under the Biden Administration. The rule generally finalizes major provisions related to Medicare Advantage plans and the codification of certain Inflation Reduction Act (IRA) requirements around prescription drug costs and vaccine cost sharing requirements. However, the Administration is not finalizing some provisions largely related to health equity, coverage for weight loss drugs, and certain reporting requirements.

HHS Secretary RFK Jr. had previously indicated he generally does not favor use of weight loss drugs like GLP-1 medications as a first line treatment, preferring to focus on promoting lifestyle interventions. Additionally, CMS indicates some provisions are “being reviewed” to make sure they align with President Trump’s executive order around reducing regulations, i.e., for every new regulation, 10 existing regulations must be repealed.

With the final rule, Part D plans may experience higher costs as a result of the IRA cost-sharing and cost capping provisions on adult vaccines and insulin products. However, obesity medications remain optional for health plans to cover. State Medicaid agencies also retain the option to not cover GLP-1s, though 14 states like North Carolina, Virginia, Pennsylvania, California, and Minnesota have opted to provide coverage.

State Medicaid agencies had previously expressed concern over the cost of mandated coverage for the medications. The agency subsequently released a rate announcement on April 7, which predicts that federal payments to MA plans are expected to increase by 5.06% on average in the next calendar year. This is a benefit to the financial health of health plans, which had expected a much smaller increase this year.

Overall, the finalization of this rule shows the new administration continues to support Medicare Advantage, even as they pared back the proposed rule to remove provisions that do not align with the administration’s priorities. CMS is also expected to finalize the three-year initiative to remove Direct and Indirect Graduate Medical Education costs from MA rate calculations in 2026.

_{[i] GLP-1 Weight Loss Drugs: Coverage Under Medicaid and Other Health Plans | MultiState; Trump Finalizes Prior Auth, Hospital Stay Reqs In Medicare Advantage Rule | InsideHealthPolicy.com; Can RFK Jr. Limit Ozempic Access as HHS Chief? Here’s What to Know – The New York Times}

Judge Blocks Key Nursing Home Staffing Requirements

• Matthew Kacsmaryk, a federal judge in the Northern District of Texas, has blocked parts of a Biden administration rule that would have required most nursing homes to have a registered nurse on-site 24/7 and minimum staffing levels for aides, while allowing other parts of the rule to remain in effect. Judge Kacsmaryk ruled that the Centers for Medicare & Medicaid Services (CMS) overstepped its authority in designating such staffing levels.

The staffing rule, first proposed in 2023 and finalized in 2024, was designed, according to the Biden administration, to improve care quality in long-term care facilities. In promulgating the rule, CMS cited research showing that higher staffing levels are linked to better outcomes for residents. However, the nursing home industry challenged the rule, arguing that it imposed strict requirements without addressing workforce shortages or funding issues.

They also said the mandate could force some facilities, particularly in rural areas, to reduce services or close.  Judge Kacsmaryk emphasized that Congress had already set staffing standards, including requiring a registered nurse to be on-site for at least eight hours a day, and that CMS cannot change those standards without legislative approval. The ruling has sparked mixed reactions. Nursing Industry groups have praised the decision, saying it gives them more flexibility to address staffing challenges in ways that are sustainable for their communities. On the other hand, some consumer advocacy organizations expressed disappointment, noting that the rule could have led to safer, more consistent care for nursing home residents (McKnights, April 7; Politico Pro, April 7).

⇒ On Our Radar

Congressional leaders are also working to potentially repeal the nursing home staffing rule (Medicare and Medicaid Programs: Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting Final Rule) with a budget reconciliation. Lawmakers cite concerns over the federal cost to implement and potential harmful impacts on nursing homes as reasons to cut the mandate. For now, HHS is still supporting the final rule in two separate federal court cases (Iowa Capital Dispatch, March 3).

State Updates

NEWS

OK DOGE Releases Report Aiming for Cuts in Federal Grants and Streamlined Processes

• On April 1, the Oklahoma Division of Government Efficiency (DOGE-OK) released a report highlighting its proposals to eliminate wasteful expenditures, streamline operations, and save the state and federal government money while continuing to offer Oklahomans high-quality services. Key healthcare recommendations, many of which are directed to the federal government, include:
  • Repealing continuous coverage requirements for children under Medicaid
  • Returning $157M in federal grants DOGE-OK identified to be duplicative and underutilized and therefore could be returned without affecting services.
  • Repealing the federal requirement for states to cover prescription drugs in accelerated approval program.
  • Amending the federal average manufacturer price cap to protect manufacturer rebate dollars paid to states
  • Repealing the minimum staffing rule for nursing facilities

DOGE-OK also identified next steps, including a cost-benefit analysis, strategic consolidations, technology integration, and collaboration with key stakeholders to ensure transparency.

Oklahoma is one of several states that have established a state-level DOGE or DOGE-like entity, though it appears to be the first to issue a formal report. Late last month, Government Technology unveiled a tracker exploring government efficiency initiatives across the US. According to their research, 14 states now have active DOGEs, while 4 others are in the process of establishing DOGEs (Oklahoma, April 1; Government Technology, March 28).

UCare to Potentially Reduce MA Footprint Due to Financial Losses

• According to local news reports, UCare, a Minneapolis-based health insurer, may reduce its Medicare Advantage (MA) footprint following financial losses in 2024. Late last month, the insurer sent a memo to insurance agents informing them that broker commissions for new MA enrollments would be suspended starting July 1. The company recorded a loss of $504M in 2024, the largest loss in 15 years, and ended the year with financial reserves of $595M, down from $1.1B in reserves in 2023. During the most recent open enrollment period, UCare saw significant growth in MA plans, 20% between December and March, that may have resulted from tensions between local healthcare systems and other MA insurers. However, the company experienced higher than expected costs from increased utilization in certain plans. In March, UCare covered around 182,000 enrollees in MA plans and employed 1,600 individuals (Minnesota Star Tribute, April 3; Health Payer Specialist, April 7).

Aetna Wins Bid to Serve Pennsylvania State Employees Next Year

• On April 1, the Pennsylvania Employees Benefit Trust (PEBT) announced that it has awarded a contract to Aetna to provide health coverage for the state’s employees. Through this plan, effective January 1, Aetna will cover about 68,000 employees and their dependents, as well as 1,000 non-Medicare eligible retirees and their dependents (Health Payer Specialist, April 2).

Indiana Bill to Establish Hospital Performance Standards Passes House Committee

• Indiana’s Senate Bill 2 proposes new Medicaid policies, including work requirements for individuals aged 19-64 enrolled in the state’s Healthy Indiana Plan. This bill has passed the House Ways and Means Committee with amendments. The bill mandates the Office of Family and Social Services to report Medicaid data, enforces a five-year asset lookback period for long-term services eligibility, and establishes performance standards for hospitals. A proposed amendment to change the Medicaid eligibility review from quarterly to twice per year was among several amendments debated but ultimately failed.  Supporters believe the bill will reduce costs, while opponents argue it does not address deeper issues, such as potential national Medicaid funding cuts. The bill will be voted on by the House before potentially going to Governor Mike Braun for approval (Chicago Tribune, April 2).

SPA and Waiver Approvals

SPAs

• Administrative
  • Hawaii (HI-25-0005, effective January 1, 2025): Assures the state’s compliance with nondiscrimination language found in Section 1557 of the Affordable Care Act.
• Services
  • Oregon (OR-25-0007, effective February 1, 2025): Expands the Nurse Home Visiting program, Targeted Case Management Family Connects, into Douglas County. Additionally, expands the list of qualified providers for this program.
  • Pennsylvania (PA-25-0003, effective January 1, 2025): Establishes doula services as a covered service and establishes its payment methodology.
• Payment
  • Colorado (CO-24-0038, effective January 1, 2025): Makes revisions to the Physician Alternative Payment Model 2 Methodology by updating historical data periods, removing inaccurate language, clarifying credibility threshold populations, and adjusting language to better align with current practices.
  • Iowa (IA-24-0013, January 1, 2025): In compliance with a legislative mandate, establishes triennial budget-neutral impatient hospital rebase and diagnosis-related group (DRG) weight recalibration.
  • Minnesota (MN-25-0009, effective February 1, 2025): Updates the annual Medicare Resource-Based Relative Value Scale (RBRVS) for physician services.
  • North Dakota (ND-25-0001, effective January 1, 2025): Establishes a 3% payment rate increase for Nursing Facility services.

Sellers Dorsey Updates

NEWS

Impact Watch: How Proposed Federal Policy Changes Could Impact Various States

• Congress is considering changes that may reduce federal Medicaid funding. We’ve summarized recent state analyses showing how this could affect healthcare systems, communities, and local economies.

Explore Potential Impacts

Transforming the Safety-Net System: A Playbook for Safety-Net Leaders Inspired by California’s Innovative Strategies

• Inspired by California’s innovative strategies, this playbook offers actionable insights for safety-net leaders to drive better health outcomes and coordinate state initiatives across health and social services.

Download the Playbook

Sellers Dorsey to Facilitate Roundtable at CWLA Conference on Child Welfare and Medicaid

• Katie Renner Olse and Rachel Marsh will facilitate a roundtable at the CWLA 2025 Conference focused on Medicaid, managed care, behavioral health, and funding streams that impact children and families.

Learn more