Medicaid funding questions swirl after White House orders widespread spending pause (updated)

Jan. 29 update: The White House on Wednesday retracted the OMB memo implementing the general pause of federal grant and loan spending, saying a stringent review of agency spending nonetheless will continue and funding for agencies and programs could still be frozen if deemed to be used in a way that’s contrary to the administration’s strategic priorities.

In another development, the previous day’s issues blocking access to the federal Medicaid portal for state agencies appeared to have been resolved.

A move by the Trump administration to temporarily freeze a significant segment of federal spending while conducting compliance reviews could have big implications for healthcare if allowed to continue.

But after a morning and afternoon of confusion, the White House clarified that Medicaid is not subject to the Jan. 27 memo from the Office of Management and Budget (OMB). It was clear from the beginning that Medicare was not in the funding categories impacted by the memo, which had an effective time of 5 p.m. ET on Jan. 28.

Jan. 28 update: In the late afternoon, a judge at the U.S. District Court for Washington, D.C., blocked the spending pause from taking effect, saying it cannot begin until Feb. 3 at the earliest in order to allow a lawsuit to proceed.

At the very least, Medicaid programs had a chaotic Tuesday on their hands while the ramifications of the memo played out. Sen. Brian Schatz (D-Hawaii) posted to X earlier in the day that “multiple states” already were “locked out of the Medicaid portal,” and other reports suggested all 50 states faced the same issue.

“Doctors and hospitals cannot get paid,” Sen. Chris Murphy (D-Conn.) wrote in a tweet that appeared to be regarding providers in his state specifically. “Discussions ongoing about whether services can continue.”

States have a Jan. 30 deadline to submit Q4 2024 Medicaid expenditures to the federal government as the basis to receive their allotment of federal funding. The White House on Tuesday attributed the various portal interruptions to “an outage” that was set to be resolved shortly.

A sustained lapse in federal Medicaid funding would have profound implications for provider payments and, in turn, beneficiary access. The federal government accounted for 68.9% of Medicaid expenditures in FY23, according to KFF data, and the program covers more than 72 million Americans.

Immediate pushback

Among many other examples of healthcare programs that could be affected by the OMB order, grants made through the Health Resources and Services Administration (HRSA) support the healthcare workforce, especially in underserved areas, and help providers prepare for emergencies and disasters. A prolonged or permanent loss of funding also would be a big blow to community health centers and HIV prevention and treatment programs, as well as future medical research and clinical trials funded by the National Institutes of Health, among various other HHS subagencies.

Democrats and other critics quickly decried the order as unconstitutional, saying it seeks to halt the distribution of funds that already have been appropriated by Congress and even applies to money that has been disbursed but not spent. The White House responded that a pause and review are allowable.

At least one state attorney general was preparing to seek a court order to block the OMB mandate, as was a coalition that included the American Public Health Association (AHPA).

“Should the memo take effect, it would take a wrecking ball to APHA’s public health programs that receive federal financial assistance and grants, as well as to the thousands of programs across the nation on which APHA’s members rely,” the lawsuit states.

Hope for a quick resolution

If the OMB’s order ultimately proceeds, the administration’s review process remains unclear, as does the timetable for restoring funding.

NPR reported that a senior administration official said the pause could be as short as a day for some agencies. The order is meant to serve as an impetus for agencies to review programs to ensure funding is not being used in a way that conflicts with the administration’s stated priorities, the official told the news outlet.

Even as the situation begins to play out in court, providers can be assured that Medicare and Medicaid payments will continue as they were, assuming the portal situation is resolved quickly. However, big changes are possible in the FY25 budget reconciliation process over the upcoming weeks.