Looking Ahead: Avoiding a Government Shutdown

With the One Big Beautiful Bill Act (OBBB) passed by U.S. Congress and signed into law, Congress now has less than three weeks that it will be in session before government funding expires on Sept. 30, 2025. Appropriators will continue to work toward approval of individual funding bills; however, consideration of the appropriations bill to fund the U.S. Department of Health and Human Services (HHS) has been delayed to September 2025, signaling another continuing resolution (CR) will be required to avert a government shutdown.

Hearings This Week

The U.S. House of Representatives Committee on Ways and Means will hold a joint hearing of the Health Subcommittee and Oversight Subcommittee on July 22, 2025, titled “Hearing on Medicare Advantage: Past Lessons, Present Insights, Future Opportunities.”

The U.S. Senate Committee on Finance will hold a hearing on July 22, 2025, on the nomination of Alex Adams to be assistant secretary for family support at the HHS.

The Senate Committee on Health, Education, Labor and Pensions (HELP) will meet in an executive session on July 24, 2025, to consider several pending nominations, including the nomination of Dr. Brian Christine to be assistant secretary of HHS.

Week in Review

Congress passed, under expedited procedures on July 18, 2025, a bill to rescind $9 billion in funding for various federal programs that had previously been appropriated. The Senate considered several amendments during an overnight “vote-a-rama” session, though only one amendment was adopted to remove funding reductions for the President’s Emergency Plan for AIDS Relief (PEPFAR) from the package.

The House Committee on Energy and Commerce’s Subcommittee on Health held a hearing on July 16, 2025, titled “Legislative Proposals to Maintain and Improve the Public Health Workforce, Rural Health, and Over-the-Counter Medicines.” The hearing featured witnesses from the U.S. Food and Drug Administration (FDA) and Health Resources and Services Administration (HRSA) and included discussion on several programs set to expire this year unless reauthorized, including the Over-the-Counter Monograph Drug User Fee Act. Potential riders – such as the SAFE Sunscreen Standards Act, FDA Modernization Act 3.0, Newborn Screening Saves Lives Reauthorization Act of 2025, and several bills addressing rural health – were discussed.

Administrative Updates

Executive Order Updates

The Trump Administration has continued to release wide-ranging executive orders (EOs). For the most recent updates, see our “Trump’s 2025 Executive Orders: Updates and Summaries” tracking chart.

President Donald Trump issued a proclamation, “Regulatory Relief for Certain Stationary Sources to Promote American Security with Respect to Sterile Medical Equipment,” on July 17, 2025. The proclamation exempts for two years commercial medical sterilization facilities from limitations on the use of ethylene oxide (EtO), which was part of a final rule issued in April 2024 by the U.S. Environmental Protection Agency (EPA). The proclamation notes the exemption is “in the national security interests of the United States.”

Personnel Updates

HHS Secretary Robert F. Kennedy Jr.’s Chief of Staff Heather Flick Melanson and Deputy Chief of Staff Hannah Anderson have left the HHS. Matt Buckham has been appointed to serve as acting chief of staff.

George Francis Tidmarsh has been named director of the Center for Drug Evaluation and Research (CDER) at the FDA.

Legislative Updates

CBO Releases Assessment of Changes to NIH and FDA Funding on Drug Development

The Congressional Budget Office (CBO) released a new assessment on July 18, 2025, completed at the request of Democratic leaders of budget and healthcare committees. The assessment details the potential impact of funding reductions to the National Institutes of Health (NIH) and FDA on drug development. The assessment analyzes two scenarios: a permanent 10 percent reduction in funding for the NIH and a nine-month increase in review timelines for new drug applications (NDAs) submitted to the FDA. The CBO found that a 10 percent reduction in NIH funding – particularly for preclinical research – would decrease the number of new drugs coming to market by 4.5 percent, or two drugs per year. The CBO also found that an increase in the time it takes the FDA to review NDAs would raise the cost to develop new drugs and reduce the number of new drugs coming to market by two percent. The CBO used a 30-year window for its assessment.

CBO Releases Updated Budgetary Effects of H.R. 1

CBO updated estimates on July 21 2025, the budgetary impacts that Public Law 119-21, also known as H.R. 1 or the OBBB, will have on the deficit. The CBO estimates that H.R. 1 will result add $3.4 trillion to the deficit and increase the number of individuals who do not have health insurance by 10 million in 2034.

Regulatory Updates

CMS Announces New Actions to Prevent Dual Enrollment

The Centers for Medicare & Medicaid Services (CMS) announced on July 17, 2025, that it would begin taking action to prevent beneficiaries from being dually enrolled in Medicaid programs in multiple states or being enrolled in a plan through the Affordable Care Act (ACA) marketplaces and a state Medicaid program. The announcement points to a recent analysis that found almost 2.8 million beneficiaries fell into one of those categories, including 1.2 million Americans each month enrolled in Medicaid/Children’s Health Insurance Program (CHIP) in two or more states and an average of 1.6 million Americans each month enrolled in both Medicaid/CHIP and ACA marketplace plans. CMS announced it would begin working more closely with states to:

provide a list of individuals dually enrolled, with direction to have states recheck eligibility for those enrollees

notify individuals found to be dually enrolled and direct the beneficiary to take action, including disenrolling from a program, ending an ACA subsidy if applicable and notifying the ACA Exchange that an individual must provide supporting documentation for eligibility While CMS noted notifications to enrollees had be sent, it does not state how many letters and when the letters were sent.

end a beneficiary’s subsidy, with the option to continue coverage without the subsidy

After 30 days, CMS will direct the ACA exchanges to end subsidies for beneficiaries who maintain their dual enrollment. CMS also intends to provide the exchanges with a list of individuals potentially dually enrolled and direct eligibility to be rechecked. CMS noted in its announcement that it will provide additional guidance to state Medicaid/CHIP agencies in August 2025 with additional information to continue eligibility checks and implement new requirements as directed by the OBBB.

CMS Will No Longer Approve Section 1115 Waivers Supporting Continuous Coverage

In letters sent to state Medicaid agencies on July 17, 2025, the CMS Center for Medicaid and CHIP Services announced that CMS does not anticipate approving new or extending existing Section 1115 waivers to provide continuous eligibility for Medicaid and CHIP beyond the time allowed by Medicaid and CHIP statute. CMS also notes it will conduct outreach to states with existing expanded continuous eligibility and require states to complete additional outreach and notice to beneficiaries to alert them that their continuous eligibility will be ending. States will also be required to provide information regarding how beneficiaries can complete a redetermination of their eligibility.

CMS Releases CY 2026 Medicare Physician Fee Schedule Proposed Rule

CMS issued the calendar year (CY) 2026 Medicare Physician Fee Schedule (MPFS) Proposed Rule on July 14, 2025, which introduces significant updates to payment policies, including separate conversion factors for qualifying Alternative Payment Model (APM) participants and non-qualifying clinicians. The qualifying APM conversion factor is projected to increase by $1.24 (3.83 percent) to $33.59, while the non-qualifying APM conversion factor is projected to increase by $1.17 (3.62 percent) to $33.42, both up from the current $32.35. CMS also proposes its first-ever efficiency adjustment to work Relative Value Units (RVUs) for non-time-based services, expanded telehealth and virtual supervision flexibilities, and new behavioral health and chronic disease prevention initiatives. Additional proposals include the Ambulatory Specialty Model (ASM), changes to skin substitute reimbursement, updates to practice expense methodology and refinements to global surgery payment accuracy. Public comments are due by Sept. 12, 2025. For a detailed analysis, see Holland & Knight’s previous alert, “CMS Releases CY 2026 Medicare Physician Fee Schedule Proposed Rule,” July 16, 2025.

CMS Releases CY 2026 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Proposed Rule

CMS released the CY 2026 Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Proposed Rule, introducing a 2.4 percent payment rate increase and significant policy reforms. Key proposals include phasing out the Inpatient Only (IPO) list over three years, expanding site-neutral payments, revising hospital price transparency requirements to mandate percentile-based reporting of negotiated rates and a proposed revision to the annual reduction to the Outpatient Prospective Payment System (OPPS) conversion factor for non-drug items and services from 0.5 to 2 percent for the 340B Drug Pricing Program. CMS also proposes a $10 add-on payment for domestically produced Technetium-99m (Tc-99m), updates to packaging thresholds and continued pass-through payments for select drugs and devices. Additional initiatives include a national drug acquisition cost survey, expanded Ambulatory Surgical Center (ASC) covered procedures and quality reporting updates across OPPS, Rural Emergency Hospital Quality Reporting (REHQR) and ASC Quality Reporting (ASCQR) programs. CMS seeks stakeholder input on software as a service (SaaS) reimbursement, site-neutral ASC services and regulatory burden reduction. For a detailed analysis, see Holland & Knight’s previous alert, “CMS Releases CY 2026 Outpatient Prospective, ASC Payment System Proposed Rule,” July 21, 2025.

Cell and Gene Therapy (CGT) Access Model Participants Announced

The Cell and Gene Therapy (CGT) Access Model is a voluntary, multi-year initiative launched by CMS to improve Medicaid beneficiaries’ access to high-cost, potentially transformative therapies, beginning with gene therapies for sickle cell disease. The model facilitates outcomes-based agreements between states and manufacturers, tying payment to clinical results while aiming to reduce financial barriers for state Medicaid programs. On July 15, 2025, CMS announced that 33 states are now participating in the CGT model, in addition to the District of Columbia and Puerto Rico, representing approximately 84 percent of Medicaid beneficiaries with sickle cell disease (SCD). CMS notes that patients are already receiving treatment through the model and it continues to engage with interested parties – including states and manufacturers of cell and gene therapies – regarding future conditions the model may target or other directions the CGT Access Model might consider. For more information, see the model website.

Judicial Updates

Federal Court Overturns Rule to Wipe Medical Debt from Credit Reports

A federal court overturned a rule finalized by the Biden Administration on July 11, 2025, to erase medical debt from credit records, finding that the Consumer Financial Protection Bureau (CFPB) rule had exceeded its statutory authority. The ruling means that medical debt can remain on the credit reports of Americans. The rule was finalized by the Biden Administration prior to the change in administration and was issued to prevent lenders from considering medical debt when assessing a borrower’s financial status. More than 100 million Americans have healthcare debt, and some states have passed legislation to protect borrowers. Republicans have long sought to rein in the powers of the CFPB, and the Trump Administration had previously granted a three-month delay in enforcement of the rule given the change in administrations.

Federal Court Rules FDA Drug Approval Does Not Pre-empt State Laws

A federal court in West Virginia dismissed a lawsuit on July 15, 2025, that was brought by the manufacturers of generic mifepristone, who had challenged a law in West Virginia that sought to prohibit access to most abortion services. The law made it a felony to prescribe or dispense mifepristone outside of limited exceptions. The manufacturer previously argued that federal law pre-empted the state law, given the FDA’s role in approving prescription drugs and determining prescribing conditions for drugs. It remains unclear whether the ruling will be appealed by the manufacturer; however, the ruling potentially sets a precedent to allow states to prevent individuals from access drugs, even if found to be safe and effective by the FDA. The U.S. Supreme Court previously considered a case related to the dispensing of mifepristone but found the petitioners lacked standing to bring the lawsuit. The ruling of this case may require the Supreme Court to rule on the legality of states stepping in to block the sale of products approved by the FDA.

NIH Directed to Reinstate Federal Grants

A federal judge directed the NIH on July 18, 2025, to reinstate federal grants related to gender and diversity, equity and inclusion. The decision follows a previous ruling that found the termination of NIH grants to be illegal, which the Trump Administration requested a stay of to prevent the order from taking effect.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.