Weekly StateVitals Update: Volume 72 (June 8, 2026)
National
CMS Releases Interim Final Rule on Medicaid Work Requirements. Last Monday, the Centers for Medicare and Medicaid Services (CMS) released an interim final rule to guide implementation of Medicaid work requirements for eligible enrollees in the Affordable Care Act (ACA) Medicaid expansion group and partial expansion waiver programs. States have been operating on a short timeline, having to implement the requirements by January 1, 2026, prompting them to make implementation decisions that may not align with the released ruling. Hence, several states may be at increased risk for future CMS audits and financial penalties.
A significant portion of the ruling focuses on a more restrictive definition of medical frailty than expected, which would be used to determine exemptions from work requirements. The ruling ties medical frailty to the ability to comply with community engagement requirements and prohibits states from adding categories of individuals to the definition. In applying the definition, the ruling requires states to develop lists of health conditions that qualify for medical frailty, but prohibits them from outright including categorical exemptions for people (e.g., exemptions for everyone with HIV or cancer) without first considering their ability to meet work requirements. This restriction may challenge states like Nebraska and Washington, which assumed a less restrictive definition and developed preliminary lists that exempted individuals based almost strictly on medical diagnoses.
Accounting for the time constraints of implementing new verification systems, the ruling temporarily allows for self-declaration of work exemption status, including for medical frailty, when reliable data is unavailable. This flexibility is in place through 2027; beginning January 2028, states will be required to request documentation for exemptions for individuals for whom they do not currently have data. However, for medical frailty, individuals will be able to submit a self-declaration once per enrollment period, though they must submit documentation later on.
Connecticut
Governor Lamont Signs Law Restricting Private Equity Influence in Hospitals. Last Tuesday, Governor Ned Lamont (D) enacted SB 196, prohibiting hospitals from entering into a sale-leaseback transaction involving their main campuses. Additionally, the bill requires hospitals to submit annual attestations stating that no private equity entity has a controlling interest in the hospital or interferes with the professional judgment or clinical decisions of the hospital's health care providers. The ban on sale-leaseback transactions is set to go into effect on July 1, 2027, while the private equity interest attestation is effective Feb. 15, 2027.
Colorado
Judge Hears Arguments on Manufacturer Lawsuit Against PDAB. Last Thursday, Chief Judge Daniel Domenico of the U.S. District Court in Denver heard oral arguments on whether to issue a preliminary injunction on the Colorado Prescription Drug Affordability Board’s (PDAB’s) upper pricing limit (UPL) for the drug Enbrel, while the lawsuit takes place. In October 2025, the PDAB opted to place a UPL on the rheumatoid arthritis Enbrel, which prompted the drug’s manufacturer, Amgen, to sue. The UPL sets a $600 price cap for a standard weekly dose; Amgen claims this UPL is unconstitutional and will cause irreparable financial harm. Amgen had previously sued the state after selecting Enbrel for a UPL; however, the case was dismissed due to a lack of standing since it was unlikely to cause harm to the manufacturer. The current case alleges the PDAB's process to determine the UPL violated the U.S. Constitution’s Supremacy and Commerce Clause, in addition to due process protections under the 14th Amendment. The UPL on Enbrel is effective January 2027, and at the end of the hearing, Judge Domenico said he would issue a written ruling soon.
Florida
Legislature Enrolls FY 2027 Budget with Reductions to Medicaid Managed Care Plan Reimbursements. Recently, the Florida legislature enrolled HB 5001E, their $114.5 billion budget for Fiscal Year 2027. Legislators voted 99-6 in the House and 35-0 in the Senate to pass a less restrictive budget than expected, which does not contain significant policy changes for the state’s hospitals. Notably, the bill reduces reimbursements to Medicaid managed care plans by 1.3% and extends existing plans from six to ten years. The bill now awaits Governor Ron DeSantis’ (R) signature, who has indicated that the may submit line-item vetoes.
Illinois
Session Wraps with Movement on 340B and Downcoding. Last Monday, Illinois legislators enrolled HB 2371 with near-unanimous support. Notably, the bill contains provisions that prohibit pharmaceutical manufacturers from interfering with 340B entities’ or contract pharmacies’ acquisition of 340B drugs, while also establishing reporting requirements for 340B entities. Additionally, the bill:
Prohibits restricting 340B covered entities from contracting with or designating a 340B contract pharmacy.
Prohibits requiring or compelling a 340B covered entity or 340B contract pharmacy to perform specified actions.
Requires 340B covered entities to dispense or administer 340B drugs only when in connection with an outpatient health care service received by the patient within the last 18 months.
Requires 340B covered entities to develop and maintain a policy that prevents duplication of 340B discounts.
Requires the Department of Healthcare and Family Services to report to the General Assembly on covered outpatient drug units dispensed or administered in connection with the medical assistance program.
Authorizes enforcement by the Attorney General.
The legislature also enrolled SB 3114 to prohibit fully automated downcoding and impose several other limitations on the practice, and included a provision in the state budget to delay the implementation date of the 2024-enacted 72-hour hospital rule to July 1, 2027. Governor JB Pritzker (D) has yet to sign any of these bills.
Hawaii
HHS Cuts Funding to Hawaii Medicaid Fraud Control Unit. Last Thursday, the U.S. Department of Health and Human Services Inspector General, March Bell, sent a letter to Attorney General Anne Lopez (D) that her Medicaid Fraud Control Unit has been denied federal certification, cutting out $3 million in annual funding. Notably, the lack of a Medicaid fraud unit puts other federal medicaid funding for the state at risk. HHS’s decision prompted Governor Josh Green (D) and AG Lopez to publish a news release that they would be taking measures to respond to HHS and strengthen the state’s Medicaid fraud enforcement efforts. The news release details that federal reports focus on the state’s low level of Medicaid fraud-related convictions, which do not capture the full work done by the fraud unit. The state is expected to submit a formal response soon and has not yet specified which actions it will take to bolster its fraud prevention and enforcement efforts.
Louisiana
Legislature Enrolls Bills to Create a PDAB and Accelerate MCO Utilization Review Determinations. Last Monday, the Louisiana Legislature enrolled SB 401, creating a Prescription Drug Affordability Board (PDAB) for the state. While the PDAB does not have an Upper Payment Limit (UPL) or other price control authority, they are tasked with identifying an annual list of high-cost drugs in the state and submitting recommendations to the legislature to lower prescription drug costs before the start of the session. To help make the list, the bill imposes new drug price reporting requirements on drug manufacturers. In addition to SB 401, the legislature enrolled HB 915, which sets specific deadlines for when Medicaid managed care organizations (MCOs) must make utilization review determinations. These deadlines require determinations to be made within 72 hours for expedited requests and seven calendar days for standard requests. Additionally, HB 915 prohibits MCOs from denying prior authorization claims if they fail to make a determination within the timeline and from retracting a service authorization or reducing payment after services are rendered, unless they were materially misrepresented.
Michigan
Sixth Circuit Court Affirms Decision to Dismiss Lawsuit Against Abortion Rights Protection. Recently, the U.S. Court of Appeals for the Sixth Circuit affirmed the district court’s dismissal of a challenge arguing that a 2022 voter-approved constitutional amendment to protect abortion rights in the state violated provisions of federal law. The plaintiffs, who were largely represented by the Right to Life of Michigan, argued that the constitutional amendment violates First Amendment and Fourteenth Amendment rights by depriving parents of the ability to make decisions about medical treatment for their children, burdens the free exercise of religion, and reduces legal protections for women. In an opinion by Circuit Judge John K. Bush, the Court held that the plaintiffs failed to show that their lawsuit would resolve concerns about parental rights.
New York
Governor Hochul Enacts FY 2027 Budget With Significant Medicaid Funding Increase. Recently, Governor Kathy Hochul (D) enacted the state’s $269 billion budget for Fiscal Year 2027. Notably, the state’s Department of Health Medicaid budget increased to $40 billion, with an additional $1.5 billion in Medicaid funding for healthcare facilities. Out of this $1.5 billion piece, $706 million is for hospitals, $480 million is for nursing homes, $80 million is for federally qualified health centers, and $20 million is for assisted living centers. Additionally, the budget permanently extended the state’s Medicaid managed care organization (MCO) tax starting on January 1, 2027. Pending federal approval, the state would impose a uniform tax on MCOs of 0.35% of total premium revenue.
Ohio
Managed Care Plans Required to Apply Statewide Prior Authorization Standards. Recently, the Ohio Department of Medicaid (ODM) released new prior authorization requirements for community behavioral health, mental health, and substance use disorder services. The standards come as a larger statewide initiative to strengthen provider and managed care plan oversight and tackle fraud, waste, and abuse (FWA). Under the new framework, managed care plans will have to use standardized prior authorization forms, apply prior authorization only when services exceed reasonable thresholds, improve monitoring of service levels to detect FWA, and identify and incentivize quality behavioral health providers. ODM expects this initiative to reduce unnecessary and duplicative services, ensure care access and oversight, support clinical care coordination, and improve medical necessity documentation.
Oregon
CMS Approves State Proposal for Rural Maternity Care Support. Recently, the Oregon Health Authority (OHA) announced that the Centers for Medicare and Medicaid Services (CMS) approved its state-directed payment proposal to support rural maternity care services. The approval comes with a $37.5 million investment for 21 rural hospitals across 17 counties. The matched federal funds are part of a previous $25 million state investment authorized in 2025. The state intends hospitals to use the payments toward hiring or retaining maternity care staff, purchasing clinical equipment, and expanding outreach, navigation, or perinatal support for Oregon Health Plan members. Notably, rural hospitals are not required to apply; those that currently offer maternity services will automatically receive payments, and OHA is coordinating the payment schedule with coordinated care organizations and hospitals.
Pennsylvania
Department of Human Services Releases RFI for Community HealthChoices MCO procurement. This past Monday, the Pennsylvania Department of Human Services released a request for information (RFI) for the Community HealthChoices agreement for the upcoming re-procurement of CHC Managed Care Organizations (CHC-MCOs). CHC is a Medicaid waiver program that provides long-term services and supports for dually eligible individuals and individuals with physical disabilities. Currently, AmeriHealth Caritas, Centene, and UPMC are the participating MCOs. Back in April, MCOs protested the previous procurements and awards, leading the Commonwealth Court of Pennsylvania to cancel them. Within the RFI, the state is asking for input on the number of CHC-MCOs, the term length, the regional versus the statewide breakdown, artificial intelligence, strategies for aligning Medicare and Medicaid coordination, and other program recommendations.
Texas
House holds Interim Committee Hearings on Affordability and the Rural Health Transformation Program. Last Thursday, the House Committee on Insurance held an interim hearing on how federal health policy is impacting consumers’ healthcare access and affordability. This hearing also covered how federal policy is influencing innovation in insurance offerings, network adequacy, and the administrative burden on insurers and providers. Simultaneously, the House Committee on Public Health held an interim hearing that, among other issues, examined the state of the Texas’ Rural Health Transformation Program and how it might affect access to care, rural care delivery, and the healthcare workforce. In both cases, the committees will ultimately determine whether any state policy recommendations are appropriate to address consumer and industry challenges or concerns.
Washington
State Seeks Feedback on Medical Billing Code and Condition List to Identify Medical Frailty. Recently, the Washington Health Care Authority (HCA) released a request for public feedback on a preliminary list of medical billing codes and conditions that will be used to identify medical frailty, which would exempt enrollees from Medicaid work requirements imposed by HR 1. This request came just before the Centers for Medicare and Medicaid Services (CMS) released an interim final ruling on the Medicaid work requirements last Monday, which prompted states to develop their own lists of health conditions for medical frailty. Comments on the state’s list are due by June 19, 2026, to the HCA.
West Virginia
Governor Morrissey Announces Additional $3.4 million in RHTP Funding. Last Monday, Governor Patrick Morrisey (R) announced an additional $3.4 million in Rural Health Transformation Program funding, bringing the total announced funding to $65 million. The additional funding is intended to support preventative and community-health-based initiatives, reduce chronic disease burden, and support West Virginians returning to work. Interested applicants may apply for the funding through the state’s procurement and management system. Additional information on this and the other RHTP funding opportunities will be released in an upcoming Announcement of Funding Availability (AFA) release webinar.
