Weekly StateVitals Update: Volume 79 (August 3, 2026)

National

• Federal Judge Temporarily Blocks School Mental Health Funding Cuts. This past Monday, a U.S. District Court Judge for the Western District of Washington issued a temporary restraining order blocking the U.S. Department of Education from terminating school-based mental health grants. The order follows a lawsuit from a coalition of 15 states led by Washington Attorney General Nick Brown (D). The attorneys general argued that terminating the grants would violate a December 2025 court order prohibiting the Department of Education from discontinuing the grants and requiring it to make new continuation decisions. The Department originally issued a continuation of the grants through December 31, 2026, before announcing its plan to terminate them effective July 31, 2026. The temporary restraining order will expire on August 24; in the meantime, the court is expected to hold a hearing on a preliminary injunction, which would provide a longer-term block on the terminations. Along with Washington, the other states joining the lawsuit are California, Colorado, Connecticut, Delaware, Illinois, Massachusetts, Maryland, Maine, Michigan, New Mexico, New York, Oregon, Rhode Island, and Wisconsin. 

Arizona

• Arizona Releases Draft Five-Year Section 1115 Demonstration Renewal. Recently, the Arizona Health Care Cost Containment System (AHCCCS) released a draft renewal for its Section 1115 demonstration, requesting to continue the demonstration from October 1, 2027, through September 30, 2032.  The routine request would allow AHCCCS to continue programs covering home and community-based services in the Arizona Long Term Care System, a KidsCare (CHIP) eligibility expansion to 225% of the federal poverty level, Housing and Health Opportunities (H20), Tribal dental benefits, and Medicaid reentry services. Additionally, AHCCCS is seeking authority to expand reimbursement for Traditional Health Care Practices provided through Urban Indian Organizations (UIOs), extend review timelines for home and community-based services provided to children, and expand intensive behavioral health services for adults with Serious Mental Illness (SMI). A public forum on the renewal is scheduled for August 7, and public comments may be submitted through September 6, 2026.

Arkansas

• Board of Pharmacy Votes to Support Settlements in PBM Regulation Lawsuits. This past Tuesday, the Arkansas State Board of Pharmacy voted to support settlements and to stop processing pharmacies’ limited distribution network applications, following court rulings that blocked enforcement of two 2025 pharmacy benefit manager (PBM) reform laws. Last May, U.S. District Judge Lee Rudofsky issued a preliminary injunction against Act 630, which prohibited pharmacy benefit managers (PBMs) from restricting prescription medication distribution to a limited network of out-of-state pharmacies. Moreover, in July 2025, U.S. District Judge Brian Miller issued a preliminary injunction against Act 624, which restricted pharmacy benefit managers from obtaining pharmacy permits. In their decisions, the federal judges found that both laws violated the Dormant Commerce Clause. While Attorney General Tim Griffin (R) appealed the court’s decision against Act 624, representatives from his office told the Board of Pharmacy on Tuesday that an appeal against the Act 630 decision is “very unlikely.”

• Request to Renew Medicaid Expansion Program Section 1115 Waiver Rejected. This past Friday, Sam Dubke, a spokesperson from Governor Sarah Huckabee Sanders’ (R) Office, stated that the Centers for Medicare & Medicaid Services (CMS) verbally rejected the state’s request to renew the Section 1115 demonstration waiver for Arkansas Health and Opportunity for Me, or ARHOME. This program uses Medicaid dollars to purchase private insurance coverage for eligible adults within the state’s expansion population and covers over 200,000 individuals. The current waiver is set to expire on December 31; the state requested to extend the program through 2031. While Arkansas legislators are not scheduled to meet until January 11, Mr. Dubke noted that CMS provided the state “with an opportunity for bold, conservative healthcare reform,” and that Governor Huckabee Sanders intends to work with legislators on a new model next session. Administration officials are deciphering next steps for any requisite transition of Medicaid expansion members to either fee-for-service or managed care prior to the December 31 waiver end date. 

Colorado

• PDAB Votes to Permit State to Appeal Injunction Against UPL for Enbrel. Recently, the Colorado Prescription Drug Affordability Board (PDAB) voted to permit Attorney General Phil Weiser (D) to appeal a preliminary injunction that blocked the PDAB’s upper payment limit (UPL) for Enbrel. In granting a preliminary injunction, the judge reasoned that the UPL is likely preempted by federal patent law and rejected Colorado’s argument that the UPL affects only downstream transactions rather than harming the drug’s manufacturer directly. The ruling significantly challenges the legal foundation of UPLs. If upheld, it could significantly impact states’ ability to set UPLs for patented drugs and reduce other states' appetite for pursuing them. As of July 30, AG Weiser’s office has not yet filed a request to appeal the preliminary injunction. 

Georgia

• Department of Community Health Defines Medical Frailty Exemptions, Excluding HIV Diagnoses. Recently, the Department of Community Health (DCH) released its proposed rule on exemptions to Medicaid community engagement requirements, effective January 1, 2027. Along with the rule, DCH included two lists: one covering conditions that automatically qualify a recipient as medically frail and another that will be considered on a case-by-case basis. Notably, neither list contains HIV diagnoses as conditions that could exempt individuals from the community engagement requirements. Following the Centers for Medicare and Medicaid Services’ interim final rule in June, states are tasked with coming up with their own lists of conditions for determining medical frailty exemptions. However, states are not permitted to categorically exempt individuals without first considering their ability to meet work requirements. Public comments on DCH’s proposed rule will be considered at an upcoming board meeting on August 13. 

Idaho

• Idaho Opts for Three-Month Lookback Period for Medicaid Work Requirements. Recently, the Department of Health and Welfare (DHW) released an update on the state’s adoption of Medicaid work requirements effective January 1, 2027. Notably, federal guidelines allow states to limit work requirement compliance look-back reviews to 1 month and to give medically frail enrollees a grace period of up to 1 year to prove their condition qualifies for an exemption from work requirements. In its update, DHW announced it would implement more stringent processes for verifying work requirements. In particular, Idaho Medicaid applicants will be required to demonstrate compliance with work requirements for three months before their application. Additionally, instead of having a one-year grace period, medically frail applicants will be required to provide immediate proof of their inability to work to receive an exemption. 

Indiana

• Health Coverage Programs to Implement HCBS Waiver Provider Moratorium. Recently, the Indiana Health Coverage Programs (IHCP) received federal approval to implement a moratorium for home and community-based services 1915(c) waiver providers. In particular, the moratorium will cover  24 services, including those falling under the Indiana PathWays for Aging (PathWays), Health and Wellness (H&W), Traumatic Brain Injury (TBI), Community Integration and Habilitation (CIH), and Family Supports (FS) waivers. Current applications under review for H&W, PathWays, and TBI waivers will still be processed, while those for CIH and FS waivers will not. The moratorium is effective August 1, 2026, and will be in place for an initial 6 months; however, IHCP indicated it may continue to extend the moratorium for further 6-month increments.

New York

• Federal Judge Exempts Catholic Ministries from New York Medical Aid in Dying Law. This past Thursday, with an agreement from the state, U.S. District Judge Anne Nardacci temporarily blocked the enforcement of New York’s Medical Aid in Dying Act (S. 138/A.136) for several healthcare ministries and four orders of Catholic nuns in response to a recent lawsuit. The law allows for an individual with a terminal illness or condition to be prescribed pharmaceutical drugs intended to end their own life if their prognosis is six months or less to live. In February, Governor Kathy Hochul (D) signed the law after the Senate added additional protective provisions, including a mandatory 5-day waiting period while the prescription is being filled, requirements for mental health and in-person evaluations, limits on who can serve as witnesses, mandatory audio and video recordings of prescription requests, and authorizations for religiously-oriented home hospice providers to opt out of offering the service. Notably, the temporary restraining order requires Attorney General Letitia James (D) to respond to the motion by August 20. Not including the plaintiffs, the law is scheduled to take effect on August 5. 

North Dakota

• ND HHS Releases $50.5 Million in RHTP Funding Opportunities. Last Wednesday, North Dakota Health and Human Services (ND HHS) released $50.5 million in Rural Health Transformation Program (RHTP) funding opportunities. The state is currently accepting applications across all four of its strategic initiatives, covering improvements and support for behavioral health and wellness, the rural healthcare workforce, telehealth, and health technology. Grant applications have varying due dates ranging from July 30 to August 18, with more information available in the funding announcement. Additionally, in the coming days, the state intends to release a $2 million funding opportunity covering four $500,000 grants for purchasing non-emergency medical transportation vehicles.

• U.S. District Court Denies Request to Block Enforcement of Ruling Against 340B law. This past Monday, a U.S. District Judge for North Dakota denied a motion to stay the permanent injunction for the state’s 340B contract pharmacy law, HB 1473, while the state appeals. The law penalizes pharmaceutical manufacturers for interfering with a contract pharmacy’s ability to acquire 340B drugs and prohibits them from requiring extraneous data sharing or offering the drugs in rebates that are not compliant with federal law. In April, the court reasoned that the law inhibited the federal government's spending power by deterring manufacturers from participating in the 340B program and thus was preempted by section 340B of the Public Health Service Act and violated the Supremacy Clause and the Commerce Clause. In its motion for a stay, North Dakota argued that three previous appellate rulings supported other states’ 340B laws, including an 8th Circuit decision for Missouri’s law. However, the court found that HB 1473 was harsher than Missouri’s law and a pause on the already 2.5-month injunction would disrupt the status quo. As it stands, North Dakota is still awaiting the 8th Circuit's ruling on its appeal.

Virginia

• U.S. District Judge Finds 2023 FDA Review of Abortion Restrictions Unlawful. Recently, U.S. District Judge Robert Ballou ruled that the U.S. Food and Drug Administration (FDA) insufficiently justified its 2023 restrictions on Mifepristone. The ruling is in response to a lawsuit filed on behalf of multiple abortion providers across Virginia, Kansas, and Montana. The lawsuit challenged the 2023 rules that required prescribing pharmacies and clinicians to be specially certified and for patients and prescribers to sign a form acknowledging mifepristone’s risks. Judge Ballou found the FDA’s 2023 Risk and Evaluation Mitigation Strategies (REMS) modification, or the process for making changes to an approved drug safety program, to be unlawful and remanded it back to the FDA for further review. Notably, this decision comes shortly before the Fifth Circuit Court will hear oral arguments in a Louisiana lawsuit seeking to reinstate in-person dispensing requirements for Mifepristone on September 9.