Weekly StateVitals Update: Volume 84 (September 8, 2026)
National
22 States Sue over Block on Medicaid and CHIP Reimbursement for Gender-Affirming Care. This past Wednesday, a coalition of 22 states’ attorneys general sued the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) over a recently published final rule that would prohibit Medicaid and Children’s Health Insurance Program (CHIP) funding for “sex-rejecting procedures” (SRP) for youth. Specifically, the rule would prohibit using federal funds for puberty-delaying medications, hormone therapies, and surgical procedures to treat gender dysphoria for Medicaid recipients under 18 or CHIP recipients under 19. The rule is scheduled to go into effect on October 13, 2026, though federal funding will be available for the following six months for beneficiaries who have already started receiving SRP. Filed in a Massachusetts U.S. District Court, the lawsuit is co-led by the attorneys general of California, Connecticut, Illinois, Maryland, and Massachusetts. These states are joined by the attorneys general of Colorado, Delaware, the District of Columbia, Hawaii, Maine, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia, Washington, and Wisconsin, along with Pennsylvania Governor Josh Shapiro (D).
California
Legislature Enrolls Several Bills Regulating AI in Healthcare. Last week, the California legislature enrolled several bills to regulate how healthcare providers and artificial intelligence (AI) developers may use or design AI for clinical decision-making and health chatbots.
AB 1979 prohibits health care facilities from using AI to independently perform clinical functions that a licensed professional must perform and requires facilities to ensure clinical decisions are made with professional judgment. Notably, the bill still allows AI to perform documentation and communication that does not require professional judgment, such as sending health record updates to patients, and deems a business offering a healthcare chatbot a healthcare provider subject to the Confidentiality of Medical Information Act.
SB 903 also requires professional judgment to supplement AI use. The bill prohibits AI from unilaterally offering psychotherapy services and restricts using AI to transcribe therapy communications, advertise psychotherapy services using companion chatbots, and have AI directly interact with patients or make therapeutic decisions, recommendations, or results.
AB 2575 limits clinical decision support systems developers’, modifiers’, selectors’, or deployers’ arguments against liability for when an AI recommendation leads to patient injury.
SB 503 requires developers and deployers to make reasonable efforts to identify AI systems that pose a risk of biased healthcare decision-making. All four bills have been sent to Governor Gavin Newsom’s (D) desk for signature.
Given California’s role as a blueprint for past state consumer privacy laws, health organizations should view these bills as a likely preview of future state legislative action on AI use in clinical and administrative processes.
General Assembly Enrolls Bill Increasing Medi-Cal Pharmacist Reimbursement. This past Tuesday, the California General Assembly enrolled AB 2571, which would increase the Medi-Cal reimbursement rate for advanced pharmacist practitioner services to at least 85% of the fee schedule for physician services. The bill contains several additional provisions related to reimbursement requirements, including:
Requiring federally qualified health centers (FQHCs) and Medi-Cal to recognize advanced pharmacist practitioners as healthcare providers for reimbursement.
Requiring healthcare service plans and disability insurers to reimburse for advanced practice pharmacist services.
Requiring the Department of Health Care Services to implement a medication therapy management (MTM) reimbursement methodology to ensure Medi-Cal payments are only made to eligible advanced practice pharmacists or pharmacies, including those operating at FHQCs or rural health clinics, for MTM pharmacist services provided in conjunction with specialty drug therapy categories.
Requiring the rate of reimbursement for advanced practice pharmacist services to be the same as the fee schedule for physician services, including MTM pharmacist services.
The California legislature concluded its session on August 31st, and the bill currently awaits Governor Gavin Newsom’s (D) decision.
Colorado
Federal Judge Dismisses Challenge to 340B Contract Pharmacy Protection Law. Last Monday, U.S. District Judge Philip Brimmer granted Colorado’s motion to dismiss a drug manufacturer’s challenge to its 340B law (SB 71) that prohibits manufacturers and wholesalers from restricting or interfering with covered entities’ and contract pharmacies’ access to 340B drugs. Similar to a recent dismissal in South Dakota, Judge Brimmer reasoned that SB 71 is not preempted by Section 340B or federal patent law because it regulates drug distribution, not price. He also found SB 71 does not violate the Contracts Clause or Takings Clause because it does not impact the terms of the manufacturer’s Pharmaceutical Pricing Agreement, and the manufacturer’s voluntary participation in the 340B program forecloses its Takings Clause claim. This dismissal comes right before the 10th Circuit Court is scheduled to hear oral arguments to appeal a preliminary injunction of Oklahoma’s 340b law on September 17, 2026.
Hawaii
Governor Green Announces $58 Million in Funding for Rural Workforce Development and EMS. Last Tuesday, Governor Josh Green (D) announced a $58 million investment in the Rural Health Transformation Program (RHTP) to support the healthcare workforce and emergency medical services. The funding includes $45 million to administer workforce development programs through the Hawai’i Outreach for Medical Education in Rural Under-resourced Neighborhoods and $13 million to acquire new ambulances and upgrade emergency communications systems. Hawaii’s RHTP includes six initiatives covering health information technology, telehealth, emergency and mobile medical services, workforce development, medical respite care, and innovative care models for rural providers. The state is expected to make additional funding announcements as it awards its $188.9 million in first-year funding.
Iowa
Gubernatorial Candidate Sand Announces Affordability Agenda with PDAB and Medicaid Changes. This past Monday, Gubernatorial Candidate and Iowa State Auditor Robert Sand (D) released his proposed policy agenda to lower consumer costs. Notably, Auditor Sand recommends creating a Prescription Drugs Review Board to negotiate drug costs, reduce price gouging, consider drug importation, and follow the recommendations of his June pharmacy benefit manager (PBM) audit. The audit stated PBMs received $100 million in clawback payments from 2019 to 2021 and recommended Medicaid-specific claim networks and uniform contracts, increased PBM data reporting, stricter Medicaid non-compliance penalties, and greater accountability from managed care organizations (MCOs) in managing PBMs. Auditor Sand’s agenda also includes switching Iowa Medicaid to a fee-for-service model, creating a nonrefundable annual caregiver tax credit, expanding Iowa’s surprise billing law to all appointments and procedures, and combating medical debt through public-private partnerships and legislation to limit its impact on credit scores. Current election forecasts rate the race as either tilting Democratic or a toss-up.
Indiana
CMS Announces $120 Million for Maternal Health, Primary Care, and the Healthcare Workforce. This past Thursday, the Centers for Medicare & Medicaid Services (CMS) announced Indiana would deliver $120 million in Rural Health Transformation Program (RHTP) awards to expand care across eight regions of the state. The funding will support improvements to maternal health, infant health, food and nutrition access and counseling, and chronic disease prevention and management. Additionally, the funding intends to expand access to primary and behavioral health care and crisis response, build a regional rural health workforce pipeline, and create a coordinated regional rural health transportation network. The state’s remaining $87 million in first-year funding will invest in data sharing, remote care, cybersecurity, emerging technology, care coordination, and cost-efficient payment mechanisms.
Family and Social Services Administration releases Medicaid Managed Care RFP. Recently, the Indiana Family and Social Services Administration (FSSA) released a request for proposals to reprocure the state’s four managed care programs covering about 1.5 million beneficiaries. The procurement includes Hoosier Healthwise (HHW), Healthy Indiana Plan (HIP), Hoosier Care Connect (HCC), and Indiana PathWays for Aging. The state intends to award all four Medicaid programs to the same awarded health plans; successful bidders must support care integration for Medicare-Medicaid dual enrollees throughout the contract term and operate a Dual Eligible Special Needs Plan (D-SNP) beginning January 1, 2029 under Indiana PathWays for Aging. Indiana seeks managed care organizations (MCOs) that can support the state’s Make Indiana Healthy Again initiative and advance quality improvement, member engagement, provider collaboration, and fiscal accountability. The RFP encourages plans to implement member and provider incentive programs, targeted enhanced benefits, and expanded value-based purchasing arrangements.
Contracts are expected to begin January 1, 2029, and run for four years, with two optional one-year extensions. Proposals are due November 6, 2026, and Indiana expects to announce award recommendations in July 2027. Medicaid health plans, providers, and investors should take particular notice of this Medicaid managed care procurement; the opportunity to compete for such a large membership in Indiana’s Medicaid market and support the state’s focus on various program improvements make this one of the most significant procurements currently underway.
Louisiana
Managed Care Organization Covering 290,000 Beneficiaries Exits Medicaid. Last Tuesday, the Louisiana Department of Health (LDH) announced that Healthy Blue is exiting the state’s Medicaid managed care program effective December 31, 2026. The managed care plan covers 290,000 beneficiaries who will retain coverage through the end of the year before starting new coverage for their selected plan on January 1. The state will automatically assign members who do not select a new plan to Healthy Blue, and the remaining managed care plans are coordinating with the state on the transition.
New York
Governor Hochul Announces $76 million in Awards for Rural Coordinated Care. This past Friday, Governor Kathy Hochul (D) announced the state had awarded $76 million in funding to 56 organizations through its Rural Health Transformation Program (RHTP). The funding comes through the state's Rural Community Health Integration Initiative and will support regional partnerships among hospitals, Federally Qualified Health Centers, behavioral health providers, and other community-based organizations. The funding will be used for activities that improve care coordination, strengthen regional healthcare networks, and expand access to services across the continuum of care. These awards are part of the state's $212 million in first-year RHTP funding, which also includes initiatives for technology-enhanced primary care, rural healthcare workforce recruitment and training, and improvements to cybersecurity, telehealth, and use of the health information exchange.
Oklahoma
SoonerCare Section 1115 Waiver Receives CMS Approval for Renewal Through 2031. Recently, the Centers for Medicare and Medicaid Services (CMS) approved a five-year renewal for the Section 1115 SoonerCare demonstration, extending the program until 2031. Through the renewal, Oklahoma can continue several Medicaid initiatives, including the Insure Oklahoma Employer-Sponsored Insurance premium assistance program, Health Access Networks, and the Health Management Program. Additionally, the demonstration renewal supports the state’s transition to the SoonerSelect managed care program, phases out the Insure Oklahoma Individual Plan, and incorporates updated federal requirements related to budget neutrality, monitoring, and program evaluation.
Tennessee
Department of Health Announces Initial Recipients of RHTP Funding. This past Thursday, the Tennessee Department of Health (TDH) announced that 53 projects had received the state’s first Rural Health Transformation Program (RHTP) funding awards. While the state did not specify funding amounts, the awards were part of the state's Health Active Rural Tennessee (HART) priority. HART projects intend to increase the percentage of rural populations living near health-promoting environments by improving nutrition, physical fitness, and community social supports and programs. The state received $206.9 million in first-year funding, which covers competitive grant projects supporting care access, maternal and child health, preventive health, rural non-emergency transportation, health technology, community health improvement plans, active living environments, and nutrition security.
Texas
Federal Judge Pauses Challenge to Mifepristone Access amid FDA Review. Recently, U.S. Chief District Judge Reed O’Connor granted the U.S. Food and Drug Administration’s (FDA) request for a stay on a lawsuit seeking to reverse Mifepristone access. The stay will remain in place until the FDA completes a safety review of the drug or until December 1, 2026, whichever comes first. Texas Attorney General Ken Paxton (R) and Florida Attorney General James Uthmeier (R) filed the lawsuit last December, which seeks to permanently revoke the FDA’s approval of the abortion drug made in 2000 and all subsequent decisions to increase access. If a judge ruled in favor of Texas and Florida, mifepristone would no longer be available in any state, regardless of abortion laws. This case is one of three lawsuits challenging access nationwide. On September 9, the full Fifth Circuit will hear oral arguments on a Louisiana case to remove telehealth and mail-order dispensing for the drug following a U.S. Supreme Court order to block the 5th Circuit panel’s decision to pause the current dispensing rules. Meanwhile, Idaho, Missouri, and Kansas attorneys general are awaiting a Missouri federal judge’s ruling on their request to revert mifepristone rules to 2016, ending mail-order distribution.