On September 2, 2026, twenty-one states, plus the District of Columbia, [1] sued the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) over a Medicaid Final Rule that would end the use of Medicaid and CHIP Funding for certain types of gender affirming care.
The Final Rule prohibits federal financial participation (FFP) for puberty-suppressing medications, cross-sex hormone therapy, and surgical interventions when furnished to Medicaid beneficiaries under age 18, or CHIP beneficiaries under age 19, for treatment of gender dysphoria. Issued on August 13, the Final Rule is scheduled to go into effect October 13, 2026. For more on the content of the Final Rule, see the Powers Knowledge Drop here.
In their complaint, the states allege that the Trump Administration seeks “replace individualized medical judgments made by licensed practitioners consistent with state law with a categorical prohibition on federal reimbursement for healthcare it happens to disfavor.” Specifically, the states argue that CMS:
The Final Rule prohibits federal financial participation (FFP) for puberty-suppressing medications, cross-sex hormone therapy, and surgical interventions when furnished to Medicaid beneficiaries under age 18, or CHIP beneficiaries under age 19, for treatment of gender dysphoria. Issued on August 13, the Final Rule is scheduled to go into effect October 13, 2026. For more on the content of the Final Rule, see the Powers Knowledge Drop here.
In their complaint, the states allege that the Trump Administration seeks “replace individualized medical judgments made by licensed practitioners consistent with state law with a categorical prohibition on federal reimbursement for healthcare it happens to disfavor.” Specifically, the states argue that CMS:
- Exceeded its statutory authority under the Social Security Act.
- Violated federal law and regulations including the Social Security Act, Affordable Care Act, and Medicaid and Children’s Health Insurance Program requirements.
- Promulgated an arbitrary and capricious rule by:
- Failing to justify the change in federal reimbursement;
- Relying on a report issued by HHS containing several methodological and scientific shortfalls; and
- Ignoring reliance interests and costs brought to the attention of CMS through comments.
- Violated the Spending Clause by imposing new conditions for Medicaid funding that Congress did not authorize.
These arguments are similar to those made against other Trump Administration changes.
In addition to requesting that the Final Rule be declared unlawful and vacated, the plaintiff states requested that the Court stay the effective date of the Final Rule pending judicial review within the Plaintiff states. If the Court grants the states’ request for a stay, the Final Rule would be stayed only in the Plaintiff states. If the Court does not grant the Plaintiff states’ request for a stay, the Final Rule will go into effect on October 13, 2026.
In addition to requesting that the Final Rule be declared unlawful and vacated, the plaintiff states requested that the Court stay the effective date of the Final Rule pending judicial review within the Plaintiff states. If the Court grants the states’ request for a stay, the Final Rule would be stayed only in the Plaintiff states. If the Court does not grant the Plaintiff states’ request for a stay, the Final Rule will go into effect on October 13, 2026.
[1] Illinois, California, Connecticut, Maryland, Massachusetts, Colorado, Delaware, District of Columbia, Hawaii, Maine, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Pennsylvania (through Governor Shapiro’s office, rather than its Attorney General), Rhode Island, Vermont, Virginia, Washington, and Wisconsin.
Contact us to learn more:
MOLLY EVANS
molly.evans@powerslaw.com
Sydney Habegger
sydney.habegger@powerslaw.com
DIANNE PLEDGIE
dianne.pledgie@powerslaw.com
