Federal Government Shutdown Begins; Telehealth Most Directly Affected

On Wednesday, October 1, at the stroke of midnight as the new fiscal year began, the federal government went into a shutdown, its first since 2019. As the Washington Post’s Jacob Bogage, Riley Beggin, Hannah Natanson, and Olivia George, reported on Wednesday morning , “Most federal government functions came to a halt Wednesday, after funding ran out and Congress deadlocked over how to extend spending laws. The lapse in finances means everything from small business loan services to national parks to job training for veterans will stop until lawmakers approve more money. Federal work vital to national security will continue, though employees, including many service members and law enforcement officers, will go unpaid.”

The Post reporters wrote that “The Senate voted early Wednesday afternoon on whether to reopen the government, but Democrats held firm against a Republican plan to extend funding until Nov. 21. The measure, which needed 60 votes, failed by the same 55-45 margin as it had before the deadline. Democrats say they won’t go along with funding the government unless Republicans agree to extend health care subsidies set to expire at the end of the year. Republicans insist that any negotiations take place with the government open. The shutdown is the first since January 2019, and the fourth of President Donald Trump’s two terms,” they added. “White House officials this time, though, have signaled plans to use the closed agencies as a way to vastly reshape the federal government and consolidate power under the presidency. White House budget director Russell Vought ordered agencies to consider mass firings rather than instituting furloughs. And instructions to agencies from his Office of Management and Budget include guidance on rewriting regulations surrounding federal grants and challenging Congress’s constitutional power over spending.”

Meanwhile, also on Wednesday morning, the leaders at the Washington, D.C.-based healthcare policy and government affairs firm Leavitt & Partners noted that, on September 25, the Office of Management and Budget (OMB) had directed federal agencies to consider reduction in force (RIF) notices that would go beyond standard furloughs normally issued during a shutdown, and recommending that RIF notice be considered for “programs for which discretionary funding lapses on October 1, 2025, if another source of funding (such as the recent reconciliation law) is not available and the program, project, or activity is not consistent with President Trump’s priorities. RIF notices should be considered for these programs regardless of whether an employee is furloughed or not. In the memo, OMB indicates that once FY 2026 funding is provided, agencies should revise RIFs as needed to retain the minimal number of employees necessary to carry out statutory functions.”

The Leavitt & Partners leaders reported that the Department of Health and Human Services (HHS) then posted FY 2026 shutdown plans, indicating that “approximately 60 percent of employees (47,257 employees) are expected to be retained, and about 40 percent (32,460 employees) are expected to be furloughed.”

That said, the Leavitt Partners leaders noted, there will be no interruption of Medicare and Medicaid benefits during the shutdown. But, they noted, “Generally, an agency cannot incur a new obligation when the funding source for that obligation would be the lapsed appropriation (e.g. an agency cannot sign a new contract or grant, extend a contract or a grant, or exercise a renewal option). However, for recently awarded FY 2025 grants (such as the State Opioid Response grants to states) the grantees can continue

Telehealth leaders speak out on impact to their sector

The glaring exception in terms of healthcare operations centers around the federal telehealth flexibilities, which expired on September 30, and would have had to be renewed by Congress before the shutdown, but were not. Leading the charge in terms of advocating for reimbursement and regulatory recognition of telehealth-based care delivery and hospital-at-home programs has been ATA Action, the advocacy arm of the Washington, D.C.-based American Telemedicine Association (ATA), which represents the telehealth sector’s interests.

Reacting to the news of the shutdown, Alexis Apple, head of federal government affairs at ATA Action, told Healthcare Innovation on Wednesday that “We weren’t surprised by the shutdown; we had been anticipating this for weeks. But unfortunately, at midnight, 30 million Medicare beneficiaries lost access to care in their homes.”

Per that, Apple said, “We’ve already sent letters to congressional leadership and President Trump asking them to restate these flexibilities and with retroactive reimbursement. Many providers will continue to provide services; others will say that they can no longer provide such services.”

Further, she added, “We had a call with members earlier today, and about 50 percent have said that they’ll continue to provide telehealth-based care for now, even without guaranteed reimbursement. As for hospital-at-home programs, over 360 hospital programs participate, and because of CMS [Centers for Medicare and Medicaid Services] guidance last week, they had to discharge all their patients into the hospital and could no longer care for patients in the home, and so they’ve discharged all the patients back into the hospital. And CMS had already stopped accepting waivers on September 1, and said no one will be able to participate going forward.”

Per all that, Apple said, “We sent out a letter to congressional leadership and President Trump, and we’re asking President Trump and his agencies to do what they can, perhaps non-enforcement discretion. If for some reason, Congress doesn’t include a retroactive provision, our members want to make sure they won’t get into trouble with CMS. And we’re hoping CMS will put out some sort of guidance and won’t pursue any providers for providing those services, even though technically it wasn’t allowed under the law.”

Still, even in a difficult moment for the telehealth sector, Apple said that “We are very confident that whatever continuing resolution language is created when Congress reopens, that telehealth will be included. But we really want to be decoupled from the funding conflict. We don’t want to be associated with that at all. Telehealth and the hospital-at-home programs have become collateral damage unfortunately, and it’s unfortunate. On a happier note,” she added, “I think that congressional leaders, throughout the shutdown, will see the impacts. It will create a lot of uproar in states and congressional districts. And I think they’ll act to make the flexibilities permanent.”

The dimensions are significant. As the Post’s Lauren Weber and Trisha Thadani had reported on Tuesday morning that, “Particularly for elderly people with limited mobility or transportation hurdles, telehealth has become a vital service improving their access to care, advocates say,” adding that “More than 6.7 million seniors received care through a telehealth service visit last year, according to the federal Centers for Medicare & Medicaid Services (CMS), which is a quarter of eligible Medicare beneficiaries.”

With regard to a core sticking point in the discussions between Republicans and Democrats in Congress that ultimately resulted in failure and in the shutdown, Anthony Wright, executive director of the Washington, D.C.-based Families USA, a non-profit organization advocating for families and consumers in healthcare, released a statement on Wednesday morning. "We shouldn't need a shutdown to prevent a massive spike in health insurance premiums. After an election on affordability, Republican leaders are betraying their own voters with their willingness to shut down the government to avoid extending tax credits that help more than 20 million working-class Americans afford health care,” Wright said. “When Republicans in Congress passed huge, permanent tax credits for billionaires and big corporations this summer, they blocked multiple attempts and amendments to similarly extend the tax credits that help working families pay their health insurance premiums. President Trump and members of Congress promised to take action to lower costs on day one, and yet nearly one year in, the biggest cost impact will be premium spikes that they could have easily prevented. Congress must act now to make good on their promise to lower costs immediately and make these enhanced health care tax credits permanent.”

What’s more, Wright said, "People have been rightfully demanding lower costs for groceries, but the average premium increase of over $700 will far exceed what most people pay for eggs in an entire year. Health care consumers will face major sticker shock as their monthly health care expenses rise by hundreds or even thousands of dollars and millions will fall off coverage. Congress must come together to open the government and pass a permanent extension of the enhanced tax credits, period."

This is a developing story. Healthcare Innovation will update readers as new developments emerge.