On August 13, the Centers for Medicare and Medicaid Services (CMS) issued its final rule prohibiting the use of federal funds through Medicaid and the Children’s Health Insurance Program (CHIP) to pay for gender-affirming care for children and youth. The rule takes effect on October 13 of this year.

According to the press release, under the final rule, federal Medicaid and CHIP funding will be available for up to six months from the rule’s effective date for children currently on hormone therapy. The rule does not affect coverage of mental health services. Medicaid’s Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) provisions continue to ensure coverage of mental health services for eligible children, and CHIP continues to require coverage of necessary mental health services in accordance with federal law.

Lawyers at Crowell & Moring, LLP, noted in a client brief that on August 14, the day after the final rule was published, CMS suffered a setback in litigation over a provision that excluded gender-affirming care from essential health benefits (EHBs) under the Affordable Care Act (ACA) for health plans sold through the ACA marketplace. In State of California v. Kennedy, the U.S. District Court for the District of Massachusetts found that the United States Department of Health and Human Services (HHS) violated the ACA and vacated the provision.

“The final rule could have a disproportionate impact on low-income and disabled children seeking gender-affirming care,” Alice Hall-Partyka, Tai Williams, and Meaghan Katz wrote. “The rule also could raise questions about allowable procedures performed on intersex children and infants when chromosomes are not XX or XY.”

The final rule permits states or private insurers to cover SRPs (sex-rejecting procedures), a term used by CMS, without using federal funds, according to the lawyers.