Bringing you the latest news impacting our network from Congress and the Administration.
In this Edition:
Medicaid: Federal Crackdowns and State Implementation
GSA Proposes New DEI Related Certifications for Federal Grantees
Federal Housing Developments: Legislative Package Advances, HUD Proposes Rule Affecting Mixed Status Families
President’s Budget Expected the Week of March 30
Upcoming March Capitol Conversations Webinars:
March 19, 1-2 PM ET: How 501(c)(3) Organizations Can Engage in Effective Advocacy
March 26, 1-2:15 PM ET: The Release of “Partnering for Impact Guide”
Reminder: Update Us About Lawmaker Meetings or Site Visits
What We Are Reading
Medicaid: Federal Crackdowns and State Implementation
Federal Crackdown on “Fraud” Continues through 3-Phase Effort
On February 25, the Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) announced a coordinated, three-part initiative aimed at tightening program integrity oversight across Medicaid and Medicare. Federal leaders framed the actions as a response to what they describe as "rising risks of improper and/or unsupported claims" across several areas of the programs.
1. Minnesota Federal Funding Deferment:
CMS has deferred $259.5 million in federal Medicaid matching funds to Minnesota while it conducts a program integrity review. The agency cited $243.8 million in unsupported or potentially fraudulent claims and $15.4 million tied to claims associated with beneficiaries lacking satisfactory immigration status. CMS also noted unusually rapid growth in spending on personal care, home and community-based services, and certain practitioner services. Minnesota may submit additional documentation during the review, and CMS has indicated that deferrals could increase if issues remain unresolved. Advocates are seeking legal remedies, and we will continue to monitor the situation and share updates.
2. Six Month DME Enrollment Moratorium:
On February 27, CMS issued a nationwide six-month moratorium, effective immediately, on new Medicare enrollment for certain Durable Medical Equipment, Prosthetic Devices, Orthotics & Supplies (DME) suppliers. The agency cited $1.5 billion in suspected fraudulent DME billing last year and said the temporary freeze is intended to prevent new fraudulent operations from entering the program while integrity controls are reassessed.
3. New CRUSH Initiative Request for Information:
CMS released a Request for Information (RFI) under the Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH) initiative. The agency is seeking stakeholder feedback on future rulemaking and additional anti-fraud tools across Medicare, Medicaid, CHIP, and the Marketplace. The RFI specifically requests input on the issues identified below with comments due by March 30th:
stronger identity-proofing and ownership requirements for Medicare enrolled providers,
the use of AI in Medicare Advantage coding oversight, and
ways to support state Medicaid program integrity activities.
Congressional Fraud Probe Also Widens
Republican leaders of the House Committee on Energy and Commerce sent letters March 3 to ten states — California, Colorado, Massachusetts, Maine, Nebraska, New York, Oregon, Pennsylvania, Vermont and Washington — requesting information on waste, fraud, and abuse, as well as integrity efforts, in their Medicaid programs. This is in addition to recent and upcoming hearings on fraud, and other targeted efforts by the administration aimed at rooting out alleged fraud in California, Maine, Massachusetts, Minnesota, and New York. We are continually monitoring these efforts and engaging with our contacts on the Hill.
What can you do?
The federal fraud actions noted above come as states continue preparations to implement the Medicaid provisions of H.R. 1. As state agencies are still awaiting more detailed federal guidance, they are also moving ahead with early planning, revising procedures and updating systems based on the law’s broad requirements. Accordingly, advocates, providers, and community partners are encouraged to proactively engage with their state Medicaid agencies.
A new tool to use
The Center on Budget and Policy Priorities (CBPP) has released a new resource outlining key questions state policymakers will need to address as they finalize their implementation plans. You can use this resource to frame concerns and highlight potential operational challenges, in order to ensure state decision makers consider the impact of changes on beneficiaries, providers, and service access.
Looking ahead
We will continue monitoring federal and state developments and share updates as new guidance becomes available.
GSA Proposes New DEI Related Certifications for Federal Grantees
The General Services Administration (GSA) has issued a proposed rule that would revise the requirements for all federal grantees—including nonprofits and state, local, and Tribal governments—to certify compliance with federal antidiscrimination laws. The proposed rule includes an explicit reference to programs described as DEI/DEIA. While the Department of Justice has noted that not all DEI activities are unlawful, the proposal signals increased oversight of any work labeled as DEI through the System for Award Management (SAM).
What else?
The rule also introduces new certifications related to immigration-related conduct, terrorism prohibitions, and potential liability for misrepresentation under the False Claims Act. Sector leaders are raising concerns that the language is broad, complex, and difficult to interpret—creating significant legal and financial uncertainty for organizations that rely on federal funding.
Now what?
Many grantees warn that this uncertainty could have a chilling effect, discouraging organizations from applying for federal resources out of fear of audits, investigations, or litigation. If nonprofits and government partners step back, communities could face disruptions in housing, health, education, food assistance, disaster recovery, and other essential services.
What Can You Do?
Take action to make your voice heard. With thanks to our coalition partner, The National Council of Nonprofits, you can:
Submit a public comment by March 30 using NCN’s comment guide, which provides talking points and instructions.
Contact your members of Congress to share how the proposed rule could affect local organizations and the communities they serve. ies they serve.
The package incorporates several major policy changes intended to increase housing supply, improve program coordination, and strengthen affordable housing programs nationwide. Key elements include:
Rural Housing Service Reform Act, aimed at preserving affordable rural rental and homeownership opportunities, reducing administrative barriers, and encouraging public/private partnerships.
Housing Supply Frameworks Act, directing HUD to develop promising or best practice guidance to help communities address zoning and land use barriers that restrict housing development.
HOME Investment Partnerships Reauthorization and Reform Act, updating and reauthorizing the HOME program to improve administration and expand affordable housing production.
Innovation Fund, creating a flexible funding source for communities building new housing and improving essential infrastructure.
Agency Collaboration Directive, requiring HUD, USDA, and VA to identify ways to streamline and enhance housing program implementation.
ESG Spending Flexibility, allowing states and localities to request a waiver of the 60% spending cap on emergency shelter and street outreach.
It also includes a new provision that prohibits large institutional investors from purchasing single-family homes, which has bi-partisan support, and that the President also supports.
What’s missing?
Notably absent is the Reducing Homelessness Through Program Reform Act, which proposed reforms to speed housing placements and strengthen coordination across homelessness systems. We will continue to monitor the bill’s progress and any changes made as it moves through the legislative process.
HUD Proposes Rule Affecting Rental Assistance for Mixed Status Families
The Department of Housing and Urban Development released a proposed rule on February 20 that would significantly change how rental assistance is administered to mixed status families—households that include both citizens or eligible immigrants and members who are ineligible due to immigration status.
What’s Changing
For decades, these families have received prorated assistance, meaning benefits are calculated only for eligible household members. HUD’s proposed rule would end prorated assistance altogether, making entire households ineligible if even one member lacks eligible immigration status. Among the nearly 80,000 people in mixed status families, about 37,000 are children, and two thirds are U.S. citizens. Housing providers warn that the change could put many families at a heightened risk of eviction or homelessness.
The proposed rule would also require housing agencies and property owners to use DHS’s Systematic Alien Verification for Entitlements (SAVE) tool to verify immigration status for all applicants and participants. Providers have expressed concern that this would add significant administrative burden and slow down access to assistance for all residents, regardless of eligibility.
Take action:Public comments on the proposed rule are open through April 21.
President’s Budget Expected the Week of March 30
The White House is preparing to release President Trump’s fiscal year 2027 (FY27) budget during the week of March 30. While presidential budget requests traditionally function as a “wishlist” to Congress rather than binding policy, this year’s proposal may carry more weight than usual. The administration has shown a willingness to depart from longstanding norms in how appropriated federal funds are interpreted and used—raising the stakes for what is included, omitted, or emphasized in the document.
What's Expected
This year’s release is expected to be a “skinny” budget, offering only topline FY27 numbers rather than a full multiyear outlook. Even so, early indications suggest it will propose significant shifts in federal spending priorities. The President has already signaled he intends to request $1.5 trillion for defense—roughly a 50 percent increase over current levels—with details still being finalized on how much would flow through traditional discretionary channels versus a potential second reconciliation bill, and what this would mean for spending levels on other discretionary programs.
One factor we’ll be monitoring closely this year: the use of terms like “waste,” “fraud,” and “abuse” which could signal an attempt to justify cuts or program eliminations under the banner of fiscal responsibility. If certain programs are framed this way in the President’s request, it may point to areas where the administration hopes Congress will scale back federal investment.
What's Next
Congress still controls the power of the purse, and appropriators are not waiting for the budget before beginning their FY27 work. Subcommittee chairs have already started building their bills, meaning advocates and stakeholders should be making their case to Hill offices now rather than waiting for the administration’s official submission. Once the President’s budget is published, we’ll break down the key provisions and what they could mean for the programs and communities we support.
Upcoming March Capitol Conversations Webinars
March 19, 1-2PM ET: How 501(c)(3) Organizations Can Engage in Effective Advocacy
We will be joined by Blair Abelle-Kiser from Social Current who will detail the legal rules that nonprofits must abide by when engaging in advocacy. This is an essential presentation to better understand critical do’s and don’ts related to effective nonprofit advocacy.
In addition to updates from Washington, D.C., Melissia Robinson from EverTrue will also discuss a tax-related effort to support senior services.
March 26, 1-2:15 PM ET: Launch Webinar for the Release of "Partnering for Impact Guide"
On March 26 we will release our new “Partnering for Impact Guide” with a special webinar to discuss and explore strengthening partnerships as we navigate a changing Medicaid landscape. We will be joined by thought leaders and experts including:
Lutheran Services in America network leaders, including Hector Colon, LSS Wisconsin and Mark Stutrud, LSS IL.
NOTE: If you have already registered for an upcoming session, please note the updated registration link. You must re-register using the new registration form for each individual session that you would like to attend.
Reminder: Update Us About Lawmaker Meetings or Site Visits
If you have meetings with federal lawmakers or their staff members, or if they have a site visit at one of your facilities, please let us know so we can track these advocacy engagements. We have a simple tool available for you to log these meetings/visits yourself, or simply contact our Policy team to let us know.
For more information, please contact Sarah Dobson, Senior Director of Public Policy and Advocacy.
Lutheran Services in America is one of the nation’s largest national networks of health and human service providers with a mission to cultivate caring communities that advance health and opportunity for all. With 300 nonprofit organizations across 1,400 U.S. communities and more than $26 billion in combined annual services, the Lutheran Services in America network advances equitable outcomes for children, youth and families, improves independence and choice for older adults, champions meaningful services and support for people with intellectual and developmental disabilities, and strengthens stability and purpose for veterans and others. Formed in 1997, Lutheran Services in America brings together a network of leaders, partners and funders to catalyze innovation, strengthen organizational capacity and advance public policy.
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