Bringing you the latest news impacting our network from Congress and the Administration.
In this Edition:
More Medicaid Changes Underway
New CMS Constraints on 1115 Waivers
What's Next on Work Reporting Requirements
Escalating Actions on Waste, Fraud and Abuse
Reconciliation 3.0: What Happens Now?
OMB Proposes Sweeping Changes to Federal Grants
Senate Action on Road to Housing
Join Us: June 18, 1 p.m. ET -- Making Sense of Behavioral Health Measurement
What Are We Reading?
More Medicaid Changes Underway
New CMS Constraints on 1115 Waivers
On June 11, CMS Administrator Dr. Oz issued a letter to all state Medicaid Directors that outlines significant changes to 1115 waivers – a key way states have been gaining flexibility to address non-medical factors that impact health, such as food, transportation, and housing.
What's changing?
The June guidance aligns with an H.R. 1 requirement: beginning January 1, 2027, specific to budget neutrality, CMS will not approve, renew or amend 1115 demonstrations without independent certification from CMS's chief actuary that confirms the demonstration will not increase federal spending to state Medicaid programs.
Key changes include:
Under the new guidance, states will have to submit actuarial, economic, statistical or another form of rigorous analysis to show projected financial impacts of individual demonstration activities.
Demonstrations that would increase federal Medicaid expenditures will not move forward.
States must monitor programs based on CMS parameters (still to be defined) and will face corrective actions if expenditures do not closely align with projections.
What's next?
CMS expects to provide additional details, guidance, and technical assistance to states before January 1, 2027.
What's Next on Work Reporting Requirements?
CMS's June 1, 2026, interim final rule on Medicaid work requirements sets up a more prescriptive and administratively complex framework for eligibility and compliance.
Significant Changes in Medical Frailty
The rule narrows the definition of "medical frailty," requiring that conditions demonstrably limit an individual's ability to meet work requirements, reducing state flexibility and limiting automatic exemptions. As a result, fewer individuals may qualify for exemptions—particularly those with mental health or substance use conditions—and providers may face increased administrative burden to document functional limitations and support eligibility determinations.
A new report from the Paragon Health Institute, a conservative think tank led by a former Trump adviser, argues that improper enrollments are widespread in the ACA marketplaces, estimating that more than 6 million (about 27%) of 2026 sign-ups may not meet eligibility criteria. The report attributes these issues in part to incentives tied to zero-premium plans and weaker verification systems, particularly in states using the federal exchange platform.
Why it matters
While "improper enrollments" do not necessarily indicate intentional fraud, the findings are being used to bolster calls for stronger oversight and tighter eligibility verification.
What You Can Do Now
Use our Here We Stand resources — Schedule a one-on-one consultation to put the new Here We Stand resources into action: please contact Kylie Bowlds to set up a time.
Take Action and send messages to your lawmakers urging them not to make further harmful cuts to Medicaid funding, using our quick, easy advocacy tool.
With passage of "reconciliation 2.0" earlier this month to fund Immigration and Customs Enforcement (ICE) and the Border Patrol, Republican leaders are returning to the prospect of a third budget reconciliation package ahead of the midterm elections.
Driving the Conversation
President Trump has attempted to jump-start "reconciliation 3.0," calling on Congress to act "immediately" on a sweeping package that would include a $350 billion increase in Pentagon funding alongside the SAVE America Act election overhaul.
Will they or won't they?
While House Republicans have been laying groundwork for months, significant skepticism remains within the Republican conference about whether another party-line bill can move forward given the limited number of legislative workweeks remaining and the party's narrow margins. House conservatives are pushing leadership to stretch reconciliation rules further—potentially incorporating elements of traditional government funding, such as SNAP and TSA, into a partisan package—in part to avoid a pre-midterm government shutdown.
At the same time, appropriators and moderates in both chambers have voiced concern about abandoning the bipartisan funding process and the political risks of deep spending cuts that could be required to offset new investments.
The outlook for providers
For healthcare stakeholders, the stakes remain high. As with prior reconciliation efforts, Medicaid and other safety-net programs are expected to be central to the debate to pay for proposed increases. The House Freedom Caucus members are expected to roll out a framework soon, reinforcing that if reconciliation 3.0 is to advance, Republicans will need to coalesce quickly around a unified strategy.
What's Next
We will continue to closely track developments around reconciliation 3.0 and engage policymakers as the debate evolves.
How are Lutheran Services in America Providers Responding?
As an alternative to last year's federal funding freeze attempts, the Office of Management and Budget (OMB) is proposing sweeping changes to the rules governing more than $1 trillion in federal grants and assistance. Although billed as "oversight," the proposal broadly expands federal discretion over funding decisions—allowing agencies to withhold or terminate awards, or change terms midstream.
An OMB target list?
At the same time, OMB has directed agencies to compile detailed data on funding to 49 nonprofit organizations, signaling increased scrutiny of the sector.
Now what?
Together, these developments pose major financial, legal, and operational uncertainty for nonprofits. Like last year, it's important to contact your Governors, state and federal lawmakers to share your concerns.
The Senate is expected to take up the bipartisan 21st Century ROAD to Housing Act as early as this week, signaling renewed momentum on a long-negotiated effort to address housing affordability nationwide.
What's in it
The latest Senate package is anticipated to include most of the recent House-passed provisions—particularly restrictions on large institutional investors purchasing single-family homes—while reinstating several bipartisan measures that had been dropped and removing certain banking-related provisions due to budget concerns.
Will it pass?
Ongoing negotiations among Senate and House leaders and the White House reflect both strong cross-party support and the remaining differences that must be resolved before a final bill can reach the President's desk.
Key Differences
The House overwhelmingly passed its version of the legislation following a negotiated agreement with the White House, advancing a compromise package that promotes zoning and land-use reforms to increase housing supply while maintaining key provisions to curb corporate ownership of single-family homes. However, some proposals—such as the Build Now Act—were ultimately excluded, disappointing advocates seeking stronger federal incentives for new development.
Now what?
Together, the House and Senate efforts represent a major bipartisan push to expand housing availability and reduce costs, though final agreement will depend on reconciling differences between the two chambers.
Join Us: June 18, 1 p.m. ET: Making Sense of Behavioral Health Measurement
Our next Capitol Conversation takes place later this week — June 18 from 1–2 p.m. ET, on behavioral health measurement and how organizations can continue to drive better, long-term outcomes aligned with payment. We will also provide timely updates on federal issues covered above.
We will cover:
The current behavioral health measurement landscape, including what's changing.
What's working? What's needed?
Opportunities for further work and exploration to continue to improve quality and outcomes.
Featured Speakers:
Josh Rubin, Vice President of Client Solutions, Health Management Associates
Crissie Anderson, Executive Director of Quality, Compliance, and Data, Lutheran Social Services of Illinois
Kate Hutchinson, Deputy Director, Lutheran Social Services of Northern California
LSA staff will share the latest updates on federal policy-related efforts.
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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