Bringing you the latest news impacting our network from Congress and the Administration.
In this Edition:
Healthcare & Reconciliation 3.0, Timing?
CMS Guidance on Medicaid Work Requirements Released as Governors Urge Flexibility
New Administration Proposal to Overhaul Federal Grantmaking to Nonprofits
House Advances Affordable Housing Bill, Now What?
House Ways & Means Advances "Protecting Seniors and Stopping Fraudsters Act"
Join Us on June 18 at 1 p.m. ET for the Next "Capitol Conversations" Webinar on the future of Behavioral Health Measurement
What Are We Reading?
Medicaid Update: Healthcare in the Crosshairs of "Reconciliation 3.0", Timing in Flux
Ongoing hurdles with Reconciliation 2.0 are delaying the timeline for another budget package, Reconciliation 3.0. While Republican Congressional leaders had hoped to rapidly shift to work on a third bill, the timing remains unclear while emerging plans still include a major legislative vehicle ahead of the midterm elections with implications for healthcare, especially Medicaid.
Reconciliation 2.0, Still Stumbling
Progress on reconciliation 2.0, which is focused on immigration and border enforcement funding, has stalled in the Senate. Pushback among Republicans over the $1.776 billion fund to finance claims of government mistreatment and security funding or White House ballroom are the two main roadblocks.
Senate leadership indicates an on-going commitment to clearing this second package, and at the same time, the backlog has constrained legislative bandwidth, pushing the overall timeline for next steps deeper into the summer months.
Reconciliation 3.0 & Threats to Medicaid
House Republicans, including House Budget Committee Chairman Jodey Arrington (R-TX), continue to push for introduction of the third package in June, with the goal of advancing the legislation by the end of July or more likely, before the August Congressional recess.
Reconciliation 3.0 places healthcare squarely in the crosshairs with key committees of jurisdiction for Medicaid and other social safety net programs actively expected to participate, as Medicaid continues to be a key source for offsetting federal spending. Proponents are positioning the third package around a “program integrity” frame, meaning the further inclusion of strict anti-fraud initiatives and eligibility restrictions designed to reduce federal healthcare outlays.
Now what?
Advancing a third reconciliation bill will require tight agreement among Republicans with many lawmakers already expressing concerns. In the Senate, Majority Leader John Thune called a third reconciliation bill a "potential option" rather than a commitment. Moderate House Republicans like Rep. Brian Fitzpatrick (R-PA) have already signaled deep hesitation toward another single-party solution, leaving House leadership with virtually zero room for defections given their razor-thin majority.
We will continue to track this shifting policy landscape closely as the state of play sharpens in the coming weeks.
If none of the proposed dates/times works for you, please contact Kylie Bowlds to set up a different 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.
CMS Guidance on Medicaid Work Requirements Released as Governors Urge Flexibility
Led by Gov. Tina Kotek (D-OR), a coalition of governors from several states, including Michigan, Washington, New York, Maine, and New Mexico, has sent a letter to HHS Secretary Robert F. Kennedy Jr., raising concerns about the rollout of new Medicaid work reporting requirements and requesting additional federal guidance and flexibility. In the letter, sent on May 29 just before CMS released the guidance yesterday, the governors emphasized that while states are working to implement policy changes under an accelerated timeline, they have not yet received sufficient formal direction from federal officials. This leaves many states to rely on informal guidance and to make “good-faith” assumptions in redesigning eligibility and enrollment systems. Lutheran Services in America will be reviewing the just-released guidance and will share more information soon.
Concerns for States
In their letter, the governors highlighted the operational complexity of implementing the new requirements, including:
major updates to IT systems
coordination with contractors
staff training,
and new beneficiary communications.
They cautioned that any late changes in federal rules could require states to redo substantial work within a limited timeframe, potentially leading to administrative challenges and unintended coverage disruptions for eligible individuals. The governors are asking HHS to provide clear written guidance by yesterday, June 1, 2026, and to allow additional flexibility if final rules differ from current assumptions. The letter also underscored the importance of a coordinated federal-state approach to avoid system strain and ensure smooth implementation ahead of the January 2027 deadline.
New Administration Proposal to Overhaul Federal Grantmaking to Nonprofits
The White House is advancing a sweeping effort to increase federal oversight of how taxpayer dollars are distributed through grants, contracts, and other assistance programs — potentially posing significant challenges for nonprofits, including faith-based organizations.
What's happening?
The administration’s wide-ranging proposal from the Office of Management and Budget (OMB) aims to tighten control over more than $1 trillion in annual funding distributed to states, nonprofits, and other entities in the name of improving transparency and consistency across agencies. The 400-page proposal would represent one of the most significant updates to grantmaking in decades, giving the federal government greater control over who receives federal funds and how those funds are used.
New Scrutiny of Nonprofit Funding, including Global Refuge
Complementing the broader regulatory overhaul, the White House has released another memo from OMB that aims to more closely examine federal funding flowing specifically to nonprofit organizations. OMB has directed federal agencies to compile detailed data on spending directed to 49 specific nonprofit organizations – including Lutheran Immigration and Refugee Services (LIRS) (now known as Global Refuge), spanning civil rights, environmental advocacy, humanitarian work, as well as immigration and refugee assistance. The request includes all forms of federal support—grants, contracts, loans, and cooperative agreements—across fiscal years 2024 through 2026.
Agencies were instructed to provide comprehensive and validated data, even for funding that is currently under legal dispute. Officials indicated the goal is to “better understand the scope of funding” going to these organizations, though the administration has not publicly detailed how the information will ultimately be used.
This data-gathering effort follows earlier attempts by the administration to pause or review federal grant funding more broadly—efforts that drew legal challenges and were quickly rescinded.
Looking Ahead
While the administration’s proposals are still unfolding, the direction is clear: federal funding for nonprofits is entering a period of increased oversight, data collection, and potential restructuring.
House Advances Affordable Housing Bill
Last week, House lawmakers passed the bipartisan 21st Century ROAD to Housing Act following a negotiated agreement between House GOP leadership and the White House, marking a significant step forward after months of stalled momentum. The updated package reflects a compromise on several contentious issues, including revised provisions addressing large institutional investors’ ownership of single-family homes—an area that had divided lawmakers in earlier versions of the bill.
What’s In, What’s Out
The legislation also incorporates the Housing Supply Frameworks Act, which promotes best practices for local zoning and land-use policies aimed at increasing housing supply. However, not all proposals survived negotiations: the Build Now Act, which would have incentivized communities to expand housing through HUD’s Community Development Block Grant program, was ultimately removed—disappointing some advocates seeking stronger federal incentives for new development.
Now, Senate Action?
Despite broad bipartisan support in the House, prospects in the Senate remain uncertain. Senators Elizabeth Warren (D-MA) and Tim Scott (R-SC), who led the Senate’s earlier housing effort, signaled that “there is still work to be done” before a final bill can be approved. Still, both acknowledged that the House version represents progress compared to prior proposals, and House Democrats are expected to press for Senate action in the coming weeks.
What Now
For nonprofit organizations—including faith-based groups engaged in affordable housing, community development, and supportive services—this evolving legislation bears close watching. While the bill’s emphasis on increasing housing supply and addressing market dynamics could create new partnership opportunities, the removal of direct incentive programs like the Build Now Act may limit near-term funding avenues. With key provisions still in flux, nonprofits should remain engaged as negotiations continue and be prepared to adapt to a changing federal housing policy landscape.
House Ways & Means Advances Protecting Seniors and Stopping Fraudsters Act
New legislation to strengthen oversight of hospice and home health services in Medicare has been introduced by Rep. Beth Van Duyne (R-TX) and has already cleared a key hurdle following passage by the House Ways and Means Committee.
The Protecting Seniors and Stopping Fraudsters Act (H.R. 8883) would increase scrutiny of high-risk providers requiring more frequent inspections, enhancing enrollment screening, while expanding transparency around enforcement and program integrity activities. It also includes measures such as stronger accreditation standards and clearer notification requirements to ensure seniors understand their care choices and rights.
Now what?
Several stakeholder organizations have expressed support for the legislation, including LeadingAge and the National Alliance for Care at Home, along with other provider and advocacy groups. Supporters have generally emphasized the bill’s focus on targeted, data-driven oversight and its potential to curb fraudulent activity while preserving access to quality care from legitimate nonprofit and community-based providers.
Join Us for the Next "Capitol Conversations" Webinar
June 18 , 2026 | 1–2 p.m. ET
Join us for a timely discussion on behavioral health measurement. We will examine the movement towards aligned, systemwide accountability tied to Medicaid, state reform, and population outcomes.
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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