In Ambiguous Guidance, CMS Suggests Restrictions on Medicaid Coverage of Gender-Affirming Care for Youth

Editor: Patti Boozang and Amanda Eisenberg
Author: Julian Polaris

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tl;dr

• On April 11, the Centers for Medicare & Medicaid Services (CMS) issued guidance to state Medicaid directors implying that Medicaid programs may no longer cover gender-affirming medications and surgeries for youth.

• The guidance does not expressly define any new mandates or prohibitions, but in an accompanying statement, CMS Administrator Dr. Mehmet Oz declared that “Medicaid dollars are not to be used for gender reassignment surgeries or hormone treatments in minors.” CMS has rarely defined concrete coverage exclusions without express statutory authorization.

• A significant minority of states cover gender-affirming care for youth. Faced with ambiguous CMS guidance, these states may choose to continue covering these services while awaiting additional clarity as to whether CMS intends to disallow federal payments (and if so, starting when and as to what age group of Medicaid enrollees) — or they may choose to challenge CMS’ guidance in court.

• Providers and young trans Medicaid enrollees and their families should look to their states for guidance. Some states may inform their providers and enrollees that services and payment for them will continue to flow — with or without federal Medicaid dollars.

The 80 Million Impact

This guidance is the Department of Health & Human Services (HHS)’ latest step to implement President Trump’s January 28 executive order (EO), which directed agencies to prohibit access to gender-affirming care for transgender individuals under the age of 19.¹ In early March, HHS sent letters previewing future action to shut off various types of federal funding for providers that offer gender-affirming care to youth.

As with prior HHS letters, CMS’s new guidance describes the Trump administration’s position that gender-affirming medications and surgery “lack reliable evidence of long-term benefits for minors, and for some children, these interventions are now known to cause long-term and irreparable harm.”² (The guidance does not comment on the positions published by professional organizations, such as the American Academy of Pediatrics and the Endocrine Society, that endorse such care.)³

The guidance then reminds states of the following federal Medicaid requirements, without expressly directing any changes in federal or state policy:

• Overarching quality requirements. Federal law broadly requires states to ensure that fee-for-service (FFS) provider payment levels are consistent with “efficiency, economy, and quality of care” and covered services are provided in a manner consistent with the “best interests” of Medicaid enrollees.⁴

• Sterilizations. Federal Medicaid funding is not available for sterilizations performed on children and youth under the age of 21.⁵ Notably, CMS regulations define “sterilization” as a medical service “for the purpose of rendering an individual permanently incapable of reproducing.”⁶ Though not discussed in the guidance, CMS and states have understood this provision to permit medical services, such as some cancer treatments, that impair fertility as a side effect rather than as the intended purpose.

• Drug utilization review (DUR). States must implement DUR programs to ensure that prescribed drugs are appropriate, medically necessary, and are not likely to result in adverse results.⁷ Through their DUR programs, states must establish “predetermined standards” for appropriate use based on the peer-reviewed literature and published guidelines from designated organizations

The guidance is not presented as a preview of future policy action, without immediate impact, but it also doesn’t define any new requirements or prohibitions for states. Still, even if CMS does intend the guidance as a new coverage exclusion, CMS’ communications leave several important questions unanswered:

• Effective date. To the extent the guidance declares a new restriction on federal Medicaid funding, states are left without a clear sense of when this policy change takes effect. Federal law authorizes CMS to deny federal payments if a state has not adhered to federal requirements, but when implementing a new policy, CMS typically announces a clear effective date and gives states an opportunity to come into compliance.

• Age threshold. CMS’ guidance discusses treatment for “children” and “minors,” but does not define a specific minimum age at which states may begin covering all forms of gender-affirming care. “Minor” commonly refers to individuals under the age of 18. However, President Trump’s January EO expressly defined the term “child” to include 18-year-olds. Moreover, the guidance cites sterilization restrictions that apply to individuals through age 20.

• Medical necessity and EPSDT. CMS has historically been reluctant to prohibit state Medicaid programs from covering specific services except where the agency had clear statutory authority to do so. That reluctance extends long before the Supreme Court’s 2024 holding in Loper Bright that agencies are no longer entitled to deference on questions of statutory interpretation. Federal statutes define broad classes of benefits — such as prescription drugs, physician services and hospital services — and generally allow states to define their own standards for medical necessity and utilization review, subject to certain requirements.

Notably, for children and youth under the age of 21, Congress defined a broad coverage requirement known as Early and Periodic Screening, Diagnosis and Treatment (EPSDT). Under EPSDT, states must offer all services that are medically necessary for any individual child or youth, and that can be covered under the state plan as a matter of federal law, regardless of whether the state covers the corresponding service for adults.⁸

CMS’ new guidance does not mention EPSDT. It is not clear whether, in CMS’ view, EPSDT should not apply under the theory that gender-affirming medications and surgery are never medically necessary for youth. In light of this ambiguity, combined with EPSDT’s emphasis on individualized assessments of medical necessity, states, providers, and enrollees may be left wondering whether EPSDT still has a role to play.

The Bottom Line

State Medicaid programs are the primary audience for CMS’s new guidance. States that cover gender-affirming medications and surgery for youth may ask CMS to clarify its intent in the guidance, including the various ambiguities discussed above. Absent a quick and clear answer from CMS, states may choose to continue covering gender-affirming care for youth based on their assessment that CMS’ guidance likely does not create binding obligations, and that a funding disallowance based on that guidance could be challenged in court.

States concerned about perceived risk of disallowances — or that receive confirmation that CMS intends to prohibit coverage — may file a lawsuit seeking to preempt a disallowance. Although multiple courts have blocked EO provisions directing federal agencies to terminate federal funding for providers of gender-affirming care, CMS’ new guidance likely does not fall within the scope of those injunctions.⁹

Even if CMS does prohibit federal funding for coverage, and the prohibition is upheld in court, some states may choose to continue covering these services using state funds, as several states have chosen to do with abortion services that do not qualify for federal funding.

Providers of gender-affirming care should look to their states for guidance on whether to continue billing for gender-affirming care for youth. Unlike most prior HHS communications on this issue, this latest guidance is targeted at the states that cover these services rather than the providers that offer them. Additional actions targeting providers are expected, however, potentially including a new Condition of Participation that would prohibit Medicare and Medicaid providers from offering gender-affirming care to youth at all, including under those federally funded programs.

For young trans people enrolled in Medicaid and for their families, this guidance adds another layer of uncertainty as to whether they’ll be able to continue receiving health care services that have been prescribed by their physicians in accordance with state guidelines.

[1] For additional discussion of the January 28 EO, see Manatt’s analysis. This EO was not cited in the HHS letters or CMS guidance discussed in this post, but these documents align with the EO’s policy objectives and agency directives.

[2] Unlike the January EO and HHS’s prior letters, CMS’s Medicaid guidance does not use the loaded phrase “chemical and surgical mutilation.” The guidance focuses on “medical interventions for gender dysphoria,” including “surgical procedures that attempt to transform an individual’s physical appearance to align with an identity that differs from his or her sex” or “alter or remove an individual’s sexual organs to minimize or destroy their natural biological functions”; the use of puberty blockers to “delay the onset or progression of normally timed puberty for purposes of treating gender dysphoria”; and the use of sex hormones and androgen blockers to “align an individual’s physical appearance with an identity that differs from his or her sex.”

[3] Further Defining Gender-Affirming Care | AAP Journal Blogs | American Academy of Pediatrics

Endocrine Society Statement in Support of Gender-Affirming Care | Endocrine Society

[4] Social Security Act (SSA) § 1902(a)(19) & (30)(A).

[5] 42 C.F.R. § 441.253(a).

[6] 42 C.F.R. § 441.251.

[7] SSA §§ 1902(a)(54), 1927(g); 42 C.F.R. § 456.703.

[8] SSA §§ 1902(a)(43), 1905(r); CMS, Best Practices for Adhering to Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) Requirements, SHO # 24-005 (Sept. 26, 2024). For additional discussion of CMS’s 2024 guidance, see Manatt’s analysis.

[9] No court has yet ruled on the most pertinent EO provision for this guidance, which directed HHS to “take all appropriate actions to end” gender-affirming care for youth, with specific references to quality, clinical appropriateness, and DUR.

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