Sept. 8 Federal Update: House Subcommittee Votes in Favor of Labor-HHS-Education Appropriations Bill

On Sept. 2, by a vote of 11 to 7, the House of Representatives Labor, Health and Human Services, Education, and Related Agencies appropriations subcommittee approved the 2026 Labor, Health and Human Services, Education, and Related Agencies Appropriations Act. The bill allocates significant funding toward:

• Certain programs offered through the Department of Health and Human Services, including the Low-Income Home Energy Assistance Program and Home and Community Based Supportive Services
• The Department of Health and Human Services (HHS) to invest in prevention and innovation programs for rural communities, telehealth resources for chronic care, and nutrition services
• Substance use treatment, prevention, and long-term recovery
• Safeguarding the safety and well-being of unaccompanied children under the custody of the Office of Refugee Resettlement through improved sponsor vetting, interagency data sharing, welfare checks, and reporting requirements
• Youth and young adult suicide prevention and mental health treatment
• Certain programs offered through the Department of Education, including those for special education and charter schools

Notable funding decreases include:

• The elimination of Transitional and Medical Services and the Refugee Support Services programs
• Title I grants by $5.2 million, a reduction of 27%
• The elimination of Preschool Development Grants

Additionally, Child Care and Development Block Grants and Head Start will be funded at equal levels to fiscal year 2025. Behavioral health programs focused on criminal and juvenile justice and homelessness prevention will also be streamlined.

For additional information, the Appropriations Committee issued a summary of the bill’s main provisions.

Executive Branch Rescinds Foreign Aid Funding

The White House Budget Office advanced a proposal to rescind $4.9 billion in funding allocated to the State Department and the U.S. Agency for International Development (USAID).

Typically, Congress would be offered 45 days to process the request. However, the proposal was advanced while Congress members had returned to their districts for August recess and with fewer than 45 days until the fiscal year ends.

The Government Accountability Office has previously determined that the maneuver, often referred to as a “pocket recission,” is illegal as it attempts to bypass Congress’ constitutional power to approve a budget and appropriate funds. Pocket recissions have also been criticized by Congress members who similarly claim that it is a violation of congressional authority.

CMS Issues Guidance to Expand Access to Affordable Catastrophic Health Coverage

The Centers for Medicare and Medicaid Services (CMS) issued guidance intended to expand access to catastrophic health coverage. The guidance also aims to streamline access for people who are ineligible for advance payments of the premium tax credit or cost-sharing reductions.

Catastrophic plans are designed to protect consumers from very high medical costs in the event of serious illness or injury and generally have lower monthly premiums as a result. They also offer full access to preventive services without cost-sharing requirements. The guidance aims to improve healthcare access as health insurance premiums are expected to rise significantly for the 2026 plan year.

CMS Issues Final Rule to Expand Access to Prescription Drug Information by Certain Medicare Beneficiaries

The Centers for Medicare and Medicaid Services (CMS) issued a final rule, effective Oct. 1, intended to enhance transparency for patients and providers participating in Medicare Advantage, Medicaid Managed Care, Medicare Part D, Health Insurance Marketplace, and commercial plans. Specifically, the rule aims to improve access to prescription drug information for physicians and patients to ease the identification of the most appropriate and cost-effective treatments. Through deregulatory actions, the rule will enable Medicare recipients to compare drug prices, view their out-of-pocket costs, and access information on prior authorization requirements.

Sector Updates from the Judiciary  

Federal Court Issues Temporary Restraining Order to Prevent Agencies from Enforcing Grant Conditions

The U.S. District Court for the Northern District of California issued a temporary restraining order, preventing agencies, including the Departments of Housing and Urban Development, Transportation, and Health and Human Services, from conditioning congressionally approved grant funding.

States and counties filed the lawsuits alleging that the Trump administration imposed “vague and unauthorized conditions” on grant funds, which violated the Separation of Powers doctrine, the Spending Clause, the Fifth and Tenth Amendments, and the Administrative Procedure Act. Specifically, grantees were required, “to certify that they prohibit diversity, equity, and inclusion programs, prohibit the promotion of gender ideology and elective abortion, and promote federal immigration enforcement efforts.”

Judge Seeborg determined that the plaintiffs are likely to suffer irreparable harm by requiring grantees to certify compliance with “likely unconstitutional conditions or [surrender] key federal grant funding.” The judge also emphasized the potential harm to communities, as plaintiffs require clarity about their budgets and programmatic capacities to deliver public services.

Education Department Reaches Agreement to Release Frozen Education Funding

Beginning the week of July 28, the U.S. Department of Education will begin releasing funding for the current federal and education fiscal year for the following programs:

• Title I-C, ESEA: Migrant Student Education
• Title II-A, ESEA: Supporting Effective Instruction State Grants
• Title III-A, ESEA: English Language Acquisition
• Title IV-A, ESEA: Student Support and Academic Enrichment State Grants
• Title II, WIOA: Adult Basic and Literacy Education State Grants (including English Literacy and Civics Education State Grants)

The decision to release frozen federal funding stems from an agreement the federal government made with 24 states and the District of Columbia. The U.S. Department of Education agreed to release any remaining funds between Oct. 1-3 to resolve a previously filed lawsuit. The lawsuit was filed following a notice sent to state-level school departments nationwide from federal officials, detailing that the above education funding was being returned to the federal government.

Federal Judge Declines to Reinstate Funding for a Maine Reproductive Health Care Provider

The U.S. District Court for the District of Maine permitted the U.S. Department of Health and Human Services to proceed in halting Medicaid payments to Maine Family Planning, a network of 18 clinics that operate across the state.

The loss of funding follows the passage of H.R. 1, the recent budget bill, which prohibited Medicaid funding for organizations primarily engaged in family planning services that have received more than $800,000 from Medicaid in 2023.

Maine Family Planning filed the lawsuit, alleging the withdrawal of Medicaid payments would cause the organization and its clients irreparable harm. Maine Family Planning stressed that Medicaid dollars are not directed toward its abortion services, but toward primary care services. The loss of funding would prevent the clinics from offering cervical cancer screenings, contraception, and primary care to low-income residents.

Judge Walker determined that Maine Family Planning failed to demonstrate the irreparable harm cited and further affirmed Congress’ right to “withhold federal funds and otherwise disassociate from conduct that is not enshrined” as a constitutional right.

Payments to Maine Family Planning will not resume, as litigation continues.

Federal Court Temporarily Pauses State Law Prohibiting DEI Initiatives in Schools

The U.S. District Court of New Hampshire issued a two-week temporary restraining order against a portion of a New Hampshire state law prohibiting diversity, equity, and inclusion (DEI) programs within local school districts. As a result of the verdict, certain school districts will not have to report any contracts or activities involving DEI initiatives until Sep. 18.

The requirement was issued through HB2, the state’s budget package. It prohibits any DEI initiatives in schools and public agencies that seek to improve outcomes for individuals who are grouped by age, sex, gender identity, race, or disability. Schools are required to report to the New Hampshire Department of Education any DEI-related programs and contracts they provided, detailing if any were funded through state allocations. Districts that failed to comply would be subject to financial penalties.

Judge McCafferty issued the temporary restraining order because of the harm school districts would face if they violate the law, even unknowingly. Additionally, the judge maintained that the state failed to demonstrate that it has the authority to withhold funding if schools fail to comply with the law’s deadline to report to the state’s Department of Education.

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