Jan. 12 Federal Update: HHS Freezes Key Child Care and Social Services Funding

The Department of Health and Human Services has activated Defend the Spend for all Child Care and Development Fund grantees. In response to suspected fraudulent activity, HHS is seeking additional records, including attendance records, licensing, inspection, and monitoring reports, and complaints and investigations.

The pause in child care funding is accompanied by a pause in funding for the Temporary Assistance for Needy Families program, Child Care and Development Fund, and the Social Services Block Grant for California, Colorado, Illinois, Minnesota, and New York. The states are now required to submit justifications and documentation before payments are released.

However, the programs are designed to reach families most in need, leading temporary pauses in funding to hold severe and potentially long-term challenges in securing needed child care, nutrition, and housing, among additional key services.

Funding disruptions have also extended to Community Schools and Promise Neighborhoods grant recipients. Community schools offer a wide range of services and supports for students and their families, including extended learning time, health care, tutoring programs, and internship opportunities. Likewise, Promise Neighbors were designed to invest in services for children in communities with high crime rates and low academic achievement. On Dec. 12, the Department of Education notified recipients of 19 grants across 11 states and the District of Columbia that they would not receive their remaining two or three years of expected funding. In total, the decision represents a loss of $168 million.

CMS Introduces a Series of Efforts to Increase Health Care Affordability  

The Centers for Medicare & Medicaid Services (CMS) proposed significant reforms to increase healthcare affordability and price transparency.  

On Dec. 21, CMS introduced two models, the Global Benchmark for Efficient Drug Pricing (GLOBE) and Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Models. Each intends to reduce drug prices for Medicare beneficiaries. While the GLOBE Model would test a new rebate formula for certain separately payable Medicare Part B drugs, the GUARD Model aims to test a payment model that modifies the inflation rebate for certain Medicare Part D medications.   

Both will operate for five years, the GLOBE Model beginning Oct. 1, 2026, and the GUARD Model beginning Jan. 1, 2027. 

Additionally, CMS, in partnership with the Department of Labor and the Department of the Treasury, issued a proposed rule to improve health care price transparency and accessibility. The rule aims to equip employers, innovators, and researchers with the needed information to strengthen negotiations, identify cost drivers, and build new tools that help consumers shop for care with confidence. 

CMS Issues Rural Health Grant Awards  

On Dec. 29, the Centers for Medicare & Medicaid Services (CMS) announced that all states will receive awards through the Rural Health Transformation Program, a $50 billion initiative created through the recent budget reconciliation bill, H.R. 1.  

First-year awards averaged $200 million per state. Collectively, the funding aims to expand access to care in rural communities, strengthen the rural health workforce, modernize rural facilities and technology, and support innovative models that bring high-quality, dependable care closer to home.    

Children’s Bureau Publishes CFSR Technical Bulletin #14

On Dec. 19, the Children’s Bureau published the Child & Family Services Reviews (CFSR) Technical Bulletin (TB) #14. The bulletin accompanies the Administration for Children and Families’ A Home for Every Child initiative. The initiative aims to ensure every child has access to a safe, stable, and loving home, while supporting states in building the capacity and systems to make that possible.

In support of a Home for Every Child and to strengthen the CFSR process, ACF is introducing a pilot opportunity for any state at any stage of CFSR round 4. The bulletin enables states in various stages of CFSR Round 4 to center their program improvement efforts around the goal of A Home for Every Child. Participating states will be excused from the PIP development and measurement process outlined in Technical Bulletin 13A.

The bulletin aims to maintain state accountability for achieving meaningful outcomes for children and families, enhance transparency and public accountability, reduce administrative burden, and provide states with greater flexibility to innovate and build capacity to manage and improve child welfare systems and outcomes.

USDA Issues Report Detailing Food Insecurity in America in 2024

On Dec. 30, the USDA published Household Food Security in the United States in 2024. The report details statistics on food security in U.S. households throughout 2024 based on the Current Population Survey Food Security Supplement data collected by the U.S. Department of Commerce, Bureau of the Census, in December 2024.

According to the report, an estimated 86.3% of U.S. households were food secure throughout the year in 2024, with access to enough food at all times for an active, healthy life for all household members. Approximately 13.7% of households were food insecure at least some time during the year, although the population is not statistically significantly different from the populations recorded in 2022 or 2023. Approximately 5.4% of households experienced very low food security, with one or more members reporting reduced food intake and disrupted eating patterns due to limited resources.

FNS Issues Guidance for FY 2026 Discretionary Exemption Allocations for SNAP ABAWDs

The Food and Nutrition Service (FNS) released its Fiscal Year (FY) 2026 allocations of discretionary exemptions for able-bodied adults without dependents (ABAWDs). The policy memorandum clarifies that qualifying individuals may participate in SNAP for only 3 months in any 36-month period, unless they meet certain work requirements or are otherwise exempt from the time limit. It also estimates the number of new discretionary exemptions each state agency has earned for FY 2026, according to 8% of the state’s estimated number of covered individuals.

FNS Issues Report to Review Risk Assessment Tools for SNAP Payment Accuracy

FNS published a study to analyze the risk assessment tools state agencies currently use to administer the Supplemental Nutrition Assistance Program (SNAP). The tools categorize program applications most likely to result in payment errors and allocate resources to improve the accuracy of SNAP benefit payments to families. This study assesses the effectiveness of a subset of those tools and identifies best practices in RA tool development, implementation, and evaluation.

Forty-three state agencies and one local agency provided information and data for the study, which provides detailed assessments of six state agency uses of RA tools, their effectiveness, and potential opportunities for improvement.

Sector Updates from the Judiciary 

Appeals Court Approves the Denial of Medicaid Funds to Certain Abortion Providers   

On Dec. 12, the United States Court of Appeals for the First Circuit overturned a lower court’s ruling, determining that a provision of H.R. 1 that denied Medicaid funds to certain abortion providers is constitutional. 

H.R. 1 removed federal Medicaid funding from abortion providers that received more than $800,000 in Medicaid funds in fiscal year 2023, as well as any entities affiliated with the providers. The provision primarily affects Planned Parenthood and two separate organizations. 

Previously, the U.S. District Court for the District of Massachusetts determined the law unconstitutionally targets Planned Parenthood and violates the First Amendment. However, the appellate court held that the law relies on Congress’ inherent taxing and spending power. Affected parties have the choice between receiving Medicaid funding and abandoning the provision of abortion services or refusing Medicaid funding and continuing to provide abortion services. 

Wyoming Supreme Court Overturns Law Severely Restricting Abortion Access 

On Jan. 6, the Wyoming Supreme Court found recently passed state laws restricting abortion access unjustifiably limit women’s state constitutional right to make their own health care decisions. 

The lawsuit centered a 2023 law, Life is a Human Right Act, which prohibited the provision of abortions within Wyoming, with certain exceptions. It also addressed S.F. 0109, which criminalized prescribing, dispensing, distributing, selling, or using any medication to perform an abortion.  

The lawsuit was brought by medical providers, patients, and organizations, who argued that the laws violated individuals’ right to make health care decisions. They referred to a 2012 amendment voters passed, enshrining the right of health care access. 

As a result of the verdict, abortion will now become legal in Wyoming. The justices stressed the fundamental right of every competent adult to make their own health-care decisions.  

Federal Court Requires HHS to Pause DEI Grant Conditions for Head Start Program Funds 

The United States District Court for the Western District of Washington halted recent actions to restrict Head Start’s diversity, equity, and inclusion efforts and issue mass layoffs at the Office of Head Start. The order applies to programs nationwide. 

The lawsuit was filed after the Office of Head Start notified providers that federal funding for training, technical assistance, and other program expenditures to promote or participate in diversity, equity, and inclusion initiatives will not be approved. The lawsuit also addressed the closure of half of Head Start’s regional offices and mass reduction-in-force. 

Plaintiffs detailed the significant challenges providers faced in accessing needed funding, endangering vital access to early childhood education for nearly 750,000 infants, toddlers, and preschool children nationwide. 

Judge Ricardo S. Martinez Chambers issued a preliminary injunction, temporarily prohibiting the Department of Health and Human Services from imposing grant conditions that require recipients of Head Start program funds to certify that the cash will not be used to promote diversity, equity, and inclusion.