TL/DR –
The federal government shutdown resulting from Congress’ failure to pass a fiscal year 2026 continuing resolution has prompted certain Medicaid cuts and the expiration of several policies benefiting healthcare providers. Some of the key impacts include an $8 billion reduction to state Medicaid Disproportionate Share Hospital (DSH) allotments, the expiration of the Medicare Dependent Hospital (MDH) and Medicare Low Volume Adjustment (LVA) programs, as well as the expiration of several telehealth waivers and the Medicare Acute Hospital at Home program. Regardless of the shutdown, claims payments to providers from Medicare and Medicaid will continue, and it is possible Congress might retroactively address the cuts and expired policies when funding legislation is passed.
Federal Government Shutdown Impact on Medicare and Medicaid Through 2026
The federal government shutdown on September 30, 2025, resulted from Congress’ inability to pass a continuing resolution (CR) for the federal fiscal year (FY) 2026. The House had passed a CR to fund the federal government until November 21, 2025. Still, it fell short of the required Senate support for enactment.
While Medicare and Medicaid claims payments continue, due to these payments not being subject to the annual appropriations process, the lack of passed legislation implies that certain Medicaid cuts have taken effect. Additionally, several policies advantageous to providers expired on October 1, 2025. It’s possible Congress may retroactively address these issues when it eventually passes funding legislation for FY 2026. However, this is not guaranteed.
Medicaid Payment Cuts & Expiring Medicare Policies – October 1, 2025
The changes impacting healthcare organizations due to Congress’ inability to pass extenders are significant. Here’s an overview:
- Medicaid Disproportionate Share Hospital (DSH) Cuts: An $8 billion reduction to state Medicaid DSH allotments mandated by the Affordable Care Act became effective on October 1, 2025. The cuts are imposed on states with the lowest percentage of uninsured individuals and those not directing their DSH payments to hospitals with high Medicaid patient volumes and high levels of uncompensated care.
- States receive Medicaid DSH payments quarterly, allowing each state’s Medicaid agency to impose cuts based on the likely duration of the shutdown and the probability of further delay of these cuts in FY 2026 legislation.
- Medicare Dependent Hospital (MDH) Program: The MDH program expired on October 1, 2025. Hospitals formerly qualified as MDHs can now apply for sole community hospital (SCH) status.
- Medicare Low Volume Adjustment (LVA) Program: On October 1, 2025, the LVA program reverted to pre-FY 2011 conditions. Only hospitals located more than 25 miles away from the closest facility and have fewer than 200 total discharges will qualify for the program.
- Medicare Telehealth “Flexibilities”: Several telehealth waivers expired on October 1, 2025, affecting geographic, originating site, audio-only, continuing tele-behavioral health requirements, and types of providers delivering care via telehealth.
- Medicare Hospital at Home: The Acute Hospital at Home program by the Center for Medicare and Medicaid Innovation expired on October 1, 2025. CMS provided guidance stating that, in the absence of Congressional action, all program inpatients must be discharged or returned to the hospital on September 30, 2025.
- Community Health Center Funding (CHCF): CHCF, accounting for over 70% of CHC funding, expired on October 1, 2025. The National Association of Community Health Centers reports CHCs can continue drawing down grants despite shutdown.
Getting Assistance From Forvis Mazars
Forvis Mazars’ healthcare professionals can help healthcare organizations adapt to evolving federal policies. If you have queries about the government shutdown’s impact and the expiring policies’ effects on your organization, please contact our team.
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