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October 2, 2025 – We are in day two of a government shutdown, but the health policy community has been discussing the implications of a shutdown for weeks now. The shutdown occurred because a new fiscal year (FY) started on October 1 (FY 2026), and Congress has yet to enact a discretionary appropriations bill to fund the government. Providers have been asking questions not only about the impact of this “lapse in discretionary appropriations” on Medicare payments and other healthcare programs, but also about the lack of a legislative vehicle in which to include “riders” to extend certain coverage and payment waivers that have existed since the COVID-19 pandemic but are now expired. Regulatory folks like me have also been wondering how a government shutdown will affect regulations and the regulatory process.
To help me break all this down, I’m bringing in my colleague Erin Fuller.
While legislative “riders” are not directly connected to this lapse in appropriations, many stakeholders were counting on Congress to include riders in any continuing resolution enacted to keep the government open. These riders include a host of healthcare extenders, but most notably the extension of the Medicare telehealth waivers and the Acute Hospital Care at Home (AHCAH) waiver.
Medicare telehealth waivers
As discussed in a previous Reg & Eggs blog post, many stakeholders repeatedly urged Congress to extend the telehealth waivers that had been in place since March 2020. Under these waivers, patients with traditional Medicare (fee-for-service) could receive telehealth services in both urban and rural areas and in their own homes. The telehealth waivers also allowed Medicare coverage for certain audio-only visits and expanded the list of Medicare covered telehealth services to include non-behavioral/mental telehealth services such as occupational therapy and even emergency and nursing facility visits. Although patients and providers have gotten used to these flexibilities, and said flexibilities have contributed to a substantial increase in telehealth utilization, now Medicare telehealth has returned to being a rural-only benefit (as it is in statute), so Medicare patients are not able to receive most telehealth services in urban areas. Medicare patients also need to come to an “originating” site (such as a hospital) to receive these services and can no longer receive most telehealth services from home. It is important to note here that Medicare Advantage plans (which cover more than half of the total Medicare population) can still employ flexible Medicare telehealth coverage policies. The restrictions only apply to traditional Medicare. Thus, coverage of telehealth services could differ for Medicare beneficiaries depending on what part of Medicare they are enrolled in.
On October 1, CMS released a newsletter addressing how to proceed with telehealth visits covered under Medicare fee-for-service following the expiration of the Medicare telehealth waiver. In summary, CMS states that it has instructed Medicare Administrative Contractors (MACs) to hold Medicare fee-for-service claims for 10 business days. CMS notes that this hold should have a limited impact on payment, since, by law, there is a 14-day payment floor for MACs to pay electronic claims (MACs cannot pay claims for 13 days after receiving the claim and can pay starting on the 14th day). Providers can continue to submit claims during this period, but payment will not be released until the hold is lifted. CMS also indicates that providers may opt to continue offering telehealth services that are no longer reimbursable under Medicare. However, they are encouraged to issue an Advance Beneficiary Notice of Noncoverage to Medicare beneficiaries and consider holding claims pending potential Congressional action. It is important to note that there is no guarantee that there will be congressional action to retroactively cover these telehealth services. The newsletter does not discuss this potential scenario nor provide assurances that providers will eventually be reimbursed for these services.
Medicare telehealth waivers are unique among healthcare extenders. Unliked other programs that have previously lapsed and may have partial coverage or transition plans, these waivers have never expired before, creating a complete telehealth coverage and reimbursement shutoff for Medicare fee-for-service beneficiaries. Read more on next steps here.
Acute Hospital Care at Home waiver
CMS implemented the AHCAH waiver program to allow Medicare beneficiaries to receive acute-level care at home. The Centers for Medicare & Medicaid Services (CMS) posted a note addressing the waiver’s expiration:
For all hospitals with active AHCAH waivers, all inpatients must be discharged or returned to the hospital on September 30, 2025, in the absence of Congressional action to extend the initiative. CMS will no longer accept waiver requests for participation in the AHCAH initiative as of September 1, 2025.
Other policy riders that expired on September 30 include:
Government departments have released contingency plans outlining the programs and activities that will remain operational during the shutdown and stating how many staff will be furloughed and how many will be “exempt” and can continue working. In general, federal staff can continue working if they are funded by a source other than the annual appropriations bill or if leftover money from the previous FY is allowed to be “carried over” to support staff, programs, and activities in the current FY. Commissioned Corps officers and staff who are necessary to “ensure that fully funded programs continue operation, and that funded entitlement benefits are paid,” also can continue working.
According to the latest US Department of Health and Human Services (HHS) contingency plan, about 41% of staff will be furloughed, meaning more than half of the staff will continue to work during the shutdown. The previous HHS contingency plan from the Biden administration included furloughing of 45% of HHS staff, while retaining 55%. Some staff can continue working because they work on programs with already-approved funding, such as the CMS Innovation Center, or funding from user fees, such as the Clinical Laboratory Improvement Amendments program. Other staff are kept on to keep basic programs and activities functioning. According to the CMS-specific contingency plan, 53% of staff will be retained.
To make matters a bit more complicated, on September 24, the Office of Management and Budget (OMB) directed agencies to create a list of workers to be laid off in the case of a shutdown. The OMB stated that the list should include workers who are funded by discretionary appropriations (which are impacted by lapse of appropriations) and not another funding source, and who do not work on a program, project, or activity that is consistent with the president’s priorities. It is unclear if or how these “reductions in force” will be effectuated across HHS.
Many individuals that continue working during all or part of a shutdown are either necessary to ensure an “orderly” shutdown or are used to make sure that entitlement programs such as Medicare and Medicaid keep operating so that beneficiaries can continue to receive healthcare services. For example, Medicare and Medicaid beneficiaries can still go to their doctor or visit a hospital, and clinicians and facilities can still provide and bill for services. But depending on how long a shutdown lasts, providers could see a lag in their payments under Medicare fee-for-service until MACs receive additional funding. When a MAC runs out of funding and needs additional money from the new FY appropriation, it can hold back payments until the funding is received (once funding is received, the claims are paid in full). Therefore, any payment delay to providers depends on how each MAC’s contract is structured and how long the shutdown lasts. If the shutdown lasts longer than 30 days, there is a greater likelihood that at least some MACs could run out of funds.
Medicare Advantage plans are paid a monthly risk-adjusted capitated payment on around the first of every month. The payments, which come directly from the US Department of the Treasury, are mandatory. Therefore, a government shutdown, regardless of its length, will have no impact on Medicare Advantage payments to health plans.
CMS will have sufficient funding for Medicaid to fund the first quarter of FY 2026, based on the advance appropriation provided for in the Full-Year Continuing Appropriations and Extensions Act, 2025. A shutdown that goes beyond the first quarter of FY 2026 could result in delayed payments to states, although that is unlikely (the longest shutdown to date was 35 days). CMS is unlikely to approve state plan amendments and waivers during a government shutdown, although review can occur in the background.
Some programs that aren’t directly affected by the lapse in appropriations could still be impacted by the shutdown. For example, while Innovation Center staff can continue developing new alternative payment models, any new model that the Innovation Center planned to formally announce would likely be delayed if the CMS and OMB staff involved in approving and rolling out new models are furloughed.
Doing just enough to “keep the lights on” for these essential programs and activities is a far cry from what the government can accomplish normally. CMS’s contingency website includes a few details about healthcare activities during a shutdown, stating that CMS’s surveys “would focus on complaint investigations alleging the most serious incidents of resident or patient harm. Other survey activities, such as recertification surveys, initial surveys, and less serious complaint investigations, and all surveys by federal staff would be suspended.” (CMS also issued a memo to state surveyors on October 1 explaining how surveys will be impacted). In addition, CMS will not be able to do beneficiary casework and may reduce beneficiary outreach and education activities.
Regulations and related meetings with the administration may be impacted depending on how long the shutdown lasts. Meetings with some HHS and CMS staff and officials have been cancelled already. Some significant rules are expected to be released soon, including most of the major Medicare calendar year payment final rules (the Physician Fee Schedule and the Outpatient Prospective Payment System final regs, to name a few). However, the CMS staff who work on these rules and the OMB staff who review them before they are released could be furloughed. If OMB staff can’t work on regs, especially staff within the Office of Information and Regulatory Affairs, then regs simply can’t be released.
The Medicare rules are required to come out on or around November 1 (60 days prior to the start of the next calendar year), but if the shutdown lasts a full month and there are fewer staff to work on them or approve them, CMS’s only option may be to put these regs out late. If that happens, CMS would have to decide whether the final regs can go into effect with less than 60 days’ notice or if their effective date should be pushed back. Following the 2013 shutdown, CMS released the 2014 Physician Fee Schedule final rule almost four weeks late, on November 27, 2013. CMS waived the 60 days’ notice requirement, stating that it “would be contrary to the public interest to delay the effective date” of the rule.
Beyond the major rules, any operational tasks or guidance that CMS and other federal agencies are working on will also likely be put on hold. If clinicians have questions about Medicare policies or scores under the Merit-based Incentive Payment System, there may not be anyone available to answer them. Furloughed staff are not allowed to answer phone calls or look at or respond to emails until the shutdown is over (furloughed staff may be occasionally called in to perform a specific function or duty that is deemed essential, but once that function or duty is completed, they go back to being furloughed).
Still, we may not see a total shutdown of regulatory activity. The president can put out executive orders, and the administration can call on staff to issue rules that carry out the president’s priorities (such as lowering drug prices). In other words, the administration could use the shutdown as an opportunity to pursue key policy initiatives with a limited federal staff in place.
It is unclear how long this government shutdown will last – but what is clear is that the longer the shutdown, the more potential for long-term implications. For example, if there is a short shutdown and Congress is able to include the policy riders in a continuing resolution, telehealth services could restart in urban areas without much of a gap. Congress may also be able to make the policies retroactive to the start of the shutdown. However, if the shutdown continues and no separate bill extends the telehealth waivers, providers and Medicare fee-for-service patients will have to get used to the pre-pandemic telehealth rules, under which many telehealth services are simply not covered.
While healthcare stakeholders have been planning how to handle the shutdown, let’s sincerely hope that the shutdown ends quickly and that we won’t have to deal with long-term consequences.
Until next week, this is Jeffrey (and Erin) saying, enjoy reading regs with your eggs.
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