What’s new in Medicaid news and compliance? Oh, just the first government shutdown since 2018-2019. Overnight, as the Fiscal Year turned over, we went from high drama to crickets on Capitol Hill. But we’re here to remind you to “Keep calm and carry on”— oh, and: “Kill the clipboard.”
We have every reason to expect the shutdown to be brief, and to expect that the 2026 budget policies and rollout timelines to hold. Also, we’re going out on a limb to say there is reason for optimism as we look toward 2026. There have been some exciting industry developments recently, and some are a win on either side of the patient-provider paradigm.
We’re covering all of it in this early fall edition.
Some Medicaid Funds Are Expiring. What’s the Vote Post-Mortem?
The last time we were here, Democrats made several contentious concessions. This time around, with a dozen appropriations bills on the table to avoid a government shutdown, the U.S. House passed a continuing resolution (CR) to fund the government through November 21. But that measure did not survive the Senate, stalling in a 44-48 vote.
CRs can often include riders—small concessions that can sometimes have a big impact on providers. In a surprising twist, Senate Democrats now say they want to use the CR debate as a chance to revisit Medicaid cuts. Their proposed alternative funding measure, however, also failed to gain traction.
Before the Fiscal Year deadline, Jeffries had this to say about the impending vote:
“We will not support a partisan spending agreement that continues to rip away health care from the American people. Period. Full stop.” — House Democratic Leader Hakeem Jeffries (N.Y.)
The Rescission Shadow
The Department of Government Efficiency (DOGE) was not in favor of spending the remainder of the allotted 2025 funds. Those who rely on those funds were hoping the money will still be available for their programs’ final operational costs in the ending months of 2025.
Congress already pulled back $9 billion in July, mostly from foreign aid and public broadcasting. Then came the pocket rescission from the White House, proposing to block $4.9 billion in congressionally approved foreign aid so late in the fiscal year that Congress had no chance to respond. The strategy? Propose a clawback just before the fiscal deadline, letting the funds quietly expire before they’re used.
On September 4th, A federal judge blocked that from happening, but it’s being appealed.
The big question: Do these rescissions violate the Impoundment Control Act (ICA)?
Federal law prevents the president from unilaterally withholding or delaying the spending of funds that Congress has appropriated.Not in question: Whether these rescission proposals complicated negotiations on the 2026 budget.
A 45-day clean CR would not have provided any clarity but would have given us some breathing room.
Medicare Telehealth Flexibilities Officially Expired
Telehealth extensions are wrapped into all of this. We officially went off “the cliff” at 12:01 a.m. October 1. Clients and providers who rely on telehealth may be asking about this if things don’t resolve soon—though we expect them to. Mostly, it may briefly complicate reimbursement.
We’re Watching: Making Health Tech “Great” Again
In other big Medicaid news, the Centers for Medicare & Medicaid Services (CMS) announced the launch of a new federal initiative: the Health Technology Ecosystem.
It comes with two main priorities:
“Kill the Clipboard”
No more filling out the same intake form at every appointment. Patients should own their data and choose how to share it. Think QR codes, digital credentials, and patient-facing apps that move with you.
This voluntary roadmap aims to connect patients, providers, payers, and health apps—so information flows freely where it’s needed most.
It’s the same idea that powers financial tech: you connect your bank account once and then use that data across dozens of apps. Or Apple Health: you carry your record in your pocket and decide which providers can see it. Health care has lagged behind, but CMS is saying it’s time to catch up.
The early focus is on a few areas:
- Diabetes and obesity management, where tailored guidance could help patients directly.
- AI assistants pulling from patients’ medical records to give personalized support.
- Automating administrative tasks and making data easier to share.
This approach supports patients and simplifies daily admin for providers. Person-centered care is moving from exception to rule, with interoperability as a vehicle for delivery.
But voluntary is the key word. These aren’t requirements. They don’t change the HTI-1 certification standards or the current interoperability timeline. This shift is about shaping expectations. And it matters, because when CMS rolls something like this out, awareness grows quickly.
CMS is already recruiting early adopters–vendors pledging support for FHIR APIs and USCDI v3, providers and payers connecting to those networks, and patient-facing apps plugging into them.
To join CMS-Aligned Networks, vendors must:
Support FHIR APIs and USCDI v3 by July 4, 2026
Provide audit logs, identity verification, and network metrics
Enable delegated access and record locator services.
CMS plans to stand up “CMS-Aligned Networks” by early 2026 to showcase what this looks like in practice.
CMS is recruiting across:
- CMS Aligned Networks
- Providers connecting to CMS Aligned Networks
- EHRs connecting to CMS Aligned Networks
- Payers connect to CMS Aligned Networks
- Patient-Facing Apps leveraging CMS-Aligned Networks
The tone is set. Patients have expected the same seamless experience they get from banking or shopping online for years. Now, with the CMS acting as a forcing function, the industry will need to catch up.
CA Charges Ahead with BH System Transformation & Innovation
California continues to generate Medicaid news with its behavioral health overhaul (to become CalAIM), despite disappearing Medicaid dollars. DHCS’s Section 1115 and 1915(b)/(c) waivers are set to expire at the end of 2026, but the state has indicated that its core programs (ECM, Community Supports, and CYBHI) aren’t dependent on waiver authority to continue.
Two big things to know:
- Proposition 1 funds are flowing.
Back in May, $3.3 billion was awarded to create 5,000+ residential beds and 21,000+ outpatient slots.That $3.3 billion is just the first wave of a $6.38 billion bond measure, with $4.4 billion reserved for new facilities. - CA DHCS released preliminary outcomes from the ECM program and Community Supports services.
The results show that net costs for emergency visits, hospitalizations, and other institutional care decreased as a result of these services:
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- Housing deposits → 31% net cost reduction
- Respite care → 61% reduction
- Sobering centers → 12% reduction
- Day habilitation → 17% reduction
- Personal care & homemaker services → 58% reduction
The takeaway: these interventions are both compassionate and cost-effective. And in a year when budget hawks are circling, that kind of data could keep them from swooping in.
One wrinkle: The PATH program—funding for providers to upgrade infrastructure—didn’t make it into California’s waiver renewal. That means less support for EHRs, billing, and HIE connections down the line. So, while California is doubling down on services, the tech and infrastructure dollars are fading. That’s the tension to watch.
The Shift from MHSA to BHSA
In July 2026, California’s long-standing Mental Health Services Act (MHSA) will become the Behavioral Health Services Act (BHSA). Under BHSA, counties must spend 30% of funds on housing interventions for people with significant behavioral health needs who are experiencing (or at risk of) homelessness. The dollars can also be used for substance use disorder treatment, workforce development, and infrastructure upgrades. There will also be stronger state oversight of county spending.
Medicaid Compliance: How California Providers Can Get Ready
For providers, this isn’t just about policy; it’s about operations. Start planning budgets and programs that include housing supports. Make sure intake, billing, and reporting systems can track spending and outcomes, and monitor client results to meet county performance standards.
A few questions to ask if you have an EHR:
- Is it ONC-certified?
- Can it handle Medicaid and county-specific billing requirements?
- Can it seamlessly and flexibly report on services and outcomes?
How your EHR can help with Medicaid compliance.
Assisted Outpatient Treatment (AOT) Is Expanding
Another development to watch: Assisted Outpatient Treatment are back in focus. These are court-ordered community treatment programs for people with serious mental illness. We’re seeing a trend towards funding AOT services in state budgets as well as with Federal dollars.
AOT programs aim to provide structured care in the community, reducing hospitalizations and preventing involvement with the criminal justice system. New federal funding is fueling their expansion, with SAMHSA announcing $19 million in grants tied to housing and SMI services. States are also linking AOT to their homelessness response, and the programs are gaining political traction as part of broader “Ending Crime and Disorder” efforts.
Bottom line: Providers should expect to see more of this in contracts and state plans.
Where the New Federal Dollars Are Going
It’s not just state programs creating momentum, federal dollars moving, too.
The big one is the Rural Health Transformation (RHT) Program. Congress has set aside $50 billion over five years starting in FY 2026—that’s $10 billion a year. States will start applying this fall, with awards decisions expected by the end of December 2025.
(image source: https://www.cms.gov/files/document/rht-program-overview-presentation.pdf)
It’s not just about dollars. CMS wants to rewire rural health care with new payment models and infrastructure support. States get wide latitude on how to use the money, but it comes with strings attached. CMS will be tracking outcomes and tying dollars to results.
Priorities include:
- Tech-driven prevention and chronic disease management
- Opioid and substance use disorder treatment
- Big IT upgrades, cybersecurity, and data-sharing infrastructure
For rural states, this is the largest new Medicaid-adjacent funding stream in years. It’s still early, but the application process is already opening, and this is one to watch closely.
Housing Supports Growth
California’s not alone in tying health outcomes to housing supports. As of May 2025, more than 30 states have approved Medicaid authorities to cover housing support services. This includes everything from navigation and tenancy services, to help with deposits. What started as scattered pilot programs here is seeing state-led expansion against the odds.
What You Can Do Now
September brought the final heat wave: federal budget drama, attempts to revive the Medicaid cuts debate, rescissions looming—and a familiar return to the drawing board. At the same time, new funding streams are taking shape.
That means a busy fall, and clients looking to you for clarity.
→ Have Your Team Start Here:
- Scenario planning. Federal dollars are in flux. Build out “what if” cases now. What happens to your clients if CR negotiations drag on—or telehealth flexibilities lapse?
- Advocacy. States will decide how to spend AOT, housing, and rural transformation funds. Be sure your voice is in the mix.
- Medicaid compliance readiness. Test your systems now:
- Is your EHR ONC-certified?
- Can it handle Medicaid billing rules?
Medicaid is moving in two directions at once: funding uncertainty at the top, and expansion of innovation, services, and support on the ground.
If you need support tracking it all, we’ve built something new: The Medicaid Toolkit. It’s built for providers who want quick explanations, a clear readiness plan, and practical resources they can actually use.
Check it out, share it with your teams, and let us know what you think.
We’ll be back soon with more Medicaid news.
Intel By Juliette Palmer, Regulatory Intelligence Analyst
