Disruptions to the Medicaid System, Alongside Trump Administration’s Freeze of Federal Funding to Agencies, Results in Lawsuit by Impacted States, Federal Court Injunction
On the evening of January 27, 2025, the Trump Administration’s Office of Management and Budget (OMB) issued a “Memorandum for Heads of Executive Departments and Agencies” titled, “Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs” (M-25-13), warning heads of federal agencies that, effective as of 5:00 pm the following day, their receipt and use of federal funds would be conditioned upon agencies’ adoption and strict implementation of Trump’s recently issued executive orders.
The “Memorandum” directed that all federal agencies “must temporarily pause all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the Green New Deal.” No timeline was provided for the end of the “temporary pause,” but agencies were directed to complete a “comprehensive analysis of all their Federal financial assistance programs to identify programs, projects, and activities that may be implicated by any of the President’s executive orders” and submit reports of their findings by February 10, 2025.
Although this “Memorandum” was not published on whitehouse.gov or any other official site, it was widely circulated among concerned members of the federal workforce, and, soon after, through the media. There was immediate backlash to this directive, with many critics challenging the directive as an overreach of executive power, particularly as it relates to the disbursement of funding allocated by Congress to various causes and agencies, on the basis of the President’s (primarily social) agenda, suggesting a likely constitutional challenge of the Administration’s policy on the horizon.
As the news of the issuance of the M-25-13 Memorandum broke on January 28, 2025, a nationwide shutdown of the Medicaid system portal occurred, causing a significant disruption to the program’s operations and payment to medical providers across the country. Advocates for the elderly, disabled, and special needs population also expressed concern regarding the possibility of funding to the Medicaid system being potentially impacted by this new directive. While, notably, the M-25-13 Memorandum contains a footnote which states:
“[n]othing in this memo should be construed to impact Medicare or Social Security benefits”[1]
Conspicuously absent from this distinction, however, was Medicaid. Additionally, while the Trump Administration stated publicly that the federal freeze imposed pursuant to M-25-13 would purportedly not apply to payments made directly to individuals, there was no clear explanation as to how this would impact benefits that would flow through the states, first, who would administer federal or dual state-federal programs, to then be paid to individuals. (When one reporter asked the White House Press Secretary whether this directive would result in a loss of Medicaid coverage to individuals, the Press Secretary indicated that she was unable to answer and would revert back.) The legal challenges to M-25-13 began swiftly, with several states who were unable to access their own Medicaid systems, including New York, joining in a lawsuit against the federal government on January 28, 2025.
The M-25-13 Memorandum was short-lived; Federal Judge Loren L. AliKhan of the United States District Court issued an order, minutes before the 5:00 pm on January 28, 2025 when directives set forth in the M-25-13 Memorandum were to be made effective, and the following day, the Trump Administration issued a new Memorandum rescinding M-25-13. Confusion remains, however, as the White House Press Secretary issued a series of statements concerning the matter, including one which indicated that while the “Memorandum” was rescinded, due to the injunction imposed the day before, the “freeze” of federal funds would still occur. In the interim, reports have indicated that access to the Medicaid system portal to the states administering the Medicaid program has been restored. (This is a developing story.)
BREAKING NEWS UPDATE (January 29, 2025 1:15 pm ET):
According to news organizations, the Trump Administration has issued a memorandum RESCINDING its freeze of federal funding to agencies. More details should be available shortly.
UPDATE:
Federal Judge Loren L. AliKhan of the United States District Court has issued an order minutes before the 5:00 p.m. anticipated implementation of the Trump Administration’s directive freezing all federal funding to agencies – read the latest here.
[1] Please view footnote #2 of the OMB memorandum here.
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