Policy Watch: September Update

The biggest shift in recent weeks has been from broad federal policy development to state-level implementation and provider readiness. With the elections approaching on November 3 and a compressed congressional calendar, the next several months will be shaped by Medicaid implementation, federal funding decisions, hospital payment policy, behavioral health investments, and the transition into 2027.

National and Federal Policy Update

Medicaid community engagement requirements remain the most consequential implementation issue heading into 2027. CMS-2454-IFC requires certain Medicaid expansion adults to meet an 80-hour monthly community engagement standard beginning January 1, 2027, unless exempt. The Centers for Medicare & Medicaid Services (CMS) is providing implementation guidance and technical assistance to states as they prepare for major eligibility system, policy, and operational changes. For providers, the focus is increasingly practical: identifying patients who may be affected, understanding exemptions, and preparing for more frequent eligibility interactions.

A significant behavioral health development since the last update came on August 17, when the U.S. Department of Health and Human Services (HHS), through the Substance Abuse and Mental Health Services Administration (SAMHSA), announced $96.7 million in grants and cooperative agreements. The awards include $63.4 million for Projects for Assistance in Transition from Homelessness, $16.8 million for youth suicide prevention, $7.1 million for early intervention for young people at clinical high risk for psychosis, and additional funding for substance use disorder treatment training, peer support, and disaster-related emotional support. These awards reinforce continued federal attention to serious mental illness, addiction, homelessness, suicide prevention, and recovery.

Hospital payment policy also moved forward during August. CMS accepted comments through August 31 on its calendar year 2027 hospital outpatient proposed payment rule, including proposals affecting 340B and site-neutral payment. With the comment period now closed, hospitals and health systems should watch closely for the final rule and for any congressional activity that could alter or respond to these policies.

FY2027 appropriations remain unresolved. The House Appropriations Committee has advanced its Labor-HHS-Education bill, which includes increased funding in several behavioral health areas, including the mental health and substance use block grants, 988, youth suicide prevention, and medication-assisted treatment. However, final funding levels remain subject to negotiations. The September 30 end of the federal fiscal year creates an immediate deadline and raises the possibility of a continuing resolution if Congress cannot complete the appropriations process.

WellLink Health Alliance: Ohio Policy Update

In Ohio, one correction and important timing update from the prior Policy Watch is that Senate Bill 315, the Ohio Medicaid Program Integrity and Fraud Prevention Act, takes effect October 6, 2026. The law strengthens program integrity provisions and authority related to Medicaid fraud investigations. For providers, the practical implication is continued scrutiny of documentation, billing, enrollment, compliance, and program integrity as the law moves into effect.

Ohio Medicaid is also preparing for the federal changes affecting the Group VIII Medicaid expansion population. Ohio has advised stakeholders that the new eligibility requirements are not yet in effect, making the remainder of 2026 a critical preparation period. WellLink will continue to monitor how Ohio implements community engagement, six-month eligibility reviews, exemptions, beneficiary communications, and related federal requirements.

Ohio's political transition also matters. The state is one of the jurisdictions that will elect a governor in November while preparing for federal Medicaid implementation. With Governor Mike DeWine term-limited, the incoming administration will inherit major Medicaid implementation responsibilities almost immediately. Regardless of the election outcome, continuity between the outgoing and incoming administrations will be important as the January 1 federal deadline approaches.

For Members Across The Healthcare Council

For The Healthcare Council, the most important development since the August update is that Mid-Atlantic states are moving at different speeds from general preparation to concrete implementation. That makes state-specific readiness increasingly important for organizations operating across Maryland, Virginia, and the District of Columbia.

Maryland

Maryland has now created dedicated public guidance on the new federal Medicaid requirements. The Maryland Department of Health states that the changes could affect up to 320,000 Maryland Medicaid members. The state is communicating that some members will need to meet the 80-hour monthly requirement and that certain members will move from annual to six-month renewals. Maryland Health Connection, the Maryland Department of Health, managed care organizations, and community partners are working together on implementation. For Healthcare Council members, this means patient communication, eligibility navigation, and renewal support should become operational priorities before January.

Virginia

Virginia has moved even further into implementation. On September 4, the Department of Medical Assistance Services issued formal guidance to providers and managed care organizations covering federal work requirements, six-month renewals, reduced retroactive coverage, and new eligibility restrictions for certain noncitizen adults. The noncitizen eligibility changes begin October 1, while the work requirement and six-month renewals begin January 1, 2027. Virginia is also scheduling provider, member, advocate, and community stakeholder town halls throughout the fall and winter. Providers are being specifically encouraged to verify eligibility, keep patient contact information current, and help members respond to Medicaid notices.

District of Columbia

In the District, Medicaid operational readiness remains the key issue. D.C. is among the jurisdictions working directly with CMS on implementation of the new community engagement requirements, with CMS offering states technical support in areas including eligibility system design, data integration and verification. This comes as providers continue adapting to the District's Medicaid fiscal agent transition. For Healthcare Council members serving D.C. residents, the combination of system changes and federal eligibility requirements makes beneficiary communication, billing readiness, and coverage verification especially important heading into 2027.

A Regional Perspective

The regional picture is becoming clearer: the federal rules are common, but implementation will not look identical across Maryland, Virginia, and the District. Health systems and providers that operate across jurisdictions should avoid assuming that eligibility workflows, notices, exemptions, and implementation timelines will be identical. The Healthcare Council can add particular value by comparing state approaches, sharing operational lessons, and identifying where coordinated regional advocacy or education is needed.

Behavioral Health: From Policy Watch to Action

For behavioral health organizations, the period between now and January 1 should be treated as an implementation window. The federal rule specifically recognizes several circumstances relevant to behavioral health, including exemptions for individuals who are medically frail and for participants in drug or alcohol rehabilitation or treatment programs. Providers should understand these provisions and be prepared to help eligible patients document their status when necessary.

The August SAMHSA awards are also a reminder that, even amid significant Medicaid changes, federal behavioral health funding opportunities continue. Organizations should watch for state pass-through funding, competitive grant opportunities, technical assistance, and partnerships related to homelessness, suicide prevention, serious mental illness, substance use treatment, peer services, and crisis response.

What to Watch as We Approach the November Elections and Year End

The November 3 elections will influence the environment in which these policies are implemented. Federal, state, and local contests across the country may produce leadership transitions at the same time states are preparing for major Medicaid changes. Ohio will elect a new governor and the District of Columbia's November 3 general election includes the mayoral office. For healthcare organizations, the practical issue is continuity: changes in elected leadership can be followed by changes in agency leadership, implementation priorities, communications, and the pace of operational decisions.

Congress also has limited time before Election Day. The Senate is scheduled for a state work period for much of October, leaving a narrow legislative window. The most immediate issue is federal funding before September 30. After the election, attention could shift quickly to a lame-duck session focused on unfinished appropriations, expiring healthcare provisions, the National Defense Authorization Act, and other must-pass legislation.

For hospitals and health systems, year-end watch items should include the final 2027 outpatient payment rule and its 340B and site-neutral provisions, federal funding decisions, and any movement on expiring Medicare hospital programs. For behavioral health providers, the highest priorities are Medicaid implementation, six-month renewals, coverage continuity, SAMHSA and workforce funding, and ensuring that exemptions and treatment-related protections are understood and operationalized.

The call to action for the remainder of 2026 is straightforward: prepare before the policy changes reach the front door. Review eligibility and intake workflows, identify patients most vulnerable to coverage disruption, train patient access and care management teams, coordinate with Medicaid managed care plans and community partners, and make sure policymakers understand where implementation could unintentionally interrupt behavioral health treatment. WellLink Health Alliance and The Healthcare Council will continue connecting federal and state developments with what members are experiencing on the ground and elevating those concerns as implementation moves forward.