Restricting access to gender affirming care for children and adolescents was an early priority of the current administration, as indicated by Executive Order No. 14187, issued by President Donald Trump on January 28, 2025, shortly after taking office. The executive order created significant uncertainty around the provision of such services by health care providers participating in federal health care programs (FHCPs). While some of this uncertainty was clarified in a flurry of activity right before the holiday, new legal questions have emerged with potentially far-reaching implications.

As we mentioned in a blog post previously, the Centers for Medicare and Medicaid Services (CMS) have announced two proposed rules related to gender affirming care for minors. The first involves a plan to change Medicare hospital conditions of participation to prohibit many forms of gender affirming care for transgender children and adolescents. The second proposes to prohibit the use of federal Medicaid and Children’s Health Insurance Program (CHIP) funds for gender affirming care for minors. Both of the proposed rules rely on a same-day declaration by the Secretary of Health and Human Services (HHS) Robert F. Kennedy, Jr., asserting that certain gender affirming care for minors does not meet professionally recognized standards of health care and purporting to supersede contrary national or statewide of standards of care.

Importantly, unlike the proposed rules, which must still go through the standard notice and comment process before taking legal effect, the declaration is effective immediately. As the Secretary hinted in the declaration, this means that, as of the date of the declaration, anyone performing these procedures is arguably subject to permissive exclusion from FHCPs. Exclusion can be fatal for any entity involved in the US health care system because all insurance companies and providers (in addition to the FHCPs themselves) generally require suppliers, employees, and contractors to not be excluded. A group of state attorneys general have already challenged the legality of the declaration in court, and HHS has already launched at least one investigation of a children’s hospital under the purported authority of the declaration.

In this in-depth we will discuss the impact of the declaration, the proposed rules, and the elements of the legal challenge. Understanding the impact of this move by HHS will be critical for any health care organization given the high stakes of possible exclusion from the FHCP.

Authority for the declaration

The declaration relies on HHS Office of inspector General (HHS-OIG) Program Integrity regulations defining “professionally recognized standards of health care” (42 CFR 1001.2). That definition provides that when HHS has declared a treatment modality not to be safe and effective, practitioners who employ it are deemed not to meet professionally recognized standards. The declaration states that HHS reviewed policy statements from medical organizations and scientific evidence on gender affirming care for minors and found them “markedly weak” with “inadequate existing clinical guidelines,” prompting the declaration.

In the declaration, the Secretary states:

Sex-rejecting procedures for children and adolescents are neither safe nor effective as a treatment modality for gender dysphoria, gender incongruence, or other related disorders in minors, and therefore, fail to meet professional recognized standards of health care. For the purposes of this declaration, “sex-rejecting procedures” means pharmaceutical or surgical interventions, including puberty blockers, cross-sex hormones, and surgeries such as mastectomies, vaginoplasties, and other procedures, that attempt to align an individual’s physical appearance or body with an asserted identity that differs from the individual’s sex

As a result, the declaration creates a circumstance where any health care provider who provides gender affirming care for minors would be “deemed not to meet professionally recognized standards of health care,” a consequence that itself has significant ramifications in health care.

Permissive exclusion risk for supporting gender affirming care

Under current regulations, HHS-OIG may exclude individuals or entities that furnish, or cause to be furnished, items or services “substantially in excess of the patient’s needs, or of a quality that fails to meet professionally recognized standards of health care” (42 CFR 1001.701). The declaration cites this regulation to underscore that exclusion is not limited to FHCP beneficiaries and does not require submission of a federal claim. Accordingly, permissive exclusion risk may extend beyond direct health care providers to any health care participants who perform, support, or provide products to support gender affirming care procedures for minors.

On its face, HHS-OIG and not the Secretary would need to exclude the individual or entity. It is worth a reminder, however, that the exclusion regulations reflect a delegation of authority granted to HHS-OIG by the Secretary by statute (42 U.S.C. § 1320a-7(b)(6)(B)). It is not permanent, and the Secretary could claw back the delegated power and bring the exclusions himself under the statute’s authority.

The separate proposed regulations

There are also two rules at issue here –– a rule that amends the Medicare hospital conditions of participation regulations and a separate rule that amends the regulations governing federal matching funds for Medicaid and CHIP programs. Both rely substantially on the Secretary’s declaration to ban what CMS is calling “sex-rejecting procedures” but what is more commonly referred to as gender affirming care. Despite the use of the term “procedures” in the declaration, which seems to connote a surgical intervention of some kind, the term “sex-rejecting procedures” is defined broadly to include non-surgical interventions such as puberty blockers and hormone therapy, both of which are common treatments in gender affirming care protocols for minors.

Medicare hospital conditions of participation regulations

The proposed new Medicare rule would add Section 482.46 to Subpart C of the hospital conditions of participation regulations (42 CFR Part 482). Under the updated regulations, in order to be accepted into the Medicare program, a hospital “must not perform sex-rejecting procedures on any child.” The proposed rule defines those procedures as:

[A]ny pharmaceutical or surgical intervention that attempts to align an individual's physical appearance or body with an asserted identity that differs from the individual's sex either by:

1. Intentionally disrupting or suppressing the development of biological functions, including primary or secondary sex-based traits; or
2. Intentionally altering an individual's physical appearance or body, including removing, minimizing, or permanently impairing the function of primary or secondary sex-based traits such as the sexual and reproductive organs.

The rule applies to any individuals under the age of 18 and defines male and female specifically. The proposed rule includes a definition of “sex” that hinges on “an individual’s immutable biological classification as either male or female.” In turn, “male” and “female” are defined based on whether the individual’s reproductive system has the “biological function of (at maturity, absent disruption or congenital anomaly) producing” either sperm or eggs, respectively.

On its face, this proposed rule only applies to hospitals participating in Medicare and contains exceptions for treatment of patients with medically verifiable disorders, to treat complications from prior gender affirming care procedures, and for purposes “other than attempting to align an individual's physical appearance or body with an asserted identity that differs from the individual's sex.”

Medicaid and CHIP regulation

The second proposed rule would add Subpart N to the regulations governing the use of federal funds by state Medicaid plans (42 CFR Part 441) and would add Section 457.476 to Subpart D of the CHIP regulations governing state plan requirements (42 CFR Part 457).
 
The Medicaid proposed rule mirrors the language in the Medicare proposed rule, only it restricts states from using Federal Financial Participation funds to pay for the procedures on individuals under the age of 18. The CHIP regulations cross-reference to the Medicaid regulations in an effort to coordinate coverage between the two programs. However, due to the nature of the CHIP program and its age restrictions, the procedures are forbidden under the CHIP program for individuals under the age of 19.

Do HHS and CMS have the authority to do this?

Although CMS may set Medicare conditions of participation and define parameters for federal Medicaid and CHIP funding, significant legal questions remain. The primary statutory roadblock to these new regulations comes in the form of 42 U.S.C. 1395, the “prohibition against any Federal interference,” a statutory prohibition against CMS exercising “any supervision or control over the practice of medicine or the manner in which medical services are provided.” CMS acknowledges this limitation in the Notice of Proposed Rulemaking (NPRM).

The proposed rules purport to get around this statutory restriction by pointing to the Secretary’s declaration and an HHS review of evidentiary literature that CMS claims to show that gender affirming care is not health care and thus not contained under the “practice of medicine.”

However, it remains to be seen how this issue would develop as there are both constitutional and statutory precedents at issue, and it follows at a time when agencies have faced increasing scrutiny of their actions by courts.

States’ challenge to the declaration

On December 23, only five days after the declaration was issued, 19 states and the District of Columbia filed suit in a federal court in Oregon seeking to vacate the declaration and obtain a permanent injunction against its enforcement. The states make a number of legal arguments against the declaration, claiming primarily that the Secretary violated the Administrative Procedure Act (APA) when issuing the declaration.

The states first claim that the Secretary was required to provide at least a 60-day notice and comment period for the declaration as it qualifies as final agency action under the APA. According to the states’ complaint, the Secretary violated the provision of the Medicare statute that requires notice and comment for any “rule, requirement, or other statement of policy” that changes the scope of benefits within Medicare or Medicaid. The proposed rules mentioned above have the requisite notice and comment period. However, according to the states, due to the impact of the permissive exclusion threat in the declaration on both Medicare-eligibility for providers and the need to change benefits availability in state Medicaid plans, the declaration itself should have been subject to notice and comment.

The complaint also asserts that the declaration is contrary to law and violates many other provisions of the Medicare act and thus should be voided under the provision of the APA that forbids agency action that exceeds statutory authority or is not in accordance with the law.

The court has not acted on the complaint and there is no hearing scheduled as of the date of this alert. But this litigation, which has been assigned to Judge Mustafa T. Kasubhai in the Eugene Division of the U.S. District Court for the District of Oregon (Oregon v. Kennedy, No. 6:25-cv-2409), bears watching. 

Timing and provider impact

Comments on the proposed regulations are due February 17, 2026. Given anticipated volume and complexity, CMS will need time (likely several months) to meaningfully review comments before publishing a final rule, and may otherwise risk challenges that the rule falls short of APA requirements. Any final rule would likely include a delayed effective date of at least 60 days, suggesting a potential effective date in late 2026 if finalized.

However, health care practitioners need to start preparing for the implementation of these proposed rules unless they are enjoined by the courts. It is possible that, starting in late 2026, CMS could start seeking to disenroll hospitals from FHCPs under these rules for providing gender affirming care to children, even in states where such care has not been banned and remains legal under state law.

Separately, the declaration took effect December 18, 2025 and it does not require rulemaking. Because it operates as a predicate for existing permissive exclusion authority, it could be invoked immediately to exclude persons from participation. Indeed, in a December 26, 2025, post on the social platform X, HHS (@HHSGov) announced that HHS General Counsel Mike Stuart “referred Seattle Children’s Hospital to [HHS-OIG] for failure to meet professional recognized standards of health care as according to Secretary Kennedy’s declaration that sex-rejecting procedures for children and adolescents are neither safe nor effective as a treatment modality for gender dysphoria, gender incongruence, or other related disorders in minors.” This referral could result in Seattle Children’s exclusion from FHCPs.

Notably, this is far from Seattle Children’s first legal skirmish over gender affirming care for minors. In 2023, the Texas Attorney General, Ken Paxton, issued a subpoena to Seattle Children’s seeking, among other things, children’s medical records. The Texas AG was purportedly investigating whether Seattle Children’s providers were providing gender affirming care to Texas minors, either in-person or virtually, in potential violation of the Texas Deceptive Trade Practices Act. Texas agreed to drop the investigation after Seattle Children’s provided sworn statements that it was not providing gender affirming care to Texas minors and gave up its Texas business license.

Recently in the fall of this year, and prior to the Secretary’s Declaration, unsealed court documents also demonstrate that Seattle Children’s successfully quashed a subpoena from the U.S. Department of Justice (DOJ) seeking, among other things, patient information and medical records regarding every patient who received gender affirming care at Seattle Children’s. The Court set aside the subpoena, finding that DOJ’s assertion that the subpoena was issued “to investigate a federal healthcare offense” to be “threadbare” and “more likely … pretextual.” In contrast, the Court noted that Seattle Children’s “present[ed] significant evidence that the DOJ issued the subpoena to pressure hospitals into ending gender-related care for minors.” Thus, the Court concluded, the subpoena was issued for an “improper purpose” and thus was not within its statutorily conferred authority. DOJ has sought reconsideration of the order setting aside the subpoena, which is still pending.

Seattle Children’s joins at least four other children’s hospitals that have received and challenged DOJ subpoenas seeking similar information and documents regarding children who received gender affirming care at their hospitals. See, e.g., In re Admin. Subpoena No. 25-1431-019, No. 1:25-mc-91324 (D. Mass.) (Boston Children’s Hospital); In re Subpoena No. 25-1431-014, No. 2:25-mc-39 (E.D. Pa.) (Children’s Hospital of Philadelphia); In re Dep’t of just. Admin. Subpoena No. 25-1431-030, 1:25-mc-63 (D. Colo. (Children’s Hospital of Colorado); QueerDoc, PLLC v. U.S. Department of Justice, No. 2:25-mc-42 (W.D. Wash.) (QueerDoc PLLC). The Seattle Children’s case was under seal until the Court’s December 11, 2025, order unsealing it; thus, other challenges to similar subpoenas may be out there.

It is clear that HHS is moving quickly to take action under the December 18 declaration. Providers and suppliers—even those indirectly involved in gender affirming care, such as supplying drugs or prosthetics or providing therapy—should assess exclusion risk and consult legal counsel regarding the impact of this declaration.

Broader policy and precedent considerations

The declaration’s mechanism invites broader questions. Could similar determinations be used to target other politically and publicly contested medical interventions, such as mifepristone, abortion, or vaccines, or—conversely—practices like conversion therapy? The prospect of defining “professionally recognized standards” through unilateral and purportedly immediately effective HHS declaration has far reaching implications for how the practice of medicine is regulated nationwide.

Reed Smith will continue to track the impact of this declaration and the proposed rules. If you have any questions about the impact of these actions by HHS on your organization, please reach out to the authors of this client alert or to the health care attorneys at Reed Smith.