CMS Final Rule Ends Federal Medicaid, CHIP Funding for Youth Gender-Affirming Care

A new CMS final rule will bar federal Medicaid and Children’s Health Insurance Program (CHIP) funding from covering puberty blockers, cross-sex hormones, and surgical interventions for transgender minors, the agency announced yesterday, August 11, 2026.¹

Scheduled to take effect on October 13, 2026, the rule applies to approximately 17 state Medicaid programs that currently cover one or more of these services.² CMS, which administers coverage for 35.5 million children through Medicaid and CHIP, said the change is grounded in an HHS evidence review that found the interventions carry a poor risk-benefit profile in pediatric patients.¹

CMS Details Funding Restrictions, Evidence Rationale

Under the rule, state Medicaid plans may not use federal financial participation (FFP) to pay for what CMS describes as "sex-rejecting procedures" for beneficiaries younger than 18²; it also blocks federal CHIP funding for enrollees younger than 19. The term broadly captures any pharmaceutical or surgical intervention intended to align a minor's body with a gender identity that differs from their sex, including puberty-suppressing medication, cross-sex hormone therapy, and surgeries such as mastectomy or vaginoplasty.

After the final rule goes into effect, federal Medicaid and CHIP funding will only be available to beneficiaries currently on hormone therapy for a tapering-off period of up to 6 months, intended to allow for a clinically managed transition off coverage.¹

However, the rule excludes treatment for diagnosed disorders of sexual development, procedures undertaken for other clinical purposes, and care for complications arising from a prior procedure. It also does not restrict coverage of mental health services, Medicaid's Early and Periodic Screening, Diagnostic, and Treatment benefit, or CHIP's mental health coverage requirements. In addition, states remain free to pay for these services using state-only Medicaid funds or through private insurance, as the rule applies only to federal financing.

The final rule is supported by a November 2025 HHS umbrella review of the pediatric gender dysphoria literature, which the agency said found limited evidence of benefit alongside more consistent signals of harm, including infertility, impaired bone density accrual, and surgical complications.² CMS also pointed to the UK's Cass Review, as well as independent systematic reviews in Sweden and Finland, from which the agency concluded that “the very low certainty of benefit and plausible evidence of risks of significant, irreversible harms does not support FFP for these procedures for the purposes described in this rule.”

In addition, a February 2026 position statement from the American Society of Plastic Surgeons recommending against gender-related surgery in minors was cited by CMS in support of the rule. The agency characterized it as evidence that clinical consensus is moving away from earlier guidance issued by groups like the American Medical Association, the American Academy of Pediatrics, and the World Professional Association for Transgender Health.

Once the final rule goes into effect, CMS projects it will reduce federal Medicaid and CHIP spending by $138 million from fiscal year 2027 through fiscal year 2036, with state Medicaid spending falling by another $97 million (combined Medicaid and CHIP spending would drop $235 million).² The agency based this number on an analysis of 2023 claims data showing roughly $31 million in total Medicaid and CHIP spending on gender dysphoria-related surgical and hormonal care for beneficiaries 17 and younger, the large majority of it for hormone therapy rather than surgery. States that had not already restricted these services accounted for about 75% of that spending, meaning the fiscal and administrative impact will fall unevenly across state Medicaid programs depending on their existing coverage policies.

Trump Administration Defends Rule as It Draws Criticism From Advocates

In yesterday’s news release, HHS Secretary Robert F. Kennedy Jr and CMS Administrator Mehmet Oz, MD, expressed support for the new rule.¹ Kennedy claimed that gender-affirming interventions carry serious risks and that they can cause irreversible harm.

“The federal government will no longer use Medicaid and CHIP dollars to fund procedures that fail to meet the evidentiary standard our children deserve,” he said in a news release.

Oz echoed Kennedy’s sentiments, emphasizing that US children deserve protection, not “experimental interventions” that he said pose serious risks with no proven benefits.

“By cutting off federal funds for these sex-rejecting procedures, we’re following the science, saving taxpayer dollars, and, most importantly, protecting children from potentially irreversible harm so they can truly flourish,” Oz said in a news release.

By contrast, several groups have spoken out against the final rule, including the Congressional Equality Caucus (CEC).³ In a statement released yesterday, CEC Chair Representative Mark Takano (D, California) emphasized that politicians should not be involved in the health care decisions of young people; instead, those decisions should be made between patients, their parents, and their provider.

“This rule is just another cruel, overreaching attack by an administration hell-bent on making a small, vulnerable minority of Americans’ lives worse,” he said in the statement. “As Chair of the [CEC], I’m going to continue fighting for the right of families to make their own medical decisions without politicians’ interference and for the right of young transgender people to access the care they need.”

Advocates for Trans Equality made a similar statement via their health policy analyst, SMK.⁴ The representative characterized the CMS rule as discriminatory and lacking a credible medical or financial basis, arguing that it will restrict access to medically necessary, transition-related care for transgender youth. Like CEC, SMK also criticized the federal government’s role in medical decision-making, saying the policy creates a discriminatory double standard by restricting treatments for transgender youth that remain available to those who are cisgender.

Advocates for Trans Equality also warned that the rule could exacerbate existing access challenges, including clinic closures and delayed care, particularly for families in rural areas, arguing that the policy further weakens the health care safety net for vulnerable populations.

“Good, evidence-based public health policy must focus on expanding access to medical care, fostering innovation, and reducing costs for all patients, not issuing discriminatory regulations that restrict access at a time [when] people across the country struggle with rising health care costs,” SMK said in a news release.

References

1. CMS ends federal Medicaid and CHIP funding for sex-rejecting procedures for children and youth. News release. CMS. August 11, 2026. https://www.cms.gov/newsroom/press-releases/cms-ends-federal-medicaid-chip-funding-sex-rejecting-procedures-children-youth
2. Medicaid Program: prohibition on federal Medicaid and Children's Health Insurance Program funding for sex-rejecting procedures furnished to children. Accessed August 12, 2026. https://www.federalregister.gov/public-inspection/2026-16508/medicaid-program-prohibition-on-federal-medicaid-and-childrens-health-insurance-program-funding-for
3. CEC blasts Trump rule to restrict care for trans youth on Medicaid, CHIP. News release. Congressional Equality Caucus. August 11, 2026. Accessed August 12, 2026. https://equality.house.gov/cms-rule-aug11-2026
4. Trump Medicaid rule to strip federal funding from transition-related care. News release. Advocates for Trans Equality. August 11, 2026. Accessed August 12, 2026. https://transequality.org/news/trump-medicaid-rule-strip-federal-funding-transition-related-care