CMS Rule Ends Medicaid, CHIP Funding for Pediatric Gender Care

CMS' final rule prohibiting federal Medicaid and Children's Health Insurance Program (CHIP) funding for sex-rejecting procedures (SRPs) for individuals under the age of 18 and 19 years, respectively, went into effect October 13, 2026.¹

Under this rule, CMS opted for the term SRP as opposed to gender-affirming care because the latter "inaccurately describes and characterizes the grave and possibly irreversible nature of these interventions."¹ These interventions include any 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."¹

CMS received approximately 11,000 public comments after the proposed rule was first published on December 19, 2025, and more than 90% of them opposed the rule.¹ CMS responded to comments in the final rule. It stated that the evidence for benefits of these interventions in children and adolescents with gender dysphoria is "of very low quality” and that the reviews it relied on concluded the evidence does not support broad use of these interventions in pediatric populations.¹

However, the pharmaceutical and surgical interventions classified as SRPs are also used for reasons outside of gender-affirming care. Examples include treating precocious puberty or treating adolescents who are intersex or have a medically verifiable disorder of sexual development. These uses are excluded from the rule's definition of SRPs, and the rule states that these individuals "do not fall under the FFP [federal financial participation] prohibition for sex-rejecting procedures."¹

The nuance within this rule may be difficult to understand for patients, as well as for providers and state Medicaid and CHIP programs. Here are 3 common questions about what this rule means for payers and providers.

How Will the CMS Rule Affect Medicaid and CHIP Spending?

CMS' analysis found that total spending on hormone therapy for children aged 6 through 17 years was $23.8 million in 2023. About 88% ($21.0 million) of that was for puberty blockers, and the remaining $2.8 million was for estrogen/anti-androgen and testosterone therapy.¹

These data cover claims with ICD-10 diagnosis codes related to transsexualism, gender identity disorder in childhood or in adolescence or adulthood, and personal history of sex reassignment.¹ Hormone therapy accounted for most of the approximately $31 million in total computable Medicaid and CHIP spending on these claims in 2023.¹ Those claims spanned:

• inpatient and outpatient hospital care with surgical procedures
• professional services
• prescription drugs with hormone therapy

Overall, CMS estimated that this rule will reduce total Medicaid and CHIP spending by $235 million from fiscal year (FY) 2027 through FY 2036, including $138 million in federal spending and $97 million in state spending, according to the rule's regulatory impact analysis.¹ The rule's text separately states that federal Medicaid spending will fall by about $175 million over the same period, a figure that does not match its own projections table.¹

The rule further states that states currently covering these services under Medicaid will see the largest reductions in Medicaid spending. States that had not banned gender dysphoria treatments for children as of 2023 accounted for 76% of spending.¹

How Will the Rule Affect Children Covered by Medicaid and CHIP?

SRPs include:

• puberty blockers
• cross-sex hormone therapies like estrogen and testosterone
• surgeries affecting the breast, chest, or genitals
• any other pharmaceutical or surgical intervention used for this purpose^1,3

Children and adolescents currently receiving cross-sex hormone therapy through federal Medicaid or CHIP funding will have a tapering-off period of up to 6 months from October 13, 2026, during which federal funding remains available.^1-3 The tapering period does not apply to puberty blockers or surgeries, for which federal funding ended on the effective date.¹

CMS acknowledged the rise in gender dysphoria diagnoses among youth in the US and abroad. It cited HHS' review of the evidence on surgical and pharmaceutical interventions to treat children and adolescents with gender dysphoria. That review found the evidence for benefit to be very uncertain and pointed to psychotherapy as a noninvasive alternative.¹ CMS stated that the review's findings align with conclusions reached by Sweden, Finland, and the United Kingdom, which now recommend psychotherapy as the first line of treatment.¹

Mental health coverage is preserved under federal Medicaid and CHIP funding. Medicaid's Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) provisions continue to ensure comprehensive coverage of mental health services for eligible children, and CHIP continues to require coverage of necessary mental health services.^2,3

What Can Providers Do for Children With Gender Dysphoria Under the New Rule?

The rule restricts federal payment, not the practice of medicine. Providers may still counsel patients and families on all treatment options, make their own clinical assessments, and recommend interventions they consider clinically appropriate.¹

Psychotherapy, counseling, and treatment for co-occurring conditions such as depression and anxiety remain federally matched, including through EPSDT for most Medicaid-enrolled children.^1,2 Providers can also bill Medicaid and CHIP for the same drugs and procedures when they are used for other purposes, such as treating precocious puberty, a medically verifiable disorder of sexual development, or complications from prior procedures.¹

For patients already on cross-sex hormones, providers have up to 6 months of federal funding to taper treatment. CMS notes the period is not intended to serve as a clinical guideline, and providers may choose a shorter timeline.¹

Puberty blockers, hormones, and surgery can still be provided where state law allows if they are paid for through state-only funds, private insurance, or out of pocket.^1,3 However, providers in the 27 states and 1 territory with restrictions may be barred from offering these treatments regardless of payer.¹ A separate proposed rule that would bar Medicare- and Medicaid-certified hospitals from performing these procedures on minors could further limit access if finalized.^1,3

References

1. Medicaid program; prohibition on federal Medicaid and Children's Health Insurance Program funding for sex-rejecting procedures furnished to children. Fed Regist. 2026;91(155):52406-52474. Accessed October 13, 2026. https://www.federalregister.gov/documents/2026/08/13/2026-16508/medicaid-program-prohibition-on-federal-medicaid-and-childrens-health-insurance-program-funding-for

2. CMS ends federal Medicaid and CHIP funding for sex-rejecting procedures for children and youth. News release. CMS. August 11, 2026. Accessed October 13, 2026. https://www.cms.gov/newsroom/press-releases/cms-ends-federal-medicaid-chip-funding-sex-rejecting-procedures-children-youth

3. CMS's final rule bans federal Medicaid funding for youth gender-affirming care. Crowell & Moring. August 19, 2026. Accessed October 13, 2026. https://www.crowell.com/en/insights/client-alerts/cmss-final-rule-bans-federal-medicaid-funding-for-youth-gender-affirming-care