On December 18, 2025, U.S. Department of Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. signed a declaration titled “Safety, Effectiveness, and Professional Standards of Care for Sex-Rejecting Procedures on Children and Adolescents” (Kennedy Declaration), which states the administration’s formal position that certain treatments for transgender minors do not meet professionally recognized standards of health care and could subject practitioners to exclusion from federal health care programs. The Kennedy Declaration asserts that puberty blockers, hormone therapy, and surgical interventions for transgender minors are “neither safe nor effective” and fail to meet “professionally recognized standards of health care.” The Kennedy Declaration further suggests that HHS’s Office of Inspector General (OIG) may exclude practitioners who provide such care from Medicare and Medicaid funding, including for services furnished outside federal programs.
HHS has since publicized referrals of more than ten hospitals to OIG, signaling its intent to operationalize a categorical, program-wide prohibition through subregulatory action rather than completed rulemaking.
As a matter of federal statutory and administrative law, however, HHS may not rely on the Kennedy Declaration to retroactively recoup Medicare or Medicaid payments, terminate participation in federal health care programs, or impose program-wide exclusions. Any change to payment, coverage, or eligibility standards must proceed through notice-and-comment rulemaking and would operate prospectively. OIG’s exclusion authority is case-specific and forward-looking, and it does not authorize retrospective sanctions.
Existing Medicare and Medicaid Coverage Framework
Current Medicare Coverage Policy. There is no national Medicare exclusion of coverage for transgender health care. In 2016, the Centers for Medicare and Medicaid Services (CMS) CMS issued a National Coverage Determination (NCD) on Gender Dysphoria and Gender Reassignment Surgery, which states that coverage for gender dysphoria-related surgery is determined on a case-by-case basis by local Medicare Administrative Contractors. That determination remains operative unless and until amended through rulemaking or a revised NCD process.
Current Medicaid Coverage Policy. Medicaid coverage varies by state. CMS must pay Federal Financial Participation (FFP) for services furnished under approved state plans. Currently, 11 states explicitly exclude the coverage of transgender healthcare by Medicaid for all ages, and three states explicitly exclude such coverage for minors. Twenty-six states, one territory, and Washington, DC explicitly cover transgender healthcare under Medicaid, and ten states and four territories have no explicit policy. Movement Advancement Project, Healthcare Laws and Policies: Medicaid Coverage for Transgender-Related Health Care (last updated Jan. 1, 2026). Whatever the variation, coverage determinations are governed by state-plan terms approved by CMS and by federal Medicaid requirements, not by subregulatory declarations.
Retroactive Payment Recoupment Is Foreclosed. The Medicare and Medicaid statutes, together with core administrative-law principles, sharply limit HHS’s ability to impose retroactive consequences. Under the Administrative Procedure Act (APA), substantive changes to legal standards governing payment, eligibility, or participation require notice-and-comment rulemaking. Absent clear congressional authorization, such changes apply only prospectively. Agencies may not recoup funds or penalize past conduct based on newly announced interpretations that depart from prior policy, particularly where regulated entities lacked fair notice.
Statutory Bars on Retroactivity. Any policy that changes a substantive legal standard governing Medicare benefits, payment, or eligibility requires notice-and-comment rulemaking and, absent clear statutory authorization, applies only prospectively. Efforts to recoup funds or penalize past conduct based on new subregulatory policies contravene the Medicare Act’s rulemaking and prospective-application provisions and violate core APA fair-notice principles. For Medicaid, when a state operates under an approved plan, the Secretary “shall pay” FFP for covered services. HHS may withhold future funds only after reasonable notice and opportunity for a hearing; it cannot unilaterally rewrite approved plan content or deny FFP for previously covered, lawful services via declaration.
The Declaration Cannot Supply a Valid Legal Predicate. The Kennedy Declaration is a subregulatory pronouncement. It does not carry the force of law and cannot, standing alone, establish binding clinical standards that override existing statutory and regulatory frameworks. The Medicare Act contains a non-interference clause that bars federal control over the practice of medicine. States and CMS have long operated under approved plans covering medically necessary transgender care for minors, and funding conditions must be unambiguous under the Spending Clause. Retroactive recharacterization of previously covered care as categorically below professional standards fails the clarity requirement and operates coercively. Categorical exclusions also risk conflict with Medicaid comparability and availability requirements, as courts have recognized when blanket exclusions target care for gender dysphoria.
OIG Exclusion Authority Is Limited. Exclusion requires notice and an opportunity to be heard and affects only future participation and payment. The statute governing OIG’s exclusion authority does not authorize retroactive recoupment of properly paid claims. Any exclusion action must be grounded in statutorily defined bases and supported by case-specific findings. OIG cannot bypass required procedures by treating a policy declaration as a self-executing disqualification standard. Nor may the agency use exclusion authority to impose a de facto nationwide clinical ban without engaging in rulemaking.
Agency Practice Underscores the Need for Rulemaking. Notably, on the same day the Kennedy Declaration issued, CMS proposed rules addressing Medicaid/CHIP funding and hospital Conditions of Participation for the pediatric care targeted by the Declaration. CMS provided a 60-day comment period, underscoring that program-wide changes to funding or participating standards require formal rulemaking and cannot be imposed retroactively by declaration.
What This Means for Hospitals and States
With the Kennedy Declaration now serving as the basis for OIG referrals, hospitals and states should understand the legal limits on HHS’s authority. HHS cannot retroactively reclaim Medicare or Medicaid payments or terminate participation based solely on the Kennedy Declaration.
Any substantive change to payment, coverage, eligibility, or Conditions of Participation must undergo rulemaking and apply prospectively to be lawful. For Medicaid specifically, CMS must continue paying FFP for services furnished under approved state plans unless and until plan terms are lawfully changed; any withholding is limited to future funds and requires notice and a hearing.
OIG exclusion actions, if initiated, must be individualized, prospective, and grounded in professionally recognized standards—not agency-created per se bans—and provide no basis for backward-looking sanctions or recoupment.
Next Steps
Developments in this space are rapidly evolving as the administration continues to target transgender health care for minors. Hospitals and states should continue administering care consistent with state law, approved plan terms, and existing Medicare coverage policies while maintaining robust documentation of medical necessity and compliance. Organizations should monitor the pending CMS rulemakings concerning Medicaid/CHIP funding and hospital Conditions of Participation related to transgender care for minors. Hospitals should also review state-plan provisions, provider agreements, and hospital Conditions of Participation for potential prospective changes and to prepare to challenge any attempted retroactive recoupments, FFP disallowances, or categorical provider exclusions premised on the Kennedy Declaration. Finally, hospitals should assess and prepare for potential OIG exclusion actions, including preserving evidence of compliance with professionally recognized standards of care.
Our team at PLG, which includes former attorneys from the Departments of Health & Human Services, Justice, and Education, can assist clients in navigating these evolving regulatory and enforcement challenges, ensuring compliance with applicable civil rights laws and administrative requirements while honoring institutional values.
