New Regulation Prohibits Federal Medicaid Funds From Covering Gender-Affirming Medical Care for Young People

On August 11, 2026, the Centers for Medicare and Medicaid Services (CMS) issued a much-anticipated final rule prohibiting federal Medicaid or Children's Health Insurance Program (CHIP) funds from covering certain gender-affirming care services for young people. This follows a proposed rule issued in December 2025. CMS received nearly 35,000 comments on the proposal, and of the 11,000 comments posted, CMS writes that more than 90% were in opposition to the policy change. While it is not a blanket ban on gender-affirming care and expressly permits states to use state-only funds to cover these services, it could have a significant impact on access to care for young low-income transgender people.

While about half of states already restrict access to gender affirming care, KFF estimates that there are about 130,000 young trans people with Medicaid or CHIP coverage who live in states without restrictions. These enrollees, if they sought gender-affirming care, would face new limitations under the rule if their state does not provide state-funded access.

Despite gender-affirming care being a best medical practice, recommended by major medical groups, including the American Medical Association, American Academy of Pediatrics, and the American Psychological Association, the new rule builds on a range of administration actions aimed at restricting this care. States have also increasingly sought to limit access, with the number restricting access rising from just 4 in 2023 to 27 states today.

Specifically, the rule prohibits federal Medicaid dollars from covering puberty blockers, hormone therapy, and surgery (which is very rarely used among young people) for enrollees under the age of 18 in the Medicaid program and under the age of 19 in CHIP. It does not prohibit coverage of counseling or psychotherapy as part of gender-affirming care.

The most significant difference between the final and proposed rule is that the final rule includes a limited tapering period. For enrollees who are receiving hormone therapy as of the effective date of the rule (60 days after publication), federal funds can continue to cover the services "for a tapering period of up to 6 months." CMS added this provision "after careful consideration of the comments" and "to provide beneficiaries and their treating providers a reasonable opportunity to phase off these medications in a manner that allows for clinical discretion, if desired." The tapering provision does not apply to puberty blockers.

CMS estimates that Medicaid spent about $31 million on the prohibited services for enrollees under 19 years old in 2023, representing 0.003% of all Medicaid spending that year.

It is likely that there will be litigation challenging this rule. When the proposed rule was released, multiple state attorneys general and the ACLU immediately stated that they were opposed to the policies and planned to fight them.