CMS Proposed Rules Prohibit Provision and Coverage of "Sex-Rejecting Procedures" for Minors Enrolled in Medicare and Medicaid

Overview: Trump Administration’s Proposed Rules Regarding Gender-Affirming Care for Minors

Since the signing of Executive Order 14187 (“Protecting Children from Chemical & Surgical Mutilation”) in late January 2025, the Trump Administration has made its skeptical stance on gender-affirming care—especially regarding services provided to minors—clear.

On December 18, 2025, the Department of Health and Human Services (HHS) took further action to codify its perspective into law by introducing two proposed rules (“CMS-3481-P: Medicare and Medicaid Programs; Hospital Condition of Participation: Prohibiting Sex-Rejecting Procedures for Children” and “CMS-2451-P: Medicaid Program; Prohibition on Federal Medicaid and Children’s Health Insurance Program Funding for Sex-Rejecting Procedures Furnished to Children”).

In the proposed rules, CMS replaces the term “gender affirming care” with  “sex-rejecting procedures” (SRPs), defined by the agency to encompass the administration or dispensing of puberty-blocking medications, cross-sex hormone therapy, surgeries affecting the breast, chest, and genitals, as well as other pharmaceutical or surgical interventions that seek to align an individual's bodily characteristics with a gender that does not match their biological sex at birth. The rules prohibit hospitals from performing “SRPs”, prohibit Federal Financial Participation (FFP) in Medicaid and CHIP for such services, and require all state Medicaid plans to confirm that federal funds will not be used to pay for “SRPs” delivered to minors.

The following day, Secretary Kennedy announced a third proposed rule (“45 CFR Part 84: Nondiscrimination on the Basis of Disability in Programs or Activities Receiving Federal Financial Assistance”) to clarify that the gender dysphoria does not constitute a disability under Section 504 of the Rehabilitation Act of 1973, which prohibits discrimination on the basis of disability in federally assisted and federally conducted programs and activities, including the Affordable Care Act.

• • CMS-3481-P | Proposes to add a new section to 42 CFR part 482, subpart C that will, if codified, prohibit Medicare and Medicaid-participating hospitals from performing gender-affirming care on individuals under the age of 18. Hospitals found to provide such services to minors would no longer qualify for Medicare and Medicaid certification and lose access to program funding.
    
    
  • CMS-2451-P | Proposes to prohibit Federal Financial Participation (FFP) in Medicaid for gender-affirming care for individuals under the age of 18 and forbid the use of Federal CHIP dollars to fund such services for individuals under the age of 19. The proposed rule would not preclude states from covering gender-affirming care with state-only funding outside of their federally matched Medicaid programs, nor would it prohibit the use of federal Medicaid or CHIP dollars for mental health treatments for gender dysphoria.
    
    
  • 45 CFR Part 84 | Proposes to revise 45 C.F.R. § 84.4(g) to clarify that the term “disability” does not include “gender dysphoria not resulting from physical impairments.” 45 C.F.R. § 84.4(g) is one of the implementing regulations for Section 504 of the Rehabilitation Act of 1973 (“Section 504”), which is incorporated by Section 1557, the nondiscrimination provision of the Affordable Care Act (“Section 1557”). Section 504 prohibits discrimination on the basis of disability in federally assisted and federally conducted programs and activities. 45 C.F.R. § 84.4(g) excludes certain conditions from the meaning of “disability’ by referring to 29 U.S.C. § 705(20)(F), which has excluded “gender identity disorders not resulting from physical impairments” since it was amended in 1992.

HHS contends that these policy changes are necessary to address what it describes as the rise in chemical and surgical interventions for children with gender dysphoria. To support this perspective, both CMS-3481-P and CMS-2451-P reference HHS’s 2025 review of scientific evidence and current best practices (originally issued in May and reissued in November) for treating children experiencing gender dysphoria, which concluded that pediatric medical transition (PMT) lacked sufficient scientific justification. That review further highlighted recent policy reversals in several European countries, described guidelines produced by the World Professional Association for Transgender Health (WPATH), the Endocrine Society, and the American Academy of Pediatrics (AAP) as being “very low quality”, and suggested that gender-affirming services should not be performed for individuals under 18 “in the absence of a reasonable expectation of proportionate medical benefit”. To reinforce HHS’s policy position, both CMS-3481-P and CMS-2451-P refer to medical services intended to align an individual's bodily characteristics with a gender other than their biological sex at birth as “sex-rejecting procedures” (SRPs).

Notably, the Administration is not limiting its restrictions to the provision and coverage of medical services. During the press conference on December 18, Secretary Kennedy announced that the FDA had issued warning letters to 12 manufacturers and retailers of breast binders, claiming their marketing of these items to minors violates federal law where they are marketed to children for the purpose of treating gender dysphoria. The warning letters assert that breast binders are classified as devices under Section 201(h) of the Federal Food, Drug, and Cosmetic Act (the “FDCA”), 21 U.S.C. § 321(h), and that because the 12 companies in question “manufacture” the breast binders within the meaning of 21 U.S.C. § 360(a)(1), the devices are required to be registered with HHS from October 1 to December 31 each year. The letters direct each company to “take prompt action” to register the devices and fix alleged misbranding. 

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Implications for Member, Providers, and Payors

If passed without revision, CMS-2451-P and CMS-3481-P would significantly reduce providers’ ability to deliver and payors’ capacity to pay for pediatric gender-affirming services, respectively. The proposed rules would also—given that Medicaid and CHIP members typically have limited financial resources—severely restrict minors’ access to care. While CMS-3481-P (affecting Medicare Conditions of Participation) does not specify a target effective date, CMS suggests in the economic analysis for CMS-2451-P (affecting Medicaid and CHIP funding) that its policies would become effective immediately upon the rule’s formalization on October 1, 2026.  

Proposed rules would withhold federal funding from certain health care entities providing or paying for gender-affirming care

Both proposed rules seek to curtail the provision of gender-affirming care to minors by withdrawing federal funding from those who deliver and pay for services.

To accomplish this goal, the proposed rule would add a new section to 42 CFR part 482, subpart C, prohibiting Medicare and Medicaid-participating hospitals from providing gender-affirming care to any individual under the age of 18. All hospitals interested in participating in federal health programs are required to meet the Medicare Conditions of Participation (CoP), which detail the essential safety standards for participating facilities in their treatment of Medicare and Medicaid enrollees.

CMS-2451-P takes a similar approach to curtailing payor coverage for pediatric gender-affirming care by withholding Medicaid and CHIP funding. If codified, CMS-2451-P would prohibit the use of federal funds for gender-affirming care for children under 18 years of age in the state Medicaid programs and individuals under 19 years of age in the state Children’s Health Insurance Programs (CHIP). Medicaid managed care plans would be responsible for covering and paying for services in accordance with federal law (i.e., not cover or pay for the services that are restricted federally).

In the proposed text for CMS-3481-P, the government indirectly acknowledges the impact these policies could have on minors’ access to not only gender-affirming care but also care overall. Per CMS’s own estimates, approximately half of all children in the U.S. receive health care through Medicaid. Moreover, the agency notes in the proposed rule that “while Medicare does not pay for a significant number of [gender-affirming care] procedures for children […] hospitals that participate in Medicare perform a considerable number of these procedures every year,” and that “Medicare hospital CoPs apply to hospitals providing services to patients receiving Medicaid covered services”.

While the agency notes in CMS-3481-P that, under Section 1801 of the Social Security Act, it may not “exercise any supervision or control over the practice of medicine or the manner in which medical services are provided,” (42 U.S.C. § 1395), CMS asserts that providing “SRPs” to minors is not healthcare and hence is not subsumed under the term of “the practice of medicine”. CMS also suggests that non-hospital providers can step in to fill the gap, as “primary care providers and endocrinologists outside of hospitals, who would not be affected by these requirements,” and could prescribe non-surgical treatments (e.g., puberty blockers and hormone replacement therapy).

Taken together, these statements imply that CMS intends, in promulgating this rule, to restrict hospitals from providing gender-affirming care even if these services are not reimbursed by federal health care programs. For example, if a hospital exclusively provides gender-affirming care to private insurance patients or self-pay patients, the provision of that care could still violate the CoP and lead to the termination of all Medicare and Medicaid funding. Many hospitals would not risk the loss of funding and may simply stop providing these services. Given the risk associated with this potential change, this rule, though still in proposed form, will likely have an immediate impact on hospitals, particularly those that offer specialty programs in gender affirming care.

Federal preemption of state laws will likely become a point of confusion if the proposed rules are finalized

Under CMS 2451-P, there is some flexibility for states to step in and provide alternate funding for these services. In CMS-2451-P, CMS states that its proposed policy of prohibiting the use of federal funds for pediatric “SRPs” would not preclude states from covering these services with state-only funding outside of their federally matched Medicaid programs. Theoretically, states could step in to cover the costs for gender-affirming care for minors using separate state funds, as the proposed rule allows; such an arrangement has been used historically to cover abortion costs. The Hyde Amendment similarly prohibits the use of federal funds for abortion, and many states cover those services for Medicaid members using separate state funds. In states that cover the services, minor Medicaid and CHIP members could continue to obtain coverage for gender-affirming care services in those states.

That said, given that there is no similar flexibility under CMS-3481-P, plans may be unable to find providers who are eligible to be in the plan’s network and willing to provide the services (at least with respect to hospital providers). While primary care providers and endocrinologists “outside of hospitals” would not be affected by the hospital CoP, they could be affected by the Medicaid rule if they treat children who are Medicaid beneficiaries, and—even if not directly prohibited from providing the services—many providers may simply determine that the enforcement risk relating to gender-affirming care for minors is too high.

Further, in CMS-3481-P, the agency contends that the proposed rule’s restrictions would preempt state and local laws that that require hospitals to deliver gender-affirming care to minors, as well as those that prohibit gender-affirming care services for children but allow for exceptions beyond those provided in this proposed rule.  The proposed rule limits exceptions to: “medically verifiable disorders” of sexual development, procedures not intended to align physical traits with an asserted gender identity—such as those to address physical disorders, injury, or illness—or procedures to treat complications arising from prior gender-affirming treatments. Notably, the agency asserts that this preemption would apply even for hospitals who are actively delivering such services (e.g., in cases where minors are already undergoing these procedures.) The agency argues that such statutes directly conflict with the exercise of CMS' statutory health and safety authority.

In practice, CMS-3481-P and CMS-2451-P would, if finalized as proposed, create tremendous confusion for providers and payors alike. Both proposed rules would drastically limit the providers who are willing to provide these services, as well as the Medicare and Medicare payors able to reimburse for services. State Medicaid agencies are already burdened by budget challenges and—even if potential preemption were not a concern—would likely be unable to allocate the funding required to close all gaps. Further, hospitals (and likely their affiliated medical systems) could not provide the services, regardless of payor. An inevitable and significant restriction in minors’ access to gender-affirming care will occur if both rules are codified without significant revision.

Final Thoughts

Both proposed rules are currently undergoing a 60-day review and comment period, which will expire 60 days after their publication date, December 19, 2025. Many of Crowell and Moring’s health care attorneys are former government counsel and, as such, can provide invaluable insight into both the rules and the process of submitting comments.

Given these proposed rules, health care entities may expect further efforts by the federal government to discontinue financial and other forms of support for gender-affirming care. However, the content of the rules is highly likely to draw critical comments and, if enacted in their present forms, court challenges. For now, payors, providers, and manufacturers alike should stay tuned and prepare for further developments in 2026.

Our team is available to answer questions and provide support to any health care organization that may be impacted by these proposed rules; please reach out to any of our authors or your usual Crowell contact for assistance.