Medicaid Program; Prohibition on Federal Medicaid and Children's Health Insurance Program Funding for Sex-Rejecting Procedures Furnished to Children

We proposed to add a new subpart N to 42 CFR part 441 to ensure care and services are provided consistent with the best interests of Medicaid recipients and ensure Medicaid payments are consistent with quality of care by prohibiting Federal Medicaid payments to States for sex-rejecting procedures provided to children under the age of 18. The basis and purpose of proposed subpart N (as described previously in this final rule) is reflected in proposed Sec. 441.800.

Within new subpart N, we proposed at Sec. 441.802(a) that State Medicaid plans must provide that the Medicaid agency will not make payment under the plan for sex-rejecting procedures for children under the age of 18. Per 42 CFR 430.10, the State plan is the vehicle through which States assure that their Medicaid programs will be administered in conformity with title XIX of the Act (including sections 1902(a)(19) and 1902(a)(30)(A) of the Act) and CMS' implementing regulations, and the State plan must also contain all information necessary for CMS to determine whether the plan can serve as a basis for FFP. Proposed Sec. 441.802(a) would not preclude States from covering sex-rejecting procedures with State-only funding outside of their Federally-matched Medicaid programs. We proposed at Sec. 441.802(b) that FFP would not be available in State expenditures for sex-rejecting procedures for children under the age of 18.

Proposed Sec. 441.801 would define sex-rejecting procedures as any pharmaceutical or surgical intervention that attempts to align a child's physical appearance or body with an asserted identity that differs from the child's sex either by: (1) intentionally disrupting or suppressing the normal development of natural biological functions, including primary or secondary sex-based traits; or (2) intentionally altering a child's physical appearance or body, including amputating, minimizing, or destroying primary or secondary sex-based traits such as the sexual and reproductive organs. However, our definition also provided that the term sex-rejecting procedures would not include procedures undertaken: (1) to treat a child with a medically verifiable disorder of sexual development; (2) for purposes other than attempting to align a child's physical appearance or body with an asserted identity that differs from the child's sex; or (3) to treat complications, including any infection, injury, disease, or disorder that has been caused by or exacerbated by the performance of sex- rejecting procedure(s).

Given States' obligations under sections 1902(a)(19) and 1902(a)(30)(A) of the Act to assure care and services are provided consistent with the best interests of Medicaid recipients and that payments are consistent with quality of care, respectively, we believed that our proposed prohibition of FFP for sex-rejecting procedures for children under age 18 was necessary given the lack of an adequate evidence base for the effectiveness of these treatments for the purposes that would be included in our definition and the significant potential for negative and irreversible side effects.

We noted that CMS has imposed age limitations on the availability of Federal funding for certain procedures in the Medicaid program before. CMS has long prohibited, at Sec. 441.253, Federal funding for permanent sterilizations furnished to individuals under age 21, motivated by concerns about potential coercion, informed consent, and patient regret that were based on data specifically related to permanent sterilizations (see preamble discussion at 43 FR 52146, 52151 through 52153). In this context, our concerns about the effectiveness of sex-rejecting procedures and the plausible evidence for risk of irreversible harm motivated our proposal to prohibit Federal funding for sex-rejecting procedures for children under the age of 18. Specifically, the proposed rule recognized that the more cautious approach of psychosocial support to treat individuals diagnosed with gender dysphoria prior to age 18, which is the legal age of majority in nearly all U.S. States and Territories,159 160 better protects children and youth from adverse effects of any such procedures.

\159\ CMS is aware that 3 States--Alabama, Nebraska, and Mississippi--recognize higher ages as the age of majority. See “Age of Majority by State 2025,” World Population Review, accessed August 11, 2025, https://worldpopulationreview.com/state-rankings/age-of-majority-by-state. CMS proposed to prohibit FFP in State expenditures within the Medicaid program for sex-rejecting procedures for children under the age of 18 to correspond to the legal age of majority used by the overwhelming majority of States and Territories. Because section 2110(c)(1) of the Act defines “child” for purposes of CHIP as an individual under age 19, CMS proposed to prohibit FFP in State expenditures within CHIP for sex- rejecting procedures for children under age 19.

\160\ “Age of Majority by State 2025,” World Population Review, accessed September 9, 2025, https://worldpopulationreview.com/state-rankings/age-of-majority-by-state.

Three states have a different, higher age of majority. Alabama and Nebraska's age of majority is 19 and Mississippi has the highest age of majority at 21.\161\ We noted that this rule would not conflict with the age of majority in Alabama, Nebraska and Mississippi because these States recognize higher ages of majority than this final rule. Under this rule, FFP for sex-rejecting procedures would be available for Medicaid coverage at age 18, which is a lower age than the age of majority in these States. Additionally, nothing in this rule preempts State authority to regulate the age of majority in their State, nor does it interfere with a State's ability to fund these services with State-only funds. The rule makes age 18 as the minimum age for Federal payment of sex-rejecting procedures under the Medicaid program, should a State include such procedures in their program.

\161\ “Age of Majority by State 2025,” World Population Review, accessed September 9, 2025, https://worldpopulationreview.com/state-rankings/age-of-majority-by-state.

We originally considered establishing the prohibition on Federal reimbursement of sex-rejecting procedures to individuals under age 19

as we proposed for CHIP. However, age 19 had no specific meaning for the Medicaid program and, as stated, was a year older than the legal age of majority in nearly all U.S. States and Territories. By comparison, this is not true under CHIP, as the statutory definition of a child in CHIP under section 2110(c)(1) of the Act is an individual under 19 years of age. In addition to other issues, we solicited comment on the operational feasibility of States in implementing the under-age 18 prohibition in Medicaid and the under-age 19 prohibition in CHIP. A summary of the comments and our responses are at the end of this section.

As discussed previously, States have obligations under sections 1902(a)(19) and 1902(a)(30)(A) of the Act to ensure that Medicaid- covered care and services are provided in a manner consistent with the best interests of beneficiaries and that payments for Medicaid-covered care and services are consistent with quality of care. For the reasons discussed in the proposed rule and this final rule, CMS believes prohibiting Federal Medicaid funding for sex-rejecting procedures for children under the age of 18 is warranted to help ensure that States meet these statutory obligations.

We believe that the definition of sex-rejecting procedures provides an appropriate degree of clarity and certainty regarding which sex- rejecting procedures would and would not be subject to the prohibitions at proposed Sec. 441.802. We believe the definition is narrowly tailored and appropriate to exclude only FFP for treatments CMS has determined to lack sufficient evidence of safety and effectiveness for their intended purposes. Examples such as procedures to treat precocious puberty, therapy subsequent to a traumatic injury, or the use of hormone replacement therapy to treat a growth hormone deficiency would not fall under the definition of sex-rejecting procedures, and Federal Medicaid payment for such procedures would therefore not be prohibited for individuals under the age of 18, when medically necessary. As the HHS Review explains, central precocious puberty and gender dysphoria are distinct clinical conditions. In addition, because the definition is narrowly tailored in this way, we believe that States will be able to administer Medicaid coverage for drugs in a manner that is consistent with both the rule and the requirements in section 1927 of the Act. Section 1927 of the Act governs the Medicaid Drug Rebate Program and payment for covered outpatient drugs (CODs), which are defined in section 1927(k)(2) of the Act. In general, if manufacturers enter into a National Drug Rebate Agreement (NDRA) as set forth in section 1927(a) of the Act, payment is available for the CODs covered under that NDRA for medically accepted indications.\162\ As defined in section 1927(k)(6) of the Act, “medically accepted indications” mean use for a COD approved under the Federal Food, Drug, and Cosmetic Act or approved for inclusion in any of the compendia described in subsection 1927(g)(1)(B)(i) of the Act. There is no pharmaceutical that is approved for these sex-rejecting procedures; the pharmaceuticals that are used for these procedures are approved for other indications. Thus, these pharmaceuticals will continue to be coverable by Medicaid programs for other indications in accordance with section 1927 of the Act to the extent that the manufacturer of these pharmaceuticals participates in the Medicaid Drug Rebate Program and complies with other requirements set forth in section 1927 of the Act, as discussed earlier in this Preamble. In addition, we note that the rule only applies to pharmaceuticals that are used in the definition of sex- rejecting procedures and would not apply to other pharmaceuticals that are prescribed to a child.

\162\ The NDRA does not have a specific OMB number, however the OMB package that contains all of the information a manufacturer has to report once entering into an NDRA is included in CMS 367a-367e.

As noted previously, the definition of sex-rejecting procedures categorically excludes procedures undertaken (1) to treat a child with a medically verifiable disorder of sexual development; (2) for purposes other than attempting to align a child's physical appearance or body with an asserted identity that differs from the child's sex; or (3) to treat complications, including any infection, injury, disease, or disorder that has been caused by or exacerbated by the performance of sex-rejecting procedure(s). We reiterate that these regulatory changes do not prohibit the use of Federal Medicaid dollars for mental health treatments for conditions such as gender dysphoria.

In addition, to further explain the meaning of terms used in the sex-rejecting procedures definition, we also proposed definitions at new Sec. 441.801 that would apply to subpart N of part 441. We define FFP for purposes of subpart N of part 441 as Federal financial participation, recognizing the longstanding term used in the Medicaid program to describe the Federal Government's matching arrangement with States and Territories. We also define “female” as a person of the sex characterized by a reproductive system with the biological function of (at maturity, absent disruption or congenital anomaly) producing eggs (ova). We define “male” as a person of the sex characterized by a reproductive system with the biological function of (at maturity, absent disruption or congenital anomaly) producing sperm. We define “sex” as a person's immutable biological classification as either male or female.

A landmark study of and model for anisogamy established that differences in gamete size, and the associated differences in gamete production time, lead to stable sexual dimorphism and the establishment of two sexes: ovum producers (females) and sperm producers (males).\163\ Additionally, more recent literature acknowledges differences in sex roles but maintains that such differences can still be traced to the concept of anisogamy and the resultant sexual dimorphism that remain the root cause of sex specific selection, the sex roles, and the biological determination of sex.\164\ We believe our definitions of female, male, and sex are appropriately rooted biological concepts. In addition to other issues, we solicited comments on whether these proposed definitions of “sex”, “male”, and “female” could pose challenges to States in operationalizing this proposed prohibition on Federal reimbursement of sex-rejecting procedures or other aspects of the Medicaid program or CHIP.

\163\ G.A. Parker et al., “The origin and evolution of gamete dimorphism and the male-female phenomenon,” Journal of Theoretical Biology 36, no. 3 (1972): 529-553, https://doi.org/10.1016/0022-5193(72)90007-0.

\164\ Lukas Sch[auml]rer et al., “Anisogamy, chance and the evolution of sex roles,” Trends in Ecology & Evolution 27, no. 5 (2012): 260-264, https://doi.org/10.1016/j.tree.2011.12.006.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Many commenters supported the proposed rule, specifically the proposed definitions of “male,” “female,” and “sex,” because they believed that sex is innate and cannot be changed. These commenters stated that DNA is not changed by sex-rejecting procedures and that no individual can be born in the wrong body. Many commenters supported the proposed rule because of their religious beliefs that attempting to change one's sex goes against God's design. Many commenters supported the proposed rule because they believed that

attempting to change one's sex is an unethical, scientifically incorrect, harmful, or medically unnecessary practice that should be stopped. Several commenters stated that only psychological care should be offered to children for the treatment of gender dysphoria. Several commenters indicated they believed providing sex-rejecting procedures to children and youth pathologizes normal struggles that many children have with their body image as they mature. Several commenters stated that these procedures interrupted or interfered with normal adolescent development and several commenters characterized these interventions as unnecessary because they expected gender dysphoria to resolve without the need for medical intervention.

Response: We appreciate commenters who stated support for the proposed definitions of “sex,” “male,” and “female” set forth in the proposed regulatory text at Sec. 441.801. As stated in the preamble of the rule, these definitions are rooted in the biological concept of anisogamy and the resulting sexual dimorphism that underlies the two sexes.

For comments noting support on religious grounds, we note that this regulation is not based on, nor does it endorse, any specific religious doctrine or belief. Rather, it is grounded in sections 1902(a)(19), 1902(a)(30)(A), 2101(a), and 2102(a)(7)(A) of the Act and in the current state of the medical evidence regarding the risk/benefit profile of sex-rejecting procedures for children. We recognize that concerns about protecting children from potentially harmful and irreversible medical interventions are shared across communities for a variety of reasons.

For comments stating that gender dysphoria should be addressed exclusively through psychological treatment, CMS notes that the regulation does not affect the continued use of Federal Medicaid and CHIP funds for mental health treatment and psychotherapy. As discussed in Section I.D. of the preamble of the rule, psychotherapy represents a noninvasive intervention that has been proven effective for many mental health conditions that frequently co-occur with gender dysphoria, and multiple countries that have independently reviewed the evidence on these procedures have similarly recommended psychosocial support as the first line of treatment. We believe that the prohibition on FFP for sex-rejecting procedures reflects our determination that Federal funds should be directed toward interventions with a more favorable and better-established evidence base.

Comment: Commenters offered a range of views on the definitions in the proposed rule. A commenter stated support, stating that the definitions were medically and scientifically accurate. A few commenters offered suggestions, including adding a definition of meaningful informed consent and harmonizing definitions across the 42 CFR part 441 and 42 CFR part 482 rules. A few commenters did not agree with the definitions, stating that they were overly broad, unclear, difficult to operationalize, not authorized by the governing statutes, or that the language demonized gender-affirming care and those involved in providing it.

Response: We appreciate the commenter who supported the definitions in this rule and agree that biologically grounded, clear definitions are important for the administrability of the policy finalized here. In response to the commenter who suggested that we include a definition of meaningful informed consent, we note that the rule does not alter existing State requirements for informed consent, which continue to govern the provision of medical care to children. We do not agree with commenters who stated that the definitions are overly broad, unclear, or not authorized by the governing statutes. The definitions of “sex,” “male,” and “female” are grounded in biology and are necessary to give meaning to the purpose-based definition of “sex- rejecting procedure.” \165\ This purpose-based approach is more precise and less sweeping than a categorical exclusion of specific drugs or procedures, and it reflects our careful consideration of the range of medical uses for the interventions addressed in this rule.

\165\ Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government, Exec. Order No. 14168, 90 FR 8615 (January 30, 2025), https://www.govinfo.gov/content/pkg/FR-2025-01-30/pdf/2025-02090.pdf.

Comment: Several commenters did not agree with the definitions of female and male in the proposed rule. A few commenters stated that they did not agree with both definitions because they ignored the role of gender identity in individual human experience and biology. A commenter believed the definitions of female and male were circular because each relied on the definition of sex, while the definition of sex in turn relies on the definitions of female and male. Several commenters stated that the definitions were too narrow and ideologically based.

Response: We do not agree with commenters who stated that the proposed definitions of female and male are inadequate, circular, or scientifically inaccurate. The definitions adopted in this rule--that “female” means a person of the sex characterized by a reproductive system with the biological function of (at maturity, absent disruption or congenital anomaly) producing eggs (ova), and that “male” means a person of the sex characterized by a reproductive system with the biological function of (at maturity, absent disruption or congenital anomaly) producing sperm--are grounded in established biological science regarding sexual dimorphism and gamete production. These definitions are consistent with the definition of “sex” in this rule and with similar definitions used in other recent Federal regulatory actions.

We also acknowledge that the definitions do not incorporate concepts of gender identity. This is intentional. The definitions in this rule are intended to reflect sex, based on biology, as relevant to the purpose of the prohibition on sex-rejecting procedures, which is aligning a child's physical appearance or body with an asserted identity that differs from the child's sex.

Comment: Many commenters stated concern that CMS' proposal did not provide adequate protections for individuals with intersex conditions. Some commenters estimated that there are approximately 6 million individuals who are intersex. Commenters stated that these conditions are complex and may involve multiple sets of gonads, not be detectable at birth, involve extra chromosomes or differences in hormone levels, and asserted that these conditions would require high-cost efforts like karyotyping to determine treatment paths to align with the proposed regulations. A commenter suggested that the “anomaly” language in each definition would not include such individuals because such conditions are a natural variation of human experience rather than an anomaly. The commenters also argued that CMS' proposed examples of conditions where a child's “reproductive or sexual anatomy does not develop in typical ways due to genetic, hormonal, or other factors that can be medically verified” excluded such individuals and did not sufficiently address how they must navigate the proposed regulations when receiving care. Several commenters stated concerns that these individuals may face care delays if their care involved interventions considered to meet the proposed definition of a “sex-

rejecting procedure”, including testosterone or estrogen therapy. Finally, commenters argued that CMS created a double standard in allowing the continuation of medical interventions for patients with disorders of sexual development without their informed consent. Many commenters requested CMS prohibit funding for procedures conducted on children with these conditions who may receive non-consensual corrective surgeries that may negatively impact their physical, sexual, and psychosocial well-being. Commenters stated that these were non- medical interventions that could be delayed until later in life. Several commenters also highlighted public statements from professional organizations, governing bodies, government leaders, and other countries' approaches along with peer-reviewed publications that similarly concluded that non-consensual procedures on such infants should be prohibited. A commenter questioned why CMS departed in the proposed rule from the 2025 HHS report urging the protection of informed consent rights of such patients.

Response: We appreciate commenters raising concerns about individuals with disorders of sexual development and the adequacy of protections in this rule. We acknowledge commenters' observations that the boundaries between disorders of sexual development and other conditions may not always be clear-cut and that the definition of “medically verifiable disorder of sexual development” gives discretion to the reasonable medical judgment of qualified providers to make such assessments in accordance with standard medical practice. We want to be clear that individuals with medically verifiable disorders of sexual development are excluded from the prohibition on FFP for sex- rejecting procedures. This exception is specifically intended to ensure that medical care for children with disorders of sexual development, including surgical and pharmaceutical interventions that may be appropriate for such conditions, is not disrupted by this rule. While we acknowledge that some individuals may not view themselves as having a disorder of sexual development, and may prefer the term “intersex,” we clarify here that these individuals do not fall under the FFP prohibition for sex-rejecting procedures.

We acknowledge commenters' concerns about non-consensual surgical interventions on infants and children with disorders of sexual development. Those concerns are outside the scope of this rule, which addresses Federal Medicaid and CHIP funding for a defined category of procedures. This rule neither mandates nor endorses surgical or any other interventions on individuals with disorders of sexual development.

Comment: A few commenters provided suggested revisions to the definitions of both female and male. For female, a commenter recommended CMS finalize a definition aligned with that in the Chloe Cole Act: “Female is a person who naturally has, had, will have, or would have but for a congenital anomaly or intentional or unintentional disruption, the reproductive system that produces, transports, and utilizes the large gamete (ova) for fertilization.” For male, a commenter recommended CMS finalize a definition aligned with the Chloe Cole Act: “Male is a person who naturally has, had, will have, or would have but for a congenital anomaly or intentional or unintentional disruption, the reproductive system that produces, transports, and utilizes the small gamete (sperm) for fertilization.” Commenters for both definitions also suggested including references to XX and XY chromosomes in the respective definitions.

Response: We appreciate commenters who offered suggested revisions to the definitions of female and male. We have considered the alternative formulations proposed, including language modeled on the Chloe Cole Act and proposals to incorporate chromosomal references. After careful consideration, we are retaining both definitions as proposed. We believe the definitions as finalized, grounded in reproductive system function and gamete production, are biologically accurate, administrable, and appropriate for the purposes of this rule. The definitions' reference to “absent disruption or congenital anomaly” provides sufficient flexibility to account for individuals whose reproductive development has not followed a typical course.

Comment: A few commenters supported CMS' definition of sex outlined in the proposed rule. A commenter agreed that sex is unchangeable and determined by objective biology. A commenter appreciated that the definitions aligned with the Hospital COP rule. A commenter stated that clear definitions reduce public confusion between sexuality and gender identity.

Response: We appreciate the commenters who support the definition of sex in this rule. We agree that clear and biologically grounded definitions are important for the administrability of the policy finalized in this rule and for providing clarity to States, providers, and beneficiaries.

Comment: Many commenters did not agree with CMS' definition of sex outlined in the proposed rule. Many commenters asserted that science demonstrated that sex is not binary, sex is complicated and the proposed rule fails to account for intersex individuals. Several commenters stated that the definition of sex was discriminatory and politically and ideologically motivated. Several commenters stated that sex and gender are not the same thing, and that they do not always correlate. A commenter stated that the Federal government should not be in the business of or have the right to “reduce human beings to producers of reproductive cells.”

Response: We do not agree with commenters who state that the definition of sex in this rule is scientifically inaccurate or fails to account for biological complexity. The definition--that “sex” means a person's immutable biological classification as either male or female-- reflects the established biological understanding that sexual reproduction involves two distinct reproductive strategies associated with the production of large gametes (ova) and small gametes (sperm), giving rise to a stable sexual dimorphism. This understanding is well- established in the scientific literature, as discussed in the preamble to the rule.

In humans, it is not possible for a person to have two fully functional reproductive systems capable of producing both eggs and sperm. At the moment of fertilization, a human embryo receives a fixed set of chromosomes from the egg and sperm. That genetic blueprint contains all the information that will ultimately guide whether the unborn child develops along the male or female pathway. Human sexual development is organized in such a way that once the embryo begins differentiating along either the male or female pathway, the other pathway is actively suppressed. Once this developmental pathway is initiated, it proceeds in one direction and does not reverse.

We acknowledge that biological sex development is not always typical and that a small number of individuals have conditions affecting the development of their sexual organs. These cases do not disprove the binary nature of sex reflected in the definitions of male or female. For example, there are rare developmental conditions, sometimes grouped under disorders (or differences) of sexual development, in which tissue from both testes and ovaries is present

(for example, ovotesticular disorders of sexual development). In such cases, small amounts of tissue from both pathways can exist in the same individual. However, only one set of reproductive structures is ever dominant and functional in producing gametes. There are no documented cases in humans of an individual with both a fully functional set of testes and a fully functional set of ovaries.

As discussed in the proposed rule and in our responses regarding the definitions of male and female, individuals with medically verifiable disorders of sexual development are expressly excluded from the prohibition on FFP for sex-rejecting procedures. The definition of sex in this rule does not eliminate or invalidate the medical recognition of such conditions; it provides a biological reference point for the purposes of the prohibition finalized in this rule.

We acknowledge that unlike sex, which has a definite and established meaning, gender identity is a distinct but internally inconsistent concept that diminishes sex as an identifiable or useful category but nevertheless maintains that it is possible for a person to be born in the wrong sexed body. The definitions in this rule address sex, as biologically understood and defined, because the prohibition on sex-rejecting procedures is defined in relation to interventions that attempt to align a child's physical appearance or body with an asserted identity that differs from the child's sex.

Comment: A few commenters proposed alternatives to the definition of sex. A commenter recommended CMS finalize a definition of sex that aligned with that in the Chloe Cole Act. A commenter suggested including references to XX and XY chromosome to the definitions of sex.

Response: We appreciate commenters who offered suggested revisions to the definition of sex. For the reasons discussed in our response to other comments related to the definition of sex, we are retaining the definition as proposed. We believe the finalized definition is scientifically grounded, consistent with other recent Federal regulatory definitions, and appropriate for the purposes of this rule.

Comment: Several commenters supported the use of the proposed term “sex-rejecting procedure.” The commenters believed that this term was appropriate for distinguishing between procedures conducted to treat sexual development disorders, and those procedures performed to align an individual's body with an identity that differs from an individual's sex. A commenter suggested that 42 CFR 440.230 be amended as well to prohibit specifically defined sex-rejecting procedures, require providers to conduct time-defined evaluations and prioritize psychotherapy, define specific exceptions and restrictions, and conduct enforcement through auditing measures. The commenter suggested that parallel amendments be made to CHIP at 42 CFR 457.53, TRICARE at 32 CFR 199.4 and FEHB at 5 CFR 890.203.

Response: We appreciate commenters who support the term “sex- rejecting procedure” and for the purpose-based approach to defining the prohibited category of interventions. We agree that a purpose-based definition, which allows payment of the same pharmaceutical or surgical interventions for other medically indicated purposes, is an appropriate approach that reflects the targeted nature of this prohibition. However, we are declining to additionally modify Medicaid or CHIP regulations and note that amendments to TRICARE or FEHB regulations are outside of our purview.

Comment: Many commenters did not agree with the proposed rule's use of the term “sex-rejecting procedures,” stating that it was ideologically driven, scientifically imprecise, and not recognized in medical practice, peer-reviewed literature, insurance coding standards, or major medical association guidelines. Commenters stated that “gender-affirming care” was the appropriate clinical term and should be reflected in Federal regulations. Several commenters stated that the term was absent from billing codes, procedure categories, and other State and Federal statutes, and expressed concern that its ambiguity would create confusion in claims adjudication and compliance, particularly for Medicaid managed care organizations. A commenter stated that CMS used different terminology (“specified sex-trait modification procedure”) in the 2025 Marketplace Integrity and Affordability Final Rule without explaining the distinction. Another commenter indicated that the inclusion of “intentionally” in the definition imposed an unrealistic requirement for payors to determine a provider's intent at the time of treatment. A commenter requested that CMS clarify the role of diagnosis and procedure codes in implementing the rule to reduce inconsistent coverage determinations and appeals. Several commenters also raised concern that CMS' terminology departed from the HHS Review's own use of “pediatric medical transition” and overrode clinical determinations made by licensed providers and established standards of care.

Response: We acknowledge commenters' concerns regarding the term “sex-rejecting procedures” and recognize that this term is not currently part of the standard clinical lexicon used by major medical organizations, which generally use the term “gender-affirming care.” However, we believe the term “gender-affirming care” inaccurately describes and characterizes the grave and possibly irreversible nature of these interventions, and biases treatment in favor of hormonal and surgical interventions. As the HHS Review explains, “In this context, the understandable desire to avoid exclusionary or pathologizing language--combined with beliefs firmly embedded in the field--has led to a vocabulary and a mode of communicating that is scientifically ungrounded, that presupposes answers to ethical controversies, and that is in other ways misleading.” \166\ The HHS Review continues: “`Affirming' has a positive connotation, and someone who objects to `gender-affirming surgery' sounds lacking in compassion. The euphemisms `chest surgery' and `top surgery' gloss over the relevant fact that breasts are removed.” \167\ The term used in this rule is not intended to function as a clinical descriptor; rather, it describes a defined set of pharmaceutical and surgical interventions for the specific purpose of this rule, namely, interventions that attempt to align a child's physical appearance or body with an asserted identity that differs from the child's sex and which do not fall within an exception. The definition of “sex-rejecting procedure” in this rule is purpose- based, meaning that the same pharmaceutical or surgical intervention may or may not constitute a sex-rejecting procedure depending on the purpose for which it is provided.

\166\ HHS Review, 31.

\167\ HHS Review, 31-32.

We acknowledge that commenters raised concerns about the operational feasibility of a purpose-based definition, including how payors would determine the purpose behind a provider's claim. We address those operational concerns in our response to comments on administrative and operational challenges above.

We also acknowledge that the term used in this rule differs from the term “specified sex-trait modification procedure” used in the 2025 Marketplace Integrity and Affordability Final Rule. The shift in terminology follows input the agency received in

comments received for the 2025 Marketplace Integrity and Affordability Proposed rule that the term “sex-trait modification” is on its face overbroad and imprecise by lacking an explicit purpose-based element, while “sex-rejecting procedure” is a more consistent, succinct, accurate, and precise term to refer to the hormonal and surgical interventions at issue. Additionally, a recent State Department regulation used the term “sex-rejecting procedures” in prohibiting recipients of foreign assistance to provide such procedures.\168\ We do not believe the use of different terminology in different regulatory contexts creates inconsistency, as each rule operates within its own statutory framework and applies to a different set of programs and populations.

\168\ 2 CFR pt. 603 (2026).

Comment: A few commenters recommended revisions to the definition of sex-rejecting procedures. A commenter did not agree with the term “sex-rejecting procedures” and believed that “transition-related healthcare” should be used as an alternative term. A commenter indicated that “disorders of sexual development” include defined conditions, such as atypical development of sex chromosomes or genitalia or androgen insensitivity syndrome, that should receive Federal coverage for healthcare interventions addressing such conditions. The commenter indicated that covered healthcare interventions would be inclusive of reconstructive procedures aimed at restoring form and function to be consistent with an individual's genetic profile. A commenter indicated that CMS should be more definitive in the rule language that psychotherapy for gender dysphoria is not a prohibited procedure. Alternatively, another commenter requested CMS clarify that gender-affirming mental health counseling and psychotherapy are prohibited procedures. A commenter suggested revising the definition of sex-rejecting procedures to allow for coverage when a patient had a history of attempted suicide or suicidal ideation or was likely to experience such as a result of losing care.

Response: We appreciate commenters who offered suggestions related to the definition of sex-rejecting procedures. After careful consideration, we are retaining the definition as proposed (with a change that replaces “child” with “individual” noted below). We believe the purpose-based definition provides the appropriate degree of precision while allowing payment of the same pharmaceutical or surgical interventions for other medically indicated purposes. As indicated above, procedures to treat disorders of sexual development are excluded from the prohibition on federal funding for sex-rejecting procedures.

In response to commenters who recommended that we be more explicit that psychotherapy and mental health counseling for gender dysphoria are not prohibited by this rule, we affirm that these services are not sex-rejecting procedures as defined in this rule and remain federally matchable under Medicaid and CHIP. Federally matched Medicaid and CHIP coverage for mental health services, including psychotherapy, remains available to all eligible children, including those diagnosed with gender dysphoria.

In response to commenters who suggested that the prohibition should include an exception for patients with a history of attempted suicide or suicidal ideation, we note that the prohibition on FFP for sex- rejecting procedures does not eliminate coverage of other medically necessary services, including mental health interventions, for children at risk of self-harm.

We are finalizing the definitions in Subpart N as proposed, with the exception of revising references to “child” in the definition of “sex-rejecting procedure” to “individual”. The procedures themselves are not differentiated between children and adults; however, the prohibition on FFP for these procedures applies only to individuals under the age of 18 in Medicaid and under the age of 19 in CHIP. We have also added a new Sec. 441.802(c) to specify in regulation text the availability of FFP for cross-sex hormone therapy during a tapering period of up to 6 months from the effective date of this final rule for individuals receiving such therapy as of the effective date of the rule.

We proposed to revise subpart D in 42 CFR part 457 to prohibit Federal CHIP payments to States for sex-rejecting procedures provided to children. The purpose of this section was to ensure that CHIP is operated in an effective and efficient manner that is coordinated with other sources of health benefits coverage, including Medicaid, for children consistent with section 2101(a) of the Act by prohibiting Federal financial participation in payments by States for sex-rejecting procedures for a child under the age of 19. This would promote consistency between CHIP and Medicaid.

The prohibition on FFP for payments by States for sex-rejecting procedures for children applies in the same manner described in Medicaid at Sec. 441.802 to a State administering a separate CHIP except that it applies to children under the age of 19 in accordance with the definition of a targeted low-income child at Sec. 457.310. This prohibition would apply to CHIP regardless of the type of health benefit coverage option described at Sec. 457.410. The definitions applied under Medicaid at Sec. 441.801 would apply equally to a separate CHIP.

We believe that our prohibition of Federal CHIP payment for sex- rejecting procedures is necessary given the policy goal of aligning CHIP payment with Medicaid, the lack of scientific evidence regarding the effectiveness of these treatments, and the plausible risks of negative and often irreversible side effects when used for the purposes included in our definition in children.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Many commenters believed that the rule did not cite a relevant authority under CHIP to make Federal determinations about what kind of care may be included in CHIP programs in each State. These commenters stated that the Congress allowed standalone CHIP plans to cover any State-recognized medical services provided by licensed physicians and other professionals in accordance with State-determined standards and scopes of practice, even those not specifically enumerated in the CHIP statute. Several commenters believed that the proposed rule would compromise the intent that CHIP funds help States provide care to a select population in an “effective and efficient” manner (referring to manner of administration, initiation and expansion of coverage). They suggested that using the “effective and efficient manner” phrase to justify this rule was inconsistent with CHIP's statutory framework, as the phrase functioned as administrative directive and not a mechanism for excepting certain medical care from coverage. A commenter stated that section 2101(a) of the Act concerns the administration of the CHIP program and does not require States to align the scope of benefits provided in the various sources of health coverage for children. A commenter cited section 2103 of the Act, stating that the provision gives States flexibilities in creating a CHIP benefit plan, and does not limit States to a specific set of benefits.

Response: We do not agree with commenters who state that we lack

authority to prohibit FFP for sex-rejecting procedures under CHIP. While the Congress afforded States considerable flexibility in designing their CHIP benefit packages, including authority under section 2110(a)(24) of the Act to cover services recognized by State law, that flexibility has some specified restrictions. We have a responsibility to ensure that CHIP operates consistently with its statutory purpose

Section 2101(a) of the Act establishes that CHIP funds are provided to enable States “to initiate and expand the provision of child health assistance to uninsured, low-income children in an effective and efficient manner that is coordinated with other sources of health benefits coverage for children.” This provision imposes substantive requirements on how CHIP is administered, not merely procedural requirements. Our authority to oversee CHIP to ensure consistency with the “effective and efficient” standard and the coordination requirement supports the prohibition established in this rule. This authority is reinforced under regulations at Sec. 457.50, which states that we have the ability to determine whether the plan “can be approved to serve as a basis for Federal financial participation in the State program,” and Sec. 457.60, which specifies that a State must amend its State plan whenever necessary to reflect “changes in Federal law, regulations, policy interpretations, or court decisions that affect provisions in the approved State plan.”

With respect to the authority provided undersections 2103 and 2110(a)(24) of the Act for States to cover services recognized by State law, we acknowledge that these provisions provide States flexibility to cover and provide these services in alignment with State law, but we do not read that provision as compelling FFP for any service a State recognizes. These sections must be read in context with section 2102(a)(7)(A) of the Act, which requires that State CHIP plans describe how the plan will “assure the quality and appropriateness of care, particularly with respect to . . . well-child care.” We do not believe that it would be possible for a State to include such a description in its plan in light of our conclusion that there is insufficient evidentiary support for the medical necessity of sex-rejecting procedures. The flexibility that the State-recognized services provision provides, like other State flexibility under CHIP, is conditioned on compliance with applicable Federal standards. We have determined that FFP for sex-rejecting procedures described in this rule is not consistent with those standards, based on the current evidentiary record. States that wish to cover these services in their CHIP programs may do so using State-only funds.

The following changes will be made available for public review/ comment under OMB control number 0938-1148 (CMS-10398 #97) via the standard non-rule PRA process which includes the publication of 60- and 30-day Federal Register notices. In the meantime, the following discussion scores the potential impact of the finalized provisions. We will revisit these preliminary estimates during the 60-/30-day PRA process and revise if needed.

We anticipate that the definitions (adding and defining “female”, “male”, “sex”, and “sex-rejecting procedure”) may result in the need for some States to amend existing policy/manual documents where those items are inconsistent with the provisions of this final rule. However, we do not anticipate that this would impact any active claims/ billing forms or instructions.

We estimate a potential of 56 Medicaid respondents and 56 CHIP respondents consisting of 50 States, the District of Colombia, American Samoa, Commonwealth of the Mariana Islands, Guam, Puerto Rico, and the US Virgin Islands. Based on research discussed in section I.1.C. (United States' State Bans of and Coverage of Sex-Rejecting Procedures) of this final rule, we further estimate that approximately 27 States and one Territory have laws enacted restricting some or all of the sex- rejecting procedures that are covered by this final rule. For these States and Territories, we do not anticipate State staff will need to conduct a review of policy documents for Medicaid or CHIP as these procedures are currently banned (or will be banned).

For the remaining 28 States and Territories, we assume that State staff will review and amend their State's Medicaid and CHIP policy documents to be compliant with the provisions of this final rule. We estimate it will take 3 hours at $89.26/hr for a Business Operations Specialist to review existing State policy documents to ensure consistency with the definitions and 1 hour at $129.74/hr for a General and Operations Manager to review and approve the necessary State policy document changes.

In aggregate we estimate a one-time State burden of 112 hours (28 States x 4 hr/response) at a cost of $11,131 [(3 hr x $89.26/hr x 28 States) + (1 hr x $129.74/hr x 28 States)]. When taking into account the Federal administrative match of 50 percent, we estimate a one-time State cost of $5,566 ($11,131 * 0.5). We assumed all services meeting the definition will no longer be covered by Medicaid nor CHIP, and thus will not be eligible for Federal matching funds.

With regard to the rule's public comments:

Comment: Several commenters state that CMS underestimated the administrative burden associated with the rule's information collection requirements, contending that our proposed burden estimates failed to account for the full scope of work required by States and territories (including those that have already implemented bans) to review and align policy documents, update State Plan Amendments, engage external interested parties such as managed care plans, providers, and State legislatures, and obtain necessary legal and leadership review. Another commenter, by contrast, supported the rule's approach to information collection, stating that it aligns with PRA objectives and administration directives to reduce administrative burden, clarify regulatory scope, and prevent the misuse of Federal funds.

Response: We acknowledge commenters' concerns that the burden estimates may not fully capture the scope of administrative work required of all States and territories. We recognize that States may need to engage a range of internal and external interested parties (including managed care plans, providers, and legislative staff) and that review processes may require participation from legal counsel and senior leadership beyond the roles specifically identified in our estimates. We will revisit and refine these estimates as part of the aforementioned standard PRA process. As we indicated in the proposed rule, the estimates provided are preliminary, and we are committed to revising them if/as and when needed.

We note that for States and territories that have already enacted laws restricting some or all of the procedures covered by the rule, we continue to believe that the administrative burden for those jurisdictions will be limited, as the rule largely aligns with existing State policy. However, we acknowledge that even these States may need to conduct some degree of review to confirm consistency with the Federal requirements being established here. We will take this into account in our 60- and 30-day Federal Register notices.

We also acknowledge and appreciate the commenter(s) who support the rule's information collection approach and its alignment with PRA objectives and administration directives to reduce administrative burden, clarify regulatory scope, and ensure the appropriate stewardship of Federal funds. We share these goals, and we believe the administrative requirements associated with this rule are proportionate to and necessary for their achievement. 2. ICRs Regarding the Prohibition on Payment for Sex-Rejecting Procedures (Sec. 441.802)

The following changes and associated SPA template will be made available for public review/comment under OMB control number 0938-1148 (CMS-10398 #97) via the standard non-rule PRA process which includes the publication of 60- and 30-day Federal Register notices. In the meantime, the following discussion scores the potential impact for preparing and submitting the SPA. We will revisit these preliminary estimates during the standard PRA process and revise if needed.

Under this rule's finalized provisions, States and Territories will be required to submit SPAs that indicate adherence to the prohibition on claiming Federal funding of sex-rejecting procedures for individuals under the age of 18 for Medicaid and for individuals under the age of 19 for CHIP. The content of the SPA will be a simple recitation of the prohibition. We intend to require all States and Territories to submit this template for approval as part of their State plan.

We estimate a potential of 56 Medicaid and CHIP respondents consisting of 50 States, the District of Colombia, American Samoa, Commonwealth of the Mariana Islands, Guam, Puerto Rico, and the US Virgin Islands. We estimate it will take 2 hours at $89.26/hr for a Business Operations Specialist to prepare an initial SPA and 1 hour at $129.74/hr for a General and Operations Manager to review and approve the SPA for submission to CMS.

In aggregate, we estimate a one-time State burden of 168 hours (56 States x 3 hr/response) at a cost of $17,263 [(2 hr x $89.26/hr x 56 States) + (1 hr x $129.74/hr x 56 States)]. When taking into account the Federal administrative match of 50 percent, we estimate a one-time State cost of $8,632 ($16,970 * 0.5). We assumed all services meeting the definition will no longer be covered by Medicaid nor CHIP, and thus not eligible for Federal matching funds.

With regard to the rule's public comments:

Comment: Several commenters state that CMS underestimated the administrative burden associated with the rule's information collection requirements, contending that our proposed burden estimates failed to account for the full scope of work required by States and territories (including those that have already implemented bans) to review and align policy documents, update State Plan Amendments, engage external interested parties such as managed care plans, providers, and State legislatures, and obtain necessary legal and leadership review. A commenter, by contrast, supported the rule's approach to information collection, stating that it aligns with PRA objectives and administration directives to reduce administrative burden, clarify regulatory scope, and prevent the misuse of Federal funds.

Response: We acknowledge the commenters' concerns that our burden estimates may not fully capture the scope of administrative work required of all States and territories. We recognize that States may need to engage a range of internal and external interested parties (including managed care plans, providers, and legislative staff) and that review processes may require

participation from legal counsel and senior leadership beyond the roles specifically identified in our estimates. As indicated in our proposed rule and again in this final rule, our burden estimates are preliminary and we are committed to revisiting them in our 60- and 30-day Federal Register notices.

For States and territories that have already enacted laws restricting some or all of the procedures covered by this final rule, we continue to believe that the administrative burden for those jurisdictions will be limited, as they largely align with existing State policy. However, we acknowledge that even these States may need to conduct some degree of review to confirm consistency with the Federal requirements being established here. We will take this into account in our revised estimates.

We also acknowledge and appreciate the commenter(s) who support the rule's information collection approach and its alignment with PRA objectives and administration directives to reduce administrative burden, clarify regulatory scope, and ensure the appropriate stewardship of Federal funds. We share these goals, and we believe the administrative requirements associated with this rule are proportionate to and necessary for their achievement.

We have examined the impacts of this final rule as required by E.O. 12866, “Regulatory Planning and Review”; E.O. 13132, “Federalism”; E.O. 13563, “Improving Regulation and Regulatory Review”; E.O. 14192, “Unleashing Prosperity Through Deregulation”; the Regulatory Flexibility Act (RFA) (Pub. L. 96-354); section 1102(b) of the Social Security Act; and section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

E.O.s 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select those regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts). Section 3(f) of E.O. 12866 defines a “significant regulatory action” as any regulatory action that is likely to result in a rule that may: (1) have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or Tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, or the President's priorities.

A RIA must be prepared for a regulatory action that is significant under section 3(f)(1) of E.O. 12866. Based on our estimates, the Office of Management and Budget's (OMB) Office of Information and Regulatory Affairs (OIRA) has determined this rulemaking is significant per section 3(f). Accordingly, we have prepared a RIA that to the best of our ability presents the costs and benefits of the rulemaking.

We estimate that this rule will reduce Federal Medicaid spending by about $175 million from fiscal year 2027 through fiscal year 2036 (in real 2027 dollars). To estimate the impact of this rule, we analyzed data from T-MSIS TAF v8.0 for 2023. We selected all claims with a gender dysphoria diagnosis and in the following claims categories: inpatient hospital with surgical procedure; outpatient hospital with surgical procedure; and professional services and prescription drugs with hormone therapy. We

included fee-for-service and managed care encounter data. We only counted claims with one of the following ICD-10 diagnosis codes: F64.0 (transsexualism); F64.1 (gender identity disorder in adolescence or adulthood); F64.2 (gender identity disorder in childhood); F64.8 (other gender identity disorders); F64.9 (gender identity disorder, unspecified); and Z87.890 (personal history of sex reassignment).

We also analyzed this data by beneficiary age group and counted only spending for individuals ages 17 and younger. We note that the policy will not prohibit payment by a State Medicaid agency for these services for those age 18, and those individuals and costs are not included as part of the estimates. This data also includes CHIP expenditures for these services.

For 2023, we identified about $31 million in total computable (Federal and State shares) Medicaid and CHIP spending for these services and individuals. States that had not banned gender dysphoria treatments for children as of 2023 accounted for 76 percent of spending, including 92 percent of inpatient treatment with surgery and 87 percent of outpatient treatment with surgery. [GRAPHIC] [TIFF OMITTED] TR13AU26.002

Total spending on hormone therapy for children ages 6 through 17 was $23.8 million (assuming that 25 percent of spending for those ages 15 to 18 was for 18-year-olds in the data). Of that amount, we calculated that 88 percent ($21.0 million) was for GnRH analogues (or puberty blockers). The remaining spending for hormone therapy ($2.8 million) was for estrogen/anti-androgen and testosterone.

We projected this spending forward from 2023 through 2036 using projected growth in Medicaid and CHIP spending on children from the President's fiscal year 2027 Budget. We assumed all services will not eligible for Federal Medicaid or CHIP matching funds. We solicited comment on whether States that currently cover services will continue to cover these services absent FFP as described in this final rulemaking.

States that currently cover these services under Medicaid will see the largest reductions in Medicaid spending. We have updated the estimates in this rule to reflect that many States have banned these services since the beginning of 2023. As noted above, about 24 percent of spending on these services for children was in States that have implemented bans on these services. We have excluded spending in those States from these estimates, which results in lower projected savings.

We also assumed about 3 percent of spending will be delayed until individuals reach age 18, reflecting 50 percent of the surgical procedures being paid by Medicaid and CHIP in the future. Absent data or analysis on the impact of prohibitions on these procedures, we assumed some individuals will ultimately receive these services once eligible and believe 50 percent is reasonable (considering that some individuals will no longer be eligible for Medicaid in the future and some individuals may find other sources of coverage). Assuming none or all surgical procedures no longer covered by Medicaid are later performed once the beneficiaries reach age 18 would decrease or increase the estimates presented here by about 2 percent.

Table 4 shows the annual impact of the proposal on total and Federal Medicaid and CHIP spending in millions of dollars. These estimates assume the policies in the final rule will be effective as of October 6, 2026. The estimates also reflect a 6-month transition period for enrollees currently using non-GnRH hormone therapy, which was not included in the estimates in the proposed rule. Total Medicaid and CHIP spending will be reduced by $235 million over 10 years, Federal spending will be reduced by $138 million, and State spending will be reduced by $97 million (in real 2027 dollars). Actual impacts may vary from these estimates. We relied on the most recently available program data for this analysis and projections of future enrollment and spending. Actual future costs may vary if enrollment and spending are higher or lower than projected.

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We have made reasonable assumptions about how individuals may use these services in the future. A greater or lesser number of individuals may still receive coverage for these services upon reaching age 18 than we have assumed. In addition, it is possible some individuals may find alternative coverage for these services (for example, States covering services without Federal funding, or private insurance). We have also not estimated if there will be any other impacts on Federal expenditures (for example, increases in other healthcare services related to gender dysphoria). We are unable to provide quantitative estimates of these effects. To the extent that States, other healthcare programs, or other payers fund these services in the future, we would expect them to incur costs equivalent to the savings shown here, to the extent they cover these services. (For example, if half of the States were to cover these services using only State funds, those States would have costs approximately equal to about half of the spending reductions shown here.) 2. Costs

In addition, the final rule may result in several costs. States will need to update State plans or waivers to comply with the proposed changes to covered benefits. Those impacts are described in section III. of this final rule. In addition, the changes in this final rule may prevent or delay individuals from receiving these healthcare services. 3. Alternatives

As an alternative to this final rule, we considered taking no action to require that a State Medicaid or CHIP plan must provide that the Medicaid or CHIP agency will not make payment under the plan for sex-rejecting procedures for children in Medicaid under the age of 18 and children in CHIP under the age of 19 and to prohibit the use of Federal Medicaid or CHIP dollars to fund sex-rejecting procedures for these individuals. On January 28, 2025, President Trump issued E.O. 14187, Protecting Children from Chemical and Surgical Mutilation. Section 5(a) of that order directs the Secretary to take all appropriate actions consistent with applicable law to end what the order refers to as the chemical and surgical mutilation of children, including regulatory and sub-regulatory actions for specific programs, including Medicaid. In alignment with the E.O. and the evidence outlined in section I.B. of this final rule, CMS decided to pursue this policy. These final changes will not prevent States from providing coverage for sex-rejecting procedures with State-only funds outside of the Federally-matched Medicaid program or CHIP.

We acknowledge that alternative actions could have been taken such as issuing sub-regulatory guidance suggesting States refrain from offering these services based on the evidence described in the HHS Review, issuing a regulation to require utilization management in advance of the provision of these services to ensure appropriate State oversight of these services, or simply allowing continued Federal matching for these services. While these actions continue to be possible, they were not considered as alternatives as we concluded that a prohibition of Federal matching funds was warranted in the immediate term in light of the current evidence described in the HHS Review identifying significant risks associated with sex-rejecting procedures, including potentially irreversible harms, and the growing international retreat from the use of puberty blockers, cross-sex hormones, and surgeries to treat gender dysphoria in children.

The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant economic impact on a substantial number of small entities. The great majority of hospitals and most other healthcare providers are small entities, either by being nonprofit organizations or by meeting the Small Business Administration (SBA) definition of a small business.\169\ Individuals and States are not included in the definition of a small entity. Overall, the regulated industry has a high number of firms considering that there are 2,573 hospitals in the United States.\170\ Because a great majority of them qualify as a small entity, we deduce by two distinct methods that both the number and proportion of small entities expected to experience significant economic impacts from the rule are limited. For this analysis, HHS uses a change in annual revenue exceeding 3 to 5 percent as its measure of a significant economic impact.

\169\ See U.S. Small Bus. Admin., Office of Advocacy, Comment Letter on “Health and Human Services' Request for Information: Ensuring Lawful Regulation and Unleashing Innovation to Make America Healthy Again,” (July 14, 2025): 4, https://advocacy.sba.gov/wp-content/uploads/2025/07/Comment-Letter_Advocacy-Comments-to-HHS-Deregulatory-RFI.pdf.

\170\ See Table 11, column “firm count.” Sum the total number of small firms and the total number of large firms.

For purposes of the RFA, approximately 96 percent of the small businesses in the health care industries impacted are considered small businesses according to the Small Business Administration's size standards. According to the SBA's website at http://www.sba.gov/content/small-business-size-standards, the health care industries impacted fall in the North American Industrial Classification System (NAICS) 446110 Pharmacies and Drug Stores; 621111 Offices of Physicians (except Mental Health Specialists); 621112 Offices of Physicians, Mental Health Specialists; 621493 Freestanding Ambulatory Surgical and Emergency Centers; 621498 All Other Outpatient Care Centers; and 622110 General Medical and Surgical Hospitals. Table 5 shows the industry size standards for each of these health care industries.

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Tables 6 through 11 aid in showing the distribution of firms and revenues at their 6 digits NAICS code level. These tables aim to provide an understanding of the disproportionate impacts among firms, between small and large firms. BILLING CODE 4169-69-P [GRAPHIC] [TIFF OMITTED] TR13AU26.005

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BILLING CODE 4169-69-C

As shown in Table 12, all the industries combined, according to the 2022 Economic Census, earned approximately $2,364,153,884,000, while the small firms for all the industries combined earned approximately $325,819,624,000. Table 13 in section V.E. estimates a $31.6 million reduction in total annualized monetized transfers from the Federal Government and States to health care providers. This total estimated reduction represents less than 1 percent of the total revenues of the health care industries impacted and the total revenues of the small firms in the health care industries impacted. It also represents less than 1 percent of the total revenues of each health care industry impacted and the total revenues of the small firms in each health care industry impacted. As a result, this final rule will result in a change in revenue of less than 1 percent for the impacted health care industries.

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As its measure of significant economic impact on a substantial number of small entities, HHS uses a change in revenue of more than 3 to 5 percent. According to Table 12, we do not believe that the 3 to 5 percent threshold will be reached by the requirements in this rule for NAICS 446110 Pharmacies and Drug Stores; 622111 Offices of Physicians (except Mental Health Specialists); 621112 Offices of Physicians, Mental Health Specialists; 621493 Freestanding Ambulatory Surgical and Emergency Centers; 621498 All Other Outpatient Care Centers; or 622110 General Medical and Surgical Hospitals.

The $31.6 million in anticipated transfers from providers is not an economically significant impact compared to the revenues of the healthcare sector. It is small even compared to the revenues of a large hospital. The only way for a substantial number of providers to be significantly affected by $31.6 million in transfers would be for a substantial number of small providers to bear much of those transfers. That is not the case for the transfers imposed by this rule, which would be disproportionately borne by large academic medical centers.

In a nationally weighted analysis of hospital inpatient and hospital-owned ambulatory surgery data from 2016-2020, 88.4 percent of patients identified as undergoing sex-rejecting surgery were classified as receiving care at urban teaching hospitals.\171\ By comparison, urban teaching hospitals are less than 51 percent of the hospital industry by admissions and less than 20 percent by number.\172\

\171\ Jason D. Wright et al., “National Estimates of Gender- Affirming Surgery in the US,” Jama Network Open 6, no. 8 (2023), doi:10.1001/jamanetworkopen.2023.30348.

\172\ “Teaching Hospitals,” American Hospital Association, accessed July 28, 2026, https://www.aha.org/system/files/2018-02/info-teaching.pdf.

The number of hospitals that had, at the time of Executive Order 14187, been performing pediatric sex-rejecting surgeries is reported to be a few dozen. We reviewed a list of health care provider organizations that reportedly discontinued, or announced plans to phase out, pediatric sex-rejecting care services in anticipation of the final rule.\173\ With 42 organizations, the list is quite a comprehensive sample of all hospitals that had been performing the surgeries. Of the listed organizations, three-fourths were part of academic medical centers or teaching hospitals. The operating scale of the providers in the list is characteristic of some of the largest provider organizations in the industry. Their reported annual revenues average $8 billion, and 34 of them have revenues above $1 billion and have revenues above the large-hospital average shown in Table 11. Despite qualifying as small entities, their revenues are well beyond the revenue categories presented for small hospital organizations in Table 11, showing that affected providers have a large revenue profile. At least 33 of the 42 hospitals could absorb the entire $31.6 million annual transfer and still have it be below three percent of revenue, which is at the low end of the Department's threshold for economic significance. Therefore, the Secretary has certified that this final rule will not have a significant economic impact on a substantial number of small entities in these industries.

\173\ Theresa Gaffney, “Amid federal pressure, more hospitals stop gender-affirming care for minors,” STAT, February 5, 2026, https://www.statnews.com/2026/02/05/hospitals-stop-gender-care-minors-trump-administration-pressure/.

In addition, section 1102(b) of the Act requires us to prepare a RIA if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we defined a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We did not prepare an analysis for section 1102(b) of the Act because we determined, and the Secretary certifies, that this final rule will not have a significant impact on the operations of a substantial number of small rural hospitals.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess

anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2026, that threshold is approximately $193 million. The final rule will not mandate significant spending costs on State, local, or Tribal governments in the aggregate, or by the private sector.

E.O. 14192, entitled “Unleashing Prosperity Through Deregulation” was issued on January 31, 2025, and requires that “any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least 10 prior regulations.” This final rule is exempt from otherwise- applicable requirements under E.O. 14192, per footnote 1 of OMB's Accounting Methods.\174\

\174\ “Accounting Methods under Executive Order 14192,” Office of Information and Regulatory Affairs, accessed July 10, 2026, https://www.reginfo.gov/public/pdf/eo14192/Accounting_Methods_under_EO_14192.pdf.

E.O. 13132 establishes certain requirements that an agency must meet when it issues a rule that imposes substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. This final rule will have a substantial direct effect on the ability of States to receive Federal Medicaid funds for sex-rejecting procedures furnished to children under age 18 and on the ability of States to receive Federal CHIP funds for sex- rejecting procedures furnished to children under age 19.

We received public comment on this RFA analysis. The following is a summary of the comment we received and our response.

Comment: A commenter stated that the proposed rule's RFA analysis failed to accurately assess the rule's economic impact on small entities. The commenter asserted that CMS assumed almost all providers are small entities without analyzing which providers actually offer these procedures or whether they meet the definition of a small entity, and that this assumption spread costs across all providers and artificially deflated the estimated change in revenue, inconsistent with HHS guidance that a low average impact should not be used to disguise a significant impact on a subset. The commenter also stated that the analysis relied solely on change in revenue and, in finding the estimated $31.6 million reduction fell below the 3 to 5 percent significance threshold, failed to consider that providers offering these procedures often provide unrelated services that patients would no longer receive if the procedures were discontinued. Additionally, the commenter raised concerns that the analysis failed to account for other compliance costs identified in HHS guidance, such as training, new policies and procedures, technology, and insurance, and failed to consider the burden on small practices from sudden increases in patient demand or CMS' obligation to analyze options for regulatory relief.

Response: In the proposed rule, we estimated the potential economic impact on small entities. After considering the public comments, we continue to conclude that the applicable significance threshold is not reached. Accordingly, the Secretary certifies that this final rule does not have a significant economic impact on a substantial number of small entities. As explained in the proposed rule, for purposes of the RFA, we estimate that the great majority of hospitals and other healthcare providers are small entities, either by being nonprofit organizations or by meeting the Small Business Administration (SBA) size standards, and we identified the specific North American Industrial Classification System (NAICS) codes for the healthcare industries impacted by this rule along with the applicable SBA size standards and the distribution of firms and revenues within each. Using an estimated reduction in total annualized monetized transfers of $31.6 million, we determined that this reduction represents less than 1 percent of total revenues for each impacted healthcare industry and for the small firms within each such industry. Because HHS uses a change in revenue of more than 3 to 5 percent as its measure of significant economic impact on a substantial number of small entities, and this threshold is not reached for any of the impacted industries, the Secretary has certified that this final rule does not have a significant economic impact on a substantial number of small entities. We note that the estimated reduction in transfers reflects our analysis of T-MSIS TAF data identifying Medicaid and CHIP spending on the procedures at issue for the affected population, and this final rule does not prohibit States from continuing to cover these procedures with State-only funds outside of the Federally-matched Medicaid program or CHIP. We also reiterate that this final rule does not prohibit providers from continuing to furnish these procedures or from receiving payment for them through other sources, nor would it prohibit Federal Medicaid or CHIP payment for other services these providers furnish, including mental health counseling and psychotherapy for gender dysphoria and procedures falling within the exceptions in the definition of sex-rejecting procedures. To the extent the commenter raises concerns regarding downstream effects on revenue from unrelated services or other compliance costs, we continue to believe that the change in revenue for the impacted healthcare industries is well below the threshold for a significant economic impact. It is unclear what is exactly meant by a “sudden increase in patient demand” or by the asserted “obligation to analyze options for regulatory relief.” We understand the commenter to be referring to the agency's certification at the proposed rule stage under Sec. 605(b).\175\ Under HHS guidance, that certification did not require preparation of an initial regulatory flexibility analysis or an analysis of significant regulatory alternatives.\176\

\175\ Department of Health and Human Services, “Guidance on Proper Consideration of Small Entities in Rulemakings,” (May 2003): 9, https://aspe.hhs.gov/sites/default/files/documents/dd6288d1b8db19ee8a1f37b3ce775003/guidance-proper-consideration-hhs-2003-rulemaking.pdf.

\176\ Department of Health and Human Services, “Guidance on Proper Consideration of Small Entities in Rulemakings,” (May 2003): 2-3, https://aspe.hhs.gov/sites/default/files/documents/dd6288d1b8db19ee8a1f37b3ce775003/guidance-proper-consideration-hhs-2003-rulemaking.pdf.

In addition, we identify that urban teaching hospitals provide the majority of sex-rejecting procedures, and therefore they form the smaller subset of small entities disproportionately affected by the final rule. In other words, the final rule establishes that the economic impact is borne by urban teaching hospitals. Per the RFA analysis in the final rule, we show that there is not a significant economic impact on these firms due to their large revenues.

Consistent with OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/2025/08/CircularA-4.pdf), we have prepared an accounting statement in Table 13 showing the classification of the impact associated with the provisions of this final rule.

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Table 13 shows the annualized monetized transfer values required under OMB Circular A-4. At a discount rate of 7 percent, the annualized monetized transfers are $13.6 million to the Federal government and $9.5 million to the States, reflecting a reduction in payment for these services to healthcare providers. At a discount rate of 3 percent, the annualized monetized transfers are $13.7 million to the Federal government and $9.6 million to the States.

We received public comments on this RIA. The following is a summary of the comments we received and our responses.

Comment: Many commenters stated that the proposed rule's RIA failed to fully account for the range of costs associated with the rule, including costs to States, providers, managed care organizations, insurers, individuals, and drug manufacturers, as well as the long-term costs of individuals forgoing care or seeking procedures out of pocket. Commenters also stated that the RIA understated the potential harms of the rule, including the mental and physical health consequences for affected individuals and the professional impact on providers, while insufficiently quantifying the benefits of the procedures in question. Additionally, several commenters raised concerns about methodological flaws in the RIA, including unsupported assumptions about patient switching rates, inaccurate estimates of procedure volume, inconsistencies with the RIA of a companion rule, and a failure to account for the combined fiscal impact of both rules.

Response: We appreciate the detailed comments received regarding the RIA and have carefully considered the concerns raised. We do not agree with the characterization that the RIA is materially deficient or methodologically unsound.

The RIA was prepared using the most recently available program data and reasonable assumptions consistent with standard Federal regulatory analysis practice. As we noted in the proposed rule, we projected spending forward from 2023 using established methodology, and we acknowledged the limitations of available data, including the absence of direct empirical studies on the effects of coverage restrictions of this type. Where data were unavailable to support precise estimates, we used reasonable assumptions and disclosed them transparently. We acknowledge that some individuals may transition to private coverage or State-only funded programs, and we noted in the RIA that we could not estimate with precision the full range of downstream effects, including potential changes in utilization of other health care services. Commenters did not provide data or studies that could be used to quantify the impacts of this rule. For commenters' concerns that the RIA failed to quantify the mental and physical health benefits of the procedures in question, we note that the scientific evidence regarding the long-term benefits of sex-rejecting procedures for children with gender dysphoria is, as discussed extensively in the proposed rule, of very low quality. The HHS Review and the systematic reviews underlying it found the evidence base to be insufficient to support conclusions about the effectiveness of these interventions in improving mental health outcomes or reducing symptoms of gender dysphoria over the long term. In the absence of reliable evidence of benefit, we cannot quantify such benefits in the RIA. We continue to believe that the prohibition on Federal financial participation for these procedures is consistent with States' statutory obligations to ensure that Medicaid- and CHIP-covered services be provided in a manner consistent with the best interests of beneficiaries and that payments be consistent with quality of care, and meet the effective and efficient standard.

We also do not agree with commenters who suggested that our cost estimates were inflated by failing to account for existing restrictions. To the contrary, as noted in the proposed rule, States that had not enacted bans on these procedures as of 2023 accounted for 76 percent of relevant Medicaid spending. Our analysis focused on the expected reduction in Federal expenditures attributable to the proposed rule and reflects the scope of coverage that would actually be affected. We issued a companion proposed rule addressing hospital conditions of participation contemporaneously with the proposed rule. The potential interactions between the two rules were acknowledged in the proposed rule, and we noted that the effects attributable to this rule may be lower in magnitude if the companion rule were to be finalized first.

We believe that the use of the diagnosis codes was correct and that the data likely does not include unrelated claims. In addition, the relatively small amount of expenditures identified in our analysis for inpatient and outpatient procedures (about $2.4 million in 2023) suggests that there are not a large number of other claims included. We have clarified the approach that we used in our analysis.

We acknowledge that the impact analysis does not provide estimates of impacts on other programs. There are different ways that beneficiaries, providers, and States may react to this rule, including obtaining payment for these services from other programs or private payers, and States electing to pay for services without Federal contributions. We have added a description of these potential responses in the impact analysis.

Comment: Several commenters stated that the RIA failed to meaningfully consider reasonable alternatives to the proposed rule, such as informed consent requirements, utilization controls, centers of excellence pathways, coverage with evidence development, or approaches modeled on European regulatory frameworks. Commenters also indicated that the RIA did not fulfill certain analytical requirements, including a distributional analysis under OMB Circular A-4, an intersectional health equity analysis, and a Family Policymaking Assessment, with particular concern that the rule's costs would fall disproportionately on vulnerable populations such as rural beneficiaries, individuals with disabilities, tribal communities, and foster or justice-involved youth.

Response: We do not agree with commenters who stated that the RIA failed to meaningfully consider alternatives or to fulfill applicable analytical requirements.

For regulatory alternatives, as described in the proposed rule, we considered whether to take no action. In finalizing this rule, we concluded that permitting the use of Federal Medicaid and CHIP dollars to fund sex-rejecting procedures for children would be inconsistent with sections 1902(a)(19), 1902(a)(30)(A), and 2101(a) of the Act which require that services be provided in a manner consistent with the best interests of beneficiaries and that payments be consistent with quality of care and meet the effective and efficient standard. We acknowledge that alternative actions could have been taken such as issuing sub- regulatory guidance suggesting States refrain from offering these services based on the evidence described in the HHS Review, issuing a regulation to require utilization management in advance of the provision of these services to ensure appropriate State oversight of these services, or simply allowing continued Federal matching for these services. While these actions continue to be possible, they were not considered as alternatives as we concluded that a prohibition of Federal matching funds was warranted in the immediate term in light of the current evidence described in the HHS Review identifying significant risks associated with sex-rejecting procedures, including potentially irreversible harms, and the growing international retreat from the use of puberty blockers, cross-sex hormones, and surgeries to treat gender dysphoria in children.

Procedures that carry risks of permanent infertility, sexual dysfunction, impaired bone density, and other serious long-term effects cannot be rendered appropriate for Federal funding through administrative safeguards alone when the evidence of benefit is, as the HHS Review found, of very low quality.

For commenters' suggestions that we model our approach on certain European regulatory frameworks, we note that the international developments discussed in the proposed rule--including the systematic reviews conducted by Sweden, Finland, and the United Kingdom--actually support the conclusion that a more restrictive approach to these procedures for children is warranted. Those countries undertook rigorous independent reviews and concluded that the risks of these interventions may outweigh their benefits at the population level. While the specific policy responses in those jurisdictions vary, the underlying scientific findings are consistent with the conclusions of the HHS Review on which this rule is based.

For the analytical requirements identified by commenters, we note that we conducted the analyses required under E.O. 12866, the Regulatory Flexibility Act, section 1102(b) of the Act, and section 202 of the Unfunded Mandates Reform Act of 1995, and we certified, consistent with our findings, that the proposed rule will not have a significant economic impact on a substantial number of small entities and will not mandate significant spending costs on State, local, or Tribal governments in excess of the applicable threshold. We acknowledge commenters' concerns that the rule's costs may fall disproportionately on certain populations, including rural beneficiaries, individuals with disabilities, tribal communities, and foster or justice-involved youth. We take these concerns seriously and note that the Federal Medicaid and CHIP programs will continue to cover a broad range of services for eligible individuals in all of these populations, including mental health counseling and psychotherapy, which we believe offer meaningful and evidence-supported interventions for children diagnosed with gender dysphoria. We are committed to ensuring that these alternative services remain accessible to the children and families who rely on Medicaid and CHIP. Executive Order 14192, entitled “Unleashing Prosperity Through Deregulation” was issued on January 31, 2025, and requires that “any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least 10 prior regulations.” This final rule is neither a regulatory nor a deregulatory action under E.O. 14192.

Mehmet Oz, Administrator of the Centers for Medicare & Medicaid Services, approved this document on August 10, 2026.

42 CFR Part 441

Grant programs--healt. Health professions, Medicaid, Reporting and recordkeeping requirements.

42 CFR Part 457

CHIP, Grant programs--health, Health professions, Reporting and recordkeeping requirements.

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 441--SERVICES: REQUIREMENTS AND LIMITS APPLICABLE TO SPECIFIC SERVICES

0 1. The authority citation for part 441 continues to read as follows:

Authority: 42 U.S.C. 1302.

0 2. Add subpart N to read as follows:

Subpart N--Prohibition on Federal Medicaid Funding for Sex- Rejecting Procedures Furnished to Children

Sec. 441.800 Basis and purpose. 441.801 Definitions. 441.802 General rules.

Sec. 441.800 Basis and purpose.

The purpose of this subpart is to implement sections 1902(a)(19) and 1902(a)(30)(A) of the Act to protect Medicaid beneficiaries and ensure Medicaid payment is consistent with quality of care by prohibiting Federal financial participation in payments by States for sex-rejecting procedures for a child under the age of 18.

(a) As relevant to this subpart, section 1902(a)(19) of the Act requires that States ensure that care and services will be provided in a manner consistent with the best interests of the recipients.

(b) As relevant to this subpart, section 1902(a)(30)(A) of the Act requires that

States' payment methods be consistent with quality of care.

Sec. 441.801 Definitions.

As used in this subpart--

Female means a person of the sex characterized by a reproductive system with the biological function of (at maturity, absent disruption or congenital anomaly) producing eggs (ova).

FFP means Federal financial participation.

Male means a person of the sex characterized by a reproductive system with the biological function of (at maturity, absent disruption or congenital anomaly) producing sperm.

Sex means a person's immutable biological classification as either male or female.

Sex-rejecting procedure means, except as specified in paragraph (3) of this definition, 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 by either of the following:

(1) Intentionally disrupting or suppressing the normal development of natural biological functions, including primary or secondary sex- based traits; or

(2) Intentionally altering an individual's physical appearance or body, including amputating, minimizing or destroying primary or secondary sex-based traits such as the sexual and reproductive organs.

(3) For purposes of this definition, the term sex-rejecting procedure does not include procedures undertaken--

(i) To treat an individual with a medically verifiable disorder of sexual development; or

(ii) For purposes other than attempting to align an individual's physical appearance or body with an asserted identity that differs from the individual's sex; or

(iii) To treat complications, including any infection, injury, disease, or disorder that has been caused by or exacerbated by the performance of sex-rejecting procedure(s).

Sec. 441.802 General rules.

(a) Except as provided in paragraph (c) of this section, a State plan must provide that the Medicaid agency will not make payment under the plan for sex-rejecting procedures for children under the age of 18.

(b) Except as provided in paragraph (c) of this section, FFP is not available in State expenditures for sex-rejecting procedures for children under the age of 18.

(c) FFP will remain available for cross-sex hormone therapy for a tapering period of up to 6 months from October 13, 2026, for beneficiaries who were receiving such therapy as of October 13, 2026.

PART 457--ALLOTMENTS AND GRANTS TO STATES

0 3. The authority citation for part 457 continues to read as follows:

Authority: 42 U.S.C. 1302.

0 4. Add Sec. 457.476 to read as follows:

Sec. 457.476 Limitations on coverage: Sex-rejecting procedures.

(a) The purpose of this section is to ensure that CHIP is operated in an effective and efficient manner that is coordinated with other sources of health benefits coverage, including Medicaid, for children consistent with 2101(a) of the Act by prohibiting Federal financial participation in payments by States for sex-rejecting procedures for a child under the age of 19.

(b) The prohibition on Federal financial participation for payments by States for sex-rejecting procedures for children applies in the same manner described in Medicaid at Sec. 441.802 of this chapter to a State administering a separate CHIP except that it applies to children under the age of 19 in accordance with the definition of a targeted low-income child at Sec. 457.310. This prohibition applies to CHIP regardless of the type of health benefit coverage option described at Sec. 457.410. For purposes of this section, the definitions applied under Medicaid at Sec. 441.801 of this chapter apply equally to a separate CHIP.

Robert F. Kennedy, Jr., Secretary, Department of Health and Human Services. [FR Doc. 2026-16508 Filed 8-11-26; 4:15 pm] BILLING CODE 4169-69-P