Health Headlines - December 22, 2025

Federal Government Proposes Rules to Restrict Minor Access to Gender Affirming Care

The Federal Government issued two proposed rules this month that would limit minors access to gender affirming care (GAC) and restrict funding to hospitals that provide GAC to minors: (1) Prohibition on Federal Medicaid and Children's Health Insurance Program Funding for Sex-Rejecting Procedures Furnished to Children (available here), referred to as the “Medicaid/CHIP Proposed Rule” and (2) Hospital Condition of Participation: Prohibiting Sex Rejecting Procedures for Children (available here), referred to as the “CoP Proposed Rule.”

The proposed rules implement Section 5(a) of President Trump’s Executive Order (EO) 14187, Protecting Children from Chemical and Surgical Mutilation, that was issued on January 28, 2025 (available here).  Section 5(a) of EO 4187 directed the Secretary to take regulatory action to end what the EO calls “the chemical and surgical mutilation of children.”  Several courts have enjoined other sections of EO 14187, but CMS argues that these proposed rules would not conflict with those injunctions because the proposed rules are based on “independent legal authority” and a different section of the EO.

Medicaid/CHIP Proposed Rule

The Medicaid/CHIP Proposed Rule prohibits Federal Medicaid and CHIP payments to states for Sex-rejecting procedure (SRPs).  This proposed rule provides that “[t]his prohibition includes circumstances in which a provider may determine that a sex-rejecting procedure is medically necessary for a child diagnosed with gender dysphoria.”  The proposed rule provides that the burden to the states, providers, and beneficiaries is outweighed by the “potential long-term harm, especially when the possible benefits of these services are unproven and the procedures are irreversible.”

Medicaid: CMS proposes to prohibit Federal Medicaid payments to States for SRPs provided to children under the age of 18. State Medicaid plans must provide that the Medicaid agency will not make payment under the plan for SRPs for children under the age of 18, but States would not be precluded from covering SRPs with State-only funding outside of their Federally-matched Medicaid programs.  Because some states have a higher age of majority (Alabama, Nebraska, and Mississippi), CMS proposes to make age 18 the floor of Federal coverage for SRPs under the Medicaid program, should a State include such procedures in their program.

CHIP: The prohibition on Federal financial participation for payments by States for SRPs for children applies in the same manner as described above for Medicaid except that it applies to children under the age of 19. CMS provided a few examples of procedures that would not be prohibited when medically necessary, including:

• Treating precocious puberty;
• Therapy subsequent to a traumatic injury; and
• The use of hormone replacement therapy to treat a growth hormone deficiency.

CMS also states that the proposed regulatory changes would not prohibit the use of Federal Medicaid dollars for mental health treatments for conditions such as gender dysphoria.

CoP Proposed Rule

The CoP Proposed Rule prohibits Medicare- and Medicaid-certified hospitals from performing SRPs on any child as a condition of participation in the Medicare and Medicaid programs.  The CoP Proposed Rule carves out certain exceptions to the prohibition, including:

• Procedures to treat an individual with a medically verifiable disorder of sexual development. This allows treatment for children who are born with certain medical conditions that affect their sexual development.  These are rare conditions where a child’s reproductive or sexual anatomy does not develop in typical ways due to genetic, hormonal, or other medical factors that can be medically verified and documented.  Examples include a child with external biological sex characteristics that are irresolvably ambiguous, such as those born with 46 XX chromosomes with virilization, 46 XY chromosomes with under-virilization, or having both ovarian and testicular tissue.
• Procedures 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. This permits procedures that are done for reasons entirely separate from changing a child’s physical appearance to match a gender identity that differs from their biological sex, including procedures for children with a physical disorder, injury, or physical illness.  In other words, the procedure must have a purpose separate from intending to change the body to not correspond to one’s biological sex.
• Treating Complications. This exception allows treatment for any infections, injuries, diseases, or other medical disorders that were caused by or made worse by previous sex-rejecting procedures.  This exception allows physicians or other licensed practitioners to treat complications that arise from these procedures.

Any procedures or treatments under these exceptions must still be performed with the consent of the child’s parent or legal guardian.

The rules were published in the Federal Register on December 19, which started the 60-day clock for submitting comments.  Accordingly, the comment period will end on February 17, 2026 at 5 p.m.  The HHS press release is available here.

Reporters, Taylor Whitten, Sacramento, CA, +1 916 321 4815, twhitten@kslaw.com, Ahsin Azim, Washington, D.C., +1 202 626 9262, aazim@kslaw.com.

Eleventh Circuit Hears Oral Argument on Constitutionality of the False Claims Act’s Qui Tam Provision

On December 12, 2025, the U.S. Court of Appeals for the Eleventh Circuit heard argument in United States ex rel. Zafirov v. Florida Medical Association, LLC (Zafirov), which involves a challenge to the constitutionality of the qui tam provision of the False Claims Act (FCA).  The panel engaged extensively on the Appointments, the Vesting, and the Take Care Clauses of the U.S. Constitution, as well as the historical pedigree of qui tam actions.  With similar challenges percolating and an increasing number of litigants asserting that relators unconstitutionally wield executive power, the Supreme Court may take up these issues in the coming years. 

Background

The Zafirov case comes to the Eleventh Circuit from the Middle District of Florida, where Judge Kathryn Kimball Mizelle held in September 2024 that the qui tam provision of the FCA violates the Constitution’s Appointments Clause.  In her opinion, which closely tracked Justice Thomas’s 2023 dissent in Polansky v. Executive Health Resources, Inc., Judge Mizelle ruled that the FCA relator was an “Officer of the United States” who had not been properly appointed in accordance with Article II. 

Judge Mizelle did not reach the defendants’ other argument that the qui tam provision violates the Take Care Clause and Vesting Clause of Article II because the FCA denies the President necessary removal authority and sufficient supervisory control over a relator.  Judge Mizelle also rejected Zafirov’s historical arguments to support the qui tam provision’s constitutionality, holding that the text of the Constitution controls over any contrary historical practices. 

Argument

As expected, the Government and the relator both appealed, and the Eleventh Circuit heard oral argument on December 12, 2025.  The panel consisted of Circuit Judges Robert Luck and Elizabeth Branch and Judge Federico Moreno of the Southern District of Florida, sitting by designation.  For the parties, the Department of Justice intervened and split argument time with the relator in support of its position, and the Chamber of Commerce argued alongside the defendants against the constitutionality of the qui tam provision.

The argument was fast-paced and wide-ranging, addressing the Appointments Clause framework, the Vesting and Take Care Clauses, and the history of qui tam enforcement.  The parties’ core positions are summarized below.

• Appointments Clause
  
  Under the standard articulated by the district court, a person acts as an Officer of the United States, and must be appointed under the Appointments Clause, if: (1) they exercise significant authority pursuant to the laws of the United States; and (2) they occupy a continuing position established by law.  Although most of the focus during oral argument was on the first prong, the court questioned the parties extensively about this standard.
  
  The government and the relator contended that relators do not exercise significant executive authority.  They emphasized that a relator may file a complaint, but the government then decides whether to intervene and retains control, including authority to dismiss or direct the litigation.  Judge Luck noted that the government must investigate once a relator files suit, suggesting that triggering a mandatory investigation could itself be significant authority.  Counsel responded that relators do not command government resources and that the government’s ongoing supervisory powers negate any inference of officer status.  On the second prong, they argued that relators are private litigants who do not occupy a continuing office established by law.
  
  The defendants countered that the FCA effectively creates an “office of the relator” and that relators exercise significant executive authority.  Judge Branch observed that a relator’s authority is personal to that litigant, unlike a continuing public office that persists beyond any single occupant.  The defendants responded that the “position of relator” should be assessed holistically rather than case by case, and that relators “self-appoint” and decide whether and how to bring enforcement actions—quintessential executive functions.  The Chamber of Commerce added that empowering private parties to seek civil penalties on the United States’ behalf is classic executive power and that relators are substantially removed from executive control.

• Vesting and Take Care Clauses
  
  Questions about the Vesting and Take Care Clauses were less extensive, but two points from the argument emerged.  First, although the district court did not address these arguments in its opinion, both the government and defendants argued that the Eleventh Circuit could address these arguments in the first instance without remanding to the district court.  And the defendants urged the court to address them.  Second, the defendants pointed out that these arguments overlapped significantly with the Appointments Clause arguments because of the question of continuing authority.  The defendants also asserted that, once a relator exercises significant authority, the government lacks sufficient control, and that should be the end of the analysis.

• History
  
  The parties and the court argued about the significance of the statutory and enforcement history of qui tam lawsuits, which predates the ratification of the Constitution.  Judge Luck indicated he thought that the history of qui tam enforcement both before and after the Constitution was ratified was a good indication of its constitutionality.  The defendants argued that history cannot overcome the application of clear constitutional principles.  Because those principles are clear, they argued, that resolves this issue.  They also argued that historical evidence from the time of the founding to the present day shows that qui tam enforcement was inconsistent.  The government countered that qui tam enforcement is clear since the third Congress in the 1790s and Supreme Court decisions from the early twentieth century show that qui tam actions are a “bedrock of American law.”
  
  A final point in the argument concerned the history of qui tam statutes that purported to authorize private criminal prosecutions.  The defendants contended that allowing private persons to bring criminal matters in the name of the United States would clearly violate the Constitution.  Relator’s counsel replied that those criminal provisions were functionally ignored and that, in modern practice, robust government control over civil FCA litigation confirms that relators do not exercise significant executive authority.

Implications

These constitutional challenges are likely to surface in courts nationwide while the Eleventh Circuit deliberates.  Although the district court’s ruling was novel when issued, it opened the door for defendants to argue that FCA cases brought by relators should not be allowed to proceed, particularly in cases where the government declines to intervene.  How the Eleventh Circuit rules could have a substantial effect on FCA litigation in Alabama, Georgia, and Florida.  Regardless of which way the Eleventh Circuit goes, because these issues continue to percolate in other courts, and because Justices Thomas, Barrett, and Kavanaugh have all questioned the constitutionality of the FCA’s qui tam provisions, the Supreme Court will likely address these issues in the near future. 

A recording of the oral argument is available here.

Reporter, Doug Comin, Atlanta, GA, +1 404 572 3525, dcomin@kslaw.com.

Exchange Plans Being Investigated for Alleged Affordable Care Act Fraud 

Eight different insurance companies that offer Affordable Care Act (ACA) exchange plans and receive subsidy payments from the federal government are being forced to have a change of plans for their holiday season; instead of a business-as-usual conclusion to the year, these companies will be searching for and producing thousands of documents sought by Republicans targeting suspected waste, fraud, and abuse of ACA subsidies.

On December 15, 2025, the House Judiciary Committee issued letters to these various local and nationwide insurers seeking production of ten categories of documents by Monday, December 29, 2025 – two days before the enhanced ACA subsidies are set to expire.

Overview of ACA Subsidies

In a broad oversimplification, the ACA allows patients to purchase private health insurance subsidized by the federal government.  Private health insurers offer their plans (sometimes called an “exchange” plan) in a marketplace.  The premiums for these ACA plans are paid by both (a) the enrollee and (b) the federal government.  The share of the premium paid by the government (totaling approximately $124 billion in 2024) is greater for lower-income households, and reduces as household income increases (with the enrollee share capped at a percentage of income).  To assist patients in enrolling in a plan, brokers may be paid a commission for linking a patient to a plan (which is paid by the plan).

This – as detailed extensively in a December 3, 2025 report from the Government Accountability Office (GAO) titled “Patient Protection and Affordable Care Act: Preliminary Results from Ongoing Review Suggest Fraud Risks in the Advance Premium Tax Credit Persist” – allegedly presents a number of opportunities for fraud or abuse.  First, because the amount of the ACA subsidies (which were the focus of the recent government shutdown) depend upon income, applicants could be incentivized to under-report income to obtain higher subsidies.  Second, brokers could be incentivized to submit multiple applications for a single individual (or to submit applications for individuals who do not exist).

Over two different time periods, the GAO created and submitted false applications for nonexistent patients.  In the first, 4/4 of the applicants ultimately received ACA coverage, and in the second, 18/20 of the applicants ultimately received ACA coverage (in many cases aided by brokers).  Moreover, the GAO found that tens of thousands of ACA beneficiaries matched to an individual with a Social Security number reported in the Social Security Administration’s death data.  The report also found that in 2023, nearly a third of ACA subsidy payments could not be reconciled to IRS tax data.

House Judiciary Committee Response

The Trump Administration previously announced efforts to increase oversight of the ACA’s premiums, which were largely struck down by Judge Brendan Abell Hurson of the District of Maryland on August 22, 2025 under the Administrative Procedures Act.  In response to the GAO investigation, on December 10, 2025, the House Judiciary Committee held a hearing titled “Fighting Obamacare Subsidy Fraud.”  Chairman Jeff Van Drew remarked that “insurance companies get paid whether the patient is real or fake,” with the focus of the hearing being largely on the fact that premiums set by the healthcare companies have risen (an increase which has almost entirely been absorbed by the federal government).

In apparent furtherance of its investigation, on December 15, 2025, the House Judiciary Committee sent letters to eight different ACA insurers, including Blue Shield of California, Centene Corporation, CVS Health, Elevance Health, GuideWell, Health Care Service Corporation, Kaiser Permanente, and Oscar Health, Inc.  The letters are largely identical to one another, and request production of ten categories of documents by Monday, December 29, including:

• Data on the plan’s number of enrollees and sum of subsidies received from 2020 to 2025, including those attributable to enrollees who did not use insurance benefits;
• Data on payment to agents and brokers; and
• All documents referring to waste, fraud, and abuse, including those employed at the plan tasked with oversight of such waste, fraud, and abuse.

It is not entirely clear why these eight insurance companies were selected, though they represent a broad geographic sampling of insurance companies based throughout the country, including California, Missouri, Rhode Island, Indiana, Florida, Illinois, and Illinois.  Moreover, the eight insurers targeted make up five of the eight largest ACA insurers in the country (with Blue Cross and Blue Shield of Florida, Bright Health, and Oscar Health not receiving letters from the Judiciary Committee).

Whether or not the documents produced by these insurers will have any impact on the broader debate over enhanced ACA subsidies (and whether or not those subsidies continue), it appears that the practices of the exchange insurers will remain under scrutiny.

Reporter, K. Tyler Dysart, Atlanta, GA, +1 404 572 3532, tdysart@kslaw.com.

CMS Proposes Updates to the IOTA Model

On December 11, 2025, CMS issued a proposed rule to update and revise the Increasing Organ Transplant Access (IOTA) Model for Performance Year (PY) 2 (the Proposed Rule).  The IOTA Model is a 6-year mandatory alternative payment model tested by the CMS Innovation Center that began on July 1, 2025, and will end on June 30, 2031.  The IOTA Model tests whether performance-based incentives paid to participating kidney transplant hospitals can increase access to kidney transplants for kidney transplant waitlist patients, while enhancing quality of care and reducing Medicare expenditures.

The IOTA Model allows kidney transplant hospitals to be eligible to be selected as an IOTA Participant if it meets the following criteria:

• Annually performs 11 or more kidney transplants for patients aged 18 years or older, regardless of payer, each of the baseline years; and
• Annually performs more than 50% of its kidney transplants on patients 18 years of age or older each of the baseline years.

The Proposed Rule modifies the eligible kidney transplant hospital criteria to comply with statutory requirements to exclude VA medical facilities and military medical treatment facilities from the IOTA Model for PYs 2 through 6.  Additionally, the Proposed Rule raises the low volume threshold from a minimum of 11 to a minimum of 15 kidney transplants performed annually during each of the baseline years.

The Proposed Rule also updates the composite graft survival rate metric with 3 modifications:

• Adding a risk-adjustment methodology that includes several transplant recipient and donor characteristics;
• Excluding multi-organ transplants from the composite graft survival rate exclusion and inclusion criteria; and
• Updating the allocation of points awarded for performance on the composite graft survival rate.

Additionally, the Proposed Rule modifies the Extreme and Uncontrollable Circumstances payment policy and makes changes to the downside risk payment.  Under the Proposed Rule, IOTA participants must remit the downside risk payment to CMS in a single payment within 60 days after the date on which the demand letter is issued.  If the payment is late, the remaining amount owed will be considered a delinquent debt.

The Proposed Rule also updates the IOTA Model’s transparency requirements, public reporting requirements, beneficiary protections, monitoring activities, and adds noncompliance with the Organ Procurement and Transplantation Network as a reason for CMS to terminate an IOTA participant from the IOTA Model.  Lastly, the Proposed Rule removes all health equity plan provisions and related definitions from the IOTA Model to allow IOTA participants to focus their resources on care redesign activities that would improve their model performance and the quality of care and experience for the patient.

The full text of the Proposed Rule can be found here.  Comments are due by February 9, 2026.

Reporter, Morgan Cronin, Atlanta, GA, + 1 404 572 2795, mcronin@kslaw.com.

Also in the News

On December 19, 2025, HHS in collaboration with the Office of the Deputy Secretary and Assistant Secretary for Technology Policy (ASTP) and Office of the National Coordinator for Health Information Technology (ONC) issued a Request for Information (RFI) seeking input on “Accelerating the Adoption and Use of Artificial Intelligence as part of Clinical Care.”  HHS explains that feedback to this RFI will inform HHS’s approaches to regulation, reimbursement, and research and development that will support advancing the use of AI in clinical care.  HHS seeks input from those currently engaging with AI tools as part of clinical care, as well as from those who want to implement AI in clinical care but face barriers.  In addition to a general request for information on the subject of improving the use of AI in clinical care, HHS also seeks input on ten specific AI-related questions.  The RFI is scheduled to be published on December 23, 2025 and responses to the RFI will be due 60 days from the date of publication, i.e., on February 21, 2026.  The unpublished RFI is available here.

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Editors: Chris Kenny and Ahsin Azim

Issue Editors: Robert Stenzel and Marcia Foti