Michigan Attorney General Dana Nessel joined a coalition of 20 states, the District of Columbia and the governor of Pennsylvania in a federal lawsuit filed Wednesday, Sept. 2, challenging a rule that would cut Medicaid funding for certain transgender youth healthcare.
The rule takes effect Oct. 13.
Published Aug. 13 by the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS), the rule bars federal Medicaid reimbursement for what it calls "sex-rejecting procedures" for patients under 18. A similar restriction applies to the Children's Health Insurance Program (CHIP) for patients under 19. The affected treatments include puberty-suppressing medications, hormone therapy and surgical procedures used to treat gender dysphoria.
The same medications remain eligible for federal reimbursement when prescribed to non-transgender patients for other diagnoses, according to the complaint filed in U.S. District Court in Massachusetts.
The coalition argues HHS and CMS exceeded their authority. CMS itself acknowledged in the rule that it had "not previously relied on" the statutory provisions it cites "to establish a purpose-based restriction on FFP for a specific category of services in this manner," according to the complaint.
"Medical decisions should be made by parents, patients, and medical experts – not politicians," Nessel said in a statement, according to the Tampa Free Press.
Tribal healthcare in the crosshairs
The rule carries specific weight in the Upper Peninsula. The Sault Tribe Guardian reported that the final rule includes a section titled "Tribal rights and sovereignty," acknowledging that commenters raised concerns about potential conflicts with the Snyder Act and the Indian Health Care Improvement Act.
CMS acknowledged in the rule that the policy's financial and healthcare effects could fall disproportionately on tribal communities, along with rural residents, people with disabilities, and foster or justice-involved youth.
Multiple UP tribal health programs bill Medicaid.
CMS lists the Inter-Tribal Council of Michigan, based in Sault Ste. Marie, as a tribal health program participating in Medicaid long-term services and supports. Its affiliated tribes include Bay Mills Indian Community, Keweenaw Bay Indian Community, Lac Vieux Desert Band of Lake Superior Chippewa Indians and Hannahville Indian Community. The Sault Ste. Marie Tribe of Chippewa Indians is listed separately.
The rule does not directly prohibit tribal health programs from providing the affected services using non-federal funds. The restriction targets whether federal Medicaid and CHIP dollars can pay for them.
CMS stated it will engage in government-to-government consultation with tribal nations on implementation, consistent with its tribal consultation policy and the Indian Health Care Improvement Act. As of Thursday, Sept. 3, no tribal nation had been listed as a plaintiff in the lawsuit, and no formal public statement from a UP tribal nation supporting or opposing the suit had been identified.
What happens next
Patients already receiving cross-sex hormone therapy as of Oct. 13 could continue receiving federal reimbursement for up to six months. States may still use state-only funds to cover the affected services. Federal Medicaid and CHIP funding remains available for mental health services, including psychotherapy and counseling.
The proposed rule drew more than 30,000 public comments when it was issued in December 2025, with more than 90 percent opposing it, according to the state coalition. The named defendants include HHS Secretary Robert F. Kennedy Jr. and CMS Administrator Dr. Mehmet Oz, both in their official capacities.
No hearing date for the case has been announced.
