CLA (CliftonLarsonAllen) | Government Shutdown: What Now for Health Care?

A shutdown impacts the industry in various ways: Medicare and Medicaid continue, but discretionary-funded services face interruptions.

October 1, the first day of the 2026 federal fiscal year (FFY), is here — and we are now in a federal government shutdown.

Existing FFY 2025 funding expired on September 30, and Congress was unable to pass a funding extension. Typically, that has been done via a “continuing resolution” (CR) or an omnibus funding package. Until there is a funding extension enacted, government will remain in a shutdown.

What happens during a government shutdown?

The first thing to know is that not all of government shuts down. Essential programs and workers will continue while others will be furloughed.

The funding at issue in negotiations relates to what’s called “discretionary” funding. In a shutdown, non-essential aspects of discretionary funded programs are halted; mandatory programs and “essential” staff continue on.

However, the process of determining who and what are essential can be more complicated.

Are Medicare and Medicaid impacted by a shutdown?

The Department of Health & Human Services (HHS) and Centers for Medicare & Medicaid (CMS) oversee many programs, including Medicare and Medicaid. Both health insurance programs are mandatory programs — which means they will continue on during a shutdown.

However, various programs and staff within HHS — including CMS, Food & Drug Administration, National Institute of Health, and others — may have discretionary funding, so the impact of a shutdown varies considerably across agencies.

Which health care policies and funding are immediately affected by the shutdown?

There are a variety of policies and funding that have now expired. Typically, these policies ride along with government funding bills. Unfortunately, this means they expired on September 30, since FFY 2026 funding has not been enacted.

Examples of expiring health policies include:

• Medicare telehealth flexibilities
• Medicare hospital-at-home program waivers
• Section 330 community health center funding
• Rural hospital designations of Medicare dependent (MDH) and low-volume
• Medicare rural ground ambulance add-on payments
• Delay of Medicaid disproportionate care hospital (DSH) payment cuts
• National health service corps and teaching health center funds

However, the exact impacts expiring policies will have on providers is a bit more murky and will be impacted by the length of a government shutdown, whether they are included or not into the 2026 funding package, and additional CMS guidance.

What specific Medicare telehealth policies impact hospitals, physicians, home health, and others?

Various flexibilities in place since the pandemic now revert to pre-COVID requirements:

• Geographic restrictions reinstated, which means only patients in qualifying rural areas are eligible for Medicare telehealth
• Home is no longer an allowable location for telehealth, and patients need to go to an allowable medical facility for telehealth services
• Federally qualified health centers (FQHCs) and rural health centers (RHCs) no longer qualify as a distant site and cannot receive reimbursements for most telehealth services
• Audio-only visits no longer qualify as telehealth
• Expanded list of telehealth providers is rolled back, meaning physical therapists and occupational therapists, among others, no longer qualify to provide telehealth

Is the acute hospital care at home program (AHCAH) impacted?

Yes. Hospitals treating patients under Medicare’s AHCAH waiver will be impacted.

CMS states that for “all hospitals with active AHCAH waivers, all inpatients must be discharged or returned to the hospital on September 30, 2025, in the absence of Congressional action to extend the initiative.”

What issues are holding up the 2026 funding agreement?

Health care policies appear to be the holdup in the negotiations. Although Republicans have a majority in both the U.S. Senate and the U.S. House, they need some Democrat votes to pass any funding legislation.

Republicans indicate they want a “clean” CR without any policies attached to it. Democrats want specific health care policies attached to the CR.

One of the main stumbling blocks in negotiations relates to the enhanced “advanced premium tax credits” or EAPTCs. These credits are available to those purchasing health care insurance on the Affordable Care Act’s marketplace and were substantially increased during the pandemic. They revert to pre-COVID levels at the end of 2025, and Democrats want them to continue.

Does a shutdown impact health care and the broader economy?

The answer will depend on the length of a shutdown. The shorter the shutdown, the smaller the impact and vice versa.

There have been a variety of shutdowns over the years. The Congressional Budget Office estimated one shutdown that lasted roughly five weeks in late 2018 and early 2019, cost the economy $3 billion and 0.02 GDP.

Approximately $18 billion in federal compensation and goods and services were delayed during that shutdown and individuals and businesses dependent on government programs or compensation were also negatively impacted.

For more information, please connect:
Jennifer Boese, Healthcare Consultant Director, CLA (CliftonLarsonAllen)

Compliments of CLA (CliftonLarsonAllen) – a member of the EACCNY