Five states filed a lawsuit in federal court against HHS Jan. 8 over the agency’s decision to freeze $10 billion in funds that support child care programs for low-income families.
HHS announced Jan. 5 it was halting federal funds that support three social safety net programs to five states — California, Colorado, Illinois, Minnesota and New York. The funding supports the Child Care and Development Fund, which helps low-income families access subsidized child care, and the Temporary Assistance for Needy Families program, which provides direct cash assistance and employment services. A third program, the Social Services Block Grant, which funds services such as foster care and child abuse prevention, is also affected.
The agency attributed the move to concerns over fraud and abuse, stating in letters to the states that it “had reason to believe” that some of the benefits were being provided to individuals in the U.S. illegally, according to the Associated Press. HHS requested extensive data from the states, including names and Social Security numbers of benefit recipients.
New York Attorney General Letitia James, lead plaintiff in the lawsuit filed in New York City, argued the freeze violates the Constitution and said HHS has not provided evidence of “potential” fraud.
“Once again, the most vulnerable families in our communities are bearing the brunt of this administration’s campaign of chaos and retribution,” Ms. James said in a news release. “After jeopardizing food assistance and healthcare, this administration is now threatening to cut off childcare and other critical programs that parents depend on to provide for their children.”
Becker’s has reached out to HHS and will update the report if more information becomes available.
Three more federal health updates to know:
Johnson & Johnson, Trump administration strike drug pricing deal: Johnson & Johnson has reached a voluntary agreement with the Trump administration to lower drug costs and expand patient access in the U.S., becoming the latest major pharmaceutical company to join the federal TrumpRx initiative. The online platform, expected to launch in 2026, is designed to let consumers purchase discounted medications directly, bypassing traditional pharmacy benefit managers.
As part of the deal, J&J said it will offer medicines to Medicaid and cash-pay patients at prices comparable to those in other wealthy countries, according to a Jan. 8 news release from the drugmaker. In return, the company’s pharmaceutical products will be exempt from U.S. tariffs.
The agreement aligns with the administration’s broader effort to tie drug prices to a “most-favored-nation” benchmark and bring manufacturing back to the U.S. J&J also announced plans to build two new manufacturing facilities in North Carolina and Pennsylvania as part of a $55 billion domestic investment. The Trump administration has signed similar deals with Pfizer, AstraZeneca, Eli Lilly and Novo Nordisk in recent months.
House votes to extend ACA subsidies: The House of Representatives voted 230-196 to approve a three-year extension of enhanced Affordable Care tax credits that lapsed at the end of 2025. The measure now heads to the Senate, where its prospects remain uncertain.
A bipartisan group of senators is drafting an alternative two-year extension that would include new guardrails Republicans say are necessary to curb fraud and strengthen program integrity. Proposals under discussion include capping eligibility at around 700% of the federal poverty level, requiring a minimum $5 monthly premium payment and imposing penalties on insurers tied to improper enrollments.
Lawmakers are also considering an option that would allow subsidy recipients to redirect funds to health savings accounts in the second year of the extension. Senate Republicans have emphasized that any agreement must include these types of reforms as part of a compromise package.
Appeals court blocks 340B rebate pilot: A federal appeals court has upheld a lower court decision halting HHS from moving forward with its 340B Rebate Model Pilot Program, which would have allowed drugmakers to replace the traditional upfront discounts with post-sale rebates.
The 1st Circuit Court of Appeals denied the government’s request for a stay Jan. 7, finding that the program was likely unlawful and that HHS failed to consider the severe financial impact on safety-net hospitals. The pilot, announced in July, was set to launch Jan. 1 and apply initially to 10 drugs selected for Medicare price negotiations. Hospital groups had urged HHS to abandon the pilot for months, stating it would shift significant costs and risks onto providers already facing financial strain.
“The 1st Circuit recognized that the district court’s decision halting the 340B Rebate Program was ‘careful and thorough’ — and correct,” Rick Pollack, AHA president and CEO, said in a statement. “The AHA remains pleased that these courts have put on hold this harmful program that would have a devastating effect on America’s most vulnerable patients and communities, and the hospitals that serve them.”
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