September 30 is the end of Fiscal Year 2025 for the federal government. If the Congress does not pass a continuing resolution or the remaining budget bills for fiscal year 2026 by that date, then parts of the federal government will shut down with many federal workers being forced out on furlough and many federal programs running out of funds.

But what does that mean for the health care industry? And, even if the Congress is able to pass a continuing resolution and fund the government for even a temporary period, what do the current proposals look like?

In this post, I will examine some of the aspects of health care policy that will be impacted when the calendar turns to October if nothing passes and what any proposed changes could mean.

Expiration of continuing resolution from March

The federal government is funded annually through a series of 12 appropriations bills that it must pass by September 30. If it does not pass those bills either individually or, more commonly in a large omnibus consolidated package of legislation, then it must pass a continuing resolution which resolves to maintain the previous fiscal year’s funding on a temporary basis while they negotiate the passage of the bills.

Congress passed two omnibus funding packages in March 2024 to set fiscal year 2024 funding levels. However, they then failed to reach agreement on fiscal year 2025 appropriations bills and relied instead on a series of three continuing resolutions that would fund the government until the end of fiscal 2025.

The government is currently operating under the last of these resolutions. The Full-Year Continuing Appropriations and Extensions Act, 2025 was signed into law on March 15, when the previous resolution expired. The goal of this law was to fund the government for the year while Congress works on the Fiscal Year 2026 appropriations bills.

We are now at the deadline for those efforts and each house has passed three of the required 12 appropriations bills, but not the same three. And neither has passed the Health and Human Services appropriations bill that would include funding for programs that impact the health care sector.

What was included in continuing resolution?

Generally, as part of continuing resolutions, Congress will either include packages of extenders to allow certain policies or programs to continue in operation or add new policy matters in order to secure the requisite majority vote in the House of Representatives (218 votes) and a filibuster-proof majority in the Senate (60 votes). This law was no different. Among the health care extenders included in the law were:

• Reauthorization and additional funding for the Community Health Center Fund
• The special diabetes program under Section 330B(b)(2) of the Public Health Service Act
• Various provisions related to public health emergencies.
• Increased Medicare inpatient hospital payment adjustment for low-volume hospitals
• Funding for the Medicare-Dependent Hospital program
• Add-on Medicare payments for ambulance services
• Acute Hospital Care at Home waiver authorities
• Temporary inclusion of authorized oral antiviral drugs as covered Part D Drugs
• Medicare telehealth flexibilities
• Delaying Medicaid Disproportionate Share Hospital payment reductions.

If any or all of these extenders were not to make it into the final product, it could be disastrous for the impacted sectors of the health care industry. For example, according to the National Association of Community Health Centers, the Community Health Center Fund provides approximately 70% of federal funding for community health centers.

Telehealth flexibilities at risk

The expiration of the Medicare telehealth flexibilities would also be a major hit to many health care providers. The current flexibilities are designed to expire on September 30 and include the following for providers through the Medicare program:

• removing geographic requirements and expanding originating sites
• expanding the types of practitioners eligible to provide telehealth services
• provision of services by Federally Qualified Health Centers and Rural Health Clinics
• delaying in-person requirements for tele-mental health services
• allowing use of audio-only telehealth services

These flexibilities were added to Medicare payment provisions during the COVID-19 pandemic and have been extended by continuing resolutions in 2022, 2024 and 2025. They have not previously been included in the full appropriations bills and are not currently in the full appropriations bills currently before the Congress.

That means that, even if Congress is able to come to another temporary extension of funding that includes these flexibilities, it will need to pass separate legislation to continue them past the end of the continuing resolution.

Other policies that could be impacted

In addition to the policies mentioned above, that are tied directly to the continuing resolution, a couple of other aspects of health law are at issue when the federal fiscal year ends, or soon thereafter.

One of the major impacts could come from the Food and Drug Administration’s Over-the-Counter Monograph Drug User Fee Program, a program that creates a system of industry-paid fees to help support FDA regulatory activities related to OTC monograph drug. This program, based on the FDA’s similar Prescription Drug User Fee program, was initially added by the CARES Act in 2020 and is due to expire on September 30, 2025.

Also, the funding specifically designated to the Department of Health and Human Services (HHS) to create and implement regulations under the No Surprises Act is set to run out on September 30, 2025.

Legislation drafted to prevent a shutdown

Two competing bills made it to the Senate floor for a vote on Friday, September 19, both attempting to stave off the possible government shutdown.

The first was a continuing resolution that passed through the House of Representatives before that body adjourned with the stated intent not to return until October 1, 2025. That bill, H.R. 5371 included extensions for all of the items included in the March continuing resolution. But it would only extend them until November 21, 2025, with the expectation that Congress would be able to come to agreement on full appropriations bills by that time.

In addition, the House measure included reauthorization for the OTC Drug User Fee Program and an extension of the No Surprises Act regulatory funding. The measure was defeated in the Senate 44 to 48 with 8 Republicans not voting and 2 Republicans joining all but one of the Democrats and both Independents in voting against it.

The second measure was introduced by Senate Democrats and would have extended government funding until October 31, 2025, giving the Congress about 21 fewer days to pass appropriations bills before the next threatened shutdown. That bill, S. 2882, similar to the House measure, would have extended all of the prior continuing resolution policies previously mentioned. It would also have continued the funding for No Surprises Act regulation.

It differed in large part from the House measure in three major ways. First was that it would have repealed the entire Health section of the 2025 Reconciliation Law (which we covered in a prior series of articles). Second, the bill would not have addressed the expiration of the OTC User Fee program. And finally, the bill would have made an enhanced premium tax credit permanent for Affordable Care Act insurance plans. The measure failed 47 to 45 with all of the Democrats and Independents voting for it and all but 8 Republicans voting against it.

So what now?

Both houses of Congress are off until Oct. 1 according to their floor calendars, but both continue to hold pro forma sessions throughout the week. If they come to an agreement on a continuing resolution, then none of these programs or flexibilities will halt. However, if they fail to do so and the government shuts down, so does the authority and funding for all the items mentioned above.

Additionally, the Office of Management and Budget has reportedly circulated a memo instructing federal agencies to plan for large scale reductions in force if the government does indeed shutdown. This could result in even further disruption to health care industry stakeholders because, unlike with previous furloughs resulting from a government shutdown, these RIFs would reduce the number of government employees at the agencies permanently, which may substantially slow down regulatory review or the appeals processes.

So any health care industry stakeholders who rely on the telehealth flexibilities or additional funding that is currently set to expire, should prepare for at least a temporary interruption in that authority and funding. In past years, when there has been a shutdown, the resulting reopening legislation has endeavoured to make up for the missing days. This will likely be the same if and when it happens. But, until we see the language of the proposed resolution, you cannot be certain.

Reed Smith will continue to follow health care legislation. If you have any questions, please do not hesitate to reach out to the author or to your health care lawyers at Reed Smith.