In this edition of the Situation Report, we spotlight major federal actions reshaping the health landscape—from the implementation of sweeping HHS layoffs following a Supreme Court ruling to the rollout of new Medicaid work requirements that could leave millions without coverage and burden already strained state systems. We also examine how recent funding caps threaten the pipeline for training future clinicians, potentially worsening the nation’s provider shortage. Read on for updates on research funding reforms, the latest from our blog on ethical autism research and real-world data, as well as an update from our advocacy team on supporting AHRQ to mitigate rural care risks, and opportunities to get involved through our members-only Town Hall and data access advocacy effort.
In today’s issue:
- HHS Finalizes Portion of Employee Layoffs Following Supreme Court Ruling
- Health Industry Reflects on the Passage of Recent Tax and Spending Bill
- Medicaid Work Rules Threaten Coverage, Burden States
- New Proposal Aims to Reform Research Overhead Funding
- Funding Caps Jeopardize Future Medical Workforce
- Trump Administration Cuts Undocumented Immigrants’ Access to Health Care
- Latest from the AcademyHealth Blog: Ethics in Autism Research and Rural Care Risks
- Have You Lost Access to Critical Health Data? Share Your Story with Us.
- ICYMI Members-Only Town Hall: Navigating Today’s Health Policy and Research Landscape
HHS Finalizes Portion of Employee Layoffs Following Supreme Court Ruling
The Department of Health and Human Services (HHS) has officially laid off a portion of its workforce after the U.S. Supreme Court lifted a lower court's injunction, allowing the department to proceed with its reduction-in-force (RIF) plans. In an email to affected employees, HHS confirmed that those receiving RIF notices in April are now officially separated as of July 14, 2025. This move is part of a broader strategy to reduce the department's staff by approximately 25 percent, with 10,000 employees laid off and another 10,000 departing through voluntary separation incentives. The Supreme Court's decision enables HHS to advance its workforce restructuring, which had been previously halted by legal challenges.
Health Industry Reflects on the Passage of Recent Tax and Spending Bill
The passage of the recent tax and spending bill marked a rare political loss for some of the health industry’s most powerful lobbying forces, including doctors, hospitals, and insurers. Health industry lobbyists and advocates who sought to deter Republican lawmakers from passing the legislation are now performing a post-mortem to understand why lawmakers were hesitant to heed their warnings, particularly those on the dangers of Medicaid cuts. Many believe that vulnerable members were more concerned with facing a Trump-backed primary challenge than angering the hospitals and constituents in their districts. Others posit that Republicans are frustrated by hospitals’ continued and strong support of the ACA and thus have less goodwill towards hospitals. Some cite a longstanding appetite among Republicans to reduce the scope of the ACA marketplace enrollment, as well as Medicaid, which may have overrode industry and constituent concerns. There is also a feeling that GOP lawmakers faced pressure to deliver a major policy victory for the president, which overshadowed their concerns about the damages the bill poses to the health system. However, industry insiders had some successes, including preventing the federal government from reducing its share of spending for states that expanded Medicaid under the ACA and not capping Medicaid’s open-ended federal funding to states, reversing billions in Medicaid funding cuts.
Medicaid Work Rules Threaten Coverage, Burden States
The Trump Administration’s new Medicaid work rules require states to quickly implement systems to notify people who receive Medicaid about new work requirements and to track their compliance. The new law starts in 2027 and will require adults who are able-bodied to work, volunteer, or do other qualifying activities for at least 80 hours a month in order to qualify for Medicaid. States tracking adherence to requirements has already proven to be expensive and administratively burdensome, as evidenced by examples in both Georgia and Arkansas. Moreover, nearly 12 million people are expected to lose coverage under the new law due to challenges associated with proving they are complying with stricter work requirements, even though nearly 64 percent of adults with Medicaid work full time or part time, and an additional 32 percent are caretakers, ill, disabled, students, or retired. To track adherence, states will need to invest in information technology infrastructure among other administrative, operational, and communication tasks that will likely exceed the 200 million dollars in implementation funds provided by the federal government. As states consider avenues to implementation, some may conclude unwinding Medicaid expansion may ultimately be more straightforward and cheaper. Health Secretary Robert F. Kennedy Jr. has until June 2026 to define key exceptions to the work requirements.
New Proposal Aims to Reform Research Overhead Funding
A coalition of 10 academic organizations, known as the Joint Associations Group (JAG), has finalized a proposal to counter the Trump administration’s plan to significantly cut federal payments for research overhead, or indirect costs. Their model, called Financial Accountability in Research (FAIR), offers institutions two reimbursement options: an “expanded” approach that itemizes most indirect costs as direct costs within grant budgets, and a simpler “base” option that allocates a fixed percentage of the budget to support services. The proposal introduces new cost categories and aims to replace the current indirect cost system while improving transparency and auditability. It eliminates the need for institutions to negotiate overhead rates with the government, which currently range from 30 percent to 70 percent, and replaces them with standardized reimbursement structures and a standalone 15 percent allocation for general operational expenses. The FAIR model has drawn cautious interest from policymakers, and JAG is set to present it to the research community and federal officials on July 15.
Funding Caps Jeopardize Future Medical Workforce
Amid a worsening physician shortage in the U.S., a provision buried in the recent 900-page tax and spending bill signed into law earlier this month is poised to make financing medical education significantly more challenging for aspiring doctors. The provision caps the amount of federal graduate student loans to $20,500 a year, with a total limit of $100,000 and caps federal loans for professional medical, dental, and law programs to $50,000 a year, with a total limit of $200,000. These limits overlook the fact that medical students accumulate an average of nearly $240,000 in debt for educational costs, an amount that can be even higher for out-of-state students or those attending top-ranked private universities. These caps, along with elimination of Grad PLUS loans that allow students to borrow up to the full amount of the cost of attendance, will create an additional financial barrier to qualified individuals pursuing a medical degree. Without the ability to rely on government loans, students will have to pay out of pocket or rely on private loans, which can come with higher interest rates and stricter borrowing options. Further, private loans are not eligible for public service loan forgiveness programs, which may deter students from pursuing specialties or practice areas that focus on underserved populations, such as rural communities. Current and aspiring medical students are sharing their stories to exemplify how these new rules will disproportionately burden low- and middle-income students—especially those who are first generation—making it even more challenging to finance their education, let alone pursue their dream programs. Beyond exacerbating the predicted physician shortage of up to 86,000 by 2036, this provision may decrease clinician diversity, which is associated with improved health care quality.
Trump Administration Cuts Undocumented Immigrants’ Access to Health Care
The Trump Administration has taken steps to further curtail undocumented immigrants' access to federally funded programs, including health care clinics, early childhood education, and nutritional support. The decision, which went to into effect yesterday, is likely to worsen health outcomes and cause fear among immigrant communities, including concern for how this could impact immigrants who are authorized to be in the country including children covered by DACA, people with work or student visas, and those with employment authorization who may also be subject to the new rules. This move is part of a pattern where the HHS Secretary makes decisions without public input and could further burden public clinics that serve these communities if they have to check immigration status or if they face financial strain from losing access to these patients.
Latest from the AcademyHealth Blog: Ethics in Autism Research and Rural Care Risks
Ethical Concerns Raised in New Autism Research Initiative
A new AcademyHealth blog explores the risks and ethical concerns surrounding a proposed federal real-world data platform focused on autism. While these platforms can help advance research, the authors emphasize that trust, community involvement, and strong data protections are essential. The blog outlines what meaningful partnership with families and autistic individuals should look like and highlights the potential consequences of moving forward without these safeguards. This piece is a helpful resource for researchers and policymakers focused on building ethical, inclusive research practices.
Rural Health at Risk: Why AHRQ Matters Now More Than Ever
The latest blog, authored by AcademyHealth’s Advocacy Team, highlights how the new reconciliation law could lead to major coverage losses and rural hospital closures, placing millions at risk. The authors point to the Agency for Healthcare Research and Quality as a key resource for helping rural communities respond, but warn that recent efforts to weaken the agency threaten its ability to provide needed support. The post explains AHRQ’s role in strengthening rural health systems and offers practical information for those working to protect access to care. It’s a valuable read for advocates, policymakers, and anyone concerned about rural health.
Have You Lost Access to Critical Health Data? Share Your Story with Us.
AcademyHealth is part of a federal lawsuit seeking to restore access to important public health data that was removed or altered by recent federal actions. We already have a strong legal case, but personal stories from researchers, clinicians, and public health professionals about how these data losses have impacted their work and communities, can make it even stronger.
If you or your colleagues have been affected, please share your experience to help us show real-world harm and push for the restoration of these vital resources.
ICYMI Members-Only Town Hall: Navigating Today’s Health Policy and Research Landscape
Join us for an exclusive AcademyHealth members-only town hall with President and CEO, Aaron Carroll, Director of Advocacy, Josh Caplan, and Senior Vice President of Policy and Advocacy at the nonpartisan, nonprofit advocacy alliance, Research!America, Ellie Dehoney. The town hall provides members with critical insights into the policy and funding challenges shaping the health services and health policy research field. Participants will discover advocacy strategies and resources to navigate the current environment. This interactive session offers a unique opportunity to connect with peers, share experiences, and engage in open dialogue with AcademyHealth leadership.
Date and Time: Wednesday, July 16, 2025 | 12:00p.m. to 1:00p.m. ET
Register Now: AcademyHealth Town Hall Meeting | AcademyHealth
Previous Updates
This is the latest in a series of Situation Report updates from AcademyHealth. You can find prior issues here.
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