The Trump administration on Wednesday rescinded a directive ordering federal agencies to pause trillions of dollars in financial assistance after the policy sparked significant confusion and anxiety in Washington and across the healthcare industry.
A new memo from the acting director of the Office of Management and Budget to the heads of federal departments states that memo M-25-13 “is rescinded,” according to a copy of the memo viewed by Healthcare Dive.
Memo M-25-13, released Monday, told agencies to freeze “all activities related to obligations or disbursement of all federal financial assistance” unless it was directly provided to individuals or part of Medicare or Social Security.
The White House’s about-face comes after a federal judge ordered a temporary halt on the funding freeze late Tuesday afternoon.
However, “this is NOT a rescission of the federal funding freeze,” wrote White House Press Secretary Karoline Leavitt in a post on X Wednesday. “It is simply a rescission of the OMB memo” to “end any confusion created by the court’s injunction.”
The freeze if enacted would impact hundreds of billions or even trillions of dollars to states, nonprofits, healthcare providers and more, throwing their normal operations into disarray and causing layoffs or even full shutdowns of numerous services for Americans, according to experts.
As such, the OMB’s memo caused chaos in Washington and in the healthcare industry, given the healthcare sector is one of the biggest beneficiaries of federal funds.
States and providers reported that they weren’t able to access federal payment platforms, including for Medicaid, even after the White House clarified that payments to the massive safety-net insurance program would continue under the pause.
A group of nonprofits that receive federal funding quickly sued, and a D.C. district judge temporarily stayed the order’s implementation until a Monday court hearing. Democrat attorneys general from 22 states and the District of Columbia also filed their own lawsuit over the action.
It remains unclear whether the Trump administration still plans to pursue a pause on funding if courts allow. According to officials, the goal of the freeze is to allow them to review federal spending to ensure it aligns with President Donald Trump’s recent executive orders around conservative priorities like immigration, diversity and abortion.
“The President’s [executive orders] on federal funding remain in full force and effect, and will be rigorously implemented,” Leavitt wrote.
