Attorney on Law

Dentistry Likely to be Affected by Developments of a Legal Nature

Prominent among these is a Big Beautiful Bill that may not be so pretty for New York State.

Lance Plunkett, J.D., LL.M.

A few new legal developments that affect dentistry have taken place in recent months. They are summarized below.

COVID Leave

On July 31, New York State finally ended its special novel coronavirus (COVID-19) paid sick leave. This leave had been in effect since March 2020 but has now sunsetted. Obviously, employees can use other available paid leaves if they come down with COVID-19, but the unique COVID-19 paid sick leave is no more.

Water Fluoridation

On July 21, the Environmental Protection Agency (EPA) finally moved forward with an appeal of the water fluoridation case it lost in 2024—Food & Water Watch, Inc. v. United States Environmental Protection Agency. As one of its last acts, in January, the EPA under the Biden Administration filed a notice of appeal. However, under the Trump Administration, EPA had not moved forward with the appeal, and it was unclear if it would just drop it. Now the appeal is finally moving forward in the United States Court of Appeals for the Ninth Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington). Interestingly, the appeal has nothing to do with the merits of water fluoridation. Instead, the arguments are entirely focused on procedural matters stemming from how the lower court (the United States District Court for the Northern District of California) handled the case.

The EPA first argues that the plaintiffs (the main plaintiff is Food & Water Watch, Inc.) failed to carry their burden on standing to sue. The drinking water for the plaintiffs’ only relevant standing declarant naturally contains fluoride and the remedy the plaintiffs seek would not require the water utility to remove that naturally occurring fluoride. Thus, the EPA contends that injury to the plaintiffs is not caused by the addition of fluoride to drinking water and no remedy available in the case would redress the claimed injury.

The EPA next argues that, even if the plaintiffs had established standing, reversal is warranted because the lower court violated Section 21 of the Toxic Substances Control Act (TSCA) by permitting the plaintiffs to rely on evidence not first presented to the EPA in their TSCA petition and reviewed by EPA in denying that petition. EPA noted that the court’s final merits ruling overwhelmingly relied on voluminous evidence that did not even exist at the time of the original TSCA petition and could never have been presented in that petition to the EPA. The EPA stated that the court’s approach of allowing consideration of new evidence on a rolling basis throughout the proceedings is contrary to statutory text and frustrates the purpose of the mandatory exhaustion requirement in Section 21 of the TSCA. EPA argued that, if allowed to stand, the court’s approach would transform Section 21 of the TSCA from a citizen petition provision into the driving force of the entire statutory scheme and that such a boundless approach to Section 21 of the TSCA would undermine the EPA’s ability to meet the TSCA’s prioritization, risk-evaluation and risk-management deadlines. The EPA further pointed out that it would require the EPA to proceed to risk management with a record insufficient to satisfy the TSCA’s rigorous scientific and regulatory standards.

Finally, the EPA argued that the district court abused its discretion by commandeering the trial and administrative proceedings in violation of the party-presentation principle. In particular, the EPA stated that the court refused to rule after the close of evidence at the first trial—notwithstanding the parties’ insistence that the case was ready for resolution, and in the face of the court’s repeated acknowledgment that it had “serious concerns” about the plaintiffs’ standing. The EPA noted that this, and the court’s determination to accumulate more evidence that it, rather than the parties, thought proper, transformed the court from a neutral arbiter into an advocate, and transformed Section 21 of the TSCA from a citizen petition provision into a license for judicial rulemaking.

The EPA also noted that it continued to disagree with the district court’s merits order purporting to apply the TSCA’s scientific standards, but that rather than ask the Ninth Circuit Court of Appeals to review the district court’s factual findings on the technical, complex scientific issues litigated in the lower court, the appeal instead presented more straightforward legal grounds for ereversal. The appeal rests largely on the broad principle that the court usurped the prerogatives of the executive branch and not on any strong endorsement of water fluoridation, a somewhat disheartening but not unexpected approach to the appeal.

Perhaps the EPA was keeping in mind the adage, “Any port in a storm.” At least the American Dental Association has filed what is known as an amicus (“friend of the court”) brief with the court that does delve into the health benefits of water fluoridation. That public health benefit aspect will be on the radar of the Ninth Circuit now since the presentation by the EPA on that issue throughout the case has not been overly inspiring.

That Beautiful Bill Mention must be made of the federal OBBBA (One Big Beautiful Bill Act). The law is massive. It would consume an entire Journal issue to go into all its provisions—and many are of minimal interest to dentistry. But some health-care and small business provisions are more pertinent. These are addressed below. People, including lawyers, are still trying to figure out exactly what effect this law will have on Medicaid and the Children’s Health Insurance Program (CHIP)—known as Child Health Plus in New York State—but the consensus is that it is not going to be good for New York. Many of the provisions do not kick in for over a year, so some changes to the law may end up being enacted down the road. Here is a list of major health-care provisions of the OBBBA.

Medicaid Eligibility, Enrollment and Redetermination Reforms

1. Address verification and duplicate enrollment prevention

By Jan. 1, 2027, all states must set up a process to regularly obtain and verify the address for Medicaid and CHIP enrollees using reliable data sources. Managed care and prepaid health plans must promptly report any address updates provided or verified by enrollees. Starting no later than Oct. 1, 2029, states must submit enrollee data at least monthly and during each eligibility check to a new federal system to identify duplicate enrollments. If dual enrollment is found, states must review and, if necessary, disenroll ineligible individuals.

2. Deceased enrollee verification

Starting Jan. 1, 2027, states will be required to check quarterly, and ensure annually, any deceased Medicaid enrollees by reviewing the federal Death Master File. This database, maintained by the Social Security Administration, contains information on individuals who have passed away. If an enrollee is confirmed as deceased, the state must promptly end their Medicaid coverage and payments, except for services provided before death. If someone is wrongly removed, benefits must be immediately reinstated retroactively. States may also use other electronic data sources to identify deceased enrollees, provided all eligibility rules are followed.

3. Provider screening

To ensure that only living, eligible health-care providers and suppliers participate in and receive payment under the Medicaid program, states will be required to regularly check the federal Death Master File to verify the status of enrolled providers or suppliers beginning Jan. 1, 2028. These checks must be done at least every three months, as well as whenever a provider enrolls, re-enrolls or updates their enrollment information.

4. Auditing for payment errors

The legislation grants the Department of Health and Human Services (HHS), or the state if permitted, enhanced flexibility to audit and address Medicaid payment errors that exceed the three percent threshold for eligibility-related erroneous excess payments under the Medicaid Eligibility Quality Control Program beginning in fiscal year 2030. It also expands the definition of payment errors to include situations where eligibility cannot be confirmed.

5. Eligibility redeterminations in expansion states like New York

Starting after Dec. 31, 2026, states will be required to verify the eligibility of certain Medicaid enrollees every six months, rather than annually. This new requirement primarily affects adults who qualify for Medicaid under the expansion rules, as well as individuals in similar groups covered by state waivers that comply with federal minimum coverage standards. The Centers for Medicare and Medicaid Services (CMS) must provide guidance on implementing these changes by the end of 2025.

6. Medicaid eligibility for qualified immigrants

Starting Oct. 1, 2026, federal Medicaid payments to states for medical assistance will be restricted to specific groups of individuals. Eligible individuals include United States citizens, United States nationals, lawful permanent residents, certain Cuban and Haitian entrants, and those legally residing in the United States under a Compact of Free Association. As a result, undocumented immigrants and temporary visitors will no longer qualify for any non-emergency Medicaid-funded services. These same restrictions will also apply to CHIP.

7. Emergency Medicaid coverage for immigrants

Starting Oct. 1, 2026, the federal government will limit the amount it pays states for emergency medical care provided to certain noncitizen immigrants under Medicaid. Specifically, the federal matching rate for these emergency services will be capped at the standard rate for each state.

8. Moratorium on nursing home staffing standards

A moratorium is imposed on the implementation and enforcement of the nationwide nursing home staffing rules, effective immediately through Sept. 30, 2034.

9. Retroactive coverage eligibility

The retroactive eligibility period for the Medicaid expansion population will be limited to services furnished in or after the month preceding the application month, rather than the previous three-month period. For all other Medicaid applicants, retroactive coverage will be limited to services provided in or after the second month before the application month. For CHIP, if a state elects to provide retroactive coverage for child health or pregnancy-related assistance, coverage cannot extend to services furnished before the second month preceding the month of application. These provisions apply to applications submitted on or after Jan. 1, 2027.

10. Federal payments to prohibited entities

Federal “direct spending” under Medicaid cannot be used to pay any “prohibited entity,” defined as a nonprofit, taxexempt essential community provider primarily engaged in family planning and reproductive health that provides abortions (except in cases of rape, incest or life endangerment), and that received over $800,000 in combined federal and state Medicaid payments in fiscal year 2023, for items and services furnished during the one-year period beginning on the date of enactment. This restriction applies to payments made directly or through managed care organizations or other covered entities, including their affiliates, subsidiaries and clinics, effective July 4, 2025.

Medicaid Provider Tax and State-directed Payment Changes

1. Increased FMAP sunsets for new expansion states like New York

The five percent enhanced federal matching assistance percentage (FMAP), established under the American Rescue Plan Act for new Medicaid expansion states, will sunset effective Jan. 1. This is one of several provisions that single out states that opted to expand Medicaid to additional populations.

2. Change in hold harmless threshold

The legislation modifies the “hold harmless” threshold, so that beginning Oct. 1, 2026, the maximum percentage of net patient revenue that states can tax certain healthcare providers will be determined based on whether the state has expanded Medicaid. For non-expansion states, the threshold is set based on whether a qualifying tax was already in place at the time the law is enacted; if not, the threshold is zero. For expansion states like New York, the threshold is either the lower of the existing rate or a gradually decreasing cap, dropping from 5.5 percent in 2028 to 3.5 percent by 2032.

3. State-directed payments

A cap is established for certain state-directed payments as follows:

States that offer Medicaid expansion coverage equivalent to minimum essential coverage must limit payments to 100 percent of the total published Medicare payment rate (or the Medicaid rate if no Medicare rate exists), while non-expansion states are allowed up to 110 percent of the Medicare rate. Certain payments that received written approval before May 1, 2025, or a payment for a rural hospital for which written prior approval, or a good faith effort to obtain approval, was made by the date of enactment, are “grandfathered” and will have their payment rates gradually reduced by 10 percentage points each year starting in 2028 until they meet the new limits. States that newly expand Medicaid after the enactment date are subject to the 100 percent cap for expansion states. The legislation also defines key terms such as “rating period,” “rural hospital,” “total published Medicare payment rate” and “written prior approval.”

4. Medicaid provider tax requirements

States have the option to seek waivers from the Centers for Medicare and Medicaid Services (CMS) that permit them to implement Medicaid provider taxes that do not strictly adhere to broad-based or uniform tax requirements. The legislation clarifies that a tax is not considered “generally redistributive” if, within a permissible class, the tax rate is lower for providers with a smaller share of Medicaid business or higher for those with a larger share, or if the tax structure achieves the same effect by other means, such as using different terminology or closely approximating Medicaid-related groups. It defines “Medicaid taxable units” as those tied to Medicaid payments, revenue or costs, and “non-Medicaid taxable units” as those tied to non-Medicaid business. Further, it provides that a “tax rate group” is a set of entities within a permissible class taxed at the same rate.

These changes are effective upon enactment, subject to a transition period determined by HHS, not to exceed three fiscal years. Unfortunately, CMS is proposing a rule that would only grant a transition to states that adopted its tax more than two years earlier and New York does not qualify under that rule. The lack of a transition would be financially disastrous for New York. Whether CMS will make any adjustments to its transition rule now that OBBBA is the law remains to be seen.

5. Section 1115 demonstration budget neutrality

The legislation codifies that any new, renewed or amended Section 1115 Medicaid demonstration projects cannot be approved unless the chief actuary for CMS certifies that the project will not increase federal spending compared to what would have been spent without the project, beginning Jan. 1, 2027. Further, it requires that all costs, including those for populations and services that could have been covered under the regular Medicaid state plan, must be considered in the comparison. In the event the demonstration project results in lower expenditures than would have occurred otherwise, HHS will determine how those savings are factored into future project approvals.

Personal Accountability and Cost Sharing

1. Community engagement (work) requirements

Beginning in 2027, states will be required to implement community engagement requirements as a condition of Medicaid eligibility for certain adults between the ages of 19 and 64 who are not otherwise excluded. Under these requirements, individuals must demonstrate each month that they are engaged in qualifying activities, such as working at least 80 hours, participating in community service or a work program for at least 80 hours, being enrolled at least half-time in an educational program or earning income at or above the minimum wage for 80 hours per month. There is flexibility for individuals to combine these activities to meet the 80-hour threshold, and special provisions exist for seasonal workers who meet income requirements over a six-month period. States have the discretion to specify the number of months of compliance required prior to application or between eligibility redeterminations, and they may conduct compliance verifications more frequently if desired.

There are several mandatory exceptions to these requirements, ensuring that vulnerable populations are not adversely affected. Excluded groups include children under 19, seniors, pregnant women, individuals with disabilities or serious health conditions, caregivers for young children or disabled dependents, veterans with total disabilities, American Indians and Alaska Natives, and those already meeting work requirements under other federal programs like Temporary Assistance for Needy Families (TANF) or Supplemental Nutrition Assistance Program (SNAP). Additionally, states may grant optional exceptions for individuals experiencing short-term hardships, such as hospitalization, residing in areas affected by disasters or high unemployment, or needing to travel for complex medical care.

States are required to use available data sources, such as payroll or benefit records, to verify compliance and minimize the need for individuals to submit additional documentation. States are not allowed to use Medicaid managed care organizations, certain other entities or contractors to decide if beneficiaries are meeting program requirements if those contractors have any financial ties—direct or indirect—to the organizations that provide or arrange Medicaid coverage for those beneficiaries.

If a state cannot verify that an individual has met the community engagement requirement, the individual must be notified and given a 30-day period to resolve the issue, during which time Medicaid coverage continues. If the individual does not provide satisfactory evidence of compliance or exemption, coverage may be denied or terminated, but only after the state determines whether the individual qualifies for other forms of assistance and provides notice and an opportunity for a fair hearing. States are prohibited from waiving these requirements but may request a temporary exemption if they demonstrate good faith efforts and face significant barriers, with all exemptions expiring by the end of 2028.

States are required to conduct outreach to individuals enrolled in Medicaid or related waivers to inform them about the new community engagement requirements. The notice must clearly explain how to comply with the community engagement requirement, detail any exceptions and define who is considered an “applicable individual.” It must also outline the consequences of not meeting the requirement and provide instructions for reporting changes in status that could affect eligibility or exceptions. Notices must be sent by regular mail (or electronically if the individual prefers) and through at least one additional method, such as phone, text, website or other electronic means, to ensure broad and effective communication. The timing of these notifications must begin before Dec. 31, 2026, or earlier if the state decides, and then at regular intervals after that following standards set by HHS. HHS is required to promulgate an interim final rule for purposes of implementing these provisions by June 1, 2026.

2. Cost sharing for expansion enrollees

Expansion enrollees with family incomes above 100 percent of the federal poverty level must pay cost sharing for covered services, beginning Oct. 1, 2028. These individuals, called “specified individuals,” will no longer be charged enrollment fees or premiums, but states will be required to impose some form of cost sharing, such as copayments or deductibles, for certain services. However, there are important limits: no cost sharing can be applied to primary care; mental health; substance use disorder services; or services provided by federally qualified health centers, certified community behavioral health clinics or rural health clinics. For other services, the maximum charge per item or service is $35, except for prescription drugs, which have their own federal limits. Additionally, the total cost sharing for all family members cannot exceed five percent of the family’s income, calculated on a monthly or quarterly basis. Providers may require payment of these charges as a condition for providing care, but they can also choose to reduce or waive them.

Access, Coverage and Program Expansion Home and community-based (HCBS) waivers

Beginning July 1, 2028, states will be able to apply for a new type of Medicaid waiver that allows them to expand coverage for home or community-based services (HCBS) to individuals who do not require an institutional level of care, if they meet state-established, needs-based criteria approved by the Department of Health and Human Services (HHS). These waivers can be approved for an initial three-year period and extended for five-year increments, provided states meet certain requirements, such as ensuring that expanding HCBS does not increase waiting times for those already eligible for such services and that per capita spending on these new recipients does not exceed the average cost of institutional care. States must also provide detailed annual data to HHS on service costs, duration and recipient numbers, and cannot use federal funds from this program to pay for certain practitioner benefits.

Medicare

1. Medicare eligibility for immigrants

Medicare eligibility is limited to United States citizens, lawful permanent residents, certain Cuban and Haitian entrants and individuals lawfully residing in the United States under a Compact of Free Association. For current beneficiaries, these restrictions will take effect 18 months after the date of enactment (Jan. 4, 2027). The Social Security Administration is required to conduct a comprehensive review of all current Medicare beneficiaries within one year of the law’s enactment (by July 4, 2026) to determine whether they meet the newly established eligibility criteria. Beneficiaries who are found not to qualify under the updated standards must be formally notified that their Medicare coverage will terminate effective Jan. 4, 2027.

2. Temporary Medicare pay increase for health-care providers

A one-time 2.5 percent increase to the Medicare Physician Fee Schedule is provided for services rendered between Jan. 1, 2026, and Jan. 1, 2027. While it averts scheduled cuts in the immediate term, the increase is not factored into baseline calculations that determine payment amounts for subsequent years.

3. Orphan drug exclusion from price negotiation

Orphan drugs designated for one or more rare diseases or conditions are excluded from Medicare’s drug price negotiation. The updated policy clarifies that if a drug maintains its orphan status, meaning it is approved for at least one rare disease or condition, it will not accrue time toward eligibility for price negotiation under the program. If a drug loses its orphan designation, the period for negotiation eligibility will begin to count from the first day it no longer qualifies as an orphan drug. These provisions take effect for initial price applicability years starting on or after Jan. 1, 2028.

Telehealth

Services and Health Savings Accounts

1. Permanent extension of the telehealth safe harbor

The safe harbor allowing high-deductible health plans (HDHP) to cover telehealth and other remote care services before the deductible is met will be made permanent, effective for plan years beginning after Dec. 31, 2024, and the plan will still qualify as an HDHP for Health Savings Account (HSA) purposes. The law also removes language that previously limited this safe harbor to certain months or plan years.

2. Bronze and catastrophic plan eligibility for HSAs

For months beginning after Dec. 31, bronze and catastrophic plans offered through the ACA exchanges will be treated as HDHPs for purposes of HSA eligibility.

3. Direct primary care (DPC) service arrangements

DPC arrangements allow individuals to pay a fixed, recurring fee to a primary care practitioner for access to primary care services. These fees will be considered qualified medical expenses for HSA purposes if the monthly fee does not exceed $150 for an individual or $300 for a family. However, these arrangements must strictly limit services to primary care and cannot include procedures requiring general anesthesia, most prescription drugs or certain laboratory services. Dollar limits on fees will be adjusted for inflation starting in taxable years after 2026. These changes take effect for months beginning after Dec. 31.

Rural Healthcare

Rural health transformation program

The Rural Health Transformation Program provides $10 billion per year from 2026 to 2030 to help states improve rural health care. States must apply with a comprehensive plan addressing issues like access, health outcomes, technology, provider partnerships, workforce and hospital stability no later than Dec. 31. Approved states receive annual funding with no state match required. Half of the funds are split equally among participating states; the rest are distributed based on rural population and facility metrics. States must use funds for at least three key activities, such as evidencebased care, technology adoption, workforce development, information technology upgrades, or expanding mental health and substance use services. The program requires annual reporting, allows CMS to withhold or reclaim misused funds and redistributes unused funds.

Small Business Impact

The One Big Beautiful Bill Act (OBBBA) also makes changes on the small business side of the health-care equation. Below is a list of the major small business provisions of OBBBA.

Qualified Business Income Deduction

The existing 20% deduction for qualified business income (QBI) under current tax law was set to sunset at the end of 2025, but the OBBBA makes it permanent, with moderate inflation-based changes. Beginning in tax year 2026, the taxable income phase-in limit will be increased to $75,000 for single filers and $150,000 for joint returns (compared to $50,000 and $100,000, respectively, under current law).

The OBBBA creates a minimum deduction amount of $400 for taxpayers whose aggregate QBI with respect to all active qualified trades or businesses of the taxpayer for the taxable year is at least $1,000. The $400 and $1,000 amounts will be adjusted for inflation beginning in tax year 2027. Most taxpayers will see little material impact from these changes, and the OBBBA will simply continue the prior QBI tax regime.

Pass-through Business Losses

The OBBBA makes permanent the limitation on excess business losses of non-corporate taxpayers. An “excess business loss” is the amount by which the deductions (excluding net operating losses and qualified business income deductions) attributable to trades or businesses of the taxpayer exceed the gross income from such trades or businesses plus $250,000 ($500,000 in the case of a joint return).

The $250,000 amount is adjusted for inflation based on a new inflation basis starting in 2026.

Qualified Small Business Stock

The OBBBA revamps the future for qualified small business stock (QSBS), which allows owners of C corporation stock in certain qualifying businesses to exclude capital gain. For QSBS that is issued after July 4, 2025, there will be a tiered holding period requirement and corresponding percentage for exclusion of gain (noted below). QSBS issued prior to July 5, 2025, will still be subject to the flat five-year holding period and 50% exclusion of gain. Additionally, the $10 million gain limitation is increased to $15 million (and adjusted for inflation) for QSBS issued after July 4, 2025. Lastly, the gross asset test to determine a “qualified small business” is increased to $75 million (adjusted for inflation) from $50 million. No other changes were made to the mechanics of QSBS stock.

Years stock held Applicable percentage

3 years.....50%

4 years.....75%

5 years or more.......100%

How Bad Will it Be in New York?

While there are many other provisions in the OBBBA, these are the items of the most interest to dentistry. In New York State, Medicaid and Child Health Plus are going to need significant adjustment to maintain services. The possibility of a major increase in people lacking health insurance in New York is pretty much conceded by all health-care economic experts. The ripple effects of this, including rising use of hospital emergency departments, are difficult to measure this early in the game. And the specific effects for dentistry are even more difficult to assess. The possibility of adult dental Medicaid disappearing is something New York believed was no longer in play. Who knows if that ugly and foolish idea will resurface in what may become desperate efforts to save dollars in Medicaid. The OBBBA cure could prove worse than any disease in New York.

The material contained in this column is informational only and does not constitute legal advice. For specific questions, dentists should contact their own attorney.