Prominent children’s hospitals and other providers of care to transgender youth are facing a new threat to funding from President Donald Trump’s administration.
A federal rule that took effect this week bars states from seeking U.S. funds for transgender youth medical care, including puberty blockers, hormones, or rare surgical interventions.
The rule applies to youth under 18 covered by Medicaid and patients under 19 using the Children’s Health Insurance Program, or CHIP.
The rule is the latest effort by the Trump administration to curtail gender-affirming care for children and teens in the 23 states where it remains legal.
Last year, federal authorities also launched investigations into more than 20 hospitals, including the Children’s Hospital of Philadelphia and Nemours Children’s Health in Delaware, seeking confidential medical records of transgender youth to review for potential healthcare fraud.
University of Pittsburgh Medical Center (UPMC) and five other hospitals under investigation nationwide recently signed settlement agreements with the U.S. Department of Justice to end civil and criminal inquiries and protect patient records. In exchange, the hospitals have agreed to end medical care for transgender children and adolescents and pay the government millions of dollars in fees.
CHOP, which has successfully fought in court to protect patient records, did not reply to requests for comment on whether it’s negotiating with the DOJ. Nemours declined to comment.
Advocates of transgender rights say the mounting legal and political pressure has intensified an atmosphere of fear.
“It’s really terrifying when you see families who have relocated to places like Philadelphia and Pittsburgh to get care for their child and now they are faced with potentially not being able to make sure their kid can go to the doctor like everyone else,” said Pittsburgh resident Shelby Chestnut, who serves as executive director of the Transgender Law Center.
A coalition of 21 Democratic-led states and the District of Columbia have filed a federal lawsuit seeking to overturn the new federal rule. New Jersey, Delaware and Pennsylvania are part of the coalition.
The federal rule took effect on Tuesday.
“We are ending federal taxpayer funding for sex-rejecting procedures on children,” U.S. Department of Health and Human Services Secretary Robert F. Kennedy Jr. said in an August statement announcing the new rule. “These interventions carry serious risks and can cause irreversible harm. The federal government will no longer use Medicaid and CHIP dollars to fund procedures that fail to meet the evidentiary standard our children deserve.”
What the new rule means
For transgender adolescents on hormone therapy, the federal government will continue Medicaid and CHIP reimbursement for those medications during a “tapering-off period” for up to six months from the rule’s start date.
The rule does not apply to mental health services, such as talk therapy, for patients with gender dysphoria — a medical condition in which a person’s body does not match their gender identity.
It also doesn’t prohibit states from covering the medical treatments with their own dollars.
In Pennsylvania, the total cost for Medicaid participants, both adults and youth, who received gender-affirming care was about $11.9 million in fiscal year 2024-25. (The state was not immediately able to provide a financial breakdown by age.)
Of the total, Pennsylvania paid roughly $3.9 million, or 33%. CHIP expenses totaled nearly $1 million. The amounts covered both medical and behavioral health, according to the Pennsylvania Department of Human Services.
Pennsylvania will use state dollars to cover puberty blockers and hormone medications for transgender children and teens enrolled in Medicaid, according to Rosie Lapowsky, a spokesperson for Democratic Gov. Josh Shapiro.
Under Pennsylvania law, however, the state can’t use its own funds to cover CHIP, she said.
Delaware Gov. Matt Meyer, a Democrat, has decided to plug federal funding gaps with state money.
“Gov. Meyer is committing state funds to replace the lost federal funding in full, ensuring these young people continue to receive the care they need,” Meyer spokesperson Jonah Anderson wrote in an email. “Medical needs should guide care, and Delaware will not allow callous political stunts to interrupt their treatment.”
Democratic New Jersey Gov. Mikie Sherrill, who recently signed a law that makes it a crime to interfere with individuals trying to access gender-affirming care, is weighing the state’s options.
“The governor and the Sherrill administration will continue to fight the Trump administration’s endless efforts to weaponize what should be decisions between doctors and their patients,” a spokesperson said in an email.
The Philadelphia region’s three Democratic-led states are also involved with the pending federal lawsuit, which argues that the rule oversteps the Trump administration’s authority, creates illegal barriers for low-income and vulnerable individuals, and strips states of their authority to decide which services should be covered under Medicaid and CHIP.
“Gov. Shapiro joined this lawsuit to defend the rights of patients and parents to make healthcare decisions with their doctors and because he believes federal government action to dictate the kinds of care medical professionals can provide is dangerous,” his spokesperson, Lapowsky, said in a statement.
Pittsburgh hospital settles with DOJ
The new rule comes as federal authorities continue to investigate alleged healthcare and consumer fraud by providers of pediatric transgender care nationwide.
CHOP won its case late last year before a U.S. District Court judge based in Philadelphia, who prevented the DOJ from obtaining patient medical records for its investigation. CHOP’s Gender and Sexuality Development Program is one of the largest of its kind in the country.
Asked about the status of its program following news of the recent settlements by other hospitals, CHOP did not respond to requests for comment.
A Nemours spokesperson declined to comment on the status of the DOJ’s investigation and whether it was considering a settlement agreement. In July 2025, Nemours stopped providing gender-affirming care beyond behavioral health services to new patients.
The DOJ also declined to comment on whether it is having conversations with either hospital, citing its “ongoing investigations.”
In a victory touted by the Trump administration, UPMC has agreed to pay nearly $1 million to the DOJ, while “expressly and resoundingly” denying any wrongdoing, according to the Sept. 18 agreement.
The UPMC settlement was announced on the same day as a DOJ agreement with New York University Langone Hospitals, which also agreed to end the care and pay $8.5 million to the government.
Last year, UMPC had voluntarily stopped providing medical treatment for transgender youth. The agreement formalizes UMPC’s decision to end the care.
“UPMC chose to resolve the matter to avoid prolonged litigation, protect patients and families from unnecessary disclosure of sensitive personal and health information, protect employees, and remain focused on patient care and advancing its core mission,” a UPMC spokesperson said in a statement.
Mimi McKenzie, legal director for the Public Interest Law Center (PILC), lambasted UPMC for “failing transgender children.”
Her organization, a Philadelphia-based nonprofit that advocates for the civil, social, and economic rights of marginalized communities, had represented a handful of UPMC patients and their families in their fight to prevent the DOJ from getting their medical records.
“Our country’s shameful turn against vulnerable children will be made temporary. UMPC’s stain on its reputation, however, will last forever,” McKenzie said in a statement.