The Federal Funding Freeze and its Effect on Health Equity Programs

Seyfarth Synopsis: A string of executive orders and an OMB memorandum from the Trump Administration left the status of almost all federal funding in a state of limbo. In particular, funding from the National Institutes of Health and for Health Equity Programs that evaluate the health and quality of care disparities faced by underserved populations may be in conflict with the policy goals of the Trump executive orders. As such, institutions that rely on this funding must review their grant awards to determine if they conflict with the new executive orders.

Background

a. The Federal Funding Freeze

On January 20, 2025, President Donald Trump signed seven executive orders that required federal agencies to assess and terminate programs and activities that violate the policy goals of his administration. The executive orders covered a wide range of federal activities:

1. 1. EO 14159 (Protecting the American People Against Invasion)
   2. EO 14169 (Reevaluating and Realigning United States Foreign Aid)
   3. EO 14162 (Putting America First in International Environmental Agreements)
   4. EO 14154 (Unleashing American Energy)
   5. EO 14151 (Ending Radical and Wasteful Government DEI Programs and Preferencing)
   6. EO 14168 (Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government)
   7. EO 14182 (Enforcing the Hyde Amendment)

A week later, the Office of Management and Budget (“OMB”) issued Memo M-25-13 to ensure that all federal agencies instituted a temporary pause to assess and terminate any “Federal financial assistance” that met the definition of the term in 2 C.F.R. 200.1. The definition of “Federal financial assistance” in Paragraphs (1) and (2) of 2 C.F.R. 200.1 is broad and includes assistance received through grants, cooperative agreements, non-cash contributions, direct appropriations, food commodities, loans, loan guarantees, interest subsidies, and insurance.

The breadth of federal assistance covered by Memo M-25-13 prompted OMB to release a clarification memo the following day. The Q&A attached to the clarification stressed that only federal assistance that conflicted with the referenced executive orders should be paused for review. The clarification reiterated that direct benefits to individuals, such as Social Security and Medicare, were unaffected by the pause.

In response to President Trump’s executive orders and OMB’s Memo M-25-13, the National Council of Nonprofits sued the administration in the U.S. District Court for the District of Columbia and received an administrative stay on the funding pause. Additionally, 23 state attorneys general successfully sued the Trump Administration in the District Court of Rhode Island and received a Temporary Restraining Order (“TRO”) to enjoin federal agencies from pausing, freezing, impeding, blocking, cancelling, or terminating federal assistance to the 23 States except as allowed by law. To avoid confusion with the injunctions, the Trump Administration rescinded Memo M-25-13 but stated that President Trump’s orders on federal funding remain in full effect. 

Research universities and science-focused organizations also received a TRO preventing the imposition of a cap on National Institutes of Health (“NIH”) funding of indirect costs, such as for administration and personnel, related to its grants. The nationwide restriction enjoins any steps to implement, apply or enforce Supplemental Guidance to the 2024 NIH Grants Policy Statement: Indirect Cost Rates (NOT-OD-25-068), issued by the Office of the Director of the NIH on February 7, 2025.

Despite the initial success of the lawsuits challenging Memo M-25-13 and the NIH cap, it remains unclear exactly which forms of federal assistance will be honored by federal agencies in light of the new executive orders. The Trump executive orders are still in effect and the temporary stays on the funding pause and cap only prevent an agency from relying on Memo M-25-13 or the executive orders in determining which federal assistance to pause. They do not prevent an agency from exercising their independent authority to pause federal assistance. This means it is important to review federal grants and other funding contracts with respect to the policy goals established by the Trump Administration in his new executive orders.

b. Health Equity Programs

Health Equity Programs seek to research health and quality of care disparities among underserved populations in the United States and establish a strategy for combatting those disparities. Public universities and research institutions, health care providers, and nonprofits are examples of the types of organizations that apply for this type of funding which can come from a number of sources, including NIH and federal agencies whose missions involve the health of the general public.

The federal requirements for what type of research is eligible to receive grant money for Health Equity Programs are determined by the agency administering the grant. This means an institution receiving federal funds for the implementation of a Health Equity Program must evaluate each grant on a case-by-case basis to determine if the funding stream can continue to be relied on.  As an example, the Centers for Medicare & Medicaid Services (“CMS”) offer grants for organizations “to research racial and ethnic minority groups; people with disabilities; members of the lesbian, gay, bisexual, transgender, and queer (LGBTQ+) community; individuals with limited English proficiency; individuals residing in rural areas; and individuals (including children, youth, and families) adversely affected by persistent poverty or inequality among Medicare, Medicaid and CHIP enrollees.” Because of the broad range of research eligible for this grant, and because not all of these categories conflict with the Trump executive orders, an organization receiving a grant under this program needs to examine the specific language of the grant to determine if they may continue to receive the funding.

Application of the Trump Executive Orders to Grants for Health Equity Programs

Health Equity Programs serve as an enlightening example of how grant language should be evaluated in light of President Trump’s executive orders.

Grants for Health Equity Programs should be examined to determine the extent they rely on race and ethnicity in their award. Sec. 2(b)(i) of Executive Order 14151 directs agencies to terminate “all ‘equity action plans,’ ‘equity’ actions, initiatives, or programs, ‘equity-related’ grants or contracts; and all DEI or DEIA performance requirements for employees, contractors, or grantees.” While it is not clear how the executive order defines “DEI” requirements, the policy goals stated in the executive order indicate it is referring to illegal or discriminatory DEI programs. Thus, the top priority for organizations relying on Health Equity Program funding for its research should be to search for grants that contain racial exclusions. Recipients of grants for research that require this focus on specific races to the exclusion of others should be wary. It is unlikely an agency reexamining this type of grant would find it aligns with the policy goals stated in Executive Order 14151.

These organizations should apply the same scrutiny to research with gender-based exclusions. As with race and ethnicity exclusions, gender or sex-based exclusions are likely to run afoul of the goals of Executive Order 14151. In addition, a review of grants for gender or sex-based research should also ensure that the grants comply with the policy goals of Executive Order 14168. Sec. 3(g) of Executive Order 14168 requires agencies to ensure federal funds are not being used to promote “gender ideology.” The executive order defines “gender ideology” as polices that “replace the biological category of sex with an ever-shifting concept of self-assessed gender identity, permitting the false claim that males can identify as and thus become women and vice versa, and requiring all institutions of society to regard this false claim as true.” It further defines the term to include references to the “idea that there is a vast spectrum of genders that are disconnected from one's sex.” This categorical ban on references to gender identities that are not based on the biological sexes means any grants for Health Equity Programs that focus on disparities faced by the members of the transgender community are in jeopardy.

Conclusion

The Trump Administration’s federal funding pause and grants cap have undeniable impact on the federal funding of Health Equity Programs. These funds are instrumental to the work performed by research institutions and nonprofits and these institutions must begin reviewing the terms of the grants they receive. Because each grant’s continued permissibility under the new executive orders will be individually assessed in light of each grant’s particular award language and cost allocation, we encourage you to speak with an attorney in Seyfarth Shaw’s Health Care, Life Sciences and Pharmaceutical industry group if you have any questions.