Medicare Is Now Covering Hemp THC Products. Prohibitionists Are Suing to Stop It.

A federal program that pays for hemp-derived CBD and THC products for Medicare beneficiaries officially launched April 1. One day later, a coalition of anti-drug groups went to federal court to shut it down. On Wednesday, a judge refused to stop it — for now.

This is exactly the kind of situation The Grey Zone exists to explain: a federal agency launching a program that a separate piece of federal legislation may have already made illegal, with a court deciding what the law actually means and a hearing less than three weeks away.

Here’s what’s actually happening.

What CMS Just Started Doing

The Centers for Medicare & Medicaid Services (CMS) created something called the Substance Access Beneficiary Engagement Incentive, or the “Substance Access BEI.” It’s not traditional Medicare coverage — it’s an optional add-on to three specific CMS Innovation Center payment models:

– ACO REACH (Accountable Care Organization Realizing Equity, Access, and Community Health) – Enhancing Oncology Model (EOM) – Long-term Enhance ACO Design (LEAD) Model

ACO REACH and EOM participants can begin offering it now. LEAD participants don’t get access until January 1, 2027.

Under the program, participating providers can furnish eligible hemp products to qualifying Medicare beneficiaries, up to $500 per year. The products must contain no more than 3mg of THC per serving. Medicare does not reimburse for the products — the cost comes out of model participants’ own funds, with CMS providing financial incentives through the model structure.

Who qualifies as a beneficiary? You have to be 18 or older, aligned to a participating organization, not pregnant or breastfeeding, not excluded by model-specific frailty or disqualifying conditions, and a physician must determine use is appropriate and document shared decision-making before any product is dispensed.

CMS Administrator Dr. Mehmet Oz announced the program’s official launch on April 1. The Trump administration had telegraphed it since December, when the administration announced executive action on cannabis scheduling.

Why Prohibitionists Think the Program Is Illegal

The lawsuit, filed April 1 in the U.S. District Court for the District of Columbia by the Smart Approaches to Marijuana (SAM) coalition and ten co-plaintiffs, makes two core legal arguments.

First: Procedural. The plaintiffs argue CMS created this program without proper notice-and-comment rulemaking required under the Administrative Procedure Act (APA). The agency, they say, essentially invented a new benefit category — one involving controlled-substance-adjacent products — without going through the regulatory process that lets the public weigh in.

Second: Substantive. This is the sharper edge. The plaintiffs argue the products CMS wants to cover may no longer legally qualify as hemp under the definition Congress recently established.

That argument requires a short detour into Farm Bill history.

The 2018 Farm Bill defined hemp as cannabis with ≤0.3% delta-9 THC by dry weight. That definition made delta-8, THCA, and other cannabinoids a legal grey zone — technically derived from compliant hemp plants but producing intoxicating effects that weren’t contemplated when Congress wrote the law.

In late 2025, Congress included language in a federal funding bill that restricted the sale of certain hemp-derived intoxicating products, effectively reclassifying some of them as no longer meeting the legal definition of hemp. The plaintiffs in this case argue the products CMS is covering fall within that category.

If they’re right, CMS isn’t just acting without notice and comment — it’s funding the distribution of products that Congress just decided aren’t legally hemp anymore.

What the Court Said (and Didn’t)

On Wednesday, a D.C. federal judge denied plaintiffs’ motion for a temporary restraining order (TRO) — the fastest, most emergency form of court intervention. A TRO would have frozen the program immediately. The court declining to grant it means the program continues operating, at least for now.

But a TRO denial is not a ruling on the merits. Courts set a high bar for TROs: the moving party must show both that they’re likely to succeed on the merits and that they’d suffer irreparable harm without immediate relief. Denying a TRO only means the court wasn’t convinced enough to act before a full hearing.

The next major date is April 20, 2026, when the court has scheduled a hearing on the plaintiffs’ motion for a preliminary injunction. A preliminary injunction, if granted, would freeze the program while the lawsuit plays out — potentially for months or years.

A preliminary injunction is harder to get than a TRO, but it’s also a more substantive review. The April 20 hearing is where both sides will make their full legal arguments.

The Grey Zone Here Is Structural

What makes this case particularly tangled is that the legal conflict isn’t between state and federal law — it’s between two different parts of federal law and policy.

CMS is an executive branch agency. It launched this program under authority the Trump administration believes it has. The plaintiffs argue that same authority is constrained by what Congress said in the 2025 funding bill, and further constrained by the APA’s procedural requirements.

Put plainly: one part of the federal government is trying to cover hemp-derived THC for Medicare patients, while another part of the federal government may have already made that legally impossible — and a federal court is being asked to referee.

This isn’t unusual in hemp law. The Farm Bill created the framework. DEA has issued its own interpretations. USDA has issued its own rules. FDA has never finalized its CBD policy. Congress has passed funding riders. States have piled on their own bans and regulations. The CMS BEI lawsuit is the next chapter of the same structural story: when no one body has full authority over a substance, legal conflicts are inevitable.

What This Means Right Now

For Medicare beneficiaries: The program is live for ACO REACH and EOM participants. If your provider participates in one of those models, you may be eligible to receive hemp-derived products under a physician’s care. Whether that continues past April 20 depends on the court.

For hemp retailers and manufacturers: CMS hasn’t opened a general Medicare market for hemp products — this is a narrow pilot, operating through specific CMS models. But the legal question being litigated here, specifically whether products restricted by the 2025 funding bill can still be called “hemp,” has implications far beyond this pilot program. That question, if it gets a definitive answer, could reshape enforcement across the retail hemp market.

For compliance officers: The APA challenge is worth watching carefully. If courts find that CMS can’t create programs like this without notice-and-comment rulemaking, the precedent could apply to how other agencies treat hemp-derived products under existing regulatory frameworks — including FDA.

What to Watch

The April 20 preliminary injunction hearing is the immediate focal point. If the court grants the injunction, the program freezes. If it denies it, the program continues while the underlying lawsuit proceeds — likely through the rest of 2026.

The substantive question — whether the 2025 funding bill’s hemp product restrictions apply to CMS program-eligible products — is one courts haven’t addressed directly. The answer has implications well beyond Medicare.

This column will follow the April 20 hearing. For the current state of hemp laws across the country, see our hemp THC legality by state tracker.

Morgan Ellis covers hemp regulation and the gaps between federal law, state law, and enforcement reality for CannabisInquirer.com. The Grey Zone publishes weekly.