Eligible medicare beneficiaries at participating healthcare providers will soon be able to purchase $500 worth of hemp-derived products annually for medical purposes.
Under a new Centers for Medicare and Medicaid Services pilot program that begins on Wednesday, participating healthcare providers can offer their eligible patients hemp-derived CBD and THC products for symptom control with no out-of-pocket cost to the patient.
The pilot program, along with President Donald Trump‘s executive order rescheduling marijuana, marks a paradigm shift in the federal government’s relationship with the hemp industry and cannabis sativa products. Especially as it comes while congressional momentum moves in the opposite direction, with hemp-banning legislation set to go into effect on Nov. 12.
CMS Administrator Dr. Mehmet Oz floated the pilot program idea in December 2025, but the initiative was not announced until March 20. Formally called the Substance Access Beneficiary Engagement Incentive, the pilot program will be offered through three CMS Innovation Center models while the agency collects data on the program and how the product affects patients.
“These CBD products must first meet local and state quality and safety standards,” Oz said during the rescheduling Executive Order signing in December. “They must come from legitimate sources. They must abide by other regulations of those states. With these boxes checked, patients can be eligible for up to $500 of hemp-derived products each year.”
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But a new lawsuit says the program flies in the face of the proper legal procedures needed to undertake a pilot such as this. Several drug safety advocate groups, such as Smart Approaches To Marijuana, are challenging the program in court, seeking an order to vacate and set aside the program.
As CMS gets ready to launch the Substance Access BEI program on Wednesday, while the legal challenge plays out in court, here’s what to know about the program:
How will the hemp pilot program work?
The three CMS organizations overseeing the agency’s hemp pilot program are the ACO REACH Model, the Enhancing Oncology Model, and the Long-term Enhanced ACO Design Model.
The program will begin for participants in the first two models on April 1, while the program start date for participants in the Long-term Enhanced ACO Design Model is Jan. 1, 2027.
Medicare beneficiaries can now have up to $500 worth of hemp-derived products covered annually by federal health insurers. These products include CBD and THC products that come from the hemp cannabis-sativa plant, not the marijuana plant, which has higher THC levels.
During the December executive order signing, Oz called the program important because the current guidelines leave “patients and doctors without adequate guidance on the safeguards of how to use these products, even though they’re still being used.” He framed hemp products as a “non-addictive” alternative to treating chronic pain.
“At Medicare, we cover 68 million Americans, including people under the age of 65, and they did not have a way of providing these treatments until today,” Oz said. “With the president’s assistance, that all changes. The Innovation Center models are going to allow millions of Americans on Medicare to become eligible to receive CBD.”
He called the program “the first government-led testing of quality and outcomes for patients across different conditions,” related to hemp-derived products, and said it “delivers on the need for more data collection and research into hemp usage.” CMS will use the research it collects on the program to assess whether it should expand the pilot.
“We’re going to analyze that data and make it publicly available to everybody to be able to analyze with us,” Oz said. “If it shows promise, we will expand access to these products to even more conditions amongst Medicare and Medicaid beneficiaries.”
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How the program defines eligible hemp products, and why it raises eyebrows
The CMS program defines eligible hemp products using language from the 2018 farm bill, rather than the recently passed 2026 Agriculture Appropriations Act. The program allows beneficiaries to access hemp products containing no more than 0.3% Delta-9 THC, or 3 milligrams per serving.
This hemp-limit language, legalized in the 2018 Farm Bill, was slashed in November by the FY 2026 Agriculture Appropriations Act that included a provision setting the limit at 0.4 mg of total hemp-derived THC per container. This language was a drastic change in the legal threshold, wiping out nearly all products available in the current market, and is set to take effect on Nov. 12.
By using the higher, older THC threshold, the CMS program is establishing a hemp-product precedent that could change in less than eight months if Congress does not pass legislation to postpone or change the new threshold set to hit in November.
Jim Higdon, the cofounder of Cornbread Hemp, which won a contract as a hemp supplier for the CMS pilot program, called the investment in the pilot “an extraordinary leap of faith” by his company and the farmers that support Cornbread Hemp due to the impending Nov. 12 possible threshold change.
“It’s a strong bet to make on the functionality of Congress, given the state of Congress today,” Higdon told the Washington Examiner. “But we do feel like there will be a couple of vehicles that will get to the president’s desk that could bring this along with it, and we have to prepare for that scenario. We can’t sit back. We’re leaders in this space, and that’s the cost of leadership.”
There have been multiple bills introduced in Congress early this year addressing the fiscal 2026 Agriculture Appropriations Act hemp-banning language, including a bill postponing the Nov. 12 cliff supported by Rep. James Comer (R-KY), a leader in Congress on the topic.
A spokesperson for CMS told the Washington Examiner that the agency “recognizes that the legal landscape is evolving” surrounding the legal definition of hemp.
“If statutory limits change, the agency will consider updating its parameters accordingly,” the CMS spokesperson said. “CMS will continue to refine the model over time based on legal developments, data, and stakeholder input.”
The legal challenge to the pilot program
Smart Approaches To Marijuana and 10 other plaintiffs filed a lawsuit against CMS and the Department of Health and Human Services over the program, seeking a permanent injunction to prohibit the agency from implementing the hemp pilot program.
SAM President and CEO Kevin Sabet told the Washington Examiner that their legal challenge takes issue with the manner in which the program was officially announced without time for public comment and how it goes against the new legal THC threshold.
“Basically, the administration didn’t follow any rules procedurally, legally, let alone medically, for this program,” Sabet said. “They gave no time for public comment. They simply said, ‘We’re going to do this in 10 days.’ It’s totally out of precedent for that to happen. This is taxpayer money for this program, and so we think that they should be accountable.”
“It completely contradicts the law,” Sabet said. “I mean, the law is that these products that have more than 0.3 milligrams of THC are illegal.”
Sabet said the organization’s lawsuit is not aimed at blocking hemp-derived products as treatments for chronic pain, but instead meant to ensure CMS goes through regulatory processes such as public comment periods before implementing such a program.
“We don’t have anything against marijuana-based medicines, especially those based on CBD, that can help people, but we just would like to see them go through the proper regulatory process,” Sabet said.
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The groups filed the lawsuit Monday evening in the U.S. District Court for the District of Columbia.
The Washington Examiner has reached out to CMS for comment on the SAM lawsuit.