New Medicaid Work Requirements - Major Changes for States
The Centers for Medicare and Medicaid Services (CMS) announced a significant interim final rule on June 1, 2026, establishing guidelines for states to implement Medicaid work requirements as mandated by the 2025 reconciliation law. This legislation affects 44 states, requiring Medicaid eligibility for adults in the Affordable Care Act (ACA) Medicaid expansion group, as well as certain waiver programs, to be contingent upon meeting specific work requirements beginning January 1, 2027. Notably, exemptions are provided for individuals classified as "medically frail."
The rule introduces a narrower definition of medical frailty, which deviates from prior state expectations and links it to an individual’s capacity to meet community engagement activities, such as work or volunteering. The 2025 law defines the medically frail category to include individuals who are blind or disabled, those with significant physical or mental impairments, and those with severe medical conditions. However, the new rule requires states to examine both the qualifying condition and its impact on work capability, necessitating potential adjustments to prior implementation strategies.
States now face tighter timelines and increased operational complexity in integrating these requirements by the January 2027 deadline. The rule adds complexity to the pre-existing challenges, including potential audits and financial repercussions for states if compliance issues arise. Additionally, the stipulations may heighten barriers to Medicaid coverage, risking increased rates of uninsured individuals.
Each state is tasked with developing and routinely updating lists of diagnosis codes to identify medically frail individuals, subject to CMS audits. States must validate these conditions alongside assessing an individual's functional limitations in engaging in community activities. The CMS has clarified that an exhaustive list of conditions will not be specified in the regulation, leaving states the discretion to apply existing definitions for various frailty categories based on judgment and available data.
Before engaging applicants, states must attempt to verify medical frailty using claims data from the past year. However, since claims data might not capture all aspects of work capability, states are directed to employ clear, simple language during screening processes to identify potentially frail individuals accurately. Further, states are encouraged to implement methods like algorithms using healthcare data to estimate medical frailty, despite unclear directives on adjudicating ability to work, which could lead to operational and audit challenges.
Moreover, the feasibility of automating medical frailty determinations poses issues due to data limitations, particularly for new applicants or those with unusual coding profiles. States are anticipated to lean on healthcare providers to corroborate medical frailty, which could introduce administrative burdens and ethical concerns due to providers' vested interest in maintaining patient coverage.
States can accept self-attestation for medical frailty under certain conditions throughout 2027. From January 2028, however, self-attestation will be limited to one instance per enrollment period, with subsequent verifications necessitating additional data or documentation. Mandated reverification of medically frail status must occur annually, although states have the option for more frequent checks. This ongoing verification encompasses individuals classified as exempt due to medical frailty, which remains a critical administrative task for states managing these complex requirements.