States may have to revise beneficiary notices and eligibility systems on an accelerated timeline, keeping in mind the administrative reporting and verification burdens and potential CMS enforcement that continue to present material implementation and coverage risks.
HISTORY OF WORK REQUIREMENTS
During the first Trump administration, 13 states—Arizona, Arkansas, Georgia, Indiana, Kentucky, Maine, Michigan, Nebraska, New Hampshire, Ohio, South Carolina, Utah, and Wisconsin—obtained approval under Section 1115 waivers to condition Medicaid coverage on reporting time spent in qualifying work activities. Arkansas was the only state to implement its work requirements. 18,000 individuals lost coverage in the first seven months of enforcement before litigation halted the program.
In March 2019, the US District Court for the District of Columbia invalidated the Arkansas and Kentucky work requirements, finding that the HHS secretary’s authority to approve Section 1115 waivers is limited to projects that are “likely to assist in promoting” Medicaid’s purpose,[1] and the secretary had failed to offer evidence that an experiment expected to remove thousands of people promoted that purpose. In February 2020, a DC Circuit Court of Appeals panel affirmed in a unanimous opinion.[2] After the Biden administration withdrew the waiver approvals, the Supreme Court vacated the pending litigation in April 2022.
Later, in 2023, the Congressional Budget Office reported that work requirements had not meaningfully increased employment, noting that over 92% of the adult Medicaid population are already workers, students, or exempt due to qualifying conditions. Limited internet access, digital literacy, and confusion surrounding reporting resulted in substantial coverage loss, including among eligible individuals. Research also showed that administrative burdens to reapply to regain coverage resulted in 89% of those 18,000 individuals remaining unenrolled in the following year.
RENEWED PURSUIT OF WORK REQUIREMENTS
In July 2025, the One Big Beautiful Bill Act amended the Social Security Act to require 44 states—excluding Wyoming, Texas, Kansas, Mississippi, Alabama, Florida, and South Carolina—to implement work requirements (rebranded “community engagement requirements”) by January 1, 2027.
As a result, approximately 30% of Medicaid beneficiaries are expected to be subject to monthly reporting of 80 hours of qualifying activities, with state verification twice annually. At the time, the Congressional Budget Office projected approximately $326 billion in savings over 10 years and estimated that millions would become uninsured.
The statute exempts certain beneficiaries including “[a]n individual . . . who is medically frail or otherwise has special medical needs,”[3] identifying five illustrative subcategories:
- Individuals who are blind or disabled
- Individuals with substance use disorders
- Individuals with disabling mental disorders
- Individuals with physical, intellectual, or developmental disabilities that significantly impair one or more activities of daily living
- Individuals with serious or complex medical conditions
In June 2026, CMS issued an interim final rule implementing the work requirements that adopted a narrower interpretation of the medical-frailty exemption—specifically, the rule required individuals in the five subcategories to also have a “physical, mental, or other behavioral health condition [that] significantly impairs the individual’s ability to comply with the community engagement requirement.”[4]
The interim final rule also restricted the use of self-attestations to establish medical frailty and required states to conduct verifications through a limited review of 12 months of preceding claims and encounter data. 26 state attorneys general, the District of Columbia, and two state governors sought a preliminary injunction, which a federal judge denied on July 31, 2026.
COURT DECISION
On October 29, 2026, the US District Court for the District of Massachusetts held that a portion of CMS’s interim final rule exceeded the powers of the agency.[5]
The court reasoned that Congress’s five subcategories set a definitional floor for the term “medically frail” and the agency lacked authority to exclude any subset of individuals from those categories based on a functionality-based limitation. For example, the statute explicitly exempts an individual who is blind, whereas CMS’s interim final rule would require separate proof that the individual is blind and has a significant impairment to his or her ability to satisfy the work requirement.
The court vacated the conflicting regulatory language and permanently enjoined its enforcement or implementation. The court did not conclude that the rule’s restrictions on self-attestations or its 12-month claims-and-encounter-data lookback were arbitrary and capricious under the Administrative Procedure Act.
WHAT’S NEXT FOR WORK REQUIREMENTS
The January 1 implementation date for Medicaid work requirements remains unchanged: the decision removed the additional functional-impairment requirement for beneficiaries within the five statutory medical-frailty subcategories but does not otherwise eliminate work reporting obligations.
Prior to the October 2026 decision, projections estimated that approximately 5.3 million individuals could lose Medicaid coverage by 2034 as a result of the work requirements. While the partial vacatur may reduce that figure, the extent of expected coverage losses remains uncertain and the problems surrounding reporting complexity, digital literacy barriers, and beneficiary confusion endure. If past is prologue, many coverage losses may result from failure to meet the reporting requirement, rather than Medicaid ineligibility or failure to work.
States were required to begin notifying affected Medicaid beneficiaries in July, August, or September depending on their verification periods. Consequently, states may have to issue corrected notices explaining the broader medical-frailty exemption, particularly for individuals previously advised that they must demonstrate functional impairment. Revisions may also require changes to eligibility systems, implementation plans, and budgets.
These adjustments come amid compressed implementation timelines and prior changes between informal CMS guidance and the interim final rule. CMS has also foreshadowed forthcoming audits and potential financial penalties for states that fail to implement the requirements correctly.
In light of the November 2026 midterm elections, Congress has an opportunity to reconsider the Medicaid work requirements, but the future is unclear. With Democrats gaining control of both chambers of Congress, increased legislative scrutiny and oversight of the work requirements are likely, along with potential efforts to delay, modify, or repeal certain provisions. However, any legislative changes would require presidential approval or sufficient congressional support to override a veto.
At the state level, newly elected governors may pursue different approaches to implementation, including requests for additional implementation time. Absent legislative or administrative intervention, the January 1 implementation deadline remains in effect, leaving states with only a few months to adjust their systems and beneficiary communications.
