A new interim final rule affecting Medicaid work requirements could leave states scrambling and cause many to lose coverage.
The One Big Beautiful Bill Act of 2025 enacted significant changes to the Medicaid program, including work requirements. These requirements mandate that Medicaid members ages 19 to 64 covered through the Affordable Care Act Medicaid expansion prove 80 hours per month of employment, education or volunteering. These changes are set to take effect in January 2027.
But on Monday, the Centers for Medicare and Medicaid Services took it a step further with an interim final rule to the work requirements. One major change is adding conditions to the medical frailty exemption from the work requirements. Medical frailty includes blindness or disability; substance use disorder; disabling mental disorder, physical, intellectual, or developmental disability that significantly impairs a person’s ability to perform one or more activities of daily living; and serious or complex medical condition.
The new rule now requires that medical frailty be limited to situations in which a person’s condition impairs their ability to meet the work requirement. In other words, it’s no longer sufficient to merely have one of these conditions to qualify for an exemption. They now have to prove to state authorities that their condition is serious enough that they can’t fulfill the requirements. This now means that some people who previously fit the medical frailty exemption may no longer qualify, according to a recent analysis from the Center on Budget and Policy Priorities.
For example, people with a serious medical condition, like cancer, may have received an exemption. But if the interim final rule is adopted, will states have to adjudicate who is too sick to work those hours? The complicating factor is that some cancer patients may be able to work 80 hours in some months, but if they are receiving chemotherapy, they may be too fatigued to work 80 hours in another month.
“It’s not going to be enough, for example, for somebody to have cancer,” said Allison Orris, senior fellow and the director of Medicaid policy at CBPP. “They are going to have to raise their hand, or the state will have to determine that not only do they have a cancer diagnosis, but that their cancer diagnosis is essentially serious enough that they have a significant inability to comply. That two-step process is, I think, different than what many states had been assuming as they were building their systems to implement this law, and will add a lot of burden both for individuals and for states in their implementation process.”
The rule allows self-attestation by members with a condition fitting the medical frailty exemption for the first year of implementation. However, starting 2028, documentation — such as a doctor’s statement — will be required to prove medical frailty.
This will make it much more challenging for people to show the state they qualify for exemption and for the state to validate their condition, Orris added. A lot of states have not built the systems needed to identify people who have a certain condition, much less determine the severity of the condition.
With this being an interim final rule, CMS is taking comments for 60 days. However, they’re not under obligation to make any changes, Orris noted. She added that litigation is likely, but with the 2027 implementation deadline coming up quickly, states will need to move ahead even if they don’t agree with the changes.
As of June 5, 30 comments have been submitted, but they are not viewable.
Why healthcare experts are concerned
Several advocacy organizations criticized the interim final rule. This includes Community Catalyst, which is focused on race equity and health justice.
Shaina Goodman, vice president of policy and government affairs at Community Catalyst, argued that the rule adds more red tape, which will lead to more people getting kicked off Medicaid even if they are eligible. This has implications for the broader healthcare system too — when people lose coverage, they’re more likely to end up in the emergency room for care, the most expensive setting to get care.
“For health systems to offset uncompensated care costs, they often increase costs for everyone, regardless of where they get their health insurance,” Goodman said. “Increased costs for everyone create a cascade effect: more people, regardless of insurance type, are less likely to seek necessary services or to forgo treatment altogether, which, in turn, contributes to worsening health and even higher long-term costs as once-treatable conditions become chronic.”
Another healthcare expert echoed these comments.
“The data is unambiguous: Medicaid saves lives. While the Medicaid work requirements have some exemptions, the exemptions are narrow with a lack of clarity in the law around those exemptions,” said Adam Brown, an emergency physician and founder of ABIG Health. “New hurdles and documentation requirements could have the unintended consequences of removing those from Medicaid that should be on it.”
The Primary Care Collaborative, meanwhile, is worried that the new rule could undermine the continuous relationship between members and primary care physicians due to a disruption in coverage, said Ann Greiner, president and CEO.
She added that the interim final rule could be burdensome not just for states, but for providers as well.
“Primary care has a lot of paperwork, there’s a lot of red tape,” she said. “It’s been estimated that for every hour of care, there’s two hours of paperwork. I think that’s beginning to perhaps decline a bit with artificial intelligence, but it’s still really there. So we’re concerned that this just adds more paperwork.”
Greiner did note that there are some positive aspects to the rule, like prioritizing electronic data matching to verify eligibility.
Orris of CBPP, however, argued that the last minute changes should give states the opportunity to push back implementation. She noted that H.R. 1 — or the One Big Beautiful Bill — gave states the ability to ask CMS for a good faith exception to delay the work requirements.
“I think the fact that this rule is making some pretty big changes at the almost 11th hour should be grounds for a delay,” she said. “Whether CMS will see it that way … is an open question, but I think the rushed implementation was always going to be a challenge of this requirement, and the rule just deepens the risk that it will be more difficult.”
Photo: designer491, Getty Images
