How will states implement Medicaid work requirements? Here's what to know

Last week, KFF Health News hosted a discussion analyzing President Trump's July signing of a budget reconciliation package that requires all adults eligible for Medicaid under the Affordable Care Act (ACA) expansion to meet federal work and reporting requirements.

The 41 states that have expanded Medicaid under the ACA will also be required to verify that individuals are either working or qualify for specific exemptions when they apply or renew their Medicaid coverage.

Larry Levitt, executive vice president for Health Policy, served as the moderator of the discussion, joined by a panel of health experts including Caprice Knapp, acting director of the Center for Medicaid & CHIP Services; Emma Sandoe, director of the Oregon Health Authority; Jennifer Strohecker, director at the Utah Department of Health and Human Services; and Jennifer Tolbert, director of State Health Policy and Data and deputy director of the Program on Medicaid & the Uninsured.

During the discussion, panelists addressed important implementation questions and challenges that states will face in the coming months and years, including: How much will it cost states and the federal government to implement work requirements? Will states be able to meet the implementation deadline (on 12/31/2026)? How will states use or improve “data matching” to automate verification of work activities, hours, and exemptions?  What are states watching out for in forthcoming federal guidance and what might be left to states’ discretion?

Health policy discussions in recent months have been dominated by the Medicaid and ACA changes. In April, the U.S. Supreme Court heard oral arguments in Kennedy v. Braidwood Management Inc., a case that questions the legality of ACA provisions mandating that health insurance plans cover specific preventive services at no cost to patients.

The law represents the biggest rollback in federal health spending ever. And while many of the Medicaid reductions will take years to go into effect, the work requirement begins January 1st, 2027, or potentially even earlier in some states.

“A work requirement for Medicaid enrollees is simple, but actually making it work, especially in a way that avoids eligible people falling through the cracks, is anything but simple,” said Levitt.

Tolbert shared that while the new law will go into effect in the next two years, states will need to verify that individuals applying for coverage or enrolled in coverage through the Medicaid expansion meet these new work requirements. “Individuals will need to work or engage in qualifying activities such as community service for at least 80 hours a month or be enrolled in school half-time. The law exempts certain individuals from these requirements, including parents with children ages 13 and under, individuals who are medically frail, and those who are enrolled in substance use disorder programs, among others,” she said. “States will be required to verify that individuals are meeting the work and reporting requirements at the time of application and again every six months at renewal or more frequently if the state chooses. Additionally, during the application process, states must review one to three consecutive months immediately prior to the application month to confirm compliance.”

She also noted that states will be required to use available data sources to verify an individual’s work or exemption status without initially requesting documentation from the individual. However, if a state is unable to confirm compliance through these sources, the individual will have 30 days to submit documentation or demonstrate that they are meeting the requirements before facing disenrollment. “The Congressional Budget Office (CBO) estimated that these new work requirements will reduce federal Medicaid spending by $326 billion over 10 years and will lead to 5.3 million more people being uninsured in 2034,” Tolbert said.

An analysis by KFF shows most Medicaid adults under age 65 are working already without a requirement or face barriers to work. Many Medicaid adults who are working low-wage jobs are employed by small firms and in industries that have low employer-sponsored insurance offer rates.

In previous analysis, CBO found that a Medicaid work requirement would not have any meaningful impact on the number of Medicaid enrollees working, and cited research from Arkansas indicating that “many participants were unaware of the work requirement or found it too onerous to demonstrate compliance,” resulting in coverage loss.

Currently, the implementation timeline for this new law requires the Department of Health and Human Services (HHS) to issue an interim final rule by June 2026, giving states a short window to develop or revise implementation plans, protocols and systems and also to test those system changes before the work requirements take effect in January 2027.

Knapp from CMS explained that some of the resources that the federal government will be able to provide will be funding to information technology to help with the implementation process of the new law. 

She also shared that the bill itself has $200 million in funding that pertains to community engagement that will be given to the states. “100 million of which will be more equally divided amongst the states, the other 100 million we will have a formula by which Congress has said we need to think about dividing it the amount of the number of individuals that are impacted by community engagement requirements. So that money will be coming as well,” she said.

Strohecker said one opportunity they have is to align their goals around work engagement with achieving stability in health care, especially in cases where someone is new to Medicaid.

“When you consider individuals who really do have complex ongoing chronic health conditions, ranging from diabetes care to mental health conditions and things that actually could be well controlled with medications and other medical interventions. I think the way we've really been thinking about is connecting the dots for people and making sure that as we're really developing our program and thinking about how we're encountering people and we recognize which conditions they have, which medications they're using, that we're supporting them,” she said. “We're supporting them not just in achieving maintenance with those treatments, but also really building the services and the knowledge so that people are understanding what's required of them to be compliant with this.”