The Centers for Medicare & Medicaid Services (CMS) has released a new framework for implementing Medicaid work requirements across the United States. The interim final rule outlines how states must enforce these requirements beginning in 2027. While supporters believe the policy will encourage workforce participation, hospitals and healthcare organizations worry it could increase coverage losses and uncompensated care costs.

Understanding what is included in the rule—and what is prohibited—is critical for healthcare providers, payers, and Medicaid beneficiaries.

What Are Medicaid Work Requirements?

Under federal law, certain Medicaid beneficiaries must complete at least 80 hours per month of qualifying activities. These activities include employment, community service, education, job training, or a combination of approved engagements. The requirements primarily apply to low-income, nonpregnant adults between the ages of 19 and 64.

States covered by Medicaid expansion programs must implement the requirements no later than January 1, 2027. However, some states have already moved ahead. Nebraska has implemented the policy, and Montana is scheduled to follow.

Why CMS Issued New Rules

CMS published the interim final rule to establish a nationwide operational framework. The agency aims to standardize eligibility verification, reporting requirements, exemptions, and compliance procedures across participating states. According to CMS, the framework is designed to promote accountability while reducing administrative complexity.

At the same time, stakeholders continue to debate whether the policy will increase employment or simply create additional barriers to healthcare coverage.

Key Provisions Included in the Rule

Verification Process Becomes More Structured

CMS is introducing a phased verification strategy.

2027: Flexible Verification

Throughout 2027, states may rely on self-attestation from beneficiaries to verify compliance or exemption eligibility.

2028: Tighter Standards

Beginning in 2028, self-attestation will become much more limited. States may only accept beneficiary statements under specific circumstances, such as medical frailty exemptions, and those statements must be provided under penalty of perjury.

As a result, some healthcare organizations anticipate a higher risk of disenrollment after the transition period.

Federal Eligibility Tool: “Emmy”

CMS is developing a federal eligibility platform called Eligibility Made Easy, or Emmy. The system will help states verify community engagement activities and determine whether beneficiaries meet work requirements.

Importantly, states must use available federal data sources before requesting additional information from beneficiaries. This data-first approach aims to reduce paperwork and improve accuracy.

Medical Frailty Exemptions

The rule establishes a detailed two-part test for medical frailty exemptions.

To qualify, an individual must first fall into one of several recognized categories, including:

• Blindness or disability
• Substance use disorder
• Disabling mental health conditions
• Developmental disabilities
• Serious or complex medical conditions

Additionally, the condition must significantly limit the person’s ability to satisfy the monthly 80-hour requirement.

However, hospital groups have expressed concerns that the definition may be too narrow and could unintentionally reduce coverage for vulnerable populations.

Expanded Hardship Exceptions

CMS broadened the short-term hardship exception to include home- and community-based services. This change recognizes that many individuals receive intensive care outside institutional settings.

Consequently, beneficiaries receiving comparable services at home may qualify for protection under the hardship provision.

New State Reporting Requirements

States must submit extensive operational data to CMS. Required reporting includes:

• Medicaid enrollment totals
• Application processing information
• Eligibility outcomes
• Compliance rates
• Population-specific participation data

Although CMS has not finalized reporting frequency, states will face greater accountability and oversight.

What States Cannot Do

The new framework also places important limits on state authority.

No Lock-Out Periods

States cannot impose waiting periods or lock-out penalties for individuals who lose coverage because of compliance issues. This restriction aims to reduce coverage disruptions and unnecessary administrative barriers.

No Managed Care Verification

CMS prohibits states from using managed care organizations to verify compliance. The agency views this restriction as a conflict-of-interest safeguard designed to maintain fairness in eligibility determinations.

Financial Impact on States and Providers

Implementing the new requirements will require substantial technology investments.

CMS estimates that each state will spend approximately $15 million on eligibility system upgrades. Nationwide costs could reach $1.52 billion between 2026 and 2036. The federal government is expected to fund the majority of these expenses.

Meanwhile, hospitals are preparing for potential increases in uninsured patients. Healthcare leaders fear that administrative challenges may lead eligible individuals to lose coverage despite meeting the requirements.

How Hospitals Are Responding

Hospital associations have voiced strong concerns about the rule’s operational burden.

Industry leaders argue that complex reporting and verification processes could increase coverage losses among eligible beneficiaries. As a result, hospitals may experience higher uncompensated care costs, more self-pay patients, and additional financial pressure.

Safety-net hospitals and rural providers may face the greatest risk because they serve larger Medicaid populations.

What Happens Next?

The interim final rule takes effect before the public comment process concludes. States must prepare their systems and operational procedures for implementation by January 2027.

Over the coming months, healthcare organizations, payers, providers, and policymakers will closely monitor how the framework affects enrollment, access to care, and healthcare spending.

Conclusion

CMS’ Medicaid work requirement framework marks one of the most significant Medicaid policy changes in recent years. The rule establishes clear expectations for compliance, verification, exemptions, and state reporting. While supporters believe the policy will promote employment and self-sufficiency, hospitals remain concerned about coverage disruptions and rising uncompensated care costs. The success of the initiative will depend largely on how effectively states implement the new requirements and support eligible beneficiaries through the transition.