Medicaid Work-Requirement Rule Takes Effect July 31 as States Scramble to Comply

WASHINGTON, Federal Medicaid work requirements reached a new threshold this week as a Centers for Medicare and Medicaid Services interim final rule took legal effect July 31, closing the public comment window and setting binding standards for all 41 Medicaid expansion states and the District of Columbia.

The rule, published June 1, requires certain Medicaid enrollees aged 19 to 64 in expansion states to document 80 hours per month of work, community service, education, or equivalent activity as a condition of eligibility. States must be in compliance by Jan. 1, 2027, though they may move sooner through state plan amendments or approved 1115 waivers.

CMS projected the rule will reduce Medicaid enrollment by approximately 2.3 million people in fiscal year 2027, rising to more than 3 million in subsequent years, according to the agency's press release published on the CMS newsroom.

Three states have already moved ahead of the federal deadline. Nebraska was first, beginning enforcement May 1 after Gov. Jim Pillen and CMS Administrator Dr. Mehmet Oz announced the early start in December 2025, according to a summary published by the Center for Health Care Strategies. Montana followed, beginning enforcement for its expansion population July 1. Arkansas launched what it describes as a soft implementation July 1, notifying enrollees of the requirement but not disenrolling anyone for noncompliance until the January deadline arrives, per reporting tracked by the Center for Health Care Strategies.

The June rule drew immediate criticism from state administrators and health policy groups who said CMS narrowed the medical-frailty exemption beyond what the statute requires. The law identified five categories of conditions that can qualify an individual as medically frail. CMS added a functional-capacity test, requiring enrollees to show their condition "significantly impairs" their ability to meet the 80-hour threshold, according to an analysis published by Foley Hoag LLP. The Center for Health Care Strategies noted in a June update that the narrower definition "may underestimate the impact of work requirements" relative to earlier Congressional Budget Office projections.

States that plan to go live in January 2027 must send initial outreach notices to enrollees by the end of June, July, or August, depending on their chosen application lookback period, according to the Center on Budget and Policy Priorities. The Center on Budget and Policy Priorities said states have had to make major system-design decisions without complete federal guidance, and that H.R. 1 gives states less than 18 months from enactment to go-live to implement what it called a complex policy.

The cost of building the required eligibility infrastructure is estimated at an average of $15 million per state, according to the Foley Hoag analysis. States that can't meet the January deadline may apply for a limited good-faith effort exemption.

The work requirement is one of several Medicaid changes flowing from the One Big Beautiful Bill Act, signed into law July 4, 2025. The law authorized roughly $1 trillion in reduced federal Medicaid spending over 10 years, according to the Healthcare Financial Management Association. Those cuts are being implemented through a phased schedule, with the largest funding reductions hitting Medicaid expansion states in fiscal years 2027 and 2028.

New York faces an estimated $107 billion in combined Medicaid and Essential Plan losses over 10 years under the law, according to figures cited by HFMA, with federal cutoffs for the state's Essential Plan already in effect at the start of 2026 and projected to remove 730,000 of the plan's 1.6 million enrollees. Maryland projects a loss of up to $2.7 billion in annual federal funding once all provisions are in force, with the state expecting 175,000 residents to lose coverage, according to a July 2025 impact document published by the Maryland Department of Health.

The Congressional Budget Office estimated 11.8 million people will lose Medicaid coverage over the next decade due to H.R. 1, with 4.8 million of those losses attributable specifically to work requirements, per the Center for Health Care Strategies. That estimate predates the June rule's narrower frailty definition and may be understated, the organization said.

Sources cited:
- CMS Newsroom, Medicaid Community Engagement Requirement Interim Final Rule (https://www.cms.gov/newsroom/press-releases/cms-launches-nationwide-framework-implement-medicaid-work-requirements)
- Foley Hoag LLP, CMS Issues Interim Final Rule Imposing Medicaid Work Requirements (https://foleyhoag.com/news-and-insights/publications/alerts-and-updates/2026/june/cms-issues-interim-final-rule-imposing-medicaid-work-requirements-for-expansion-populations/)
- Center for Health Care Strategies, A Summary of Federal Medicaid Work Requirements (June 2026 update) (https://www.chcs.org/resource/a-summary-of-national-medicaid-work-requirements/)
- Center on Budget and Policy Priorities, States Need More Time to Prepare for Medicaid Work Requirement (https://www.cbpp.org/research/health/states-need-more-time-to-prepare-for-medicaid-work-requirement)
- KFF, An Early Look at Policy Decisions as States Get Ready to Implement Work Requirements (https://www.kff.org/medicaid/an-early-look-at-policy-decisions-as-states-get-ready-to-implement-work-requirements/)
- HFMA, States Could Implement OBBB Medicaid Cuts Sooner (https://www.hfma.org/fast-finance/medicaid-cuts-federal-funding/)
- Maryland Department of Health, Impact of Congressional Budget on Maryland Medicaid Program (https://health.maryland.gov/mmcp/Documents/OBBBA%20One-Pager_7.11.25.pdf)
- CHCS Policy Cheat Sheet, Updated June 2026 (https://www.chcs.org/media/A-Summary-of-Federal-Medicaid-Work-Requirements_June26-Update.pdf)