CMS on June 1 published the interim final rule outlining how states will carry out Medicaid work requirements. The rule sets the operational framework for a policy hospitals warn will push eligible patients off coverage and drive up uncompensated care.
CMS did not issue a proposed rule for these requirements. HR 1 directed the agency to implement them through an interim final rule, a route that lets the regulation take effect without the usual notice-and-comment rulemaking. The rule is effective July 31, 2026 — the same day public comments are due — and CMS is not obligated to substantially revise it before states begin.
That leaves providers a narrow, largely advisory window to weigh in. Earlier CMS direction to states came through informational bulletins, not a proposed rule.
Under HR 1, low-income, nonpregnant adults ages 19 to 64 must work, perform community service or attend school — or some combination of these — for at least 80 hours a month to keep Medicaid coverage. The mandate applies to expansion states and some states running section 1115 demonstrations that cover a similar population. Congress, not CMS, set both the core requirement and the exemptions; the interim final rule defines how states operate them. States must have the requirement running by Jan. 1, 2027.
Nebraska has already adopted work requirements through a state plan amendment, and Montana will follow in July.
Here is what the rule puts in place, what it prohibits states from doing, and how the hospital sector is reacting.
What’s in
- A phased approach to verification. Throughout 2027, states can accept self-attestation to confirm compliance or eligibility. In 2028, they can rely on a beneficiary’s statement only once during enrollment, and only to confirm medical frailty or special medical needs exemptions, with the information provided under penalty of perjury. CMS said states should be “data first.” “We’re forgiving, but we’re not foolish,” CMS Administrator Mehmet Oz, MD, said of self-attestation on a June 1 press call. The 2028 tightening is the point at which disenrollment risk climbs.
- A federal eligibility tool. CMS is building the eligibility made easy tool, known as Emmy, a federally operated electronic service states can use to check community engagement information. The data would show whether someone is subject to the requirements and whether they have met them, according to the agency. States must work these data sources first rather than contacting beneficiaries directly.
- A two-part medical frailty exemption. A beneficiary must first fall into one of five diagnostic categories: blindness or disability, substance use disorder, a disabling mental disorder, a physical or developmental disability that impairs activities of daily living, or a serious or complex medical condition. That condition must then “significantly impair” the person’s ability to meet the 80-hour monthly requirement, according to CMS. Congress set the exemption in statute; the rule spells out how states identify who qualifies, and states may not broaden it.
“While we continue to review the rule in totality, we are initially concerned that the definition of medical frailty could narrow eligibility in ways that unintentionally limit coverage and disrupt access to care for patients with certain chronic conditions and complex needs,” a spokesperson for the American Hospital Association, said in a June 4 statement provided to Becker’s.
- A broader short-term hardship exception. The inpatient short-term hardship exception will also cover home- and community-based services. CMS said limiting the exception to people in institutions would “fail to account for the realities of current service delivery methods” and favor institutional care over individual choice.
- A $1.52 billion price tag for system upgrades. CMS estimated each state will face a one-time cost of $15 million to upgrade its eligibility systems. Total upgrades will cost $1.52 billion from 2026 through 2036, with the federal government contributing $1.289 billion and states paying $231million.
- New state reporting duties. States must report enrollment totals for people applying for and receiving Medicaid, processing data, eligibility determination outcomes, and which populations face the requirements and are meeting them. The rule did not set how often states must report.
What’s out
- Lock-out and waiting periods. States are banned from establishing “waiting” or “lock-out” periods that would block coverage for a beneficiary disenrolled over a compliance issue. That removes one mechanism that drove coverage churn in earlier state experiments, according to CMS.
- Managed care plans as compliance verifiers. As a “conflict of interest safeguard,” states are prohibited from contracting with managed care plans to help verify whether beneficiaries are meeting the requirements.
Where hospital groups stand
CMS has cast the requirements as a push toward employment rather than a coverage cut. “Able-bodied individuals on Medicaid spend an average of 6.1 hours watching TV or just hanging out [per day],” Dr. Oz said on the June 1 call. “This is a concern, not criticism.”
Hospital groups see administrative burden — not a lack of work among beneficiaries — as the bigger risk.
“CMS’ proposal for implementing community engagement requirements goes beyond what Congress intended,” America’s Essential Hospitals President and CEO Jennifer DeCubellis said in a statement. “The new, unnecessary administrative burdens will increase the number of eligible Medicaid beneficiaries without coverage, creating further barriers to care while increasing uncompensated care costs for essential hospitals.”
The framework lands as health systems brace for a broader coverage contraction. The work requirements — arriving six months after the expiration of enhanced ACA subsidies — have forced hospital leaders to model higher self-pay volumes, more last-minute denials and rising bad debt in 2027, with safety-net and rural providers carrying the most exposure.
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