Trump’s Medicaid Work Rules Force States To Scrap Plans and Rework Systems

The Trump administration’s rollout of a federal mandate that millions of Americans on Medicaid must work or risk losing health benefits will force states to scrap months of preparation, according to advocates for Medicaid enrollees and consultants advising states.

And they say an overhaul — less than seven months before states must start enforcing the requirement — will be costly.

Regulations issued June 1 by the Centers for Medicare & Medicaid Services dictate many granular details about how the new work requirements will play out. They cover how states should check whether Medicaid enrollees are following the rules, and how people can claim an exemption so that their health benefits don’t hinge on work, community service, or going to school.

Next year, President Donald Trump’s One Big Beautiful Bill Act could require roughly 18.5 million adults across 42 states and the District of Columbia who receive Medicaid benefits to prove they’re working or participating in a similar activity to keep their health coverage — unless they qualify for an exemption.

Much of the verification will run through state computer systems that assess whether low-income people qualify for Medicaid and other safety net programs — technology often built and run by private companies under contracts routinely worth hundreds of millions of dollars. Many of those systems have a history of errors that can cut off benefits to eligible people.

For months, states have been communicating with federal regulators and rushing to build systems to comply with the looming mandates, said Kinda Serafi, a partner at the Manatt Health consulting and legal firm. The rules released this week represent a “significant policy pivot” from what states were expecting, Serafi said.

“The administration has actually taken what we know to be a tough situation and has just made it even worse,” Serafi said. States had already committed to paying contractors tens of millions to adjust their systems.

After Trump signed his signature tax-and-spending bill into law last July, one of the most significant remaining questions was how much discretion the federal government would give states to define exemptions for people too sick to work. The “medical frailty” exemption allows a person to claim they have a health condition that prevents them from working at least 80 hours a month, as the law requires.

To qualify, a person generally must fit into at least one of five categories: They must be blind or disabled; have a substance use disorder; have a disabling mental disorder; have a physical, intellectual, or developmental disability that significantly impairs their daily life; or have a serious medical condition. States are not allowed to add categories.

Under the new regulations, CMS said having a medical condition alone isn’t sufficient to exempt someone from the work requirements. States must assess “the severity of an individual’s condition” to determine whether they can stay on Medicaid without working — a standard that makes it more difficult for enrollees to meet the criteria.

CMS officials did not list specific conditions that qualify for exemptions, but the agency did say homelessness can’t be a reason to claim that exemption because it is not a medical condition.

To implement the law, states “will have to undo work that they did,” said Daniel Meuse, deputy director of Princeton University’s State Health and Value Strategies program, which works with state governments on various health coverage issues.

The Trump administration previously acknowledged that the work to upgrade state Medicaid eligibility systems to comply with the law is coming at a cost. In January, top CMS officials said government contractors, including Deloitte, Accenture, and Optum, have promised to offer discounts and reduced rates through 2028 to help states adjust their systems.

The discounts “may be helpful” in some states, but they’re “not going to be helpful across the board” due to variations in state contracts, said Heather Howard, director of the State Health and Value Strategies program.

“Anytime you have to go back and say, ‘Oops, we need to reprogram this one thing,’ there’s a cost,” Howard said.

States were prepared to create lists of conditions and diseases to qualify people for work requirement exemptions, according to health care experts advising them. Mining data to verify someone’s illness was already a tall order for states because the computer systems that determine whether someone is eligible for Medicaid often do not communicate with the systems that track medical claims.

America’s health care payment systems rely on a set of standardized codes that correspond to specific diagnoses.

But there’s no “code that designates that someone is too sick to work — that’s a subjective assessment,” said Rachel Klein, deputy executive director of The Aids Institute, a nonpartisan advocacy group for people with HIV. “This is a recipe for disaster.”

The new federal standards pose immediate issues for Nebraska, which launched its Medicaid work requirement on May 1, eight months before the federally mandated deadline. Nebraska handles decisions on medical frailty differently than the Trump administration does.

Nebraska officials had already released a nearly 300-page list of medical conditions that qualify as exemptions, such as types of cancer, dementia, autism, epilepsy, HIV, and Parkinson’s disease. The state, which relies on government workers to check Medicaid eligibility, doesn’t require a person to prove how sick they are.

But under Trump’s rules, people will have to show their qualifying illness is impeding their ability to work.

Now, Nebraska is “going to have to go back and figure out how to assess whether all of these people are too sick to meet the requirement,” Klein said.

Medicaid enrollees are slated to start losing coverage this summer under Nebraska’s early rollout.

Sarah Maresh, a program director with Nebraska Appleseed, an advocacy organization for people with low incomes, said the state should refrain from terminating people’s coverage until next year because of the changes it will need to make. State residents are already confused and scared, she said, and the new rule “makes matters much worse.”

In response to several questions, Jeff Powell, a spokesperson for Nebraska’s Department of Health and Human Services, said the state is reviewing the new federal regulation to determine potential impacts.

The new federal standards will limit people’s ability to attest that they are medically frail starting in 2028 and will require documentation as proof, another change states weren’t expecting, Meuse said. More than two dozen states had planned to allow applicants and enrollees to declare conditions themselves to get exemptions, according to KFF.

Striking the right balance of flexibility was an important part of deliberations when crafting these rules, CMS Administrator Mehmet Oz said on a June 1 call with reporters. “The mantra we kept coming back to was that we’re forgiving, but we’re not foolish,” he said.

Trump officials wrote in the regulation that Medicaid work requirements have “the potential to empower Medicaid beneficiaries” by allowing them to “escape isolation and dependency, build confidence, achieve self-sufficiency and prosperity, and improve health.”

Stephanie Burdick, a leader of the Protect Medicaid Utah coalition, disputed the premise.

“If they want to improve work opportunities or connection and decrease isolation and loneliness, they would be starting job programs and volunteer service programs,” Burdick said. “They wouldn’t just be forcing more administrative burden onto people and then saying that it’s good for them.”

An estimated 5.3 million enrollees will become uninsured by 2034 due to Medicaid work requirements, according to the nonpartisan Congressional Budget Office.

But with the new regulations, Howard said, there’s a risk of “that number being even higher.”