Medicaid Work Requirements

The One Big Beautiful Bill Act made Medicaid work requirements federal law. Starting January 1, 2027, all states must condition eligibility for the ACA expansion population on 80 hours per month of work, education, community service, or caregiving, with exemptions for populations that include the elderly, disabled, pregnant, medically frail, and caregivers of children under 14. The Congressional Budget Office estimates the provision will reduce federal Medicaid spending by more than $300 billion over ten years, primarily through coverage losses. By 2034, CBO projects 5.2 million fewer adults will have Medicaid coverage, and 4.8 million more people will be uninsured.

The dual eligible population sits at the intersection of these requirements in ways the legislative debate has largely ignored. Approximately 12 million Americans receive both Medicare and Medicaid. Most are aged or disabled and therefore exempt from the work requirement itself. That exemption, on paper, should make work requirements irrelevant to this population. It does not. The administrative apparatus states must build to verify work activity, process exemptions, and conduct six-month eligibility reviews will touch every Medicaid enrollee, including the aged and disabled beneficiaries who are nominally outside the requirement’s reach. For dual eligibles enrolled in D-SNP plans that depend on active Medicaid status, the consequences of a missed renewal or a delayed exemption determination are not theoretical. They are an enrollment and care continuity risk that plans, states, and advocates must plan for now.

The Work Requirement Structure

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OBBBA’s work requirements apply to Medicaid enrollees ages 19 to 64 in the ACA expansion population and certain waiver populations receiving minimum essential coverage. Qualifying activities include paid employment, job training, job search, education, community service, and caregiving. States must verify compliance at application through a look-back of one to three months and at each six-month eligibility renewal. The legislation requires states to use data matching where available to confirm whether an individual meets the requirement or qualifies for an exemption, but the law does not prescribe a single verification method. States retain flexibility in how they build the compliance and reporting infrastructure.

The exemption categories are broad in concept and narrow in operation. Individuals who are 65 or older, who receive disability benefits, who are pregnant, who are medically frail, who are caregivers of a child age 13 or under, or who are enrolled in substance use disorder treatment programs are exempt. Foster youth under 26, American Indians and Alaska Natives eligible for Indian Health Service, and disabled veterans rated as totally disabled are also excluded. States may grant good-cause exemptions for up to four additional reasons at their discretion.

CMS must issue an interim final rule on implementation by June 1, 2026, and the rule is explicitly exempted from public notice and comment requirements. States must conduct outreach to affected enrollees between June 30 and August 31, 2026, through regular mail and at least one additional method such as phone, text, or website notification. States that demonstrate good faith effort but cannot meet the January 2027 deadline may receive a deferral from HHS through December 31, 2028.

What the timeline makes clear is that states will have approximately six months between the interim final rule and the compliance deadline to build or modify eligibility systems, train staff, implement data matching arrangements, and conduct enrollee outreach. States that operated work requirements under first-term Trump administration waivers found the systems development and staff training requirements far more demanding than anticipated. States starting from zero will face that challenge compressed into a shorter timeline and applied to a much larger population than any previous waiver covered.

The Administrative Burden for Exempt Populations

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The central risk for dual eligibles is not the work requirement itself. It is the verification infrastructure built around it.

Dual eligibles who qualify for Medicaid through aged or disability pathways are not in the ACA expansion group and are not subject to the 80-hour work activity mandate. Their exemption is categorical. But OBBBA also requires states to conduct Medicaid eligibility renewals every six months, doubled from the current annual cycle. That provision applies to the expansion population subject to work requirements, and its implementation will consume the same state Medicaid agency staff, the same eligibility systems, and the same call center and correspondence infrastructure that serves all Medicaid populations.

When Arkansas implemented its work requirement in 2018, the administrative apparatus did not confine its effects to the target population. Over 18,000 adults lost coverage within seven months. Research published in the New England Journal of Medicine found that one-third of the people subject to the requirement had not heard of it, and 44 percent were unsure whether it applied to them. Among those who lost coverage, the vast majority met the work requirement or qualified for an exemption but could not navigate the reporting process. A later analysis found that 97 percent of those disenrolled were compliant or exempt. The coverage losses were driven by administrative friction, not by beneficiaries who failed to meet the substantive standard.

The “medically frail” exemption presents a particular challenge for dual eligibles who are under 65 and do not receive SSI disability benefits. These individuals may have chronic conditions, functional limitations, or behavioral health needs that should qualify them as medically frail, but the determination requires clinical documentation. OBBBA does not define “medically frail” with specificity. States will determine what documentation is required, which providers can certify the designation, and how the exemption is renewed. For dual eligibles whose conditions are managed rather than adjudicated through the disability system, the medically frail pathway is the primary protection against work requirement exposure, and it depends entirely on state implementation decisions that have not yet been made.

The six-month renewal cycle compounds the risk. Under the current annual renewal process, approximately 10 percent of Medicaid beneficiaries experience at least one month of coverage loss and subsequent re-enrollment within a single year. Research from the Medicare-Medicaid Plans under the Financial Alignment Initiative found that as many as 30 percent of dual eligibles lost Medicaid eligibility for a month or more in their first year of enrollment, and 21 percent sustained the loss for three months or longer. Doubling the frequency of eligibility verification will create more opportunities for administrative error, delayed paperwork, and missed deadlines. For dual eligibles, every gap in Medicaid coverage is also a potential gap in D-SNP enrollment, supplemental benefit access, and care coordination continuity.

State Implementation Variation

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Seven states had active Section 1115 waiver applications for work requirements as of early 2026, seeking to begin implementation ahead of the federal deadline. Arizona, Arkansas, Iowa, Montana, Ohio, South Carolina, and Nebraska are at various stages of the waiver or state plan amendment process. Nebraska announced its intention to proceed through a state plan amendment rather than a waiver, making it a potential early test case. The remaining states face a January 2027 deadline with no existing work requirement infrastructure.

Georgia provides the most detailed evidence of what implementation costs look like. Its Pathways to Coverage program, the only active Medicaid work requirement in the country as of mid-2025, spent $54.2 million on administrative costs and $26.1 million on actual health care services through its first two years of operation. The program enrolled approximately 8,000 people out of an estimated 300,000 eligible, a penetration rate below 3 percent. The GAO found that nearly 90 percent of administrative spending came from federal funds. Congressional Republicans cited Pathways as a model for the national mandate; the data suggest it is more accurately a cost-benefit cautionary tale.

The state capacity question is critical. State Medicaid agencies are simultaneously being asked to implement work requirements, build FIDE and HIDE SNP integration infrastructure, manage the transition from the Financial Alignment Initiative, respond to OBBBA’s Medicaid financing changes (including new limits on provider taxes and state-directed payments), and in many cases process Medicaid unwinding backlogs that remain from the end of the continuous enrollment provision. Each of these initiatives competes for the same IT systems, the same eligibility staff, and the same policy development resources. States that invoke the good-faith deferral through December 2028 are not avoiding implementation. They are buying time against a resource constraint that every state faces.

Impact on D-SNP Enrollment

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Medicaid churn from work requirements and accelerated renewals threatens D-SNP enrollment stability in ways that go beyond individual coverage gaps. D-SNP eligibility requires active Medicaid enrollment. When a dual eligible loses Medicaid status, even temporarily, the D-SNP must disenroll them from the Medicare Advantage plan. The beneficiary returns to Original Medicare, loses access to supplemental benefits, care coordination, and provider networks built around the D-SNP model of care. If the beneficiary regains Medicaid eligibility weeks or months later, they may re-enroll in the same D-SNP, a different D-SNP, or remain in Original Medicare. Each path disrupts care continuity.

The monthly integrated care Special Enrollment Period, effective January 2025, was designed to promote enrollment in FIDE, HIDE, and AIP D-SNPs. But it also means that a dual eligible who churns out of Medicaid and back in may use the monthly SEP to enroll in a different plan upon re-enrollment. For plans, this creates an enrollment volatility problem. The investment in care coordination, health risk assessment, and care plan development for a complex dual eligible member is substantial. When that member churns out of the plan for administrative reasons and enrolls elsewhere upon return, the plan absorbs the care management investment with no return.

For plans operating in states with early work requirement timelines, enrollment projections for the 2027 and 2028 plan years must now account for a churn factor that has no historical analogue in markets where Medicaid eligibility has been relatively stable. Plan sponsors bidding D-SNP products in states with aggressive implementation timelines will need to model the revenue impact of Medicaid churn separately from standard disenrollment assumptions.

The Advocacy and Counseling Response

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Legal challenges to OBBBA’s work requirements are expected but face a different landscape than the waiver-era litigation. Previous court decisions struck down state work requirements by finding that HHS had not adequately considered whether the waivers were consistent with Medicaid’s objectives. OBBBA’s requirements are statutory, not waiver-based, which removes the administrative law challenge that succeeded in Arkansas. Constitutional challenges may focus on the adequacy of procedural protections, the rationality of the exemption framework, or the relationship between the mandate and Medicaid’s purpose, but the legal pathway is less clear than it was for waiver-era litigation.

Community organizations and State Health Insurance Assistance Programs face a counseling burden that is qualitatively different from previous enrollment challenges. SHIP counselors who help dual eligibles navigate Medicare plan choices will now need to simultaneously track their clients’ Medicaid eligibility status, work requirement exemption documentation, and renewal timelines. A missed Medicaid renewal does not just affect Medicaid coverage. It cascades into Medicare plan eligibility, Part D Low Income Subsidy status, and Medicare Savings Program enrollment. The counseling challenge is no longer explaining plan options. It is maintaining the eligibility chain that makes every other benefit accessible.

Related Reading

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MCR-03_01 The One Big Beautiful Bill: What It Does to Medicare and Medicaid MCR-03_05 CMS Under Pressure: Implementation Capacity, Workforce, and the Risk of Regulatory Overload MCR-11_08 The South: Georgia, North Carolina, Louisiana, and the Rural-Urban Equity Fracture