Series 14: State Implementation of Work Requirements
A 33-year-old man in Wilcox County, one of Alabama’s poorest Black Belt counties, works as a timber cutter earning approximately $13,000 annually. He has hypertension and diabetes but cannot afford medications or regular doctor visits. He has no dependent children. He earns too much for Alabama Medicaid, which caps parent eligibility at 18% of the federal poverty level and categorically excludes childless adults. He earns too little for marketplace premium subsidies, which begin at 100% of poverty. The nearest hospital is 45 minutes away. The hospital closed its emergency department three years ago, converting to an outpatient-only facility. He represents one of approximately 92,000 to 128,000 Alabamians in the coverage gap: working poor in healthcare deserts, excluded from coverage because Alabama chose not to expand Medicaid.
H.R. 1, signed July 4, 2025, transformed Medicaid work requirements from a state-option policy experiment into a federal mandate affecting approximately 18.5 million expansion adults nationwide. The law requires 80 hours monthly of work, education, training, or qualifying community engagement activities, with semi-annual redetermination cycles for adults aged 19-64 who gained Medicaid eligibility under the ACA’s optional expansion. States that expanded Medicaid face a January 1, 2027 implementation deadline, though good-faith extensions are available through December 31, 2028 for states demonstrating genuine progress toward compliance infrastructure.
Alabama is not subject to these federal work requirements because Alabama never expanded Medicaid under the ACA. By declining expansion since 2014, the state ensured that no residents gained coverage through the expansion pathway that now carries work requirement conditions. The federal mandate applies exclusively to expansion adults, a population that does not exist in non-expansion states. This exemption does not mean work requirements are absent from Alabama policy history. The state proposed some of the nation’s most aggressive work requirements in a 2018 waiver for its traditional Medicaid population, requiring 35 hours weekly for parents, the highest threshold proposed by any state. That proposal remains in administrative limbo, neither approved nor withdrawn, suspended by the COVID-19 pandemic and never revived.
Alabama operates the nation’s strictest Medicaid eligibility alongside Texas, with parent income thresholds at 18% FPL, approximately $4,800 annually for a family of three. A parent working half-time at minimum wage exceeds this threshold. Full Medicaid expansion would cover an estimated 200,000 to 340,000 uninsured adults. The state faces one of the nation’s most severe rural hospital crises, with at least 14 rural hospitals closed since 2010 and dozens more at immediate risk. Governor Kay Ivey’s administration maintains consistent skepticism toward traditional Medicaid expansion while pursuing alternative federal healthcare funding through the Rural Health Transformation Program, which awarded Alabama $203.4 million in December 2025 for first-year implementation.
Traditional Medicaid Eligibility: Tied for Most Restrictive Nationally#
Alabama Medicaid serves approximately 1.1 million people, predominantly children, elderly, disabled, and pregnant women. The program’s eligibility structure for working-age adults creates coverage gaps as severe as any state in the nation. Understanding this architecture is essential for grasping why work requirement debates have fundamentally different implications for non-expansion states.
Parents with dependent children qualify only with household incomes up to 18% FPL. This translates to approximately $4,800 annually for a family of three, or roughly $400 monthly. Alabama and Texas maintain this threshold tied for the most restrictive in the country. A parent working even modest hours at minimum wage ($7.25 per hour) rapidly exceeds eligibility. The practical effect is that most working parents are categorically excluded from Medicaid regardless of poverty level.
Children qualify with more generous thresholds: up to 146% FPL for Medicaid, extending to 312% FPL for CHIP (ALL Kids program). Pregnant women qualify up to 146% FPL during pregnancy, though post-partum coverage drops to 60 days, creating cliff effects for new mothers. These thresholds create reasonably comprehensive coverage for children and pregnant women.
Adults without dependent children face complete categorical exclusion. A childless adult earning $0 per year cannot qualify for Alabama Medicaid. Disability (SSI eligibility) or age (65+) provides the only coverage pathway. This policy choice creates the fundamental coverage gap that defines Alabama’s healthcare landscape: able-bodied working-age adults, regardless of poverty level, receive no Medicaid coverage.
The Coverage Gap and Work Requirement History#
The 92,000 to 128,000 adults in Alabama’s coverage gap represent a population that would be immediately subject to federal work requirements if Alabama expanded Medicaid. These individuals are predominantly working-age adults (19-64) without dependent children, exactly the population H.R. 1 targets. Approximately 61% of coverage gap adults are employed, primarily in service industries, construction, retail, and agriculture. They work but lack employer-sponsored coverage. Only 34.8% of small employers in Alabama offer health insurance.
Alabama’s 2018 Section 1115 waiver proposal reveals significant policy preferences that would likely shape any future expansion. The waiver, submitted in September 2018, would have required 35 hours weekly of qualifying activities for parents with children aged six or older, and 20 hours weekly for parents with children under six. This 35-hour threshold was the most stringent proposed by any state and approached full-time employment requirements.
The proposal targeted the Parent and Other Caretaker Relative eligibility category, the only pathway through which non-disabled adults can qualify for Alabama Medicaid. Public comments identified a fundamental contradiction: the waiver created a system where compliance caused termination. A parent meeting the 35-hour weekly work requirement at minimum wage would earn approximately $1,260 monthly, far exceeding the income threshold for Medicaid eligibility. Commenters described this as a catch-22 where people who complied would lose coverage because they earned too much, while those who could not comply would lose coverage for noncompliance.
In response, Alabama modified the proposal to include up to 18 months of transitional Medicaid coverage for parents whose income increased above eligibility thresholds. The modified proposal was submitted to CMS in September 2018. The waiver remained pending when the COVID-19 pandemic began in early 2020. The federal continuous enrollment requirement suspended all Medicaid disenrollments, effectively halting waiver processing. Alabama never received CMS approval or denial, and the proposal remains in administrative limbo. The state has not formally withdrawn the application nor submitted updated proposals.
What H.R. 1 Changed for Alabama’s Strategic Position#
The passage of H.R. 1 with mandatory work requirements occurred while Alabama continued operating outside the expansion framework. The law fundamentally changed what expansion would mean if Alabama ever pursues it. The elimination of the enhanced 90% federal matching rate for expansion populations reduces fiscal incentives. States that expanded Medicaid previously received 90% federal matching; this enhanced rate remains for existing expansion states but future expansion states face time-limited 80% matching before transitioning to traditional rates closer to Alabama’s current 72.84% FMAP.
The American Rescue Plan’s temporary 5 percentage point increase in traditional Medicaid matching for newly expanding states has expired. Alabama could have captured hundreds of millions in additional federal funding had it expanded before H.R. 1 passage. That opportunity is gone. The financial case for expansion has weakened compared to pre-H.R. 1 conditions.
More fundamentally, expansion now comes with mandatory work requirements. Alabama’s 2018 waiver proposal suggested the state would likely implement requirements at or above federal minimums if expansion occurred, potentially seeking waivers for stricter thresholds. The catch-22 dynamics identified in 2018 would need resolution, likely through transitional coverage provisions similar to those added to the modified proposal.
Rural Health Transformation Program: The Alternative Pathway#
Governor Ivey announced in November 2025 that Alabama’s plan for the Rural Health Transformation Program had been submitted to CMS. In December 2025, Alabama officially received its award number, unlocking $203.4 million in first-year funding for a five-year program totaling over $1 billion. The program is administered by the Alabama Department of Economic and Community Affairs (ADECA). Governor Ivey characterized the program as an opportunity to “make meaningful improvements in how we deliver health care in rural Alabama” without the policy commitments traditional Medicaid expansion would require.
The award represents the 24th largest allocation among the 50 states. Alabama’s plan was developed by a core team including the Governor’s Office, ADECA, the Alabama Department of Finance, the Alabama Medicaid Agency, and the Alabama State Health Planning and Development Agency, along with input from dozens of stakeholders and a 20-person workgroup of healthcare experts and lawmakers. In December 2025, Governor Ivey signed an executive order establishing the Alabama Rural Health Transformation Advisory Group to advise on implementation, policy development, and oversight.
According to KFF analysis, the $50 billion Rural Health Transformation Fund nationally could partially offset approximately 37% of estimated federal Medicaid spending cuts in rural areas, projected at $137 billion over ten years. For Alabama specifically, the funding may provide temporary relief to the 47 rural hospitals at risk of closure, but it does not address the fundamental coverage gap issue or provide ongoing sustainable funding beyond the five-year program period.
The largest distribution of first-year funds will go to the Rural Workforce Initiative. ADECA Director Kenneth Boswell stated that for the grant to be “transformational” and sustainable, the state, hospitals, and physicians must “think outside the box.” The Medical Association of the State of Alabama has requested some funding be directed to addressing the state’s physician shortage. How these funds are deployed and whether they produce sustainable improvements in rural healthcare access remains to be determined as implementation proceeds through 2026.
The Rural Hospital Crisis and Black Belt Healthcare Deserts#
Alabama faces one of the nation’s most severe rural hospital crises. Since 2010, at least 14 rural hospitals have closed, with 7 located in or serving Black Belt communities. The Black Belt, 24 counties across south-central Alabama with concentrated poverty and majority-Black populations, represents the most acute healthcare access crisis in the state.
The Center for Healthcare Quality and Payment Reform identifies 47 Alabama rural hospitals as vulnerable to closure due to financial problems. According to the University of North Carolina’s Sheps Center, nine rural hospitals have closed in Alabama since 2009. Only 30% of the state’s rural hospitals have labor and delivery units, forcing pregnant women to travel long distances for childbirth, creating maternal health risks in a state already struggling with high maternal mortality rates.
The Black Belt’s poverty rates exceed 25% in counties like Bullock, Perry, Wilcox, Lowndes, and Greene. These counties have majority-Black populations and face compounding barriers to healthcare access: poverty, rurality, transportation challenges, healthcare workforce shortages. Research from the University of Alabama Education Policy Center documents that Medicaid cuts could devastate the Black Belt, where healthcare infrastructure is already minimal and hospital closures would leave large populations without access to emergency or specialty care.
Medicaid expansion would reduce hospital uncompensated care burdens, potentially stabilizing rural hospitals. The Alabama Hospital Association has consistently supported expansion. However, expansion without addressing the coverage gap through the Rural Health Transformation Program represents Governor Ivey’s chosen strategy: federal healthcare funding without Medicaid eligibility expansion.
Limited Managed Care Infrastructure and Implementation Capacity#
Unlike most states, Alabama operates Medicaid primarily through fee-for-service rather than risk-based managed care. The Alabama Coordinated Health Network (ACHN) program, launched in 2022 with contracts totaling $89 million, provides care coordination through seven regional contractors. However, medical services remain fee-for-service. Blue Cross Blue Shield of Alabama’s My Care Alabama affiliate operates ACHN contracts in three of seven regions.
The state’s 2013 Regional Care Organization initiative, which would have created risk-based managed care, was abandoned in 2017 under Governor Ivey after years of development and millions in spending. The limited managed care infrastructure means Alabama lacks the MCO capacity that other states rely on for work requirement implementation. If Alabama expanded Medicaid with work requirements, the state would need to either build substantial new administrative infrastructure or dramatically expand ACHN capabilities.
This creates implementation challenges that would complicate any future expansion. Alabama would face severe difficulties with rural verification. With 44% of Alabamians depending on rural hospitals as their primary healthcare source and severe transportation barriers in the Black Belt, in-person verification approaches would be impractical. Digital verification would require addressing digital access gaps. Community organizations capable of providing navigation and enrollment assistance are limited, particularly in the Black Belt. Building navigation capacity would require substantial investment that the state has not demonstrated willingness to make.
Looking Forward: Continued Non-Expansion With Rural Health Focus#
Alabama will most likely remain a non-expansion state through December 2026 and beyond, meaning federal work requirements will not directly affect its Medicaid program. Governor Ivey has maintained consistent skepticism toward traditional Medicaid expansion while leaving the door slightly open to private-public partnership models similar to Arkansas’s approach, which uses Medicaid funds to purchase private marketplace coverage.
House Speaker Nathaniel Ledbetter floated this private-public model in early 2024, and lawmakers received briefings from Arkansas and North Carolina officials. Some Republican legislators have expressed willingness to continue discussions, though no legislation has advanced. The combination of conservative political control, fiscal concerns about long-term state costs, and the ongoing rural healthcare crisis suggests Alabama might eventually consider expansion through a private-public model with work requirements. Such an approach would align with the 2018 waiver proposal’s philosophy while potentially addressing concerns about traditional Medicaid program expansion.
The Rural Health Transformation Program provides an alternative pathway for addressing rural healthcare access concerns without expanding coverage eligibility. Alabama may pursue rural health funding while continuing to resist expansion, effectively addressing some healthcare infrastructure concerns without expanding Medicaid to the coverage gap population. The provider tax restrictions in H.R. 1 create additional fiscal pressure that could eventually force reconsideration of expansion’s fiscal benefits.
If Alabama eventually expands Medicaid, federal work requirements would immediately apply to the expansion population. Based on the 2018 waiver proposal, Alabama would likely implement requirements at or above federal minimums, potentially seeking waivers for stricter thresholds. The state would face implementation challenges more severe than expansion states with existing infrastructure. Alabama would need to build verification systems, establish exemption processes, train staff, and develop community partnerships essentially from scratch while simultaneously enrolling 200,000+ newly eligible adults.
The Black Belt’s healthcare deserts would require either substantial exemptions for geographic barriers or acceptance that significant populations cannot realistically comply. Alabama’s experience would test whether work requirements can function in regions with minimal healthcare and employment infrastructure. For now, Alabama stands as an example of a non-expansion state pursuing alternative federal healthcare funding while maintaining categorical exclusion of working-age adults from Medicaid coverage. The 92,000 to 128,000 Alabamians in the coverage gap continue without coverage while the state invests $203 million in rural health infrastructure that does not address their fundamental lack of health insurance.