Series 14: State Implementation of Medicaid Work Requirements
The lettuce worker in Yuma makes $16.50 an hour during harvest season. From November through March, she works sixty hours a week in fields that produce ninety percent of America’s winter leafy vegetables. By June, the fields are dormant and her agricultural hours drop to zero. Under the federal work requirement mandate signed into law on July 4, 2025, she needs eighty hours monthly of qualifying activity. Five months of the year, she exceeds that threshold by a factor of three. The other seven months, the system sees a woman who isn’t working.
Two hundred miles north, on the Navajo Nation, a community health representative drives forty-five minutes on unpaved roads to check on an elder. She earns a modest tribal government salary, serves her community in ways that resist standard employment categories, and lives where the nearest AHCCCS office is a three-hour round trip. The federal government says she needs to verify her work hours through Arizona’s eligibility systems. Her tribal government says the federal government has no jurisdiction over her healthcare.
And in Phoenix, a DoorDash driver logs thirty hours a week of gig work that doesn’t appear in unemployment insurance wage data. He earns enough to stay below 138 percent of the federal poverty level but not enough to generate the kind of documentation that satisfies administrative verification systems. The app tracks his miles, his deliveries, his ratings. It does not track his compliance with Medicaid eligibility conditions.
These three Arizonans represent the state’s defining challenge: how to implement a uniform federal mandate across landscapes and populations that share a state boundary but little else. Arizona’s work requirement story is ultimately a story about what happens when standardized federal policy encounters a state where tribal sovereignty, border economics, agricultural seasonality, and desert geography create implementation conditions unlike anywhere else in the country.
The Oldest Managed Care State#
Arizona’s Medicaid program has always been different. When the Arizona Health Care Cost Containment System launched in 1982, it was explicitly designed as a managed care demonstration, making it the oldest statewide Medicaid managed care program in the nation. While other states spent decades transitioning from fee-for-service to managed care, Arizona was born managed care. Every expansion adult receives coverage through one of several contracted MCOs: Arizona Complete Health (Centene), Banner-University Family Care, Care1st Health Plan (Blue Cross Blue Shield), Health Choice Arizona (Steward), Mercy Care (Aetna), and UnitedHealthcare Community Plan.
This matters enormously for work requirement implementation. Arizona doesn’t need to build managed care infrastructure from scratch. It has forty-plus years of experience with eligibility verification, care coordination, performance-based contracting, and MCO accountability systems. The question is whether infrastructure designed for healthcare delivery can absorb the fundamentally different challenge of employment verification and compliance monitoring.
Approximately 400,000 to 450,000 expansion adults are enrolled in AHCCCS, representing about 5.5 percent of the state’s population. Their demographic composition reflects Arizona’s position as a majority-minority state: roughly 40 percent white non-Hispanic, 35 percent Hispanic or Latino, 6 percent Native American (the largest share among expansion states), 5 percent Black, and 14 percent other or multiracial. More than half are female. Age distribution skews young, with about 42 percent between 19 and 34.
A Decade of Legislative Mandate#
Arizona’s path to work requirements predates the federal mandate by a decade. In 2015, the Republican legislature passed SB 1092, requiring AHCCCS to submit annual waiver requests to CMS seeking authority to implement work requirements, a five-year lifetime benefit limit for expansion adults, and cost-sharing provisions for non-emergency emergency department use. This was not a suggestion. The statute mandated annual submission regardless of the political environment in Washington.
AHCCCS first submitted a formal waiver request in December 2017. CMS approved it in January 2019. Implementation was scheduled for no sooner than January 2020. Then came the cascade of delays that became familiar across states pursuing work requirements: federal court decisions vacating Arkansas and Kentucky waivers prompted Arizona to halt implementation in October 2019. The COVID-19 public health emergency suspended all such efforts in January 2020. The Biden administration rescinded Arizona’s approval in February 2021.
But SB 1092’s annual mandate meant AHCCCS kept submitting. Every year, regardless of whether Washington was receptive, the agency dutifully prepared and filed its waiver request. When the political winds shifted again, Arizona had years of refined policy design ready to deploy.
The February 2025 Waiver and Its Aftermath#
In late February 2025, AHCCCS opened its most consequential public comment period. The agency held three public forums between February 27 and March 13, collecting nearly 400 comments. On March 28, AHCCCS submitted its AHCCCS Works waiver amendment to CMS. By April 10, CMS confirmed it had completed preliminary review and determined the application contained all necessary components for formal review and negotiation. A federal public comment period ran through May 9 on Medicaid.gov.
The 2025 waiver application reflected a decade of iterative design. Its core elements differed from the eventual federal mandate in ways that would create alignment challenges:
Arizona proposed covering adults ages 19 to 55, not the federal mandate’s 19 to 64. The state specified 20 hours per week of qualifying activities, while the federal law requires 80 hours monthly. Arizona’s enforcement mechanism was a two-month suspension of benefits followed by automatic reinstatement, not the federal structure of termination with marketplace exclusion. And Arizona included a five-year lifetime limit on expansion coverage for non-exempt adults, a provision with no parallel in federal law and no precedent anywhere in the country.
Then came HB 2926. Introduced in the 2025 legislative session, the bill moved through the appropriations process and was signed into law as part of Arizona’s FY 2026 budget on June 27, 2025. Its provisions went further than the waiver in several respects. The bill required AHCCCS to terminate eligibility no later than January 1, 2027, if implementation conditions weren’t met within 90 days of April 1, 2026. It lowered the FMAP trigger for discontinuing expansion eligibility from 80 percent to 90 percent. And it mandated that AHCCCS submit any additional waiver amendments needed to implement the requirements no later than 90 days after October 1, 2025.
One week after the state budget was signed, on July 4, 2025, the federal picture changed fundamentally. The One Big Beautiful Bill Act established nationwide Medicaid work requirements for all expansion adults ages 19 to 64, requiring 80 hours monthly, with semi-annual redetermination cycles and an effective date of January 1, 2027.
The Alignment Problem#
Arizona now faces a layering challenge that few other states confront. It has a state statute (SB 1092) mandating annual waiver submissions. It has a pending waiver application with design elements that differ from federal requirements. It has a budget bill (HB 2926) with its own implementation triggers. And it has a federal mandate that supersedes state-level waiver provisions where they conflict.
The divergences matter. Arizona’s waiver covers ages 19 to 55; the federal mandate covers 19 to 64. That gap affects an estimated 25 percent of the expansion population, adults between 56 and 64 who would be exempt under the state design but subject to requirements under federal law. Arizona’s 20-hours-per-week framing differs from the federal 80-hours-per-month structure, a distinction that may seem semantic but matters operationally because weekly requirements are less forgiving of variable schedules than monthly aggregations. And Arizona’s two-month suspension model contrasts with the federal termination-with-marketplace-exclusion framework.
The most provocative divergence is the five-year lifetime limit. No other state has proposed capping how long expansion adults can receive Medicaid coverage. The provision traces to SB 1092’s 2015 mandate, and AHCCCS has dutifully included it in every annual submission. The waiver specifies that only months of noncompliance count toward the five-year limit; periods of compliance and periods when an exemption applies do not. Time enrolled before the provision takes effect would also not count retroactively. But the concept itself represents a fundamentally different philosophy from the federal approach, which conditions ongoing eligibility on ongoing compliance but does not impose a lifetime ceiling.
Whether CMS will approve the lifetime limit remains unclear. The first Trump administration approved Arizona’s 2019 waiver, which included the same provision, but implementation never occurred. The current CMS has shown willingness to approve work requirements but has not signaled a position on lifetime limits. If approved, Arizona would become the only state where a compliant expansion adult could eventually exhaust eligibility simply by remaining enrolled long enough.
Twenty-Two Nations Within a State#
Arizona’s tribal landscape creates implementation conditions found nowhere else at comparable scale. Twenty-two federally recognized tribes occupy 27 percent of the state’s land area. The Navajo Nation alone, spanning Arizona, New Mexico, and Utah, enrolls approximately 175,000 members and constitutes the largest tribal nation in the United States. Other significant tribal populations include the Tohono O’odham, Gila River Indian Community, Salt River Pima-Maricopa, White Mountain Apache, San Carlos Apache, and Hopi Tribe.
Arizona’s waiver application proposes automatic exemptions for members who qualify for services through the Indian Health Service or tribally operated health facilities, including enrolled or affiliate members of federally recognized tribes. This is the broadest tribal exemption proposed by any state. It acknowledges a simple reality: employment opportunities, transportation infrastructure, internet access, and verification mechanisms operate so differently on tribal lands that imposing standard work requirements would amount to structural disenrollment.
Unemployment rates on some Arizona reservations exceed 50 percent. Transportation may require personal vehicles on unpaved roads in communities where car ownership is not universal. Internet access for online verification systems is unreliable or nonexistent in many tribal communities. Employment, where available, concentrates in tribal government and gaming operations, with limited private-sector alternatives.
But the exemption framework raises its own questions. The waiver offers tribes a choice: accept automatic exemptions for their members, or opt into tribal administration of work requirements with culturally appropriate qualifying activities and verification systems. This respects tribal sovereignty by allowing each nation to determine its own approach. It also creates the possibility of twenty-two different implementation models operating simultaneously within one state, each reflecting distinct tribal governance structures, economic conditions, and cultural values.
Data sovereignty compounds the complexity. Tribal governments maintain authority over member information, and administrative data matching for verification purposes requires tribal consent. If a tribe chooses tribal administration over automatic exemption, building data-sharing agreements that respect sovereignty while enabling compliance verification becomes a government-to-government negotiation with no template.
The federal mandate does not explicitly address tribal populations beyond including them in the general exemption categories (disability, medical frailty, caregiving). Whether Arizona’s proposed automatic tribal exemption survives CMS review, and how the federal mandate interacts with tribal sovereignty principles, will be watched closely by every state with significant Native American populations.
If automatic exemptions function as proposed, approximately 50,000 to 70,000 Native American expansion adults would continue coverage without any work requirement burden. That outcome would represent the most significant protection for tribal health coverage in the implementation landscape.
Three Arizonas#
Phoenix sprawls across the Salt River Valley, a metropolitan area of nearly five million people where the expansion population can access employers, workforce development centers, community colleges, and public transportation within reasonable distances. Sixty percent of Arizona’s expansion enrollment concentrates in Maricopa County. Here, the gig economy thrives. Uber, Lyft, DoorDash, Amazon Flex, and countless other platform-based employment relationships generate real income but often fail to appear in unemployment insurance wage data. The Phoenix expansion adult working thirty hours a week across three apps is meaningfully employed but potentially invisible to administrative verification systems.
Tucson anchors Pima County, accounting for roughly 15 percent of expansion enrollment. Its economy combines the University of Arizona, military installations, healthcare systems, and cross-border commerce. The city’s proximity to the Mexican border creates employment patterns that straddle international boundaries and resist clean categorization.
Then there is rural Arizona, which is to say most of Arizona. Thirteen of fifteen counties are classified as rural, covering more than 90 percent of the state’s land mass while housing about 10 percent of its population. Counties like Cochise, Graham, Greenlee, and Gila have limited employment opportunities, no public transportation, and sparse service infrastructure. A resident in rural Cochise County may live sixty or more miles from the nearest workforce development center. Northern Arizona, encompassing Coconino, Apache, and Navajo counties, includes communities more than a hundred miles from the nearest hospital.
What works in Phoenix fails in Kayenta. What functions in Tucson collapses in Greenlee County. Arizona’s implementation challenge is not building one system but building a system flexible enough to serve three fundamentally different contexts through a single administrative framework.
Border Economics and Agricultural Seasonality#
Arizona’s 83-mile border with Mexico generates employment patterns that no other expansion state faces at comparable complexity. Cross-border employment exists in both directions. Some Arizona residents work for Mexican employers, earning wages that don’t appear in any American administrative database. Port-of-entry commerce generates employment in customs brokerage, logistics, and retail that fluctuates with trade policy and inspection wait times. Some border-region residents receive financial support from family members in Mexico, which affects income calculations but produces no documentation relevant to work hour verification.
The agricultural dynamics are even more consequential. The Yuma region produces an extraordinary concentration of American produce. During harvest season, roughly November through March, employment is abundant and hours are long. Workers regularly exceed sixty hours per week. During the off-season, particularly in the brutal summer months when temperatures routinely exceed 110 degrees, agricultural employment effectively ceases.
Yuma County’s unemployment rate seasonally reaches 15 percent or higher during these off-season months, not because workers are choosing not to work but because the work does not exist. The federal requirement of 80 hours monthly makes no accommodation for workers whose employment is structurally seasonal. A worker who averages 240 hours monthly during harvest and zero during summer averages 100 hours monthly across the year. But work requirements are assessed monthly, not annually. Five months of extraordinary compliance do not offset seven months of structural noncompliance.
How Arizona handles the Yuma lettuce worker will test the entire system’s relationship to economic reality. The exemption categories in both the state waiver and federal law don’t include “seasonal employment.” The closest available pathway might be a good-cause exception or a state-defined accommodation, but the specifics remain undefined. Without explicit seasonal provisions, Arizona’s agricultural workforce could face systematic coverage disruption every summer despite being among the state’s most productive workers.
The Director Departed, the Politics Remain#
Governor Katie Hobbs, a Democrat governing with a Republican legislature, occupies an uncomfortable position on work requirements. She has not philosophically endorsed them. On May 29, 2025, she held a press conference with nearly a dozen hospital officials opposing the federal Medicaid cuts contained in what would become the One Big Beautiful Bill Act. She acknowledged that approximately 200,000 Arizonans could lose coverage from work requirements alone, separate from the law’s other Medicaid provisions.
But Hobbs is constrained. SB 1092 mandates annual waiver submissions regardless of the governor’s preferences. HB 2926 passed as part of a budget she signed. And the federal mandate operates independent of state executive discretion. Hobbs vetoed 174 bills during the 2025 legislative session, a new state record, including several Medicaid-adjacent measures she considered harmful. She vetoed HB 2449, which would have added redundant eligibility checks to AHCCCS. She vetoed SB 1268, which would have required hospitals to inquire about patients’ immigration status. But the core work requirement machinery moved forward through mechanisms she couldn’t easily block.
Adding institutional turbulence, AHCCCS Director Carmen Heredia and Department of Health Services Director Jennie Cunico both resigned on May 1, 2025, after the Republican-controlled Senate’s Committee on Director Nominations made clear it would not recommend them for confirmation. The departures created a leadership vacuum at AHCCCS during the most consequential period for work requirement planning since the program’s creation.
What the Numbers Suggest#
Governor Hobbs’s estimate of 200,000 coverage losses aligns broadly with independent projections. The Urban Institute’s modeling of federal work requirements, conducted before the OBBBA’s passage, suggested significant coverage losses in Arizona due to the combination of seasonal employment patterns, gig economy prevalence, documentation barriers in immigrant communities, and the geographic isolation of rural and tribal populations.
Arizona’s expansion population includes roughly 35 percent Hispanic or Latino adults, many in communities where immigration status anxiety suppresses engagement with government systems regardless of actual eligibility. The state’s refugee resettlement programs, concentrated in Phoenix and including Congolese, Somali, Afghan, and Burmese populations, serve people with high workforce participation but incomplete documentation in American administrative systems. And the estimated 4,000-plus unsheltered individuals in Phoenix, the nation’s fourth-highest unsheltered count, face verification barriers that compound their housing instability.
The December 8, 2025, CMS guidance established the broad federal parameters but left critical questions unresolved. How will seasonal employment be treated? Will gig economy income verification require new data sources beyond unemployment insurance wage records? How will tribal exemptions interact with federal requirements? What happens to Arizona’s five-year lifetime limit if CMS neither approves nor explicitly rejects the pending waiver?
The Infrastructure Advantage and Its Limits#
Arizona enters work requirement implementation with genuine administrative advantages. Four decades of managed care operations have produced integrated data systems, experienced care coordination workforces, and performance-based contracting relationships that other states must build from scratch. AHCCCS’s MCO contracts already include accountability metrics that could incorporate work requirement outcomes. Care coordinators already contact members for health-related purposes, creating natural touchpoints for compliance support.
The state’s experience with TANF work requirements through the Department of Economic Security provides workforce development partnerships, case management infrastructure, and tribal coordination mechanisms. SNAP ABAWD requirements for overlapping populations create opportunities for deemed compliance, where an expansion adult meeting SNAP work requirements could be automatically recognized as meeting Medicaid requirements without separate verification.
But infrastructure designed for healthcare management is not infrastructure designed for employment verification. AHCCCS has never tracked work hours. Its systems don’t capture gig economy income, seasonal employment patterns, or cross-border wages. The agency acknowledged in its waiver application that it “will need to make changes to its systems to collect data that is not currently collected.” Data fields for work hours, qualifying activities, and exemptions must be added to systems built around medical eligibility. Staff must be trained on requirements that have nothing to do with healthcare delivery.
The gap between what AHCCCS’s systems currently do and what work requirements demand is the gap between an administrative capability and an administrative transformation. Arizona’s managed care maturity gives it a head start, but it doesn’t eliminate the distance to be covered.
The Question Beneath the Questions#
Arizona’s work requirement story ultimately asks whether a policy designed for uniform national application can function across the extremes this state contains. The expansion adult in Phoenix navigating three gig apps. The agricultural worker in Yuma with seasonal hours that swing from 240 to zero. The Navajo community health representative whose tribal government disputes federal jurisdiction over her healthcare eligibility. The refugee in Phoenix with a steady job and a documentation deficit. The rural resident in Greenlee County who can demonstrate willingness to work but not proximity to work.
The federal mandate treats all of these people as members of a single category: non-exempt expansion adults who must document 80 hours monthly. Arizona’s waiver tried to accommodate some of this variation through tribal exemptions, age limitations, and a suspension-rather-than-termination enforcement model. The OBBBA overrides some of those accommodations while leaving others in regulatory limbo.
What distinguishes Arizona from other implementation states is not the size of its affected population, which is modest by national standards, but the diversity of circumstances that population contains. If work requirements can function equitably in a state that spans tribal sovereignty, international borders, agricultural seasonality, extreme geography, and the nation’s most mature Medicaid managed care infrastructure, they can probably function anywhere. If they cannot function equitably here, the failures will illuminate something fundamental about the distance between uniform federal policy and the varied terrain of American lives.
The lettuce worker, the community health representative, and the gig driver are all waiting to find out which kind of story Arizona becomes.