Series 14: State Implementation of Work Requirements
On the night of March 14, 2025, at approximately 9:15 p.m. in a conference room steps from the Kentucky Senate floor, a committee substitute was introduced that transformed House Bill 695 from a Medicaid oversight measure into the latest chapter of the most tortured work requirement saga in American health policy. The substitute, which few legislators had seen before that evening, converted a voluntary community engagement program into a mandatory one, reinstated prior authorization requirements for behavioral health services, and created a Medicaid Oversight and Advisory Board that shifted significant program control from the executive to the legislature. The Senate passed the amended bill around 10:40 p.m. on a party-line vote. The House concurred less than an hour before the midnight deadline to end legislative business. Governor Andy Beshear vetoed the bill, calling it a measure that “would put up barriers to and delay health care for Kentuckians.” On March 27, the legislature overrode his veto: 29 to 7 in the Senate, 80 to 20 in the House, with a single Democrat, Representative Matthew Lehman, crossing party lines.
The override made Kentucky the most analytically instructive state in the national work requirements landscape, not because its policy is novel but because it has tried this before, failed catastrophically, and is now compelled to try again under fundamentally different legal conditions. The One Big Beautiful Bill Act, signed July 4, 2025, makes work requirements mandatory for expansion adults regardless of gubernatorial preference. What Beshear prevented through executive action in 2019 when he withdrew the Kentucky HEALTH waiver, and what Judge James Boasberg prevented through judicial action in 2018 and 2019 when he vacated CMS approvals twice, federal law now requires. The question is no longer whether Kentucky will implement work requirements. It is whether implementation can avoid repeating the coverage catastrophe that the state’s own prior analysis projected.
Kentucky’s Medicaid program covers approximately 1.5 million people, more than one in three state residents. The expansion adult population, those ages 19 through 64 covered under ACA expansion, numbers roughly 400,000 to 450,000. Under OBBBA, work requirements apply to expansion adults who are able-bodied, without dependents, and aged 19 through 64. HB 695 narrows the initial state target further: able-bodied adults without dependents who have been enrolled for 12 or more months, between ages 18 and 60. Kentucky Voices for Health reports that 96% of adults on Medicaid in Kentucky are working, caregiving, living with a disability or illness, in school, or retired, leaving the population actually subject to new behavioral requirements at perhaps 2 to 4% of total Medicaid enrollment. The Kentucky Center for Economic Policy estimated the work requirement would apply to a small fraction of total Medicaid recipients but that the documentation burden would ripple outward, threatening coverage for working people who fail to navigate the reporting infrastructure.
The Kentucky HEALTH Ghost#
Kentucky’s prior work requirement experience is not merely historical context. It is the implementation template that HB 695 explicitly resurrects.
Under Governor Matt Bevin, Kentucky HEALTH was approved by CMS in January 2018 as the first Medicaid work requirement waiver in the program’s 52-year history. The design required 80 hours monthly of qualifying activities, imposed monthly premiums for members above 100% FPL, created My Rewards health savings accounts, eliminated non-emergency transportation and vision and dental benefits, and established six-month lockout penalties for non-compliance. CMS projected 95,000 Kentuckians would lose coverage. Bevin himself acknowledged this projection while threatening to dismantle expansion entirely if courts interfered.
Judge Boasberg struck down the approval in June 2018, finding that HHS had not adequately considered whether the waiver would further Medicaid’s objective of providing coverage. CMS re-approved a modified version in November 2018. Boasberg vacated it again in March 2019 on the same grounds. Kentucky HEALTH never enrolled a single member under work requirements despite years of administrative investment and millions in system development.
Beshear’s election in November 2019 and immediate withdrawal of the waiver ended the experiment. COVID-19 continuous enrollment provided a stability period. But the political dynamic never resolved. Kentucky’s Republican supermajority passed work requirement legislation repeatedly. Beshear vetoed it repeatedly. OBBBA broke the cycle.
HB 695’s community engagement waiver mandate directs the Cabinet for Health and Family Services to submit a Section 1115 waiver within 90 days. The Cabinet published an overview in May 2025 and submitted the waiver to CMS in June 2025. The requirement is 20 hours weekly (equivalent to approximately 80 hours monthly) of work, education, job training, community service, or engagement with a state job placement agency. The waiver’s design consciously echoes Kentucky HEALTH while operating under a fundamentally different legal framework: OBBBA’s statutory mandate replaces the discretionary waiver authority that courts previously found inadequately justified.
The Appalachian Reality#
Kentucky’s central implementation challenge is not political. It is geographic.
Fifty-four of Kentucky’s 120 counties are classified as Appalachian, concentrated in the eastern and southeastern portions of the state. These counties have experienced population decline of 10 to 20% since 2010. Coal employment collapsed from 18,000 miners in 2008 to under 4,000 by 2024, with no industry emerging at comparable scale to replace it. County unemployment rates in eastern Kentucky range from 8 to 15%, among the highest in the nation, while the statewide rate of approximately 4.5% masks this extreme regional variation.
The labor force participation rate in eastern Kentucky is among the lowest in the country. Many working-age adults are not seeking employment because employment does not exist in accessible proximity. Disability rates are the highest in the nation: 19% of working-age Kentuckians report a disability, with rates substantially higher in Appalachian counties. Black lung disease is resurging, with advanced cases appearing among younger miners at rates not seen in decades. The opioid and polysubstance epidemic ranks Kentucky in the top five nationally for overdose deaths, with fentanyl fatalities increasing more than 300% between 2019 and 2023.
Requiring documentation of 80 monthly hours of work or work-related activity in communities where jobs do not exist is not a behavioral incentive. It is an administrative pathway to coverage loss. A resident of Owsley County or Magoffin County or Martin County faces transportation barriers that make reaching a workforce development center a half-day commitment. Roads in parts of eastern Kentucky remain unpaved. Some communities sit 60 or more miles from the nearest hospital. Broadband access, while improving, remains limited in hollows and valleys where terrain defeats infrastructure.
The expansion population in these communities relies on Medicaid for treatment of conditions that are consequences of the very economic collapse that eliminated their employment opportunities. Black lung. Opioid use disorder. Depression and anxiety following generational livelihood loss. Removing their coverage for failing to document work in communities without work does not promote self-sufficiency. It removes the healthcare that might, over time, support the capacity to work.
The Divided Government Dynamic#
Kentucky’s implementation operates under a political architecture unlike any other work requirement state. Governor Beshear, who cannot seek reelection in 2027 due to term limits, opposes work requirements and withdrew the last waiver the moment he took office. The Republican supermajority that overrode his veto not only mandated the waiver submission but also created the Medicaid Oversight and Advisory Board, shifting program governance authority toward the legislature. HB 695 also froze the Beshear administration’s ability to make changes to Medicaid eligibility, coverage, or benefits without legislative approval.
The practical consequence is that waiver design and implementation planning proceed under a governor who is legally compelled to pursue a policy he has publicly opposed. The Cabinet for Health and Family Services must submit a waiver that satisfies the legislature’s intent while the governor’s administration retains operational control of implementation. This creates incentives for the administration to design maximum mitigation within minimum compliance: broad exemption definitions, generous good-cause provisions, geographic accommodations for Appalachian counties, and enforcement approaches that prioritize documentation support over penalty imposition.
Whether CMS will approve an application that the submitting governor publicly opposes is an open question. The OBBBA mandate makes some version of approval likely, but the specifics of exemption breadth and enforcement flexibility remain negotiable. A strict CMS posture could force more aggressive implementation than the administration prefers. A permissive one could allow Kentucky to effectively exempt eastern Kentucky through administrative discretion.
The 2027 gubernatorial election adds another variable. A Republican successor could pursue more aggressive enforcement than current planning anticipates. A Democratic successor would inherit work requirements that federal law now mandates, with less room to mitigate than Beshear has sought.
Behavioral Health and the Prior Authorization Problem#
HB 695 contained a provision that received less public attention than work requirements but may affect more Kentuckians: the reinstatement of prior authorization requirements for behavioral health services, including substance use disorder treatment. Kentucky uses Medicaid to cover substance use disorders at a particularly high rate. Led by providers like Addiction Recovery Care, the state has the highest number of residential treatment beds per capita in the country.
Prior authorization creates administrative friction between a person seeking treatment and the treatment itself. For substance use disorders, where treatment windows are narrow and motivation to seek help may be fleeting, delays measured in days can translate to delays measured in relapses or overdoses. Reinstating prior authorization for behavioral health simultaneously with implementing work requirements creates compounding administrative burdens on a population where SUD treatment participation qualifies as a work requirement exemption. The circular logic is notable: a person in SUD treatment is exempt from work requirements, but accessing SUD treatment now faces a new administrative barrier.
Community health centers project significant revenue losses. Grace Health in Corbin estimated that work requirements and associated Medicaid changes could reduce their covered patient population by 10 to 15%, with a $2 to $3 million revenue loss threatening behavioral health, school-based health, substance use disorder, and dental services.
Kynect: The Infrastructure Advantage#
Kentucky possesses one genuine implementation advantage. Kynect, the state-based marketplace and enrollment system built under Governor Steve Beshear’s administration, achieved the largest uninsured rate reduction in the nation between 2013 and 2016, dropping from 20.4% to 7.5%. The navigator networks, community partnerships, eligibility systems, and MCO relationships that accomplished this remain operational.
Whether enrollment infrastructure translates to verification infrastructure is the critical question. Kynect navigators are trained to help people gain and maintain coverage. Work requirement verification requires them to help people document compliance with conditions that may result in coverage loss. The skill set overlaps but the mission differs. Still, Kentucky starts with community-level capacity that states building from scratch cannot replicate.
Kentucky operates Kynect as a state-based marketplace, providing smoother potential transitions for members losing Medicaid who might qualify for marketplace coverage. But OBBBA’s marketplace exclusion for individuals losing coverage specifically due to work requirement noncompliance eliminates this safety valve for the population most at risk. Members whose income falls below 138% FPL have no marketplace alternative regardless.
What Kentucky Will Test#
Kentucky will implement work requirements with maximum mitigation and minimum enthusiasm from its current administration. Broad exemptions for disability, SUD treatment, and caregiving will likely cover a substantial portion of the expansion population. Geographic accommodations for Appalachian counties, whether through formal exemptions or informal enforcement discretion, will determine whether work requirements function as a statewide policy or effectively apply only to Louisville and Lexington.
The outcomes will be watched as the test case for whether work requirements can coexist with regions of concentrated poverty and structural joblessness. If mass coverage losses occur in Appalachian Kentucky, the human consequences will be immediate and severe in communities already devastated by the triple burden of economic collapse, substance use epidemics, and healthcare access gaps. If broad exemptions effectively exclude eastern Kentucky from enforcement, the policy becomes geographically selective in ways its proponents did not advertise.
Kentucky’s work requirement history, with its waivers approved and struck down, governors elected and succeeded, and policies implemented and withdrawn, makes this the state where the question is sharpest: does this time produce different results because the law is different, or do the same geographic and economic realities produce the same coverage losses regardless of the legal mechanism?