Series 14: State Implementation of Work Requirements
A 35-year-old mother in rural Appalachian Tennessee works part-time at a local retail store earning approximately $9,500 annually. She has two school-age children. She qualifies for TennCare because Tennessee increased parent eligibility to 100% of the federal poverty level in 2024, making it the highest threshold among non-expansion states. Her children receive TennCare Standard coverage. If Tennessee implements the TennCare III block grant waiver proposal with work requirements for traditional populations, she would need to document 80 hours monthly of work, training, or qualifying activities despite already working. Her sister, also working part-time but childless and earning $11,000 annually, has no coverage option. She falls into Tennessee’s coverage gap: too poor for marketplace subsidies, categorically excluded from Medicaid because Tennessee never expanded under the ACA. The sisters represent Tennessee’s paradox: aggressive pursuit of work requirements for populations that have coverage while maintaining categorical exclusion for the working poor without it.
H.R. 1, signed July 4, 2025, transformed Medicaid work requirements from state-option policy into 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 for adults aged 19-64 who gained Medicaid eligibility under the ACA’s optional expansion. States that expanded face a January 1, 2027 implementation deadline.
Tennessee is not subject to these federal work requirements because Tennessee never expanded Medicaid. By declining expansion since the ACA’s passage, 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 Tennessee. Approximately 120,000 to 150,000 Tennesseans fall into the coverage gap: earning too little to qualify for marketplace subsidies but too much (or in the wrong category) to qualify for traditional Medicaid.
Yet Tennessee merits close attention in work requirements analysis for reasons that illuminate the ideological commitments driving this policy nationally. Tennessee is pursuing work requirements more aggressively than any state, seeking block grant authority to implement requirements for traditional Medicaid populations that federal law does not mandate. The state’s TennCare III waiver proposal, resubmitted in February 2025 after Biden administration withdrawal of prior approval, would extend community engagement requirements to parents receiving Medicaid, adults with disabilities not receiving SSI, and other traditional categories exempt from federal mandates. Tennessee tests whether work requirements are about promoting employment for expansion adults or represent broader philosophical commitments about conditioning public benefits on work.
TennCare Eligibility and Coverage Gap Structure#
Tennessee Medicaid (TennCare) serves approximately 1.4 million individuals, predominantly children, pregnant women, elderly, and disabled populations. The program’s eligibility structure creates one of the nation’s widest coverage gaps among non-expansion states.
Parents with dependent children qualify with household incomes up to 100% FPL following a 2024 waiver approval that increased the prior threshold. This represents approximately $2,082 monthly for a family of three, the highest parent eligibility threshold among the ten non-expansion states. Tennessee also received permission to cover up to 100 diapers monthly for infants under age two enrolled in TennCare, addressing material hardship beyond healthcare coverage. Despite this relatively generous parent threshold among non-expansion states, most working parents still exceed eligibility limits.
Pregnant women and infants qualify up to 200% FPL, with extended postpartum coverage continuing for 12 months after birth rather than the previous 60-day limit. Children ages one through five qualify up to 147% FPL, children ages six through eighteen up to 138% FPL. CHIP (CoverKids) extends coverage to children with household incomes up to 255% FPL. The children’s coverage structure is relatively comprehensive compared to adult eligibility.
Adults without dependent children face complete categorical exclusion regardless of income. A childless adult earning $0 annually cannot qualify for Tennessee Medicaid absent disability (SSI eligibility) or age (65+). This policy choice creates the fundamental coverage gap: approximately 120,000 to 150,000 adults earn too little for marketplace subsidies (below 100% FPL) yet cannot access Medicaid because they lack qualifying categorical status. Tennessee’s coverage gap is smaller than Texas or Florida in absolute numbers but represents significant unmet need in a state with 6.9 million residents.
TennCare III Block Grant Proposal: The Most Aggressive Work Requirement Pursuit#
Tennessee submitted the TennCare III waiver proposal in November 2019 under Governor Bill Lee. Unlike typical Section 1115 waivers, TennCare III proposed converting Tennessee’s entire Medicaid program to a block grant, receiving a fixed federal payment rather than open-ended matching funds. This approach differs fundamentally from how Medicaid financing operates in every other state.
The proposal included work requirements as a component, but the scope exceeded what any other state had attempted. TennCare III would impose community engagement requirements on adults ages 19-64 in traditional Medicaid populations, not just expansion adults (which Tennessee does not have). The requirements would apply to parents and caretaker relatives receiving Medicaid, adults with disabilities not receiving SSI, and other categories that federal law exempts from work requirements.
The Trump administration approved TennCare III in January 2021, in the final days of the first administration. The approval was unprecedented: no state had received block grant authority, and extending work requirements to traditional Medicaid populations exceeded what CMS had approved elsewhere. The Biden administration withdrew approval in December 2021, determining that the block grant structure did not further Medicaid objectives. Tennessee sued, but the litigation became moot when the state did not pursue implementation during the Biden years.
Tennessee resubmitted TennCare III with modifications in February 2025 following the return of a Republican administration. The resubmitted proposal maintains the core block grant structure with work requirements for traditional populations. The state is under active CMS review as of February 2026.
TennCare III Work Requirement Structure#
The resubmitted TennCare III proposal extends community engagement requirements beyond federal mandates to traditional Medicaid populations. The structure includes:
Work requirements apply to parents and caretaker relatives receiving Medicaid, adults ages 19-64 not otherwise exempt, and certain adults with disabilities who do not receive SSI. This represents a fundamental expansion of work requirement scope. While H.R. 1 mandates work requirements only for expansion adults (whom Tennessee does not have), Tennessee voluntarily seeks to impose requirements on populations federal law exempts.
The exemption structure covers pregnancy, SSI disability recipients, children, elderly, individuals in substance use disorder treatment, primary caregivers of dependents with disabilities, and residents of counties with unemployment rates exceeding 150% of state average. The exemptions align generally with exemptions in other states’ proposals but apply to different baseline populations.
Tennessee proposes graduated consequences rather than immediate coverage termination. Initial non-compliance would result in increased premiums. Continued non-compliance would trigger benefit reductions. Disenrollment would occur only after extended non-compliance with multiple intervention attempts. This graduated approach reflects lessons from Arkansas and Kentucky, where immediate termination produced coverage losses without improving employment outcomes. Whether Tennessee’s graduated approach would prevent similar coverage losses remains untested.
The Block Grant Distinction: Financial Risk Transfer#
Tennessee’s defining characteristic is pursuing work requirements through block grant restructuring rather than standard Section 1115 waiver authority. This approach differs from other states in fundamental ways.
Under a block grant, Tennessee accepts risk that enrollment or costs might exceed the fixed federal payment. This creates incentives to limit enrollment that do not exist under standard matching. Work requirements become not just policy preference but financial management tool. If work requirements reduce enrollment, the state retains federal block grant funding that would otherwise support that enrollment, creating fiscal incentive for restrictive implementation.
Block grant authority could allow Tennessee to implement requirements that standard Medicaid rules prohibit. The state seeks freedom to design programs without the constraints other states face, including the ability to modify benefit packages and impose cost-sharing structures unavailable under current law. The regulatory flexibility extends beyond work requirements to comprehensive program redesign.
No state has operated Medicaid under block grant authority. Tennessee would establish precedent that other states could follow, potentially transforming Medicaid nationally. If approved, TennCare III demonstrates that states can fundamentally restructure Medicaid financing and obligations. If rejected or successfully challenged legally, Tennessee demonstrates the limits of state flexibility in Medicaid design.
TennCare Managed Care Heritage and Implementation Capacity#
Tennessee pioneered statewide Medicaid managed care in 1994. TennCare was ambitious, troubled, and ultimately transformed. The history shapes current implementation capacity.
Tennessee has operated managed care for thirty years, longer than most states. The administrative infrastructure for complex program requirements exists. Three MCOs serve TennCare: BlueCare Tennessee (BlueCross BlueShield), Amerigroup Tennessee (Elevance), and UnitedHealthcare Community Plan. These MCOs have deep experience with Tennessee’s population and have developed care coordination capacity over decades. This infrastructure could support work requirement compliance assistance if Tennessee implements TennCare III.
TennCare faced near-collapse in the mid-2000s, with enrollment cuts and benefit reductions required to control costs. The state has experience managing program contraction, which block grant risk management might require. If enrollment or costs exceed block grant caps, Tennessee would need to reduce benefits, increase cost-sharing, or tighten eligibility. The institutional memory of prior contraction informs current capacity to manage downside risk.
The MCO relationships provide delegation capacity that Tennessee could leverage for work requirement verification. MCOs could conduct member outreach, provide compliance support, and verify activities. However, the state has no prior experience implementing Medicaid work requirements specifically, creating implementation risk even with mature managed care infrastructure.
Geographic Divide: Implementation Complexity Across Tennessee#
Tennessee’s geography creates implementation complexity even for traditional Medicaid populations. The state spans 469 miles east to west, encompassing distinct economic regions with vastly different employment dynamics.
Nashville prosperity represents one extreme. The Nashville metropolitan area is among the fastest-growing economies nationally. Employment opportunities are plentiful; labor shortages exist in many sectors. Work requirements in Nashville would face different dynamics than work requirements in Appalachian eastern Tennessee. For Nashville residents on Medicaid, documenting 80 hours monthly of qualifying activities may be administratively burdensome but practically feasible given employment availability.
Appalachian Tennessee presents the opposite dynamic. The 26 Appalachian counties face circumstances similar to eastern Kentucky: limited employment, transportation barriers, opioid epidemic, healthcare access challenges. Requiring work in communities without jobs raises fundamental questions about policy coherence. Tennessee’s proposal to exempt counties with unemployment rates exceeding 150% of state average addresses this partially, but many Appalachian counties hover near but not above that threshold.
Memphis faces concentrated urban poverty, particularly in majority-Black neighborhoods. The city’s economic challenges differ from Nashville’s growth. Work requirements would interact with structural unemployment in ways that individual compliance efforts cannot overcome. Memphis also has significant transportation barriers despite urban density, with limited public transit access to job centers.
Rural middle and west Tennessee agricultural communities have seasonal employment patterns and limited service infrastructure. Work requirement verification in these regions requires different approaches than urban implementation. The question of how someone in a frontier county documents 80 hours monthly of qualifying activities when the nearest job training program is 60 miles away remains unresolved in Tennessee’s proposal.
The Traditional Population Question: Parents and Disabled Adults#
Tennessee’s proposal to extend work requirements to traditional Medicaid populations raises distinct issues from expansion adult requirements.
Parents receiving TennCare qualify only with incomes up to 100% FPL, lower than most states. These are working parents whose income is low despite employment. TennCare data show that approximately 71% of current Medicaid adults in Tennessee are working. Requiring additional work documentation from people already working creates administrative burden without addressing actual employment. The compliance challenge becomes verification rather than behavior change.
Adults with disabilities not receiving SSI represent a particularly complex population. Tennessee proposes including some disabled adults who have work capacity limitations that do not meet SSI disability thresholds but still impair full-time employment. Where the line falls between “can work with accommodations” and “cannot work at all” becomes contested. The proposal creates risk of coverage loss for people with episodic disabilities, mental health conditions, or chronic illnesses that do not qualify for SSI but significantly affect work capacity.
Children’s coverage implications add another dimension. Parents losing coverage affects children. If a parent loses Medicaid for work requirement non-compliance, the parent may disengage from systems that maintain children’s coverage. Family coverage continuity becomes more complex when parents face requirements children do not.
Expected Trajectory: Aggressive Restructuring Attempt#
Tennessee’s expected approach is the most aggressive of any state: pursuing block grant authority that no state has received, extending work requirements to populations other states exempt, and accepting financial risk other states avoid.
Several factors drive this posture. Ideological commitment shapes policy: Tennessee’s political leadership views work requirements as principled policy, not just administrative tool. The commitment reflects beliefs about reciprocal obligation and program design that transcend fiscal considerations. Fiscal motivation aligns with ideology: block grant authority with work requirements could reduce state Medicaid spending if enrollment declines and federal payments remain fixed. The financial incentives align with policy preferences.
Federal alignment creates opportunity Tennessee has awaited. The second Trump administration’s support for state flexibility and work requirements means CMS review occurs under sympathetic leadership. No expansion population status means Tennessee’s pursuit of work requirements for traditional populations is entirely voluntary. Since Tennessee has no expansion adults, federal work requirement mandates do not apply. The state’s pursuit represents philosophical commitment rather than compliance with federal mandate.
The timeline remains uncertain. Tennessee resubmitted TennCare III in February 2025. CMS review and negotiation continue through spring-summer 2025. Potential approval would be unprecedented. Implementation could begin in 2026 if approved. The December 2026 federal work requirement deadline does not apply to Tennessee absent expansion.
Key Uncertainties and Legal Challenges#
Block grant approval remains uncertain whether any administration will approve true block grant authority. Tennessee’s proposal tests boundaries no state has successfully crossed. CMS must determine whether block grant authority with aggregate spending caps aligns with Medicaid’s statutory purpose of providing medical assistance to low-income populations.
Legal challenges appear likely. Advocacy organizations will probably challenge block grant approval as exceeding statutory authority. Litigation could delay or prevent implementation. The question of whether Medicaid law permits aggregate caps on federal funding rather than open-ended matching has not been definitively resolved. Courts may need to determine whether Tennessee’s approach violates statutory requirements.
Expansion politics create another uncertainty. Tennessee’s hospital association and some business groups support Medicaid expansion. If expansion occurs (unlikely under current leadership), federal work requirements would apply and Tennessee’s implementation approach would matter. The state could find itself implementing both traditional population work requirements under TennCare III and expansion adult work requirements under H.R. 1, creating dual systems with different verification processes.
Traditional population outcomes matter nationally. If Tennessee implements work requirements for parents and certain disabled adults, outcomes for these populations will be watched nationally as test of extending work requirements beyond expansion populations. Coverage losses among working parents would demonstrate that work requirements function primarily as documentation barriers rather than employment incentives. Conversely, if Tennessee maintains coverage while implementing requirements, the state would provide model for other states considering similar approaches.
Tennessee’s Test of Work Requirement Philosophy#
Tennessee’s pursuit tests whether work requirements are about promoting employment for expansion adults or represent broader philosophical commitments about conditioning public benefits on work. The answer shapes not just Tennessee’s Medicaid program but national policy direction.
If work requirements aim to promote employment, Tennessee’s approach makes little sense. The state targets populations already working at high rates, creates verification burdens for people with employment barriers, and risks coverage loss for disabled adults with work limitations. If work requirements represent philosophical commitment that public benefits should be conditioned on productive activity, Tennessee’s approach is consistent: the principle applies to all able-bodied adults receiving public assistance, not just the expansion population federal law targets.
The paradox is that Tennessee has no Medicaid expansion population. Federal work requirements under H.R. 1 do not apply because the state never accepted expansion. Tennessee’s work requirement pursuit is entirely voluntary, extending to populations that other states exempt and that the federal government does not require states to regulate. This voluntary extension reveals that work requirements, for Tennessee’s leadership, transcend compliance with federal mandates and represent core beliefs about program design and reciprocal obligation.
If approved, Tennessee would establish precedents other states could follow. Block grant financing with work requirements could become a model for Medicaid restructuring nationally. If rejected or successfully challenged legally, Tennessee demonstrates the limits of state flexibility in Medicaid design. Either outcome has implications extending far beyond Tennessee’s borders.