The email arrived at 4:47 PM on a Friday in December 2021. Wisconsin’s Medicaid director had been waiting months, but the timing still stung. The Biden administration was formally withdrawing approval of the state’s work requirement waiver. Wisconsin had received approval in October 2018, spent years developing verification protocols and exemption processes, trained staff, and built infrastructure. None of it was ever activated. The story repeated across the country: every work requirement waiver approved during the first Trump administration was eventually either judicially vacated, administratively withdrawn, or allowed to expire. Now, under the One Big Beautiful Bill Act, the pendulum swings again, transforming work requirements from optional experiments requiring federal permission into mandatory conditions of expansion participation.
The Architecture of Intergovernmental Authority#
Medicaid operates through cooperative federalism where states design and administer programs within federal parameters. Section 1115 of the Social Security Act allows the Secretary to approve state “experimental, pilot, or demonstration projects” that waive statutory provisions if “likely to assist in promoting the objectives of the Medicaid program.” This deliberately broad language gives the Secretary substantial discretion, meaning identical proposals receive opposite outcomes under different administrations, not because proposals differ but because the Secretary’s interpretation of Medicaid’s objectives differs. This is not a bug in the system. It is the system. Section 1115 gives the executive branch a policy lever requiring no congressional action.
The first Trump administration approved work requirement waivers for thirteen states between 2018 and 2020 at unprecedented pace, with some approvals coming within weeks of applications. The Biden administration then systematically withdrew every approval, concluding categorically that work requirements “do not promote the objectives of the Medicaid program.” States invested years of preparation that produced nothing operational. Wisconsin, Kentucky, New Hampshire, Michigan, and others spent substantial resources on systems never activated. The cumulative investment across states in unused work requirement infrastructure likely exceeds hundreds of millions of dollars.
The Statutory Mandate Transforms Everything#
The One Big Beautiful Bill Act fundamentally alters federal-state dynamics. States no longer need waiver approval to implement requirements; they need it to deviate from federal specifications. The policy baseline has shifted. States opposing requirements cannot decline to submit applications; they must implement or forfeit the 90 percent federal match for expansion adults.
CMS released initial guidance in November 2025, with an interim final rule expected by June 2026, providing detailed specifications just seven months before the deadline. States may seek “good faith” extensions through December 2028 if they demonstrate genuine efforts facing unavoidable delays. The federal government is providing $200 million in Government Efficiency Grants to support system development, distributed half evenly across states and half based on affected populations. This funding is inadequate for the infrastructure required but signals federal recognition that implementation demands resources beyond state budgets.
The mandate removes the possibility that a future administration will withdraw approval, changing the investment calculus for states. Infrastructure built for January 2027 will remain operational regardless of presidential transitions. But it also removes state discretion to not implement, making the cooperative federalism bargain more coercive when participation is not truly voluntary.
Section 1115 in the Mandate Era#
The waiver mechanism transforms from enabling tool to modification tool. Before OB3, states used Section 1115 to add requirements federal law did not require. Now states may use it to modify how they implement mandated requirements. A state wanting to count substance use treatment as qualifying activity may need waiver authority if federal guidance does not explicitly include it. States wanting longer exemption periods, presumptive compliance, or alternative verification may need waivers to exceed standard parameters.
The second Trump administration’s CMS must navigate competing pressures. Conservative states want maximum flexibility for vigorous enforcement. Moderate states want flexibility to minimize coverage losses. Progressive states want flexibility to functionally nullify requirements through broad exemptions. Each asks for “flexibility” to achieve opposite outcomes.
CMS Discretion Within Mandatory Parameters#
Even under statutory mandate, CMS retains substantial discretion. The November 2025 guidance specified that states must use existing data sources for verification rather than relying solely on beneficiary paperwork, reflecting Arkansas lessons. CMS also specified that enforcement cannot be delegated to managed care organizations. Both are CMS interpretations, not statutory text, and future administrations could modify these positions. What constitutes “good faith” for extension requests is undefined in statute and will be defined through CMS determinations. A lenient interpretation extends protection to struggling states; a strict interpretation forces compliance or forfeiture.
A supportive administration can interpret flexibility narrowly, require rigorous verification, and enforce compliance aggressively. A skeptical administration can interpret flexibility broadly, accept simplified verification, and provide lenient oversight. The same statutory language produces different operational realities under different administrations. This uncertainty complicates planning for state officials, MCOs, and community organizations alike. States must build systems functioning under any federal administration, supporting rigorous documentation if required while enabling simplified approaches if permitted.
The Maintenance of Effort Complexity#
OB3’s relationship to maintenance of effort provisions is complex. The statute mandates work requirements that will reduce enrollment, but frames this as eligibility modification rather than restriction. States are not choosing to add requirements; they are implementing federal mandates. Coverage losses become federal policy, not state policy, with implications for litigation and future changes. The maintenance of effort provisions that prevented eligibility restrictions during ACA implementation have largely expired, and OB3’s requirements layer onto this expanded state discretion.
The Bottom Line#
The federal-state dynamic is not a single relationship but fifty different relationships, each shaped by state politics, administrative capacity, population characteristics, and implementation philosophy. Georgia’s aggressive posture produces different dynamics than Kentucky’s reluctant compliance. The federal mandate establishes floors and ceilings, but what happens between those bounds depends on ongoing negotiation between levels of government. Neither level fully controls outcomes. Both share responsibility for results. The policy will produce different outcomes in different states not because the federal mandate differs but because state implementation choices differ within federal parameters, and those choices are themselves shaped by the federal-state dynamic in which they operate.
Source: MRWR-16F_Federal_State_Dynamics.md Series 16: The Politics of Implementation GroundGame.Health Research Series on Medicaid Work Requirements