How presidential administrations and CMS discretion shape what states can do
The email arrived at 4:47 PM on a Friday in December 2021. Wisconsin’s Medicaid director had been waiting for months, but the timing still stung. The Biden administration’s CMS was formally withdrawing approval of the state’s work requirement waiver, concluding that community engagement requirements were “not likely to promote the objectives of the Medicaid statute.” The letter noted that work requirements do not help people gain employment but do push people off health insurance coverage.
Wisconsin had received waiver approval in October 2018, during the final months of the first Trump administration. The state had spent years developing verification protocols, exemption processes, and reporting systems. Staff had been trained. Infrastructure had been built. None of it was ever activated.
The story repeated across the country. Kentucky’s HEALTH waiver was struck down by federal courts twice, then withdrawn by a new governor. Arkansas implemented work requirements for seven months before judicial intervention, producing 18,164 coverage losses and no measurable employment gains. New Hampshire’s requirements were enjoined before meaningful implementation. Michigan’s brief 2020 launch collided with the COVID-19 pandemic. Tennessee’s unprecedented block grant proposal was approved in the final days of one administration and withdrawn by the next.
By the end of 2021, every work requirement waiver approved during the first Trump administration had been either judicially vacated, administratively withdrawn, or allowed to expire. The policy had swung from enthusiastic federal encouragement to categorical rejection within the span of a single presidential transition.
Now the pendulum swings again. The One Big Beautiful Bill Act, signed July 4, 2025, transforms work requirements from optional state experiments requiring federal permission into mandatory conditions of Medicaid expansion participation. States that received waiver denials under one administration now face statutory requirements under another. The relationship between federal and state authority in Medicaid has never been more contested or consequential.
The Architecture of Intergovernmental Authority#
Medicaid occupies an unusual position in American federalism. Unlike Social Security or Medicare, which the federal government administers directly, Medicaid operates through a cooperative federalism model where states design and administer programs within federal parameters. Unlike block grants, which provide fixed federal funding for state discretion, Medicaid’s open-ended matching structure ties federal dollars to state spending decisions. The result is a program that is neither purely national nor purely state, but something in between that defies clean categorization.
The federal government establishes minimum requirements for state Medicaid programs through the Social Security Act and implementing regulations. States must cover certain populations, provide certain benefits, and follow certain administrative procedures to receive federal matching funds. Within these guardrails, states exercise considerable discretion over eligibility levels, benefit packages, provider payment rates, and service delivery systems.
Section 1115 of the Social Security Act creates a mechanism for states to deviate from standard requirements. The Secretary of Health and Human Services may approve “experimental, pilot, or demonstration projects” that waive specific statutory provisions if the Secretary determines the project is “likely to assist in promoting the objectives of the Medicaid program.” This language, deliberately broad, gives the Secretary substantial discretion in deciding which state proposals merit approval.
The waiver process involves formal steps: state applications following prescribed formats, public comment periods at both state and federal levels, CMS review and negotiation, budget neutrality analysis ensuring federal costs do not increase, and eventual approval or denial with stated rationale. But the formal process obscures the fundamentally political nature of waiver decisions. Secretarial discretion means that identical state proposals can receive opposite outcomes under different administrations, not because the 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 that does not require congressional action. Presidents who want to encourage Medicaid work requirements can instruct their CMS to approve state waivers. Presidents who oppose work requirements can instruct their CMS to deny or withdraw them. The statute constrains neither approach; it simply requires that the Secretary find the project “likely to promote” Medicaid objectives, a determination that turns on how one defines those objectives.
The First Trump Administration: Federal Encouragement#
The first Trump administration embraced work requirements as a core Medicaid policy. In January 2018, CMS issued guidance actively encouraging states to submit Section 1115 waiver applications for community engagement requirements. The guidance framed work requirements not as restrictions on coverage but as pathways to “financial independence” and improved health outcomes through employment.
CMS Administrator Seema Verma argued that Medicaid should be “a pathway out of poverty, not a barrier to it.” She characterized work requirements as helping beneficiaries “achieve their highest potential” rather than limiting access to healthcare. This framing positioned work requirements as consistent with Medicaid’s objectives of promoting health and well-being, since employment supposedly improves both.
The administration approved work requirement waivers for thirteen states between 2018 and 2020: Kentucky, Indiana, Arkansas, New Hampshire, Michigan, Wisconsin, Arizona, Ohio, South Carolina, Utah, Nebraska, Tennessee, and Georgia. Several of these approvals pushed the boundaries of existing waiver authority. Tennessee’s TennCare III proposed converting the entire state Medicaid program to a block grant with work requirements for populations the ACA Medicaid expansion does not cover. Georgia’s Pathways to Coverage conditioned expansion on work requirements from the outset, an approach other states had not attempted.
The approval pace was unprecedented. CMS typically negotiates waiver terms over months or years; during this period, some approvals came within weeks of state applications. The administration created new procedural mechanisms to expedite work requirement approvals while maintaining more deliberate timelines for other waiver requests. Fast-track review for work requirements signaled clear federal priorities.
But the aggressive approval strategy generated equally aggressive litigation. Legal advocates challenged approvals in federal court, arguing that CMS had failed to consider whether work requirements would promote Medicaid’s objective of providing healthcare coverage to low-income populations. The statutory language requiring waivers to “promote Medicaid objectives” became the legal battleground.
Stewart v. Azar and the Legal Reckoning#
Judge James Boasberg of the U.S. District Court for the District of Columbia became the central judicial figure in work requirement litigation. In a series of decisions beginning in 2018, Boasberg systematically struck down CMS waiver approvals on identical grounds: the Secretary had failed to consider how work requirements would affect healthcare coverage.
The Kentucky HEALTH decision in June 2018 established the template. Boasberg found the Secretary’s approval “arbitrary and capricious” because it did not adequately address projected coverage losses. The approval letter emphasized employment outcomes without analyzing coverage implications, despite projections that tens of thousands of Kentuckians would lose Medicaid.
When CMS re-approved Kentucky HEALTH with modest modifications, Boasberg struck it down again. When Arkansas implemented its waiver and produced documented coverage losses, Boasberg enjoined further implementation. When New Hampshire prepared to launch, Boasberg stopped it. The pattern was consistent: CMS could not approve work requirements without genuinely grappling with their coverage effects.
The legal standard Boasberg applied was not novel. The Administrative Procedure Act requires agency decisions to consider relevant factors and provide reasoned explanation. By focusing exclusively on employment objectives while ignoring coverage consequences, CMS had failed basic requirements of reasoned decision-making. The issue was not whether work requirements were good policy but whether the Secretary had followed proper procedures in approving them.
The Trump administration’s response revealed the limits of executive discretion. CMS could modify its approval rationale, but it could not escape the fundamental problem: work requirements cause coverage losses, and Medicaid’s primary objective is providing coverage. Any approval process that genuinely considered coverage effects would have to acknowledge this tension. The administration tried various formulations, but courts continued finding the analysis inadequate.
By the time the COVID-19 pandemic triggered continuous enrollment requirements in March 2020, no state was actively implementing Medicaid work requirements under federal waiver authority. Arkansas had terminated coverage for over 18,000 people before being stopped. Everyone else was either enjoined, delayed, or suspended.
The Biden Administration: Federal Opposition#
The Biden administration took office in January 2021 with clear opposition to Medicaid work requirements. CMS began systematically withdrawing waiver approvals, concluding that work requirements “do not promote the objectives of the Medicaid program.” The administration’s position was that the program’s core objective is expanding healthcare coverage, and policies that reduce coverage cannot be reconciled with that objective.
The withdrawal process followed formal procedures. CMS issued letters to each state explaining its rationale, providing opportunity for response, and proceeding through administrative steps. But the outcome was predetermined by policy orientation. The Biden administration viewed work requirements as coverage restrictions masquerading as empowerment, and no state response could change that interpretation.
States responded differently to withdrawal notices. Some, like Wisconsin under Governor Tony Evers, welcomed the federal action that aligned with gubernatorial preferences but had been blocked by state legislatures. Others, like Georgia, sued to prevent withdrawal and succeeded in maintaining waiver authority through litigation. Tennessee abandoned its block grant pursuit when federal support evaporated, only to resume when political conditions changed.
The Biden administration’s opposition was categorical. Unlike the Obama administration, which had never directly confronted work requirement proposals at scale, the Biden CMS developed a comprehensive rationale for rejection. Work requirements do not increase employment among populations that already work at high rates. They create administrative barriers that cause coverage losses among people who are working, exempt, or simply unable to navigate bureaucratic processes. They impose costs without demonstrated benefits.
This categorical opposition created problems when states sought other waiver innovations. CMS could not easily approve novel state proposals when the prior administration had approved work requirements and the current administration was arguing that approval process was legally deficient. The question of what Section 1115 authority actually permits became contested in ways that extended beyond work requirements themselves.
The Second Trump Administration: Federal Mandate#
The return of a Trump administration in January 2025 restored federal enthusiasm for work requirements, but the policy landscape had changed. States that had submitted waiver applications found them pending or approved. Tennessee resubmitted its TennCare III block grant proposal. Georgia’s Pathways program continued operating under litigation-protected authority. New states began developing waiver proposals anticipating favorable federal reception.
Then Congress acted. The One Big Beautiful Bill Act, passed through budget reconciliation in July 2025, transformed work requirements from discretionary waiver experiments into statutory mandates. Expansion adults in all states must now demonstrate 80 hours monthly of work, education, training, or community service to maintain Medicaid eligibility, effective January 1, 2027.
The federal mandate fundamentally alters federal-state dynamics. States no longer need waiver approval to implement work requirements; they need it to deviate from federal specifications. The policy baseline has shifted. States that oppose work requirements cannot simply decline to submit waiver applications; they must implement requirements or forfeit the 90 percent federal match for expansion adults.
CMS released initial guidance in November 2025, outlining implementation timelines and core requirements. An interim final rule is expected by June 1, 2026, providing detailed specifications seven months before the implementation deadline. States may seek “good faith” extensions through December 31, 2028, if they demonstrate genuine implementation efforts that face unavoidable delays.
The federal government is providing $200 million in Government Efficiency Grants to support state system development. Half is distributed evenly across states; half is allocated based on projected affected populations. This funding is inadequate for the infrastructure states must build, but it signals federal recognition that implementation requires resources beyond state Medicaid budgets.
Section 1115 in the Mandate Era#
The shift from waiver-based authority to statutory mandate does not eliminate Section 1115’s relevance. It transforms its function. Before OB3, states used Section 1115 to add work requirements that federal law did not require. Now states may use Section 1115 to modify how they implement requirements that federal law mandates.
Several states have submitted waiver applications seeking authority for implementation approaches that differ from federal specifications. Some seek expanded exemption categories beyond federal floors. Others seek alternative verification mechanisms or different enforcement timelines. CMS must decide whether to approve these variations, and its decisions will shape implementation nationally.
The statutory mandate includes minimum requirements but leaves many design decisions to state discretion within federal parameters. States may exempt populations beyond federal minimums. They may count activities beyond federal lists. They may design verification systems with varying levels of burden. They may enforce through termination, penalty, or alternative mechanisms depending on how they interpret federal flexibility.
Section 1115 becomes the mechanism for testing these boundaries. A state that wants to count substance use disorder treatment participation as satisfying work requirements may need waiver authority if federal guidance does not explicitly include that activity. A state that wants twelve-month exemption periods rather than six-month periods may need waiver authority to exceed standard durations. A state that wants to presume compliance rather than require documentation may need waiver authority to modify verification processes.
The second Trump administration’s CMS must navigate competing pressures. Conservative states want maximum flexibility to implement work requirements vigorously. Moderate states want flexibility to minimize coverage losses. Progressive states want flexibility to functionally nullify requirements through broad exemptions. Each asks for “flexibility,” but they want flexibility to achieve opposite outcomes.
Presidential Transitions and Policy Whiplash#
The work requirements experience reveals how presidential transitions create policy instability in cooperative federalism programs. State Medicaid agencies invest years developing implementation infrastructure only to have federal approval withdrawn when administrations change. The whiplash is not merely political inconvenience; it represents real resource expenditure that produces nothing.
Wisconsin’s experience is instructive. The state received waiver approval in October 2018, weeks before Governor Scott Walker lost his reelection bid. The incoming Evers administration opposed work requirements but was legally constrained from withdrawing the waiver by legislation the outgoing legislature had enacted. Implementation was scheduled for 2020 but suspended when COVID-19 triggered continuous enrollment. In December 2021, the Biden administration withdrew approval, rendering years of preparation moot.
The state never implemented work requirements, but it spent substantial resources preparing. Verification systems were designed. Exemption processes were developed. Staff were trained. Community organizations were engaged. All of this investment produced no operational program and no policy outcomes, positive or negative. The only product was institutional knowledge that may or may not prove useful when mandatory implementation begins.
This pattern repeated across states. Kentucky invested in system development that was never activated. Arkansas implemented briefly, producing coverage losses and litigation, then stopped. New Hampshire prepared extensively for launch that never occurred. The cumulative investment across states in work requirement infrastructure that was never used likely exceeds hundreds of millions of dollars.
The federal mandate changes this dynamic by removing the possibility that a future administration will withdraw approval. States implementing work requirements under OB3 know their systems will remain in operation regardless of presidential transitions. The investment case becomes clearer: infrastructure built for January 2027 will be needed for years, not potentially abandoned when political winds shift.
But the mandate also removes state discretion to not implement. States that would prefer to avoid work requirements entirely cannot do so without forfeiting federal matching funds. The cooperative federalism bargain, where states voluntarily participate in exchange for federal funding, becomes more coercive when participation is not truly voluntary.
CMS Discretion Within Mandatory Parameters#
Even under statutory mandate, CMS retains substantial discretion over implementation details. The statute establishes work requirements but does not specify every operational element. CMS guidance shapes how states interpret ambiguous provisions, what flexibility they can exercise, and what oversight they face.
The November 2025 guidance illustrates this discretion. CMS specified that states must use existing data sources for verification rather than relying solely on beneficiary paperwork. This requirement reflects lessons from Arkansas, where online-only reporting produced coverage losses among working people who could not document their employment. But the specification is CMS interpretation, not statutory text. A different administration might interpret verification requirements differently.
Similarly, CMS specified that enforcement cannot be delegated to managed care organizations. States must maintain direct accountability for work requirement determinations. This reflects administrative law concerns about due process and state action doctrine, but it also reflects policy preferences about where responsibility should reside. Future guidance could modify this position.
The timeline flexibility provisions demonstrate discretion at work. States demonstrating “good faith” implementation efforts may receive extensions through December 2028. What constitutes good faith is not defined in statute; it will be defined through CMS determinations on state extension requests. A lenient interpretation extends protection to struggling states. A strict interpretation forces compliance or forfeiture.
The interim final rule expected by June 2026 will establish binding federal requirements. Stakeholders from all perspectives are attempting to shape that rule through the rulemaking process. Conservative advocates want narrow exemptions and robust verification. Progressive advocates want broad exemptions and minimal documentation burdens. State Medicaid agencies want operational flexibility and realistic timelines. MCOs want clarity about their role and protection from financial risk. Each voice competes for influence over federal parameters that will govern 18.5 million people’s healthcare access.
The Maintenance of Effort Question#
Before OB3, federal law prohibited states from reducing Medicaid eligibility below levels in effect when the ACA was enacted. This maintenance of effort requirement, tied to enhanced federal matching for expansion populations, prevented states from using Medicaid flexibility to restrict coverage.
OB3’s relationship to maintenance of effort is complex. The statute mandates work requirements, which will reduce enrollment through non-compliance, but it frames this as eligibility modification rather than eligibility restriction. States are not choosing to add work requirements; they are implementing federal mandates. The coverage losses that result are federal policy, not state policy.
This framing has implications for litigation and for future policy changes. Legal challenges to state implementation will face arguments that states are merely following federal requirements. Challenges to federal requirements themselves will face arguments that Congress has clear authority to condition Medicaid eligibility on behavioral requirements.
The maintenance of effort provisions that prevented states from restricting Medicaid eligibility during the ACA implementation period have largely expired. States have broader discretion than they did a decade ago. OB3’s work requirements layer onto this expanded discretion, creating a more restrictive baseline than states could have established independently but one that states can further restrict through aggressive implementation choices.
What Changes With Different Federal Administrations#
Work requirements will be statutory requirements for the foreseeable future; only congressional action could eliminate them. But federal administration still shapes implementation in ways that affect millions of people.
A supportive administration can interpret statutory flexibility narrowly, limiting state exemption options and requiring rigorous verification. It can approve waivers that exceed federal minimums, allowing states to impose requirements on populations the statute exempts. It can enforce compliance aggressively, monitoring state implementation and threatening federal match reduction for inadequate programs.
A skeptical administration can interpret statutory flexibility broadly, approving generous exemption frameworks and accepting simplified verification. It can deny waivers that would expand requirements beyond statutory minimums. It can provide lenient oversight, allowing states to implement minimally and accepting outcomes that reduce work requirement impact.
The same statutory language produces different operational realities under different administrations. This is not lawlessness; it is executive discretion exercised within statutory parameters. But for state officials designing implementation systems, for MCOs building care coordination infrastructure, for community organizations developing navigation capacity, the uncertainty complicates planning.
States must build systems that function under any federal administration. Verification infrastructure should support rigorous documentation if required while enabling simplified approaches if permitted. Exemption processes should accommodate narrow categories under strict interpretation while scaling to broader categories under lenient interpretation. The safest approach is building flexible capacity that can adjust to changing federal expectations without fundamental redesign.
The Federal-State Implementation Partnership#
Despite tensions, work requirement implementation requires genuine federal-state partnership. States cannot implement without federal guidance on statutory interpretation. The federal government cannot achieve policy objectives without state administrative capacity. Neither level can succeed independently; cooperation is operationally necessary even when politically uncomfortable.
This partnership manifests in practical ways. CMS provides technical assistance to state Medicaid agencies developing implementation approaches. State Medicaid directors convene through the National Association of Medicaid Directors to share emerging practices and advocate for common interests. Federal and state officials negotiate over rule interpretation, system requirements, and timeline expectations. The relationship is adversarial in some dimensions and collaborative in others.
The December 2026 deadline creates shared urgency. Federal officials face pressure to issue guidance quickly enough for states to implement. State officials face pressure to build systems before deadlines arrive. Both understand that implementation failures will produce coverage losses that attract political attention. Both have incentives to avoid catastrophic outcomes even if they disagree about optimal policy.
CMS’s Government Efficiency Grants acknowledge federal responsibility for supporting state implementation. The $200 million allocation is inadequate for infrastructure needs but signals federal investment in state success. Future appropriations could expand this support, particularly if early implementation reveals capacity gaps that threaten program operations.
The relationship will be tested by implementation realities. When states seek guidance on ambiguous provisions, will CMS respond quickly enough for timely decisions? When states face system failures, will CMS extend deadlines or enforce forfeitures? When coverage losses mount, will federal officials accept responsibility for mandated policy or blame state implementation choices?
Implications for State Strategy#
States navigating federal-state dynamics face strategic choices that will shape their implementation experience. Understanding federal priorities helps states position their programs advantageously.
Engage early with CMS on interpretive questions. States that seek federal guidance before making implementation decisions reduce the risk that their choices will later be found non-compliant. Early engagement also influences federal thinking; states that articulate practical concerns may shape guidance in directions that address those concerns.
Build coalition with other states facing similar challenges. States with shared interests in flexible interpretation have more influence collectively than individually. The National Association of Medicaid Directors provides a forum for developing common positions. Regional alliances around geographic challenges, population characteristics, or implementation philosophies can amplify state voices.
Document implementation constraints for extension requests. States that genuinely cannot meet deadlines should document their efforts and obstacles. Good faith extension requests require evidence of earnest attempts and unavoidable barriers. States that appear to be using extensions to avoid implementation will face less sympathetic federal response than states with genuine infrastructure challenges.
Prepare for administrative transitions. Implementation systems should be designed for operational continuity regardless of which party controls the White House. Systems that depend on maximum federal flexibility may face challenges if administration changes bring stricter interpretation. Systems that assume minimal federal flexibility may miss opportunities that more supportive administrations provide.
Monitor litigation that affects federal parameters. Legal challenges to work requirements, whether challenging federal mandates or state implementation, may produce court decisions that alter the legal landscape. States should track litigation developments and consider implications for their own programs.
The Enduring Tension#
Medicaid’s cooperative federalism structure creates inherent tensions that work requirements intensify. The federal government provides most of the funding and establishes broad policy parameters. States provide the remaining funding, design program specifics, and administer operations. Neither level fully controls outcomes; both share responsibility for results.
Work requirements add new dimensions to this tension. States must implement federal mandates they may oppose. Federal officials must depend on state capacity they cannot directly control. Coverage outcomes depend on millions of individual interactions between beneficiaries and administrative systems, interactions that neither federal nor state policy can fully specify.
The policy will produce different outcomes in different states not because the federal mandate differs but because state implementation choices differ within federal parameters. Georgia’s aggressive enforcement will produce different results than Kentucky’s reluctant compliance. Arizona’s tribal coordination will produce different results than Ohio’s automated verification. 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.
Understanding these dynamics is essential for anyone trying to anticipate what work requirements will mean in practice. The federal mandate establishes floors and ceilings. What happens between those bounds depends on the ongoing negotiation between levels of government that defines American federalism.