On June 1^st, the Centers for Medicare and Medicaid Services (CMS) issued an interim final rule that implements the Medicaid mandatory work and community engagement requirements of the One Big Beautiful Bill Act (OBBBA) or H.R.1. Before, these requirements were adopted through optional state Section 1115 waivers; this interim final rule requires most adults ages 19-64 to complete 80 hours per month of qualifying activities, such as work, education or community service, to maintain Medicaid coverage. The rule also standardizes reporting, verification and exemptions, creating new administrative responsibilities for beneficiaries and states. Compliance with the new requirements begins on January 1, 2027.

Exemptions from the work requirements include adults who are:

• Former foster care youth;
• American Indians and Alaska Natives;
• Pregnant enrollees and those eligible for postpartum care in their state;
• Parents, guardians or caretaker relatives of a child under 13 or a disabled individual;
• Veterans with a total disability rating;
• Those who are “medically frail” or otherwise have special medical needs;
• People who already meet the TANF or SNAP work requirements;
• Participants in a drug or alcohol rehabilitation or treatment program;
• Inmates of a public institution.

What’s tighter than expected:

Narrower definition of “medically frail.” H.R.1 includes an exclusion from work requirements for individuals who are medically frail, defined as those who have a “serious or complex medical condition,” “substance-use disorder (SUD),” “disabling mental disorder,” or “disability.” The rule adds a new requirement that individuals must meet to qualify for this exclusion – the requirement for their condition to significantly impair their ability to comply with the work requirements. This will be a challenge for states to determine as the rule doesn’t provide states with a list of diagnoses or criteria for measuring severity or ability to work. This means that states can’t categorically exclude from the work requirements individuals that have, as an example, cancer or ALS disease but must assess each person’s ability to work on a case-by-case basis.

Narrower exemption for individuals with SUD. The rule disqualifies from the exemption individuals with an SUD who have been in “stable recovery” for five or more years.

CMS caps the look-back period to determine exemptions at 12-months. The rule adopts a tight look-back period for determining exemptions that is not required by the OBBBA. Currently, states have the flexibility to determine how far they want to look in a person’s medical history to determine if the person is medically frail. The rule imposes a 12-month maximum on the look-back period for medical records and other information used to identify an individual as medically frail.

Now through 2027, it’ll work like an honor system if the state doesn’t have the documentation to determine compliance with the requirements. The rule allows states to accept self-declaration of work or exemption status when reliable data are not available.  However, starting January 2028, except for verifying medical frailty, states must request documentation from individuals when the state doesn’t have data on file.

Georgia created its own Medicaid expansion program in 2023, Pathways to Coverage; recent evidence raises implementation concerns:

• A 2025 BMJ studyfound no increase in employment or Medicaid coverage during the program’s first 15 months, and a 2025 U.S. Government Accountability Office report found the state spent $54.2 million on administration to implement the work requirement demonstration.
• A Kaiser Family Foundation analysis indicates that many Medicaid enrollees already work or face barriers such as illness, caregiving, or education.

Per CMS’s Regulatory Impact Analysis, the rule is projected to reduce Medicaid enrollment by roughly 2.3 million in FY 2027 and 3.1 to 3.3 million in later years. This could cause disruptions in continuity of care, particularly for individuals with chronic disease or behavioral health needs.

While CMS is accepting public comments on this rule, it’s unclear whether they will make any changes. Meanwhile, states must start conducting outreach during the fall to ensure that individuals are aware of the new requirements. States may request a “good faith effort” waiver to delay implementation as long as they are ready to adopt the requirements by no later than December 2028.