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June 5, 2026 – As noted in last week’s Regs & Eggs blog post, the Centers for Medicare & Medicaid Services (CMS) is in the process of laying out a feast of Medicaid regs. Following up on last week’s state directed payments proposed rule, CMS released its long anticipated interim final rule (IFR) implementing the Medicaid community engagement (work) requirements mandated by HR 1, the One Big Beautiful Bill Act (OBBBA). OBBBA required CMS to issue this rule by June 1, 2026, and CMS met the deadline. To help me discuss the rule, I’m bringing back my colleagues Katie Waldo and Maddie News.
Under OBBBA, states must begin implementing work requirements for certain adults ages 19 to 64, primarily the Medicaid expansion population, by January 1, 2027. To provide states enough time to understand the rules of the road and get their work requirement programs up and running, OBBBA required CMS to put out an IFR rather than going through a full notice-and-comment rulemaking cycle. With an IFR, CMS can still seek comment on key policy issues, but the policies become effective pretty quickly. The policies in this IFR become effective on July 31, 2026, and CMS is accepting comments through that same date. CMS could issue another rule at some point going forward to address the comments and make modifications to the finalized policies.
Overall, CMS makes many operational and policy decisions in this IFR, laying out a framework and requirements that states must follow when designing their programs. Some of the major policies in the rule are described below.
CMS adopts OBBBA’s definition of “applicable individuals” as primarily adults eligible for Medicaid through the expansion group, whether through the state plan or an 1115 waiver that provides minimum essential coverage. Individuals enrolled in limited benefit waivers (e.g., family planning waivers) are not subject to the requirement.
CMS estimates that 43 states and the District of Columbia will need to implement work requirements because of their Medicaid expansion.
While one may think of the Medicaid work requirements as just having to “work” a certain amount of hours each month, the statute lays out other types of community engagement activities that also count. Each month, applicable individuals must demonstrate one of the following:
CMS provides detailed definitions for each category and outlines how states must verify compliance using reliable information available to the state before requesting anything from the individual.
OBBBA included specific exemptions to the work requirements, and the IFR lays them out:
One exemption that has garnered a lot of attention is the medical frailty exemption. In the IFR, CMS adopts a definition of medical frailty that focuses on whether a physical, mental, or behavioral health condition significantly impairs an individual’s ability to comply.
States must develop and maintain an auditable list of conditions, regularly update the list of conditions, and provide a process for individuals to request consideration if their condition is not listed. Some states already have published lists of conditions to be considered medically frail, including Nebraska and Minnesota.
CMS explicitly notes that simply having a condition on a state’s list will not automatically make an individual medically frail and therefore exempt. The condition must also significantly impair the individual’s ability to comply with the work requirement.
States may also elect to offer short‑term hardship exceptions to the work requirement. The IFR specifies that if a state adopts this option in its state plan, it must implement all hardship exceptions; states may not select only some. These exceptions apply for all or part of a month when an applicable individual experiences one of four qualifying circumstances.
Two of these circumstances result in automatic exceptions; no request from the individual is required, but CMS must approve the exceptions before they are offered:
Individuals must request exceptions for the other two qualifying circumstances:
The IFR lays out a process for verifying whether an individual has met or is exempt from the work requirements. States must rely first on “reliable information” available to them, including:
The IFR lays out a phased-in approach for requesting information from individuals when this information is unavailable. Through the end of 2027, states may request information from individuals about whether they met the work requirement or are eligible for an exemption. Beginning January 1, 2028, however, states must require documentation when it is reasonably available. States may not deny eligibility solely because documentation does not exist.
For the medical frailty exemption specifically, the following rules apply:
The IFR sets timing rules for when individuals must demonstrate compliance:
States may not require compliance for periods longer than these windows.
As included in OBBBA, CMS can grant states a temporary good-faith-effort exemption from compliance with timely implementation of work requirements. Good-faith-effort exemptions will expire no later than December 31, 2028, but CMS will determine the end date based on the state’s circumstances. CMS expects to approve initial requests for no longer than six months but may grant extensions provided the state continues to show a good faith effort to meet the requirement. CMS estimates that 10 states will need to prepare and submit a good-faith exemption request, but it is unclear how many CMS might approve and what extraneous circumstances CMS would consider as meeting this standard.
States face a quick implementation timeline to meet the January 1, 2027, deadline. States have some discretion in defining and implementing some of the exemptions and other requirements, and must make complex policy and operational decisions in the next couple of months. Then, they must update all of their Medicaid-related eligibility and enrollment systems. Some states have gotten a head start: Nebraska started its work requirements in May, Montana will begin in July, and Iowa will start in December. These states may have to revise their programs to conform to federal requirements, and other states might have to catch up relatively quickly.
We’ll continue tracking developments as states begin implementing their programs.
Until next week, this is Jeffrey (and Maddie and Katie) saying, enjoy reading regs with your eggs.
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