On September 8, 2026, the Centers for Medicare & Medicaid Services (CMS) released information to states on the implementation of the medical frailty exemption under federal Medicaid work requirements, which are to be implemented by January 1, 2027. While state Medicaid agencies are busy interpreting the “three-tier verification framework” included in CMS’ latest guidance, an issue receiving scant attention is the conflicting disability policy objectives underlying the exemption. One objective of the exemption is to protect disabled people from loss of health coverage by equating disability with inability to work, while the other objective is to support disabled people’s participation in the workforce by holding people with disabilities to a similar work standard as nondisabled people with complicated exceptions. U.S. law has long reflected these two important and conflicting disability policy objectives. The Social Security Act and implementing regulations, for example, define “disability” as the inability to work whereas the Americans with Disabilities Act (ADA) states that people with disabilities can work and holds that the “nation’s proper goals regarding individuals with disabilities” are to, among other things, “assure economic self-sufficiency.”

Disability and work participation are more complex than a simple can-work/cannot-work dichotomy. An estimated 44 percent of adults enrolled through the Affordable Care Act’s Medicaid expansion population and subject to work requirements have a physical or behavioral health disability. State Medicaid agencies’ ability to reconcile the dichotomy for this population has wide-ranging consequences. By understanding how these competing policy objectives drive current interpretations of medical frailty, the fluctuating and context-dependent realities of disabled people’s relationship with work, and opportunities for a more balanced approach, state Medicaid agencies can develop medical frailty exemption processes that bridge the “disabled people can’t/can work” divide.

This blog post draws in part on discussions with and guidance from members of the Elevance Health National Advisory Board on Improving Healthcare Services for Older Adults and People with Disabilities, whose perspectives informed consideration of the policy and implementation issues discussed below.

Different Approaches for Evaluating Medical Frailty Under Medicaid Work Requirements

Established by the 2025 Budget Reconciliation Act (PL 119-21), section 1937(a)(2)(B)(vi) applies to the Affordable Care Act’s Medicaid expansion group with exemptions for certain Medicaid enrollees from work requirements, including if they are “medically frail or otherwise [have] special medical needs.” This includes individuals who are: (1) blind or disabled; (2) have a substance use disorder; (3) have a disabling mental disorder; (4) have a physical, intellectual, or developmental disability (IDD) that significantly impairs their ability to perform 1 or more activities of daily living; or (5) a serious or complex medical condition. States are required to develop lists of “diseases, diagnoses, disorders, or other health conditions” that fit into these categories. One way to interpret this provision is that the definition is based on an implicit premise that Medicaid beneficiaries with a specific type of disability or diagnosis — those with IDD, for example — cannot, or may not be able to, work and are, therefore, exempt from work requirements.

The Medicaid work requirements interim final rule (IFR) issued by CMS on June 1, 2026, which clarifies the statutory requirements, takes a different approach. Under 42 C.F.R section 435.554(c)(5), a medically frail individual must: (1) fall within one of the five categories listed in the statute; and (2) have a physical, mental, or other behavioral health condition that significantly impairs their ability to comply with the work requirements. One way to interpret this provision is that the regulatory definition is based on an implicit premise that Medicaid beneficiaries with disabilities can work and are not exempt from work requirements unless they meet both elements of a two-part test. In the IFR, CMS acknowledged the connection between this two-part test and the definition of “disability” in the ADA.

Two-Part Test: ADA Disability and Medicaid IFR Medical Frailty Criteria

The Complicated Reality

Policies with underlying assumptions that disabled people either cannot work because they are medically frail or must work because they do not meet the medically frail standard do not fully reflect the reality of most disabled people’s lives. Two people with the same disability or diagnosis can have very different work capacities. Some people with disabilities cannot work, some can work consistently, and others can work intermittently due to the episodic nature of their disabilities. Others can work under certain circumstances, such as with remote work options, reasonable accommodations, or assistive technology. Some may also benefit from more gradual options than current medical frailty definitions allow, such as starting at a limited number of hours and increasing work hours over time. A disability and its impact on workforce participation can change over time, as can available employment opportunities. Work capacity for disabled people often exists along a continuum rather than as a simple yes-or-no determination, and medical frailty policies need to be flexible enough to reflect that reality.

Focusing the assessment on whether the disability impairs someone’s ability to work, furthermore, does not take into consideration that a disabled person’s inability to work may have little to do with their disability itself and instead be the result of social and institutional barriers. Some of the barriers specifically mentioned in the ADA include inaccessible architectural, transportation, and communication barriers, exclusionary qualification standards, and workplace policies that fail to accommodate disability-related needs, all of which may limit opportunities for employment and community participation.

As state Medicaid agencies consider how to implement the medical frailty exemption under Medicaid work requirements, accounting for this complexity is critical. States have an opportunity to move beyond simplistic assumptions about who can and cannot work and instead develop policies that more accurately reflect the diversity of disabled people’s experiences, circumstances, and employment goals.

The Importance of Developing a Balanced Approach to the Medical Frailty Exemption

How states implement the medical frailty exemption can have important consequences for both health coverage and employment for disabled people covered under Medicaid expansion. Implementation based primarily on the premise that disabled Medicaid beneficiaries can work may result in significant health coverage losses. An Urban Institute analysis of 2022-2023 Medical Expenditure Panel Survey data found that many disabled individuals within the Medicaid expansion population did not have work impairments but still had significant health needs that could prevent them from working or volunteering a set number of hours. The two-part test under the IFR definition of medical frailty may not fully capture these individuals who are too disabled to meet work requirements, yet not disabled enough to qualify for a medical frailty or other exemption.

At the same time, implementation based primarily on the premise that disabled Medicaid beneficiaries cannot work — or making assumptions based on lists of diagnoses about ability to work for administrative simplification — may also have adverse consequences. Today, some structural disincentives to work remain embedded in Medicaid for people with disabilities, such as income/asset limits, and the experiences of some Supplemental Security Income (SSI)/Social Security Disability Insurance (SSDI) beneficiaries illustrate this challenge. In their commentary in the New England Journal of Medicine, Jae Kennedy and Elizabeth Blodgett suggest that some people with disabilities may say they cannot work and enroll in SSI or SSDI primarily to obtain government-sponsored health insurance, even when they may have capacity to participate in the workforce. Studies show that after receiving a notice that their earnings may affect their disability benefits, roughly 75 percent of working beneficiaries with disabilities reduce their employment hours or leave the workforce altogether to maintain Medicaid-funded services.

Below are four key considerations for states seeking to develop a balanced approach to implementing the medical frailty exemption under Medicaid work requirements.

Four Key Considerations for States Seeking a Balanced Approach to the Medical Frailty Exemption

1. Leverage existing disability employment resources.

Corporate and nonprofit employers have three decades of experience assessing disability work capacity/accommodations using the two-part test under the ADA. Many of the lessons learned and best practices from that experience are documented by the Job Accommodation Network, funded by the U.S. Department of Labor’s Office of Disability Employment Policy. A national network of Regional ADA Centers, funded by the National Institute on Disability, Independent Living, and Rehabilitation Research, also provides information, guidance, and training related to the ADA and can help Medicaid agencies understand and effectively implement the two-part test.

The U.S. also has a national network of public vocational rehabilitation and workforce programs funded under the Workforce Innovation and Opportunity Act, the Developmental Disabilities Assistance and Bill of Rights Act and the Older Americans Act (for individuals between 60 and 63) to name a few. These programs have almost a century of experience helping disabled adults overcome low expectations and find and maintain competitive, integrated employment. Employers seeking to recruit, hire, retain, and support the career advancement of workers with disabilities can also draw on the Employer Assistance and Resource Network on Disability, a federally funded disability employment resource center. The Clubhouse Model’s Transitional, Supported, and Independent Employment programs, which are a Medicaid-covered benefit in many states, help people with mental health disabilities become accustomed to work in a safe setting. Participants have options to first try limited employment in the community and then receive support to obtain and succeed in full-time employment of their choosing.

For decades, the Social Security Administration and the Office of Special Education and Rehabilitative Services have also partnered on “return to work” programs to encourage people with disabilities receiving SSI and/or SSDI to join or rejoin the labor market. Partnerships around Medicaid Buy-In programs also offer supports to disabled workers who might otherwise drop out of the labor market to become eligible for disability benefits. Both programs have comprehensive disability employment assessment approaches that could help inform work assessments for medical frailty exemptions.

2. Use disability employment professionals to assess beneficiaries’ work impairment.

Even with the information recently released by CMS, there is limited federal guidance on how states should assess whether someone’s disability significantly impairs their ability to meet work requirements under the medical frailty exemption. Organizations such as the American Association on Health and Disability have raised concerns about the burden the medical frailty assessment process will place on health care providers, particularly when it requires evaluation of employment-related functional capacity rather than purely medical needs. In the June IFR, CMS notes that states can select a wide range of credentialed practitioners who are qualified to determine if an individual is medically frail under scope of practice laws. Among the professionals who may qualify within these parameters are disability employment professionals who routinely assess disabled people for employment potential and could provide a viable alternative to health care providers if they fit CMS and state criteria.

In addition, many disability employment professionals have lived experience with disabilities themselves, compared to only about three percent of doctors who have a disability. This lack of disability representation within the health sector could account, in part, for the documented underestimation of disability employment potential within the health care industry. A study published in the Journal of Disability and Health by Stephen Kaye, found that 97.3 percent of California labor force nonparticipants with disabilities reported being told by a health care provider that they could not work. The perspectives of disability employment professionals with lived experience can provide valuable insight into how employment barriers, accommodations, and supports shape work capacity for Medicaid beneficiaries with disabilities in the real world.

Questions may also arise when health care professionals are asked to assess a disabled Medicaid beneficiary’s work capacity, particularly when the determination could affect continued eligibility for the same coverage that pays for services the health professional provides. With some exceptions (such as supported employment providers under 1915(c) waivers), disability employment professionals are not involved in delivering or billing for Medicaid services and, therefore, may bring a more neutral perspective to medical frailty work-capacity assessments. For this reason, states may wish to consider a larger role for disability employment professionals in medical frailty determination processes.

3. Address disability-related employment barriers through partnerships with workforce agencies, the Social Security Administration, and health plans.

America’s Job Centers (AJC) are a key resource for helping individuals find and maintain employment. However, studies have shown that disabled TANF and SNAP participants who are exempt from work requirements but voluntarily seek employment have had difficulty getting help from AJCs. They have experienced service refusals due to staff confusion about work requirement exemptions, rigid local operating procedures, and limited disability accommodations. To avoid similar challenges under Medicaid work requirements, state Medicaid agencies could work proactively with AJCs and other workforce partners to ensure that disabled individuals who do not meet the medical frailty exemption, or are interested in voluntary employment, are aware of and able to equally access disability and mainstream employment supports.

In partnership with the Social Security Administration, state Medicaid agencies can also explore leveraging resources traditionally reserved for Social Security disability beneficiaries, such as Employment Networks and Community Work Incentives Coordinators. Making these resources available to beneficiaries with disabilities in the Medicaid expansion population who do not receive Social Security benefits could help address disability employment barriers.

In states with managed care, Medicaid agencies can work with health plans to identify opportunities to connect disabled beneficiaries who do not meet the medical frailty exemption with employment supports. According to the most recent National-Core Indicators-Aging and Disabilities survey, only five percent of individuals with disabilities receiving long-term services and supports through managed care plans in 20 participating states reported having a job. Among the 12 percent who wanted a job, only 33 percent reported discussing employment opportunities with their health plan care manager.

4. Partner with people with disabilities to test messaging related to medical frailty exemptions.

As state Medicaid agencies develop beneficiary communications related to work requirements and medical frailty exemptions, it is important to pay close attention to the terminology used to describe exemption status. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 stated that individuals who are “medically certified as physically or mentally unfit for employment” are exempt from TANF and SNAP work requirements. Terms such as “unfit for employment” may evoke a history of policies and practices that marginalized and devalued disabled people. Partnering with — and compensating — disabled people to help develop and test beneficiary messages can help state Medicaid agencies ensure that communications are clear, accessible, respectful, and culturally responsive to disability communities.

Looking Ahead

Implementation of the medical frailty exemption under federal Medicaid work requirements presents a long-standing challenge for policymakers in balancing two competing policy objectives: protecting the safety and security of people with disabilities and supporting disabled people’s independence and participation in the workforce. By drawing on existing disability employment resources, using qualified disability employment professionals to assess work impairment, addressing disability employment barriers, and incorporating leadership and input from disabled people, state Medicaid agencies can design exemption processes that bridge the “disabled people can’t/can work” divide. These approaches will better reflect the dynamic and context-dependent nature of disability and employment and may help reframe how Medicaid evaluates work capacity more broadly.