The 2025 budget reconciliation bill (H.R. 1, also known as P.L. 119-21) signed into law on July 4, 2025, introduces new work requirements, also referred to as community engagement requirements, for certain Medicaid enrollees. The provision makes continued Medicaid eligibility contingent upon participation in work or other qualifying activities. This policy change has significant implications for Medicaid members, state agencies, health care providers, and managed care organizations.

H.R. 1 mandates that Medicaid members aged 19-64 who are covered through the Affordable Care Act Medicaid expansion or an 1115 demonstration waiver that provides minimum essential coverage must engage in employment, education, a work program, or community service to maintain their Medicaid eligibility.

Below are key points to know about new Medicaid work requirements:

Key Facts

1. Implementation Timeline

Guidance release: On December 8, 2025, the Centers for Medicare & Medicaid Services (CMS) issued initial guidance to states. On June 1, 2026, CMS released additional implementation guidance, providing further definitions and clarifications of the bill text. Following a comment period, these provisions take effect on July 31, 2026.

• State implementation: States are required to implement work requirements by January 1, 2027, though they may choose to do so sooner through 1115 waivers. Nebraska became the first state to implement the new work requirements on May 1, 2026. The legislation permits the Health and Human Services (HHS) Secretary to grant extensions until December 31, 2028, for states that can demonstrate a good faith effort to meet the requirements. CMS has indicated that such extensions will only be granted for cases in which extraordinary or unexpected issues hinder implementation.

2. Work Requirements

• Activities required:
  • Demonstrate monthly income of $580 (equivalent to 80 hours at the federal minimum wage). States may allow seasonal workers to demonstrate average income over six months. For individuals with income not meeting the monthly threshold, income may be converted to hours and combined with the below activities; OR
  • Demonstrate 80 hours per month of one or more of the following activities:
    • Work: Paid work, work in exchange for goods or services, or certain unpaid work (outside of “community service” as defined below).
    • Participation in a work program: Certain federally or state recognized employment and training programs.
    • Enrollment in an educational program: At least half-time enrollment in an institution of higher education, a career and technical education program, a high school, or a high school equivalency program.
    • Community service: Unpaid work for community benefit that takes place within a structured program overseen by a public or nonprofit organization.
    • A combination of these activities: Individuals may meet the 80-hour monthly requirement through any combination of the activities listed above.
• Non-waivable: The work requirements may not be waived via an 1115 demonstration waiver.

3. Populations

• Applicable individuals: Adults enrolled in Medicaid under the Affordable Care Act’s Medicaid expansion —  which includes nearly all individuals who fall between the state’s traditional Medicaid income eligibility threshold and 138 percent of the Federal Poverty Level in states that have adopted the expansion — or through a waiver program that provides minimum essential coverage, and who do not qualify for an exception/exclusion (see below). Note, as of July 2025, 41 states have adopted Medicaid expansion, with over 20 million adults currently receiving benefits as part of the expansion population.
• Exceptions: Some applicable individuals qualify for exceptions to work requirements. Note that this is different than specified excluded individuals (see “Key Terms” sidebar on the previous page).
  • Mandatory exceptions include individuals:
    • Under the age of 19;
    • Entitled to, or enrolled in benefits under Medicare part A, or enrolled in benefits under Medicare part B;
    • Included in mandatory Medicaid eligibility groups, but have since lost their status;
    • Specified excluded individuals; AND/OR
    • Individuals incarcerated in the prior three months.
  • Short-term hardship exceptions: States may optionally allow exemptions for certain extenuating circumstances, including individuals receiving care in hospitals, nursing facilities, psychiatric facilities, or other intensive care settings, individuals in a federally declared disaster area, individuals living in counties with unemployment rates higher than eight percent, or 1.5 times the national unemployment rate (pending permission from HHS Secretary), and individuals or their dependents who are required to travel outside their home for medical care for an extended time. States choosing to implement this option must allow exceptions for all short-term hardship categories.

4. Specified Excluded Individuals

As with the above exceptions, specified excluded individuals are not subject to work requirements. See the “Key Terms” box above for an overview of the distinction between exceptions and specified excluded individuals.

• Former foster care youth: Individuals under age 26 who were in foster care until they aged out, were enrolled in Medicaid while in foster care, and are not included in a mandatory eligibility group.
• Indian Health Service members: Individuals recognized as American Indians or Alaska Natives and eligible for health services through the Indian Health Service.
• Caregivers: Defined as “parent, guardian, caretaker relative, or family caregiver of a dependent child 13 years of age and under or a disabled individual.” CMS describes caregiving as providing regular assistance within a “significant relationship,” as defined through criteria such as co-residence, familial relationship, or at least 80 hours of care per month.
• Disabled veterans: Defined as a veteran “with a disability rated as total under Section 1155 of Title 38, United States Code” (section of law that establishes the schedule for rating veterans’ disabilities and governs how compensation is determined).
• Medically frail individuals: People whose physical, mental, or other behavioral health conditions significantly impair their ability to comply with work requirements. To qualify, individuals must:
  • Meet one of the following five categories: are blind or disabled, have a substance use disorder, a disabling mental disorder, a physical, intellectual, or developmental disability, or have a serious or complex medical condition; AND
  • Demonstrate impaired capacity to meet work requirements.
• Individuals already subject to work requirements: Those meeting Temporary Assistance for Needy Families (TANF) work requirements or subject to the Supplemental Nutrition Assistance Program (SNAP) work requirements.
• Individuals participating in a qualifying substance use disorder (SUD) treatment program: Defined as SUD programs that meet SNAP-related federal requirements, run by nonprofit organizations or public community mental health centers.
• Incarcerated: Individuals who are currently incarcerated.
• Pregnant and postpartum individuals: Defined as “pregnant or entitled to postpartum medical assistance under paragraph (5) or (16) of subsection (e)” (the 12-month Medicaid continuous postpartum extension).

5. Outreach

• Initial outreach: State Medicaid agencies are required to conduct member outreach between June 30 and August 31, 2026, through regular mail (or, if elected by an individual, an electronic format) and one or more additional forms, such as by telephone, text message, website, and “other commonly available electronic means.” Outreach is required to contain information on work requirement compliance, an explanation of exemptions, consequences of non-compliance, and reporting instructions.
• Periodic outreach: States are also required to conduct outreach to impacted members on a periodic basis, such as following a determination or redetermination of eligibility, occurrence or end of a relevant short-term hardship event, and following the loss of a beneficiary’s specified excluded individual status.

6. Verification Process

• Look-back period: At application, states must perform a “look-back” review to determine whether a Medicaid member met the work requirement in a period of at least one and up to three months before their application. States must also verify that current enrollees meet the requirements for at least one month within each six-month eligibility review period. Note that while work activities and exceptions are assessed during these look-back periods, specified excluded individual status is assessed over a different time frame (at the time of application or renewal).
• Data matching: States are required to use available data, such as payroll data, or Medicaid payment and encounter data, to verify compliance before requesting additional information from applicants.
• Self-attestation: The June 2026 rule limits use of self-attestation for verifying work requirement activities or exclusions to 2027. Beginning Jan. 1, 2028, when reliable data is not available to the state (e.g. case records, claims data, other state and federal data sources, etc.), states must generally require documentation to verify work requirements or exclusions, when documentation is reasonably available. There are some exceptions to this broader rule, including for medically frail individuals (self-attestation may be used once during an enrollment period) and mandatory exceptions.

7. Consequences for Non-Compliance

• Notice of non-compliance: States must issue a notice of non-compliance (via mail and at least one other form of contact) to the Medicaid member or applicant if verification fails. During Medicaid renewal, this may be sent alongside or after issuance of a renewal form.
• Disenrollment: After receiving a notice of non-compliance, members have 30 days to show compliance before disenrollment.

8. Impact Estimates

• Medicaid spending: The Congressional Budget Office estimates that the implementation of work requirements will reduce Medicaid spending by $344 billion over 10 years.
• Coverage loss: The Congressional Budget Office estimates that 11.8 million people will lose Medicaid coverage due to H.R. 1 in the next 10 years. 4.8 million of those will be due to the implementation of work requirements.

Note: these estimates were developed prior to the June 2026 rule that included a narrower definition of medical frailty (see “Focus on Medical Frailty,” previous page) and may underestimate the impact of work requirements.

9. Funding

• Implementation funding: The bill appropriates $200 million to CMS in FY26 and instructs HHS to distribute an additional $200 million to states ($100 million of which is distributed equally among 50 states, and $100 million of which is distributed based on states’ Medicaid population size) as implementation funding in FY26.

Why Does This Matter?

The introduction of work requirements in Medicaid represents a significant policy shift with wide-ranging implications. State Medicaid agencies have a major implementation task ahead, with limited funding and a short window of time in which to accomplish it. In addition to the baseline challenge of H.R. 1 implementation, the June 2026 guidance included a narrower definition of medical frailty and less flexibility for use of self-attestation for work requirement compliance than many stakeholders expected, further complicating implementation. States will need to rapidly develop systems for verifying eligibility and compliance, tracking hours, managing exemptions, and addressing potential administrative challenges in an effective, timely manner.

For Medicaid members, these requirements will mean additional administrative hurdles to acquiring and maintaining coverage, particularly for those already facing barriers to employment. Payers and health care providers will also see changes in enrollment patterns and increased administrative costs. Understanding the implications of these requirements is crucial for policymakers and stakeholders as they navigate the balance between meeting federal requirements and ensuring access to essential health services for people eligible for Medicaid in their states.

What’s Next?

Following the June 2026 guidance, states face the task of finalizing H.R. 1 policies and implementation approaches. As states begin sending outreach notices and implementing work requirements, there will be much to learn about what implementation strategies best support members, approaches states are taking to overcome implementation challenges, and the ultimate impact of broad work requirements on Medicaid enrollment. Regardless of the specific approach, implementing Medicaid work requirements is expected to be a significant administrative undertaking for states — one that will require cross-sector coordination and clear, consistent engagement with Medicaid members to ensure responsive and effective implementation.