Key Provisions

On June 1, the Centers for Medicare and Medicaid Services (CMS) released an interim final rule with comment period (IFC) on Medicaid work requirements (which it calls “community engagement requirements”). The rule implements a provision from the One Big Beautiful Bill Act (OBBBA) that requires certain adults aged 19–64 in the Medicaid expansion population to complete 80 hours of community engagement (e.g., work, school) per month, to qualify for Medicaid coverage.

State Medicaid programs are responsible for implementing the requirements, which include determining:

• Who is subject to or exempt from the requirements; this will entail defining “medically frail” and short-term hardship exemptions
• How individuals can demonstrate compliance with the requirements (e.g., work, training, education, community service, and/or a minimum income)
• How state Medicaid agencies should assess compliance with work requirements, including suggested data sources and requirements for beneficiary outreach

States will be required to comply no later than January 1, 2027, with a temporary good faith effort exemption available for those that cannot meet that deadline. CMS is collecting public comments on the rule through July 31.

The work requirement introduces significant operational, clinical, and financial uncertainties that will affect current and potential enrollees,  states, providers, manufacturers, and payers even before implementation in January 2027.

State Discretion in Medicaid Work Requirement Implementation

While the IFC establishes a federal standard for work requirements, states have meaningful flexibility in how they implement key components of the policy, including the number of months an individual must demonstrate compliance between renewals or whether to offer short-term hardship exemptions. These choices will have significant implications for how many individuals are affected and will vary considerably across the affected jurisdictions.

Key Stakeholder Preparation Activities:

• Manufacturers, Providers, and Patient Advocacy Organizations: Engage with states to influence key implementation decisions, including compliance demonstration periods and short-term hardship exemptions, to support more favorable outcomes for affected populations
• Manufacturers, Patient Groups, and Health Plans: Determine estimated coverage losses across key therapeutic areas and geographies, based on ongoing state implementation planning
• All Stakeholders: Determine what operational and systems investments states will need to make for the January 1, 2027, deadline and estimate how many states are likely to seek good faith effort exemptions

Anticipating Coverage Impacts of Medicaid Work Requirements

CMS projects that 3.1–3.3 million people currently covered through Medicaid expansion will lose coverage, which could substantially impact patient drug access and utilization. Manufacturers, providers, and payers should anticipate meaningful shifts in patient volume and payer mix as a result.

Key Stakeholder Preparation Activities:

• Manufacturers, Patient Groups, and Health Plans: Develop state-level projections (based on CMS’s national-level estimates) to identify jurisdictions most at risk
• Manufacturers: Model the impact of the community engagement requirements on patient access and utilization
• Manufacturers: Prepare for expanded use of patient assistance offerings and increased 340B program volume

Engaging With States on The Medical Frailty Exemption

CMS has taken a narrower approach in defining medical frailty in the requirement than many stakeholders anticipated, requiring that a qualifying condition “significantly impair” an individual’s ability to comply with the requirement rather than on diagnosis alone. States must develop lists of qualifying conditions and establish processes for individuals to request consideration outside of those lists. How states operationalize this definition will have significant implications for patient access.

Key Stakeholder Preparation Activities:  

• Manufacturers, Patient Groups, and Health Plans: Engage with states to shape implementation of the medically frail exemption
• All Stakeholders: Track variation across states in defining medical frailty
• Providers and Patient Advocacy Organizations: Engage with patient groups to assist eligible patients in documenting and submitting their exemptions

How Avalere Health Can Support

Avalere Health is closely monitoring the implications of CMS’s work requirement for manufacturers, providers, and payers and the uncertainty they face as the details are refined. Our experts in Medicaid program requirements, state policy, patient access, and health data analytics help clients navigate Medicaid strategy and operations, patient access challenges, and health system patient mix. Connect with us to learn more about how Avalere Health’s team can help you prepare for the changes and shape the policy’s implementation in order to reach EVERY PATIENT POSSIBLE.