New Medicaid work rules put states in a bind

Axios

14-07-2025

The new Medicaid work rules in President Trump's tax-and-spending law put states on a tight timetable for setting up systems to notify millions of recipients about the requirements — and to track if they're complying.
Why it matters: Previous efforts to set work rules in Georgia and Arkansas showed it could be a messy and expensive process that generally relies on outside vendors to set up the necessary infrastructure.
Georgia spent nearly $100 million to implement its rules, $55 million of which went toward building a verification system, but in two years only enrolled a fraction of those eligible. It spent $13,000 per enrollee just to sign them up.
State of play: The new law starting in 2027 will require states to condition Medicaid eligibility for able-bodied adults on working, volunteering or doing other qualifying activities for at least 80 hours per month.
States have to verify recipients' eligibility monthly and do redeterminations at least twice a year. The new law provides $200 million to states for implementation.
The technical requirements, and the compressed time frame for rolling out the rules, will likely leave many states scrambling or applying for extensions, Medicaid experts say.
The consequences of failing could be significant. Many of the nearly 12 million people expected to lose coverage under the law will do so because of red tape around work requirements and the inability to show they're complying.
64% of adults with Medicaid already work full time or part time, according to an analysis of census data by the Center on Budget and Policy Priorities.
Another 32% are caretakers or are ill or disabled, attend school, or are retired.
Between the lines: It's not just a matter of turning a switch on states' existing Medicaid systems, which can be outdated and clunky. There needs to be reliable sources of data that can be integrated in a timely way, experts say. And there's little margin for portal crashes or other technical glitches.
"[IT] systems vary from state to state ... and we know from the COVID experience that those unemployment insurance systems are incredibly antiquated in some cases," KFF CEO Drew Altman told reporters in a call last week. "The systems work ... is quite substantial" and could be expensive, he added.
Among the challenges is how to track someone's volunteer hours, or if an individual has a varying schedule, like a gig worker. There also are factors like determining the status of a behavioral health problem that could qualify for an exemption.
"It sounds simple, but when you're talking about silos, talking to one another, it's just not," Andy Schneider, a Medicaid expert at the Georgetown University McCourt School of Public Policy.
Friction point: Georgia has turned into a cautionary tale after the state won a waiver during the first Trump administration with reports that the system was plagued with backlogs of applications, erroneous messages and technical glitches, the Associated Press reported. The state recently stopped checking each month whether beneficiaries were meeting the requirement.
"The implementation costs in Georgia are very high, a lot of systems work went into this, and at the end of the day, not nearly as many people were able to enroll in coverage," said Allison Orris, director of Medicaid policy at the Center on Budget and Policy Priorities.
Similarly, when Arkansas rolled out work requirements in 2018, individuals on Medicaid were given often conflicting information via multiple letters sent to their home, said Kevin De Liban, who was formerly director of advocacy for Legal Aid of Arkansas.
It generally took hours to get through to someone at a customer call center and, often, those people were unable to definitively answer questions about exceptions, De Liban said.
"People will lose coverage. There is no way to stop people who should be eligible from losing coverage. That's the lesson of Arkansas; there will be chaos," De Liban said.
Medicaid experts say the $200 million in implementation funds are not likely to cover the administrative, operational and communications work that will be needed to roll out the rules.
States that can't do implementation in house will find a small group of contractors with experience building enrollment and verification systems with the needed scale, including Deloitte, Accenture and Maximus.
De Liban said it's more than just handing over the keys. "The states need to be prepared to sue the contractors when those systems break, because they will break," De Liban said.
What to watch: Key exceptions to the work requirements still need to be defined by Health Secretary Robert F. Kennedy Jr. by June 2026.
The law has carve-outs for a "'disabling mental disorder" "substance abuse disorder" or "serious or complex medical conditions" but doesn't lay out details — or if states will have leeway to make determinations.
Regardless how much discretion states get, Schneider said, the data systems are going to have to sort through potentially millions of names and identify those meeting the final criteria.
The bottom line: Some states may conclude it's easier and less costly to unwind their Medicaid expansions than to deal with the cost and bureaucratic hassles of administering work rules.
"The people who wrote this were not trying to make anything work. They were trying to make this as difficult as possible because they want states to dump Medicaid expansion altogether or dump as many expansion adults as possible through red tape," Schneider said.