The Centers for Medicare and Medicaid Services (CMS) published a rule establishing standards states must use to implement new Medicaid work requirements.

Reminder: The One Big Beautiful Bill Act (HR 1) enacted last summer created community engagement requirements. Beginning in 2027, Medicaid beneficiaries enrolled through expansion will be required to work (or participate in qualifying education or community service) for 80 hours a month as a condition of coverage.

The law carves out a variety of exemptions, including people who are pregnant or postpartum, disabled, or medically frail, and parents and caretakers of children under 14.
The “medically frail” category can include those who are blind or disabled; have a SUD; have a disabling mental disorder; have a physical, intellectual, or developmental disability that impairs daily living; or have a serious or complex medical condition. There is also a separate exemption for those participating in certain SUD treatment.

But: States have been waiting for CMS rules for details on who qualifies as medically frail, how that is determined, and other implementation details.

The details:

Definition of medical frailty: According to the new rule, medically frail individuals must show not just that they have an included condition, but also that their condition prevents them from working. The rule does not include a list of conditions/diagnoses that qualify, leaving it up to the states. It also prohibits states from adding categories of individuals included under medical frailty, specifically noting that people experiencing homelessness are not included unless they fall into one of the other categories.
Verification of medical frailty: CMS is calling on states to use existing data to document whether a beneficiary meets an exemption, including verifying medical claims from the past 12 months. In 2027, if that data is not available, an individual can self-attest that they have met the exemption. But in 2028, beneficiaries will have to submit documentation verifying their conditions and that they impair their ability to meet the work requirements. States must reverify medical frailty status at least every 12 months.
Definition of SUD and disabling mental disorder: SUD and disabling mental disorder are categories included under the medical frailty exemption. The rule excludes individuals who have been in recovery for 5+ years from the SUD definition but does not otherwise define these terms, leaving it to states to define.
SUD treatment exemption: The law includes an exemption for individuals “participating in a drug addiction or alcoholic treatment and rehabilitation program” in certain settings. The new rule did not add any minimum time commitment or any other parameters around this exemption but says states can establish standards.
Post-incarceration: There is also an exemption from work requirements for those recently released from incarceration. The rule says that an individual is exempt if they were incarcerated in the past three months.

Why it’s important: Millions of people are likely to lose Medicaid coverage, the primary payer of SUD treatment. Even those who meet the requirements or qualify for an exemption may lose coverage due to the burden of reporting.

In other instances, states have automatically defined people with certain conditions to be medically frail. Using the more complicated two-step standard that also requires proof that the condition impairs ability to work creates more work for beneficiaries, clinicians, and states, and it upends planning work that state officials had been doing.
Health care providers likely will be responsible for signing paperwork that says patients’ conditions impair their ability to meet the work requirements, which will create new headaches for already overburdened clinicians and new challenges for patients.

What’s next: CMS is holding a comment period on the rule through July 31.

The fact that HR 1 does not mention employment in its description of medical frailty may set up CMS for a legal challenge, because its rule adds requirements that were not in the original legislation.