This Insight is part of PYA’s two-part thought leadership and shares in-depth information about Medicaid community engagement requirements for impacted states. Read PYA’s article about the requirements for non-impacted states.
The Medicaid community engagement requirements begin January 1, 2027. Providers in impacted states should understand affected populations, exemptions, state verification processes, and patient communication needs before implementation begins.
What are Medicaid Community Engagement Requirements?
Medicaid community engagement requirements, commonly referred to as Medicaid work requirements, are a new statutory requirement for certain adults ages 19-64 in Medicaid who must either meet an 80-hours-per-month work requirement or be determined exempt to remain eligible for coverage. On June 1, the Centers for Medicare & Medicaid Services (CMS) released an interim final rule related to the requirements (CMS-2454-IFC).
Which States are Impacted by the Community Engagement Requirements?
States that expanded Medicaid as part of the Affordable Care Act (ACA) are required to implement the work requirements. The impacted group includes most states and the District of Columbia, which must implement the requirements by January 1, 2027. While the general implementation process will be similar across the jurisdictions, each will design a process specific to their population.
Who is Impacted by Medicaid Community Engagement Requirements?
In general, those impacted by the Medicaid work requirements are able-bodied, non-pregnant adults of certain ages who are enrolled in Medicaid:
- The primary population who will be impacted by community engagement requirements is the Medicaid Expansion
- CMS describes the impacted population as “non-pregnant adults between the ages of 19 and 64 who are not entitled to or enrolled in Medicare and are eligible for or enrolled in the Medicaid adult group or in certain section 1115 demonstrations that provide minimum essential coverage to adult beneficiaries”.[1]
Who is Exempt from Medicaid Community Engagement Requirements?
Certain individuals are exempt from the community engagement requirements:
- Pregnant women or women in the postpartum period
- Children under age 19
- Disabled or medically frail individuals
- Parents and caretakers of children under age 14 or a disabled individual
- Veterans with a total disability rating
- American Indians and Alaska Natives
Additionally, short-term hardship exceptions include these:
- Those receiving inpatient or certain other medical services
- Individuals who need (or whose dependent needs) to travel outside their community for certain medical care not available in their home community
- Those in a county with an unemployment rate at or above 8%
- Those who reside in a county where certain national emergencies or disasters are in effect
What Activities Qualify as Medicaid Community Engagement Requirements?
Community engagement requirements are defined as 80 hours per month of qualifying activities in many categories:
- Employment
- Participation in community service
- Participation in a work program
- Enrollment in an educational program at least half time
- A combination of these four activities for at least 80 hours per month
How do States Verify Medicaid Community Engagement Requirements Compliance?
To determine compliance with community engagement requirements, impacted states will
- Use all available electronic data sources to attempt to confirm whether someone is compliant. Some states have long-established data matching processes with their departments of labor for access to wage data and may be able to determine 50% or more of the population compliant through this data point.
- Ask the applicant or member for documentation to prove compliance.
- Work to implement long term solutions such as additional data matches with other organizations that can prove compliance.
What Deadlines for the Medicaid Community Engagement Requirements Should Providers Know?
States are required to implement the new requirements by January 1, 2027, and other deadlines are also important:
- States have the option to implement Medicaid work requirements before January 1, 2027. Montana implemented its requirements July 1, 2026.
- States are required to verify community engagement every six months, so the process will be frequent and ongoing.
- Some states will not have automated data matches built into their process by January 1, 2027. Many will rely on paper verification from applicants and members during the first year.
How Could Medicaid Community Engagement Requirements Impact DSH and 340B Payments, and What Should Providers Do?
Some healthcare providers have stated implementation of this law could cause a significant drop in Medicaid enrollment, similar to the Medicaid redetermination “unwinding” following the COVID-19 public health emergency. If enrollment drops, patients and providers could undergo a similar disruption.
Due to the potential for a significant drop in Medicaid enrollment, hospitals and health systems should review their current Disproportionate Share Hospital (DSH) and 340B calculations to determine if they are close to the threshold. The loss of Medicaid membership could
- reduce Medicaid patient volume
- lower Medicare DSH percentages
- cause potential loss of qualification for DSH add-on payments
- cause potential loss of qualifications for 340B Drug Program Discounts
Providers can find more information about these potential impacts in our PYA webinar, “Preparing for OBBA Impacts: Medicare DSH and 340B Updates.”
Providers in impacted states should prepare now for patient questions, state notices, verification demands, and possible coverage disruption associated with Medicaid community engagement requirements. PYA’s Reimbursement Team partners with healthcare providers and health systems to prepare for Medicaid community engagement requirements and the changes the new law will bring. Contact PYA for assistance with interpretation, preparation, and operational response to the law.
Learn more about the Medicaid community engagement requirements in non-impacted states.
[1] Medicaid Community Engagement Requirement for Certain Individuals Interim Final Rule with Comment Period (CMS-2454-IFC) | CMS
