Medicaid work rules move forward as judge denies bid from AZ, other states, to halt them

States will have to meet a Jan. 1 deadline to implement new Medicaid work requirements, after a federal judge denied 25 Democratic-led states’ request to pause implementation of the rule.

The broad tax and spending law President Donald Trump signed last summer, the One Big Beautiful Bill Act, requires states that have expanded Medicaid to cover more adults under the Affordable Care Act — 42  states plus the District of Columbia — to mandate that those adults work, go to school or volunteer for at least 80 hours a month to keep their coverage.

On June 29, the Democratic-led states sued the Center for Medicare and Medicaid Services (CMS) and the U.S. Department of Health and Human Services (HHS), taking aim at new federal guidance, published earlier that month, that narrows the definition of who can qualify as “medically frail.” That designation excuses Medicaid recipients from work requirements if they have serious disabilities or illnesses.

The plaintiffs argued that the new exemption is too narrow, and would force patients with severe illnesses and disabilities to “jump through unnecessary administrative hoops” to keep their coverage. They also asserted that implementation would be costly and time-consuming, and noted that the new guidance came months after they’d already begun consulting with the federal government on how to implement the work requirements.

But United States District Judge Richard Stearns of Massachusetts noted in a ruling issued on Wednesday that CMS has said it will reimburse states for 90% of the costs associated with designing and executing the requirements. Stearns said he wasn’t convinced that states would be unable to cover the remaining 10%, and pointed out that the Jan. 1 deadline was set by Congress, not CMS.

“Because injunctive relief is the exception, not the rule, there is a certain point at which damages fail to justify the issuance of such an extraordinary measure,” he wrote. “Plaintiffs have not shown that their damages rise above that minimal threshold here. Moreover, the additional costs that may be incurred by the States are unlikely to bloom disproportionately given the familiarity of the responsible state agencies with the tasks to be performed.”

The court acknowledged that the case presents “difficult issues” about the scope of what Congress delegated to HHS. It also raises questions about CMS Administrator Dr. Mehmet Oz’s “faithfulness to Congressional intent,” the judge wrote.

Between 3 and 7 million people could lose coverage as a result of the new work requirements, the Urban Institute estimated earlier this year. With the addition of more frequent eligibility checks, up to 10 million people could lose coverage over the next decade.

Along with the governors of Kentucky and Pennsylvania, the complaint was brought by Democratic attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington and Wisconsin.

Stateline reporter Nada Hassanein can be reached at nhassanein@stateline.org.