Helping States Respond to the New Medicaid Rules

State agencies implementing Medicaid rule changes are navigating big challenges in the wake of the June 1 Interim Final Rule (IFR) from the Center for Medicaid and Medicare Services (CMS). In it, CMS released their official guidance for Medicaid work requirements, and states have until January 1, 2027 to make changes.

The tight deadline and significant changes from the previous informal CMS guidance means that many states will need to quickly rebuild their systems. These sudden changes and continuing uncertainty about how states can implement key provisions of the law will lead eligible people to lose access to healthcare due to bureaucratic red tape.

We know from years of partnering with states to make changes in benefits delivery that the road ahead won’t be easy—but with an iterative approach and human-centered strategy, states can set themselves up for long-term success.

Some rule changes provide some relief, while others require sudden pivots

The income provisions in the IFR do decrease some burden on states. States should use household MAGI income when determining if a person meets the income threshold for compliance. This definition is welcome as states can reuse existing MAGI calculations for determining community engagement compliance. This method of income compliance supports the ways Medicaid recipients work, and provides multiple pathways towards compliance.

Unfortunately, the IFR significantly altered the most complex exclusion to the requirements—medical frailty. Under the IFR, states are limited to using claims or encounter data (a detailed record of diagnoses and treatments provided to a patient by a healthcare professional) from within the last 12 months. Medical frailty exceptions now require that a person’s condition significantly impair their ability to meet the current community engagement requirements of 80 hours a month of engaging in paid work, community service, job training, or educational programs—a standard that states will, in many cases, struggle to meet using available data. Therefore, automation on the state side will be difficult or impossible, leaving medically frail clients with the increased burden of gathering and submitting their own evidence. As a result, clients with the highest medical needs are saddled with some of the highest barriers to obtain coverage.

How states can take action now

Given the short timeline of implementation and the weight of changes needed, states face an unprecedented prioritization problem. Knowing that only so much can be achieved, states can make tradeoffs now to mitigate as much harm as possible. Specifically, compliance and user experience must both be seen as priorities when planning and executing the work ahead. Since states will be limited in what they can accomplish by January 1st, they should plan for iteration. 

• Data integration: States must minimize the information they request from clients when they already have access to that data. By reducing redundant requests, states save caseworker time and reduce the risk of error, as well as conflicting information. A significant portion of clients may already be interacting with another state program that has exemption or compliance information; data sharing agreements can empower lightweight exchanges of this information. States should plan for refining their initial efforts and optimizing their data approach after their initial deployments.
• Sequencing: Clients should be routed through short, efficient pathways to compliance. In all cases, states should endeavor to reach a conclusive status for each client in as few steps as possible–and with the least amount of unnecessary client interaction. When evaluating a client, states should establish up front if work requirements apply, and only proceed forward if they do. States should verify exemptions and compliance with automation first, and request additional information only if automation fails.
• Client communication: Previous analyses of potential work requirements found that coverage losses occurred primarily due to lack of awareness and understanding—not eligibility. Communication systems and processes are therefore a core component of implementation, and should not be an afterthought. Medicaid regulations require multichannel outreach. Texts, emails, and e-notices will reach clients more quickly and reliably than mail. User testing on notices can provide feedback on clarity and usability–without it, states risk sending notices that lead to inaction or incorrect action. States should plan to iterate on their first efforts, and to learn from best practices from their peers.
• Medical community involvement: With the IFR’s narrower interpretation of medical frailty requirements, the medical community has a more important role than ever in making sure that eligible people get and keep coverage. Involving medical providers and ecosystem players in reporting, verifying, and advocating for clients will provide benefits for states, clients, and providers themselves.

Moving forward

The IFR will make state administration of Medicaid more expensive while increasing the burden on people in need. The timeline for implementation is extraordinarily short, meaning that states will be scrambling to adjust systems on faster turnarounds. Although the IFR positions states to take advantage of automation, it specifically requires non-automatable elements—such as the verification of medical frailty for many applicants and enrollees. These processes and others will fall to caseworkers, and agencies may need hundreds of new staff members to cover the workload. While states face tight timelines for their initial implementations, they should also plan for continuing improvements as the community learns more about what works best in implementing these new rules.

States don’t have to go through this process alone and without guidance. Code for America has 15 years of experience partnering with agencies to improve systems, create better workflows for caseworkers, and ease the burden on clients. Together, we can build systems that not only guarantee the compliance and integrity of the Medicaid program, but also serve clients in the most efficient, dignified, and impactful ways possible.