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Medicaid Community Engagement Requirements Interim Final Rule

Date: June 2, 2026

On June 1, 2026, the Centers for Medicare and Medicaid Services (CMS) released an interim final rule on implementing the new Medicaid community engagement requirements enacted under H.R. 1, the One Big Beautiful Bill Act (OBBBA). The press release from CMS is available here. A fact sheet from CMS is available here. Comments on the interim final rule are due July 31, 2026.

BACKGROUND AND STATUTORY BASIS

Section 71119(a) of the WFTC legislation, signed into law on July 4, 2025, added section 1902(xx) to the Social Security Act (the Act), establishing a community engagement requirement for certain adults applying for or enrolled in Medicaid. Section 71119(d) directed CMS to publish this IFC to implement the requirement. CMS describes the policy as bringing Medicaid into alignment with work-focused requirements in other public benefit programs such as SNAP and TANF.

The requirement applies only to the 50 States and the District of Columbia that elect to cover the adult group under the State plan, or that operate certain section 1115 waiver demonstrations covering an equivalent population. It does not apply to the U.S. territories. Noncompliance results in denial of eligibility for, or disenrollment from, the adult group (or applicable section 1115 waiver demonstration), though an individual may reapply at any time and will be reassessed under the procedures for applicants.

APPLICABLE INDIVIDUALS

CMS implements the statutory definition of “applicable individuals” – the applicants and beneficiaries who must demonstrate community engagement. Applicable individuals are those eligible for or enrolled in the State plan adult group under section 1902(a)(10)(A)(i)(VIII) of the Act, as well as individuals eligible for or enrolled under certain section 1115(a)(2) expenditure authority that provides coverage equivalent to minimum essential coverage and who are age 19 through 64, not pregnant, not entitled to or enrolled in Medicare Part A or B, and not otherwise eligible under the State plan.

Individuals in other mandatory or optional eligibility groups, for example, parents and caretaker relatives under section 193, are not applicable individuals. CMS also clarifies that section 1915(b) and 1915(c) waivers are not “a waiver of such plan” for this purpose, and that it is reviewing approved section 1115 demonstrations to identify which demonstration populations could be subject to the requirement.

DEMONSTRATING COMMUNITY ENGAGEMENT

An applicable individual demonstrates community engagement for a month by meeting any one or more of the statutory options. States must make all of the options available and may not offer only a subset.

The options are:

Working not less than 80 hours;
Completing not less than 80 hours of community service;
Participating in a work program for not less than 80 hours;
Being enrolled in an educational program at least half-time;
Engaging in any combination of the above for a total of not less than 80 hours;
Having monthly income not less than the Federal minimum wage multiplied by 80 hours (currently $580, based on $7.25 × 80); or
Being a seasonal worker whose average monthly income over the preceding six months meets that income threshold.

CMS defines the qualifying activities broadly and aligns them, where possible, with SNAP and TANF definitions. “Work” includes self-employment, in-kind work, and certain unpaid work such as internships and trial work periods. “Community service,” “work program,” and “educational program” are likewise defined by reference to existing program standards.

MANDATORY EXCEPTIONS

States must deem an applicable individual compliant for any month in which, for part or all of the month, the individual was under age 19; entitled to or enrolled in Medicare Part A or B; described in a mandatory eligibility group under section 1902(a)(10)(A)(i)(I) through (VII); or a specified excluded individual. A separate exception applies to recently incarcerated individuals: a person is deemed compliant for a month if, at any point during the three-month period ending on the first day of that month, the individual was an inmate of a public institution. These exceptions are assessed against the applicable months in the State’s review period.

Specified Excluded Individuals

The statute lists nine categories of “specified excluded individuals” who are removed from the definition of applicable individual altogether and therefore need not demonstrate community engagement. States must determine excluded status before assessing compliance. The nine categories are:

Former foster care children
American Indians and Alaska Natives
Parents, guardians, caretaker relatives, or family caregivers of a dependent child age 13 or under, or
of a disabled individual;
Veterans with a disability rated as total;
Individuals who are medically frail or otherwise have special medical needs;
Individuals complying with TANF work requirements and individuals not exempt from (and meeting)
SNAP work requirements;
Participants in a drug or alcohol rehabilitation or treatment program;
Inmates of a public institution; and
Individuals who are pregnant or entitled to postpartum coverage.

MEDICALLY FRAIL OR SPECIAL MEDICAL NEEDS EXCLUSION

CMS defines a medically frail individual as one whose physical, mental, or other behavioral health condition significantly impairs the ability to comply with the community engagement requirement and who falls within at least one of five categories: blind or disabled; has a substance use disorder (SUD); has a disabling mental disorder; has a physical, intellectual, or developmental disability that significantly impairs one or more activities of daily living; or has a serious or complex medical condition. An individual needs to meet only one category. CMS applies a functional standard rather than a purely diagnostic one: a qualifying condition alone is not enough, and a person who can perform 80 hours per month of qualifying activities despite the condition would not qualify. CMS declined to adopt the existing alternative benefit plan definition of medically frail, to add categories beyond the five in the statute, or to let States add their own.

For the SUD category, the exclusion applies regardless of whether the individual is in active treatment and includes those in early or sustained recovery, but excludes individuals in “stable recovery” (five or more years). States must verify medically frail status on an ex parte basis using reliable information, including adjudicated claims or encounter data from the preceding 12 months, and may not deny the exclusion based on the absence of claims data; where status cannot be verified from available data, the State must allow the individual to submit documentation. States must reverify at least every 12 months.

SHORT-TERM HARDSHIP EXCEPTIONS

States may elect to offer a short-term hardship exception, but if they do, they must recognize all of the statutory hardship circumstances rather than selecting only some. The qualifying circumstances, applicable for all or part of a month, are: receipt of inpatient, nursing facility, ICF/IID, inpatient psychiatric, or similar-acuity services; residence in a county subject to a Presidentially declared emergency or disaster, or in which the unemployment rate is at or above the lesser of 8 percent or 1.5 times the national rate (which requires a State request to the Secretary); and the need to travel outside one’s community for an extended period to obtain medical treatment for a serious or complex condition. The institutional- services and medical-travel circumstances are triggered by an individual’s request.

ASSESSING COMPLIANCE AND REVIEW PERIODS

At application, States must require an applicable individual to demonstrate community engagement for at least one, but not more than three, consecutive months immediately preceding the month of application, as specified in the State plan. For enrolled beneficiaries, States must require demonstration for one or more months (not necessarily consecutive) during the eligibility period, assessed at renewal and, at State option, through more frequent verifications between renewals. CMS uses the term “review period” to describe the months under consideration in each context.

VERIFICATION

States must first conduct ex parte verification, maximizing reliance on reliable electronic data sources already available to the State, before requiring an individual to submit information. CMS directs States to use specified data sources and may permit additional sources and addresses how to proceed when no data source is available or when available data are not reasonably compatible with information the individual provides. Only then may a State request documentation from the individual.

NONCOMPLIANCE PROCEDURES

When a State cannot verify that an applicable individual has met (or is deemed to have met) the requirement, it must send a notice of noncompliance and allow 30 calendar days from receipt for the individual to make a “satisfactory showing” of compliance or of an exception or exclusion. Coverage continues during that 30-day period. If no satisfactory showing is made, the State must, after first checking whether the individual qualifies on another basis, deny the application or disenroll the beneficiary no later than the end of the month following the month in which the 30-day period ends, with applicable notice and fair-hearing rights. CMS confirms that States may not impose a waiting or “lock-out” period; individuals may reapply at any time.

IMPLEMENTATION TIMING AND GOOD FAITH EFFORT EXEMPTION

States must implement the requirement no later than January 1, 2027, and may implement earlier through a State plan amendment or section 1115 demonstration. Applications pending at implementation are adjudicated under the rules in effect on the date of submission; compliance for those individuals is first assessed at their next renewal. The IFC also implements the statutory good faith effort exemption, under which the Secretary may grant a temporary, time-limited exemption from timely implementation. States must address statutory criteria (actions taken toward compliance, significant barriers, and a detailed plan and timeline). CMS expects to approve initial requests for no longer than six months, with extensions available only until no later than December 31, 2028, contingent on quarterly milestone reporting. Exempt States that meet their reporting obligations will not be treated as noncompliant or subjected to corrective action under section 1904 during the exemption.

OUTREACH, MANAGED CARE, AND MONITORING

States must conduct outreach and provide notice of the requirement to affected individuals before the implementation date, with prescribed notice content. States may use managed care plans to assist with outreach, education, data sharing, and referrals to work programs (subject to limits on what may be reflected in capitation rates), and the IFC addresses conflict-of-interest considerations for plans and contractors. For monitoring, CMS will rely on existing eligibility and enrollment data collections – the Performance Indicator (PI), Eligibility Processing (EP), and T-MSIS data sets – and § 435.562 requires States to submit timely, complete, and accurate data on implementation and the impact of the requirement.

RESTORATION OF SUSPENDED ELIGIBILITY AND ENROLLMENT REGULATIONS

Section 71102 of the WFTC legislation suspends, until after September 30, 2034, the amendments made by the 2024 Eligibility and Enrollment final rule (89 FR 22780) to various Medicaid and CHIP eligibility and enrollment provisions, including those governing applications, renewals, changes in circumstances, and timeliness standards. Because those provisions are necessary to implement and enforce the community engagement requirement, the IFC restores, until October 1, 2034, the pre-2024-rule versions of the affected regulations, including §§ 431.213(d), 431.231(d), 435.907, 435.911(c), 435.912, 435.916, 435.919, 457.340(d)(1), 457.344, and 457.960, along with conforming changes.

Week Ahead: The Summer Sprint

Date: June 1, 2026

The summer sprint is on, as lawmakers stream back from the Memorial Day recess. Senate Republican leaders are searching for a way to pass the immigration-enforcement funding reconciliation bill after bolting before recess over concerns about the “anti-weaponization” fund. At the same time, calls for a third reconciliation package to address issues such as affordability and health care show no signs of fading. Meanwhile, the administration is down to the wire on its long-awaited guidance on Medicaid work requirements. So with that, let’s get into it. Welcome to the Week Ahead!

The Administration

All eyes are on the Centers for Medicare and Medicaid Services (CMS), which faces a June 1 statutory deadline to issue the interim final rule implementing H.R. 1’s Medicaid community engagement (a.k.a. work) requirements. States and stakeholders are watching closely as the interim final rule has made its way through the Office of Management and Budget (OMB) and is expected to be released imminently. It will fill critical gaps left by December’s preliminary guidance, including how to define and verify the medical frailty exemption. States are also eagerly awaiting this information as they have precious little runway to retool their systems before the January 1, 2027, implementation date. Once the interim rule lands, expect a wave of stakeholder reactions and plenty of midterm-year messaging on both sides.

Turning now to the Food and Drug Administration (FDA), it’s been nearly a month since Marty Makary resigned under pressure, and Kyle Diamantas stepped in as acting commissioner. The White House has yet to finalize even a formal shortlist of potential permanent replacements. Additionally, the confirmation calendar for health nominees is already crowded, with the Senate still needing to act on President Trump’s nominees for director of the Centers for Disease Control and Prevention and Surgeon General. President Trump is also no stranger to leaving certain agencies with temporary leaders. All of this suggests Diamantas may be in for a longer stint as acting commissioner than initially reported.

The Senate

Senate Republican leaders already knew that passing the immigration-enforcement reconciliation package would be tricky. However, the vote math has gotten even trickier after incumbent Sen. John Cornyn (R-TX) was defeated by state Attorney General Ken Paxton in the May 26 GOP primary runoff. Cornyn joins Sen. Bill Cassidy (R-LA), who lost his own primary in May, on a growing roster of departing and lame-duck members with little incentive to fall in line with the President’s agenda, a dynamic that could complicate any party-line whip count. This is especially true since the Republican Conference also includes moderate members such as Sens. Susan Collins (R-ME) and Lisa Murkowski (R-AK), who have been willing to buck Republican leadership and President Trump on items they see as going too far. However, the core of the caucus is likely to gravitate back toward Trump, given the relative political safety proximity to POTUS provides through election cycles. This is one example of the challenges Senate Republican leadership is facing when it comes to moving reconciliation 2.0, let alone 3.0.

At the Finance Committee, pharmacy benefit manager (PBM) reform may get a second act. February’s funding law already delivered a first tranche, including delinking pharmacy benefit manager pay from drug prices in Medicare Part D and new transparency and rebate pass-through rules for Part D and employer plans. Our conversations on the Hill suggest there may be interest in taking further action on PBM reform. One avenue they could explore is expanding PBM reforms to Medicaid plans. Given the limited time for legislating before the midterms, we would expect any additional PBM reforms to be included in a larger bipartisan legislative package, perhaps at the end of the year.

Health Care Hearings This Week

June 3: Senate HELP Committee hearing on gender transition procedures on minors
June 3: Senate Homeland Security Permanent Subcommittee on Investigations hearing on the impacts of the COVID-19 vaccine
June 3: Senate Aging Committee hearing on the human cost of foreign drugs

The House

Both the Energy & Commerce (E&C) and Ways & Means (W&M) Committees have held a series of hearings on addressing health care affordability, and we’ve been told GOP leaders both want to keep working in this space.

On the E&C side, we’re hearing of growing interest in addressing price transparency. This could take the form of legislation to strengthen price transparency requirements for insurers and providers, as President Trump called for in his “Great Healthcare Plan.”

Over at W&M, legislation to increase the amount of information that not-for-profit hospitals have to report on their tax returns appears to still be alive after a discussion draft was released and then pulled from a recent markup of other legislation. The discussion draft would require non-profit hospitals to report on their spending on community benefits, charity care, advertising, quality improvement, non-clinical programming, and more. It’s important to note that any effort to increase the reporting requirements faces fierce resistance from the American Hospital Association, and we’ve been told that committee Democrats are also resisting the bill.

Health Care Hearings This Week

June 2: House Rules Committee meeting of FY 27 FDA appropriations bill
June 3: House Oversight Committee hearing on examining HBCS fraud
June 4: House Judiciary Subcommittee on Courts, Intellectual Property, Artificial Intelligence, and the Internet hearing on medicines and IP
June 5: House Appropriations Labor-HHS Subcommittee markup of the FY27 Labor-HHS appropriations bill

There You Have It

Summer is (unofficially) here! What summer plans are looking forward to? Let us know. Whatever’s on your agenda, make it a great week!

2 Health Plans, 3 Blind Spots

Date: May 27, 2026

Both Republicans and Democrats have unveiled their visions for health care ahead of the 2026 midterm elections, with a combined 3 pages of text. The White House released The Great Healthcare Plan for Republicans, while Senate Minority Leader Chuck Schumer (D-NY) took the lead for the Democrats with the Democratic Vision for Health Care. While there were some common mentions, namely improving health care affordability, lowering costs, and holding health insurers accountable, what might be the most revealing is what has been left out of the conversation.

This blog walks through 3 major health policy areas missing from both plans and where we can look beyond these messaging documents for answers to where the parties stand on these health care issues.

The Medicaid Silence

The lack of discussion on Medicaid in either plan is staggering. For a program that covers more than 75 million Americans and is the single largest payer for long-term care, behavioral health, and births in the US, a mention might be warranted. But the Republican plan does not mention Medicaid at all. The Democratic plan fares only slightly better, with vague references to “15 million losing care,” and “750 plus hospitals at risk.” These are claims that Democrats often attribute to changes to Medicaid under the OBBBA due to the implementation of community engagement requirements, changes to state directed payment rates, and limiting provider taxes. However, even though the claims are made, the plan does not reference what actions Democrats would take to strengthen the Medicaid program if they were to flip Congress in November.

For providers that often care for a large share of Medicaid patients, such as safety-net hospitals, managed care plans, and long-term care providers, neither party’s proposal explains what to expect should they be in power. In an industry where information is critical, the silence is deafening.

Workforce: A Value, But No Plan

The health care workforce shortage is arguably one of the most time-sensitive issues facing the health care industry. The Association of American Medical Colleges projects a shortage of 86,000 physicians in the next decade, and the American Association of Colleges of Nursing has shared data which predicts a shortage of 63,720 registered nurses in 2030. Even a fraction of these projections would lead to access challenges due to hospital closures and increasing long wait times for care.

And yet, neither the Republican plan nor the Democratic plan offers input on the many policies suggested to address health care workforce challenges, such as graduate medical education funding, top of license practicing, or improvement of visa programs to allow for more foreign-born nationals to fill the gaps. While the Democratic plan does list “a strong workforce” as a value, a bullet without a mechanism for action does not hold a lot of promise.

The AI Elephant Not in the Room

Artificial intelligence (AI) is the fastest moving area in health care policy, as providers, regulators, and policymakers grapple with how the technology fits into the health care landscape. And yet, neither plan makes any suggestions or offers insight into how each party will approach AI regulation or use in health care settings.

However, now is not the time to be passive. AI is already being used across the federal government, such as for reviewing prior authorizations in Medicare through the Wasteful and Inappropriate Service Reduction (WISeR) Model at the Centers for Medicare and Medicaid Services (CMS) or aiding in approving drug applications at the Food and Drug Administration (FDA). Without a clear path forward for federal action, individual state regulations could create a haphazard regulatory environment for providers, health systems, and pharmaceutical companies to navigate.

Reading Between the Lines

In Washington, you often have to look deeper than the messaging documents that make the headlines. To understand where the parties actually stand on these issues, and not just what they will be campaigning on, looking past the press releases to see what the White House and leaders of health care committees in Congress are working on can fill in the gaps and provide context.

Medicaid: Republicans have been laser-focused on fraud, which can be seen by recent actions taken by CMS to pause hospice and home health agency enrollment in Medicare and the House Ways and Means hearing on preventing Medicare fraud. In contrast, Democrats have highlighted the impacts of OBBBA Medicaid funding changes in reports and have advocated for their reversal at numerous hearings.
Health Care Workforce: There are numerous bipartisan bills that have been introduced to address the health care workforce crisis; however, each party has preferred proposals. Republicans often support bills to improve domestic supply of physicians, improving rural training programs, and reducing administrative burden. On the other hand, Democrats have emphasized expanding funding for health care training facilities and expanding immigration pathways as a stopgap.
AI: The Trump administration has been pro-adoption of AI in health care, including releasing an RFI on Use of AI as Part of Clinical Care, issuing a proposed rule with provisions intended to make it easier for AI to be used as it relates to electronic health information, and implementing the WISeR model. Republicans have generally supported these moves, while Democrats have been much more skeptical. For example, congressional democrats have introduced bicameral legislation to prevent the WISeR Model from going into effect.

What This Means for Health Care Leaders

With the plans released and the midterms fast approaching, here are a few takeaways on how best to engage with the health policy landscape and shape your federal engagement strategy.

Don’t focus only on the plans: while helpful guides, these plans are only campaign tools. Policy decisions are still being made in committee rooms and in agency offices. Tracking and understanding these updates can provide important context.
Engage with decision makers now: movement is happening in health policy, regardless of campaign promises. Providing input to agencies through comment letters and meetings with lawmakers is more important than ever if you want your perspective represented.
Watch the year-end vehicles and other legislative packages: These are the most likely avenues for policy to move. Tracking and advocating on legislation can continue to advance your interests.

The Bottom Line

Both health care plans reflect each party’s desire to address health affordability concerns but leave out other key health policy conversations. These messaging exercises help to highlight what they want voters to focus on in the lead up to the November midterms, but if you want to understand what is truly happening in Washington, looking at the actions of the administration and leaders of health care committees in Congress can help to shape federal engagement strategies and give a better sense of what is – or isn’t – coming.

House Energy and Commerce Health Subcommittee Hearing on Medicare Payment Reforms

Date: May 22, 2026

On May 20, 2026, the House Energy and Commerce Health Subcommittee held a hearing to examine Medicare payment reforms, focusing on the Medicare Access and CHIP Reauthorization Act (MACRA) and the Physician Fee Schedule (PFS). Members discussed ways to reform the PFS to provide more stability in payment updates, how primary care reimbursement is different from other specialties, how the PFS is driving provider consolidation, and more.

OPENING STATEMENTS

Subcommittee Chairman Morgan Griffith (R-VA-9)
Subcommittee Ranking Member Diana DeGette (D-CO-1)
Full Committee Chairman Brett Guthrie (R-KY-2)
Full Committee Ranking Member Frank Pallone (D-NJ-6)

WITNESS TESTIMONY

William Fox, MD, MACP, Cahir Emeritus, American College of Physicians Board of Regents, Fox & Brantley Internal Medicine – Testimony
Steven Furr, MD, FAAFP, Family Medicine Physician – Testimony
Dana Smetherman, MD, MPH, MBA, FACR, Chief Executive Officer, American College of Radiology – Testimony
Rick Snyder, MD, President, HeartPlace – Testimony
Farzad Mostashari, MD, Chief Executive Officer and Co-Founder, Aledade – Testimony

MEMBER DISCUSSION

Physician Fee Schedule

There were broad, bipartisan concerns about the need to reform the Physician Fee Schedule (PFS). Health Subcommittee Chairman Morgan Griffith (R-VA-9) asked how current budget neutrality rules create competition between specialties. Dr. Smetherman shared that currently, if one specialty receives an increase, another specialty must receive a cut to compensate. Reps. Raul Ruiz (D-CA-25), Lizzie Fletcher (D-TX-7), Mariannette Miller-Meeks (R-IA-1), and Troy Balderson (R-OH-12) highlighted the need for a stable update schedule and suggested tying it to inflation. Mr. Fox agreed, stating that stable payments allow for long-term planning and practice expenses, such as rent, salaries, and equipment, which increase every year. Rep. Nick Langworthy (R-NY-23) was curious about the importance of payment policies keeping up with technological advancements. Dr. Snyder shared that it was extremely important, as technological advancements can often reduce costly procedures and improve the delivery of care.

Primary Care

Multiple Democrats focused on the importance of primary care, and some of the struggles that primary care providers are facing. Health Subcommittee Ranking Member Diana DeGette (D-CO-1) and Full Committee Ranking Member Frank Pallone (D-NJ-6) were curious about the importance of primary care providers and their role in chronic disease management. Dr. Furr highlighted the time providers spend coordinating care across specialties and providing chronic care management, and he argued that this reduces long-term spending. Rep. Robin Kelly (D-IL-2) asked why primary care should be reimbursed differently than other types of care. Dr. Fox shared that Medicare is not designed to pay for these services and instead relies on a fee-for-service model that is difficult to apply to primary care. Dr. Furr added that primary care is focused on preventive care. Reps. Marc Veasey (D-TX-33) and Troy Carter (D-LA-2) asked about how reimbursement policies influence what specialties medical students are choosing to practice. Dr. Fox shared that the number one driver of specialty choice was earning potential, and therefore, primary care is often not chosen. Dr. Furr highlighted the need to rethink how Medicare reimburses graduate medical education (GME) to encourage providers to train in rural areas.

Consolidation

There were concerns about the effects of Medicare reimbursement on health sector consolidation. Health Subcommittee Vice Chair Diana Harshbarger (R-TN-1) questioned if Medicare reimbursement was driving consolidation, to which Dr. Fox shared that the lower payment rates can cause independent providers to close or sell to hospitals if they do not have positive margins.

Reps. John Joyce (R-PA-7) and Kim Schrier (D-WA-8) asked about the effects of consolidation on patients. Dr. Fox shared that independent physician practices help to reduce costs for patients. Dr. Snyder highlighted that independent practices have more autonomous clinical decision-making, which can allow the physician and patient to agree on a treatment plan that is the most suitable for the patient.

Merit-based Incentive Payment System (MIPS)

There was bipartisan interest in MIPS and its effect on physician practices. Full Committee Chairman Brett Guthrie (R-KY-2), and Reps. Kat Cammack (R-FL-3) and Schrier wanted to understand the administrative burden of MIPS reporting and how to best reduce it. Dr. Furr shared that MIPS reporting is time-intensive, especially for smaller or rural practices. Dr. Furr suggested that one standardized measure would be very impactful. Dr. Smetherman highlighted that MIPS does not align with radiologists’ practice, making it very difficult to report metrics. He suggested that specialty-specific measures that measure the quality of care provided are important. Rep. Gus Bilirakis (R-FL-12) questioned how the PFS should be updated to better reflect practice expenses in reimbursement, especially for physicians in independent practices. Dr. Smetherman shared that for specialties that are very technology-intensive, addressing budget neutrality or updating the PFS will ensure that patients continue to receive the best treatment. Rep. John Joyce (R-PA-13) asked if tethering practice expense increases for independent practices to a percentage of hospital outpatient cost data for similar services could be beneficial. Dr. Snyder stated that it would significantly level the playing field.