Federal Budget Reconciliation Bill and Medicaid Work Requirements: Implications and Considerations 

Federal Budget Reconciliation Bill and Medicaid Work Requirements: Implications and Considerations 

Overview of the Federal Budget Reconciliation Bill’s Medical Provisions

The federal reconciliation bill (pending as of the time of publication) has the potential to significantly impact Medicaid, including by: 

• • Instituting work requirements 

• • Limiting funding for Medicaid expansion 

• • Limiting retroactive coverage and increasing the frequency of eligibility redeterminations 

• • Requiring cost sharing for the Medicaid expansion population 

• • Restricting coverage of gender affirming treatment and reproductive health funding 

• • Restricting coverage for lawfully present and undocumented immigrants  

• • Codifying rules related to Section 1115 Demonstration Waiver budget neutrality  

• • Restricting Medicaid provider taxes and state directed payments 

The bill does not address the continuation of enhanced premium tax credits for Exchange coverage. 

As we wait for the final outcome of the legislation, we dive into one aspect of that bill – the proposed federal work requirements. More information about the broader health provisions can be found in the legislative committee’s summary of the bill. 

Federal Work Requirements

As some states continue to prepare and submit Section 1115 Demonstration Waivers with work requirement components, Congress is considering a detailed work requirement at the federal level. The House version of the budget reconciliation bill would require all 50 states to implement work requirements for the Medicaid expansion population. Individuals will be required to participate in at least 80 hours per month of qualifying activities, including employment, job training, or community service. Pursuant to this bill, states will be required to: 

• • Exempt certain groups, including pregnant individuals, foster youth and former foster youth under 26, primary caregivers of a dependent child or an individual with a disability, members of a Tribe, individuals who are medically frail, individuals who are in compliance with the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF) program work requirements, and individuals who are incarcerated or were released from incarceration within the past 90 day. They may include waivers for those who experience short-term hardship events. 

• • Verify that individuals applying for Medicaid coverage have satisfied work requirements for one or more consecutive months immediately prior to applying for coverage and that enrolled individuals have satisfied work requirements for one or more consecutive months between their most recent eligibility determination or redetermination. 

• • Notify and provide outreach to individuals regarding these requirements and the consequences of noncompliance. 

The proposed new requirements may not be waived, including under Section 1115 authority, meaning that states will have to implement these requirements as written and likely under State Plan authority. The proposed new requirements are detailed, providing little flexibility and leaving states with few design choices. It is not yet clear how approved Section 1115 Demonstration Waivers with work requirement components will be treated if this bill becomes law. Additionally, states will need to act quickly in order to have these new requirements in place by the December 2026 effective date.