H.R. 1 Medicaid and CHIP Implementation: A High‑Level Overview of CMS Guidance to Date

H.R.1, (known as the Big Beautiful Bill and, more recently, the Working Families Tax Cut (WFTC) legislation) was signed into law on July 4, 2025. While some provisions went into effect immediately, the implementation of many of the most significant healthcare provisions will roll out over several years and require significant action by states. To assist states as they prepare, CMS has periodically been releasing guidance and technical assistance documents that support the implementation of Medicaid and CHIP related provisions. This article provides a high-level overview of guidance issued to this date (with the exception of the Rural Health Transformation (RHT) Program, which we have written about previously here). PCG’s subject-matter experts will continue to monitor for further guidance and rulemaking.

Section 71119 – Community Engagement

Implementation of the new Medicaid community engagement (CE) requirements will require system, policy, and operational changes within a tight timeframe for states to ensure this requirement is in effect by January 1, 2027. Documents on CMS’ dedicated webpage, most notably the informational bulletin, outline specific aspects of this provision such as definitions of “applicable individuals” and “community engagement”, exclusions and exceptions, demonstrating and verifying requirements, non-compliance processes, and outreach expectations.

More recently, CMS has posted materials focused on state Medicaid system improvements and resources available to states, such as how to purchase products and services through the General Services Administrative (GSA) Schedule, as well as information on vendors who have voluntarily offered their ability to support the implementation of community engagement requirements. At the end of March, CMS introduced its “Emmy” (Eligibility made easy) software that intends to streamline income and CE reporting for Medicaid applicants and enrollees.

CMS has also indicated that it is developing the required interim final rulemaking with an intended release date of June 2026, as well as additional guidance related to community engagement. States are eagerly awaiting additional detailed, comprehensive guidance as well as a State Plan Amendment (SPA) template.

Section 71109 – Non-Citizen Medicaid Eligibility (Posted 04/08/2026)

Beginning October 1, 2026, new federal Non-Citizen Eligibility requirements will limit federal financial participation (FFP) for Medicaid and the Children’s Health Insurance Program (CHIP), with limited exceptions, to U.S. citizens and U.S. nationals, lawful permanent residents (LPRs), Cuban/Haitian entrants, and Compact of Free Association (COFA) migrants. States must reassess current beneficiaries, largely through an ex parte process that relies on electronic data sources and does not require beneficiary action whenever possible. Recent guidance reiterates that the five-year waiting period established under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) continues to apply to many qualified non-citizens. It also emphasizes due process protections, including reasonable opportunity periods when status cannot be verified, advance notice of adverse action, and appeal rights. CMS clarifies that states may continue state-only funded coverage outside of Medicaid where federal match is no longer available, however that would not be considered Medicaid coverage.

Much of the guidance outlines operational considerations. States will need to update eligibility and enrollment systems, application and renewal forms, verification workflows (including expanded use of the federal data hub and the Systematic Alien Verification for Entitlements (SAVE) system), claiming and reporting processes, and potentially managed care contracts and rate certifications. CMS is signaling additional guidance still to come, including updated SPA templates, further Transformed-Medicaid Statistical Information System (T‑MSIS) instructions, and technical assistance.

Section 71107 – Eligibility Redeterminations

CMS has also released a State Medicaid Directed Letter (03/06/2026) and a Section 71107 Overview Slide Deck (04/03/2026) outlining the more frequent eligibility redeterminations required under H.R. 1. Beginning January 1, 2027, states must complete eligibility redeterminations every six months for the adult expansion population. The guidance describes how states may transition both new and existing enrollees to the new schedule and presents two implementation pathways:

Rescheduling renewal initiation dates for beneficiaries enrolled as of January 1, 2027; or

Transitioning beneficiaries enrolled on January 1, 2027, at their next scheduled renewal.

CMS also addresses special considerations including households with different renewal schedules, movement between eligibility groups at renewal, and coordination with other human services recertifications or reviews. The guidance also outlines state next steps including related to:

Application and renewal processing

Fair hearings

SPAs and waiver amendments

IT systems changes

CMS is developing a MACPro reviewable unit, targeted for release in the second half of 2026.

Sections 71115 and 71117 – Provider Taxes

A Dear Colleague Letter on Section 71115 and 71117 (11/14/2026) describes how WFTC legislation tightens federal rules governing Medicaid provider taxes. Section 71115 of H.R. 1 freezes each state’s allowable provider tax capacity based on taxes that were both enacted and actively imposed as of July 4, 2025, effective October 1, 2026, which effectively prevents most new or increased provider taxes. For Medicaid expansion states, CMS also outlines a phased reduction of allowable tax thresholds beginning in FY 2028, further limiting reliance on provider taxes to finance Medicaid.

A recent final rule – Medicaid Program; Preserving Medicaid Funding for Vulnerable Populations-Closing a Health Care-Related Tax Loophole Final Rule (Effective 04/03/2026) also addresses this provision as well as Section 71117, which closes a long‑standing regulatory loophole by clearly barring provider taxes that impose higher tax rates on Medicaid‑related units than on non‑Medicaid units from being considered “generally redistributive,” even if they previously passed statistical tests. CMS provides limited transition periods, shorter for managed care organization (MCO) taxes and longer for other provider taxes, to allow states to unwind noncompliant tax structures, signaling a strong federal push to curb cost‑shifting and strengthen Medicaid fiscal integrity.

Section 71116 – State Directed Payments

Guidance on the State Directed Payments (SDPs) provision (02/02/2026) replaces CMS’s September 2025 letter and broadens the grandfathered rating periods to eligible SDPs. The requirements begin for rating periods on or after July 4, 2025, for inpatient and outpatient hospital services, nursing facilities, and certain academic medical center practitioner services, and temporarily grandfathers certain SDPs until the rating period beginning on or after January 1, 2028.

CMS has noted that it is preparing a notice of proposed rulemaking to revise 42 CFR part 438, thus this information is preliminary in nature and final policies will depend on the contents of the final rule.