Medicaid Work Requirements and State Challenges
JEFFERSON CITY, Mo. (AP) — With new Medicaid health insurance regulations coming into play, some adults will soon need to show proof of work, volunteer efforts, or school enrollment to maintain their coverage. But, many states are facing significant hurdles and expenses because they need to upgrade their computer systems first.
As the presidential election approaches on January 1, states are grappling with these new requirements, which will impact millions of low-income individuals reliant on government health care programs. A portion of a $200 million federal fund has begun to reach states to assist in implementing these changes. However, experts estimate that the total cost for necessary technological updates and additional staffing could exceed $1 billion, supported by a mix of federal and state taxes.
This process is far from simple; it isn’t just a quick software update. Each state operates its own Medicaid system, often requiring specialized modifications from tech experts.
“Updating the current eligibility framework is particularly challenging given its outdated nature,” noted Toy Wilde, chief information officer for the Missouri Department of Human Services.
Impact on Millions with New Medicaid Rules
The recent tax relief legislation signed by President Trump includes adjustments to Medicaid aimed at reducing government spending. The most notable requirements affect Medicaid enrollees aged 19 to 64 who do not have young children and exceed the usual income limits. Participants must either work or volunteer at least 80 hours monthly or enroll in school for at least half the time. Additionally, eligibility will be reassessed every six months instead of annually, heightening the risk of losing coverage due to any changes in circumstances.
The combination of these provisions could save the federal government an estimated $388 billion over the next decade, while also leading to approximately 6 million fewer individuals covered by health insurance, as per the Congressional Budget Office.
States must first modernize their online portals and the outdated systems used by their employees to verify individuals’ eligibility.
Many states are expected to lean on private contractors due to time limitations, with at least ten companies offering discounted services, as reported by the federal Centers for Medicare and Medicaid Services. Jason Reilly, a partner at Guidehouse, advises states on Medicaid, stated, “Upgrading the technology will definitely help, but it won’t be an easy task.”
Presently, most states do not track employment or educational status for Medicaid participants, prompting them to seek outside validation of work and schooling data. Unfortunately, there’s no comprehensive database for local volunteer activities. Moreover, states are anxiously waiting for federal guidelines that will clarify exceptions, such as defining “medically frail” individuals, with a release expected in June.
From October 2029, the federal government plans to penalize states significantly for excessive Medicaid payment errors, adding pressure on them to get this right.
Funding for States to Adapt
Congress has assured all states a share of the $200 million allocated for Medicaid changes. However, to secure additional federal funds, each state must apply individually. The federal government will reimburse up to 90% of the costs associated with developing Medicaid eligibility systems, 75% for maintaining these systems, and 50% for other administrative expenses.
Missouri has already obtained approval for a 90% reimbursement rate. The state legislature is hurriedly working to allocate $32 million necessary for inviting bids from vendors to upgrade their technology and improve support for Medicaid participants. The Department of Human Services anticipates needing around 120 extra staff members in the coming year, predicting costs of about $12.5 million to manage the increased workload.
Other states also foresee hefty expenditures. Maryland expects to allocate over $32 million, Kentucky more than $46 million, and Colorado upwards of $51 million for these changes. Arizona estimates around $65 million in costs and may need 150 additional employees.
While several states are still assessing the financial implications of these new Medicaid mandates, Arkansas reported significant enrollment declines when it previously implemented a work requirement between 2018 and 2019. A federal court ultimately ended that requirement. Arkansas officials noted that much of the tech updates required by federal mandates could be managed through existing vendor contracts, suggesting minimal financial strain on Medicaid budgets.
Nebraska plans to initiate work requirements by May, ahead of the federal deadline, but has not disclosed specifics about potential costs and did not respond to follow-up inquiries.
Concerns Over Georgia’s Work Requirements
Georgia is currently the only state mandating work for some Medicaid recipients, having received federal approval to broaden coverage for previously ineligible adults. The state’s Pathways to Coverage initiative has accumulated more than $54 million in administrative costs from 2021 to early 2025—double the amount spent on medical aid during that time, according to the U.S. Government Accountability Office. Most of these costs stem from necessary technology updates for eligibility and enrollment.
Analysts are citing Georgia’s expenses and Arkansas’ declining enrollment as cautionary tales as other states consider similar work requirements. “A vast sum is being spent on complicated vendor systems that might hinder access to health care,” remarked Joanne Alker, executive director of Georgetown University’s Center for Children and Families. “That seems like a significant risk to me.”
