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State Medicaid Work Requirements: The Impact on Medicaid beneficiaries and their DME Suppliers

Published in VGM Government Relations on July 08, 2026

Pursuant to the work and community engagement requirements included in H.R.1, the Centers for Medicare & Medicaid Services (CMS) has issued an interim final rule mandating a framework for Medicaid departments to follow when evaluating Medicaid beneficiary eligibility. Beginning no later than January 1, 2027, states must require certain adult Medicaid enrollees to demonstrate at least 80 hours per month of qualifying activity, which may include employment, education, or community service, unless the beneficiary meets one of the defined exemptions to obtain and maintain coverage.  

Not only are these requirements projected to eliminate eligibility for millions of Medicaid beneficiaries across the country, DMEPOS suppliers who service Medicaid beneficiaries can anticipate a reduction in their Medicaid patient population as well as an increase in administrative burden, operational and financial risk. 

According to Congressional Budget Office (CBO) estimates on provisions tied to H.R. 1, which included the work requirements, millions will lose health coverage with projections of approximately 7.5 million fewer Medicaid and CHIP enrollees by 2034. 

Loss of Medicaid eligibility is not solely attributable to individuals failing to meet work thresholds. Research and experience from states that adopted work requirements early consistently show administrative barriers, such as mandatory reporting requirements, documentation burdens, and system inefficiencies, are a primary driver of disenrollment, even among otherwise eligible individuals.  

  • The interim final rule outlines a standardized national approach for states to follow: 
  • Applies to non-pregnant adults aged 19–64 in the Medicaid expansion population. 
  • Requires 80 hours per month of qualifying activities or equivalent income. 
  • Requires ongoing verification at application and renewal, with some states requiring more frequent checks. 
  • Establishes limited exemptions, including medically frail individuals, caregivers, and certain protected populations. 
  • Requires state-driven compliance verification, with increased reporting obligations to CMS. 

Notably, CMS appears to have adopted a more restrictive definition of medical frailty, requiring that a condition significantly impair the beneficiary's ability to meet work requirements. This narrowed definition may reduce exemption eligibility for patients with complex chronic conditions. Further, for DMEPOS patients, particularly those with chronic conditions such as diabetes, respiratory disease, or mobility limitations, even short-term coverage gaps can lead to clinically significant challenges and higher costs. 

As a result, DMEPOS suppliers should anticipate several changes such as a reduction in Medicaid patient volume and increased risks including managing eligibility volatility and billing challenges and increased in uncompensated care; in addition to an increase in uncompensated administrative burdens as suppliers will inevitably end up educating and supporting patients who struggle to meet reporting and documentation requirements. 

DMEPOS suppliers can prepare for these challenges by implementing several strategies: 

  • Strategy 1: Strengthen eligibility and intake workflows by training intake teams early on work requirement eligibility rules and exemption and increasing the frequency of eligibility verification, particularly for rental and recurring supplies. 
  • Strategy 2: Create patient education and supports to guide patients, particularly high-risk populations (expansion adults, those intermittently employed) on how they can maintain their Medicaid eligibility and partner with local community organizations to help educate and support patient compliance. 
  • Strategy 3: Assess payer mix and contract strategy by exploring opportunities with other payers such as Medicare Advantage and commercial payers, the Veteran’s Administration, and cash-pay programs. 
  • Strategy 4: Tighten operational and revenue cycle processes by implementing pre-delivery eligibility checks to prevent delivery during inactive coverage periods and prepare for increased denial and appeal activity. 
  • Strategy 5: Monitor and track state implementation communications and managed care plan policies to identify unique requirements regarding verification processes, compliance checks, and exemption documentation requirements. 

VGM Government Relations is working to submit comments to protect coverage and continuity of care for the Medicaid population and minimize administrative burden and financial risk to our members. 

You can find the CMS Interim Final Rule here. 

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