How CMS Can Block States From Abusing Exemptions To Medicaid Work Requirements

Overview

Medicaid was originally designed as a safety net for the truly needy—the elderly, individuals with disabilities, and low-income children.¹ However, in recent years, able-bodied adults have become the single-largest category of Medicaid enrollees.²

Due to the passage of the One Big Beautiful Bill Act (OBBB), able-bodied adults on Medicaid will soon be required to meet modest work requirements to continue receiving benefits.³ There are exemptions to work requirements, including for those who are pregnant, caring for young children, or family members with a disability, those who are in drug treatment programs, and those who are deemed medically frail.⁴

Bureaucrats have a long history of trying to skirt work requirements in other welfare programs by using loopholes and gimmicks in order to exempt as many able-bodied adults as possible.⁵ To ensure the same does not happen with Medicaid, the Centers for Medicare & Medicaid Services (CMS) must ensure that states do not abuse the medical frailty exemption to work requirements.

Able-bodied adults on Medicaid are driving the skyrocketing enrollment and costs

Medicaid enrollment and costs have grown significantly in recent years. In 2000, the program had only 35 million enrollees at a cost to taxpayers of $206 billion.⁶ Enrollment had nearly tripled by 2023, while costs soared to $964 billion in 2024.⁷

This surge in costs and enrollment is largely due to the addition of able-bodied adults to the program. Able-bodied adult enrollment has grown from just seven million in 2000 to a whopping 34 million in 2024.⁸

Much of this growth was driven by ObamaCare expansion, which expanded the program to a new class of able-bodied adults. Nearly 70 percent of the Medicaid cost growth since 2000 is attributable to able-bodied adults enrolled through expansion, and more than one-third of total Medicaid spending is on able-bodied adults.⁹ Federal taxpayers now spend more on able-bodied adults than they do for low-income children, the elderly, or individuals with disabilities.¹⁰

For the first time, there are federal work requirements for able-bodied adults on Medicaid

Most able-bodied adults on Medicaid do not work. Nearly two-thirds of able-bodied adults enrolled in Medicaid report no income from work at all.¹¹ This low work participation rate has been consistent over time.¹²

The One, Big, Beautiful Bill will now require able-bodied adults between the ages of 19 and 64 to work, train, or volunteer for a minimum of 80 hours per month or earn at least $580 per month.¹³ In many states, the average entry-level wage is high enough that this requirement can be met by working just eight hours per week.¹⁴

There are several exemptions to work requirements, including if an individual is deemed medically frail and therefore unable to work.¹⁵ Already, at least 29 states report planning to allow individuals to self-attest that they are medically frail.¹⁶ Unless CMS cracks down on abuse and ensures that only those who are truly too medically frail to work are exempted, the self-attestation loophole will effectively nullify Medicaid work requirements right out of the gate.

States have a history of abusing exemptions to work requirements

Cash welfare and food stamps have required able-bodied enrollees to work or be engaged in job training or education since 1996.¹⁷ However, differences in state implementation of these work requirements have yielded mixed results in terms of effectiveness.

States that opposed work requirements have historically found ways to maximize exemptions for cash welfare.^18-19 For example, states like California have expanded the definition of work activities and exempted large groups of people from requirements based on a self-attested “barrier to work.”²⁰ California has also engaged in a scheme to provide low-income families who were already working with small amounts of cash welfare to boost the program’s employment rate, rather than engaging non-working welfare recipients in work.²¹

In food stamps, many states have used waivers and discretionary exemptions to minimize the number of people subject to work requirements.²⁴ In 2023, more than 80 percent of able-bodied adults who should have been subject to the food stamp work requirement were exempted by state policy.²⁵ The impact of maximizing exemptions to work requirements is clear. Only five percent of able-bodied adults without young children on food stamps work full time, and 70 percent don’t work at all.²⁶

Fortunately, Congress closed these loopholes in food stamp work requirements.²⁷ But, the same pattern will likely play out in Medicaid unless CMS acts to ensure that states cannot use gimmicks to minimize the impact of the new work requirements.

Work requirements benefit welfare enrollees

Work requirements are an effective way to help people achieve self-sufficiency and improve their lives. Arkansas briefly implemented Medicaid work requirements in 2018 before being paused by an Obama-appointed judge and then rescinded by the Biden administration.²⁸ While work requirements were in place, 18,000 people raised their incomes enough to leave Medicaid, which is the goal of work requirements.²⁹

In the food stamp program, work requirements have been shown to increase incomes and decrease reliance on welfare.³⁰ When work requirements were implemented, able-bodied adults moved from welfare to work in record numbers.³¹ Those leaving welfare found work in more than 1,000 different industries, touching every corner of the American economy.³² Those able-bodied adults saw their incomes double within a year of leaving welfare and continue to grow thereafter.³³

Unfortunately, some groups are already encouraging states to minimize the positive impact of work requirements by exempting as many people as possible.³⁴

Leftist organizations are pushing states to use self-attestation for medical frailty

As states work to implement Medicaid work requirements, outside organizations that advocate against work requirements are urging states to maximize exemptions. One method of preventing Medicaid enrollees from being subject to work requirements that these organizations have identified is allowing self-attestation for medically frail status.^35-36

One organization is pushing states to ensure that Medicaid applicants “can be deemed compliant by fitting into one of these exemptions, even when they can … work,” rather than actually meeting the modest work requirements.³⁷ This group encourages states to allow self-attestation of medically frail status, even when individuals lack a diagnosed condition or any history of treatment.³⁸

Another group provides states with a framework to implement OBBB with the central goal of maximizing exemptions to work requirements.³⁹ As part of advancing these goals, this organization urges states to integrate self-attestation of medical frailty into the application and redetermination process.⁴⁰

Across the board, organizations that oppose work and support welfare expansion are pushing states to adopt self-attestation for medically frail status as a method to shield able-bodied adults from work requirements without proof or documentation that they meet the definition of medical frailty.⁴¹ The goal is not to lift individuals out of dependency and help them achieve their maximum potential, the goal is plainly stated as minimizing the impact of work requirements.⁴²

CMS must block state schemes that undermine work requirements

The self-attestation scheme

Federal regulations have already defined what deems an individual to be medically frail.⁴³ These existing regulations define medical frailty to include having a disabling mental illness, a physical, intellectual or developmental disability that significantly impairs the ability to perform activities of daily living, a serious and complex medical condition, or chronic substance abuse disorder.⁴⁴

Most states do not have a process to deem an individual medically frail, and many allow people to self-attest to their being medically frail without providing documentation.^45-53 This invites fraud, and would effectively nullify the work requirement by allowing anyone to opt out simply by claiming to be medically frail.

The work requirements for able-bodied adults on food stamps contain a similar exemption for those who are physically or mentally unfit for employment.⁵⁴ Regulations require that those who are seeking to be exempt from work requirements on these grounds provide a certification from a medical professional that indicates the inability of the individual to work.⁵⁵

As a result, few able-bodied adults on food stamps are exempt as unfit for employment.⁵⁶ Indeed, fewer than 10 percent of those who could be subject to work registration requirements are made exempt for being unfit for employment.⁵⁷ But in states where individuals self-attest to medically frail status, as many as 40 percent of enrollees are classified this way.⁵⁸

Because this process is already in place for determining exemptions to food stamp work requirements, states should align the Medicaid medically frail exemption with existing regulations.

Outsourcing to managed care organizations

Another loophole that will weaken the impact of work requirements is allowing managed care organizations (MCOs) or other third parties to determine if an enrollee is medically frail. Allowing MCOs to determine medical frailty exemptions presents a conflict of interest and weakens federal oversight. Some states already allow MCOs to make medically frail determinations.⁵⁹

A similar scheme has already played out with Medicaid Advantage plans. These plans were able to conduct health risk assessments, which led to inflated diagnoses to increase federal payments.⁶³ This scheme cost taxpayers more than $7.5 billion.⁶⁴ In states that allow MCOs to make medical frailty determinations, MCOs are conducting similar “health needs screenings.”⁶⁵ Because the MCO has an incentive to minimize the number of people subject to work requirements, this invites the same type of abuse.

Additionally, allowing MCOs to make determinations shields the process from federal oversight, as CMS has less ability to audit private companies than state agencies. CMS should prohibit states from outsourcing medical frailty determinations to MCOs and require instead that the state agency make the determination using objective standards and verification

The Bottom Line:

CMS should block states from abusing medical frailty exemptions to Medicaid work requirements.

Work requirements are effective in helping people transition from government dependency to independence. Other welfare programs have had work requirements in place for able-bodied adults for decades, but state-level implementation of these work requirements has been spotty. When states minimize the impact of work requirements by exempting as many able-bodied adults as possible, enrollment and dependency remain high.

By prohibiting both self-attestation of medical frailty and outsourcing determinations to third parties, CMS can stop states from sabotaging the success of work requirements.

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