Court Challenge Tests CMS' New Medicaid Work Requirement Rule
Key Takeaways
- A coalition of 26 states and the District of Columbia has challenged portions of the Centers for Medicare & Medicaid Services' (CMS) Interim Final Rule implementing Medicaid community engagement requirements under Public Law 119-21, arguing that several provisions exceed the agency's authority.¹
- Although a federal court declined to issue a preliminary injunction, the lawsuit raises important questions about how CMS will implement the new Medicaid work requirements before they take effect on January 1, 2027.¹
- The case highlights the ongoing tension between federal efforts to standardize Medicaid eligibility requirements and states' concerns about implementation, administrative burden, and beneficiary access.
A New Legal Challenge to Medicaid Work Requirements
Implementation of the new federal Medicaid work requirements is already facing legal scrutiny as states challenge portions of the Centers for Medicare & Medicaid Services' (CMS) Interim Final Rule (IFR) implementing Public Law 119-21, commonly referred to by CMS as the Working Families Tax Cut (WFTC) legislation.²
The IFR establishes a nationwide framework requiring certain Medicaid beneficiaries aged 19 to 64 to complete at least 80 hours per month of qualifying work, education, job training, work programs, or community service as a condition of Medicaid eligibility beginning no later than January 1, 2027.²
On July 29, however, a coalition of states filed suit challenging several provisions of the rule, arguing that CMS exceeded its statutory authority in defining how the work requirements should be implemented.¹
Although the US District Court for the District of Massachusetts denied the states' request for a preliminary injunction, the decision allows the litigation to continue while implementation efforts move forward.¹
What IFR Would Do
The IFR establishes the operational standards states must use to implement the new Medicaid community engagement requirement enacted by Congress.
1. Create a National Community Engagement Standard
Beginning in 2027, certain adults enrolled in Medicaid will be required to complete at least 80 hours per month of qualifying activities, including:
- Employment
- Postsecondary education
- Job training
- Work programs
- Community service²
CMS states the policy is intended to promote employment, economic stability, and long-term self-sufficiency among Medicaid beneficiaries.²
2. Establish Uniform Exemptions
The rule also identifies individuals who are exempt from the work requirement.
Among those exempt are:
- Pregnant and postpartum individuals
- Individuals determined to be disabled or medically frail
- American Indian and Alaska Native beneficiaries
- Parents and caregivers of young children and individuals with disabilities
- Individuals already meeting comparable work requirements through the Supplemental Nutrition Assistance Program or Temporary Assistance for Needy Families²
CMS states these exemptions are intended to ensure that beneficiaries with significant health-related or caregiving responsibilities are not subject to the new eligibility requirement.
3. Standardize Verification and State Reporting
The IFR also establishes nationwide standards governing:
- Verification of work requirement compliance
- Eligibility determinations
- State reporting requirements
- Beneficiary communications
- Data collection and oversight²
CMS has said these provisions are intended to improve consistency across state Medicaid programs while reducing administrative burden through greater use of automation, data integration, and real-time verification.²
To support implementation, CMS announced $200 million in Government Efficiency Grants authorized under the WFTC legislation, along with more than $600 million in private-sector commitments to modernize eligibility systems and beneficiary outreach.²
What the States Are Challenging
Importantly, the lawsuit does not seek to invalidate the statutory work requirement itself.
Instead, the states challenge several implementation decisions made by CMS in the Interim Final Rule.¹
Specifically, the complaint argues that CMS exceeded its authority by:
- Incorporating work-related criteria into the definition of "medically frail";
- Using a 12-month look-back period when determining medical frailty; and
- Applying work requirements to individuals receiving short-term hardship exemptions during emergency declarations.¹
The states allege these provisions violate the Administrative Procedure Act and exceed the authority delegated to CMS by Congress.¹
Why the Court Declined to Block the Rule
The states sought a preliminary injunction to prevent implementation of the challenged provisions while litigation proceeds.
The court denied that request without prejudice.¹
In its decision, the court applied the traditional four-factor test governing preliminary injunctions, including the plaintiffs' likelihood of success on the merits, the possibility of irreparable harm, the balance of equities, and the public interest.¹
The ruling does not determine whether the challenged provisions are lawful. Instead, it allows the case to continue while leaving the Interim Final Rule in effect.
Because the denial was issued without prejudice, the states may renew their request for preliminary relief as the litigation develops.¹
Competing Perspectives
CMS has described the Interim Final Rule as implementing congressional direction under Public Law 119-21 while establishing a consistent national framework for work requirement administration.²
According to CMS, the policy promotes workforce participation, economic independence, and accountability while incorporating numerous exemptions for individuals with significant health or caregiving needs.²
The agency also cites a Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation analysis estimating that the work requirements could reduce poverty under certain economic conditions.²
The plaintiff states argue that several implementation provisions extend beyond what Congress authorized and impose unnecessary operational and administrative burdens on state Medicaid programs.¹
Rather than challenging the overall policy enacted by Congress, the lawsuit focuses on how CMS chose to implement specific aspects of the law, particularly those affecting medical frailty determinations and hardship exemptions.¹
The litigation also reflects broader concerns about the flexibility states retain in administering Medicaid under federal requirements.
What the Litigation Means for Stakeholders
For now, states must continue preparing to implement the work requirements by January 1, 2027, while monitoring the outcome of the litigation.
Depending on future court rulings, states may need to revise eligibility systems, beneficiary communications, or verification processes.
Although eligibility determinations remain the responsibility of state Medicaid agencies, managed care organizations may experience changes in enrollment patterns and member eligibility as implementation proceeds.
Plans also may need to coordinate closely with states regarding beneficiary outreach and continuity of care.
For Medicaid beneficiaries subject to the new requirements, the litigation does not currently alter implementation timelines.
Individuals who qualify for statutory or regulatory exemptions would continue to be evaluated under the standards established in the Interim Final Rule unless future court decisions modify those provisions.
The Bottom Line
The lawsuit challenging CMS' Interim Final Rule highlights the next phase of the national debate over Medicaid work requirements—not whether Congress may impose them, but how federal regulators may implement them.
Although the court declined to temporarily block the rule, the litigation raises important questions about federal administrative authority, state implementation flexibility, and the practical operation of one of the most significant Medicaid eligibility changes in recent years.
For states, managed care organizations, providers, and beneficiaries, the case will help shape how the new work requirements are implemented as the January 2027 implementation deadline approaches.
References
- Commonwealth of Massachusetts et al. v. Oz et al. U.S. District Court for the District of Massachusetts. Memorandum and Order on Plaintiffs' Motion for a Preliminary Injunction. Civil Action No. 26-12962-RGS. Filed July 29, 2026.
- Centers for Medicare & Medicaid Services. Medicaid Community Engagement Requirement for Certain Individuals Interim Final Rule with Comment Period (CMS-2454-IFC). Published June 1, 2026. Accessed July 31, 2026. https://www.cms.gov/newsroom/fact-sheets/medicaid-community-engagement-requirement-certain-individuals-interim-final-rule-comment-period-cms
