26 U.S. states sue Trump over Medicaid work requirements

WASHINGTON, UNITED STATES — Twenty-six states and the District of Columbia sued the Trump administration to block a Centers for Medicare & Medicaid Services (CMS) rule they say strips health coverage from medically vulnerable Medicaid enrollees.

According to a report from Healthcare Dive, the lawsuit targets a June 3 interim final rule that narrows the ‘medically frail’ exemption — a key protection determining who is shielded from Medicaid’s new 80-hour monthly work requirement.

CMS rule tightens medically frail exemption

The One Big Beautiful Bill Act — the federal legislation enacted last year — established work requirements for most Medicaid enrollees ages 19 to 64, requiring 80 hours monthly of employment, volunteering, or school — adding a new layer of administrative burden to Medicaid managed care programs. It also exempted individuals deemed ‘medically frail.’

The CMS interim final rule tightened that exemption: enrollees now must show they are ‘significantly impaired’ in their ability to meet work requirements.

States argue the new standard makes exemptions functionally unreachable for patients undergoing cancer treatment, people with disabilities, and individuals managing multiple chronic conditions.

“The Trump Administration’s attempt to impose new, burdensome requirements on Medicaid recipients threatens access to healthcare for our most vulnerable residents and families,” said Massachusetts Attorney General Andrea Joy Campbell.

“Congress made clear that people with serious medical conditions should not lose coverage,” Campbell added.

Two-fifths of at-risk Medicaid disenrollees already have three or more chronic conditions — a population for whom the narrowed ‘medically frail’ standard creates a compliance barrier rather than a genuine medical assessment.

Lawsuit accuses CMS of unlawful rulemaking

The coalition — led by California, Massachusetts, and New Jersey attorneys general — argues the interim final rule violates the Administrative Procedure Act (APA) by departing significantly from the legislation it was designed to implement.

States also contend the rule unconstitutionally coerces them by creating unclear eligibility requirements ahead of a January 1 implementation deadline.

California Attorney General Rob Bonta, one of the co-leads, framed the lawsuit as a defense of congressional intent: “People with serious illnesses or disabilities already face major challenges in their daily lives — they shouldn’t also have to worry about losing their healthcare because of work requirements or related barriers. That was Congress’s will, and it must be respected.”

The coalition seeks to vacate specific provisions of the interim final rule and pause enforcement while the case proceeds — citing evidence that APA-violating rulemaking causes eligible individuals to lose Medicaid coverage because of administrative barriers, not because they failed to work.

For healthcare outsourcing providers managing Medicaid eligibility verification, enrollment support, and prior authorization, the lawsuit signals extended administrative uncertainty.

Health systems and managed care organizations navigating shifting exemption standards across 26 plaintiff states will face compounding compliance and appeals workflows — a load that offshore revenue cycle teams are frequently called on to absorb.

Medicaid eligibility is now a contested legal question in more than half of United States states.