JEFFERSON CITY, Mo. — States are facing a complex and costly undertaking to implement new federal requirements for Medicaid eligibility, which will mandate that some recipients demonstrate they are working, volunteering, or enrolled in education programs. The changes, set to take effect January 1, 2026, are projected to cost states more than $1 billion, according to an analysis by the Associated Press, despite an initial $200 million federal allocation.
The impending requirements stem from a tax-cut law signed in 2017, and will impact Medicaid enrollees ages 19 through 64 without dependent children, whose incomes exceed typical eligibility thresholds. These individuals will be required to document at least 80 hours of operate or community service monthly, or maintain half-time student status. Eligibility reviews will also shift from annual to semi-annual, potentially leading to quicker coverage loss for those experiencing changing circumstances.
The Congressional Budget Office estimates these provisions will result in 6 million fewer people with health insurance and save the federal government $388 billion over the next decade. However, the immediate challenge for states lies in upgrading aging computer systems and establishing verification processes.
“Our current eligibility systems are pretty old, and the ability to change them is incredibly, very difficult,” said Toi Wilde, chief information officer for the Missouri Department of Social Services. Missouri is already moving to secure funding for technology upgrades and additional staff. State lawmakers are considering a $32 million appropriation to solicit bids for vendors and improve a chatbot for Medicaid participants. The state anticipates needing approximately 120 additional workers, at a cost of $12.5 million, to manage the increased administrative burden.
Many states currently lack the capacity to collect employment or education data from Medicaid participants. They are exploring connections to external databases to verify job and school enrollment. However, a significant hurdle remains: no comprehensive database exists to track volunteer hours. Federal guidelines defining exceptions to the work requirements, including criteria for determining “medical frailty,” are not expected until June 2026.
States are also motivated to ensure accuracy, as the federal government will begin penalizing states for Medicaid payment errors starting in October 2029. This creates additional pressure to implement the changes correctly.
Maryland projects spending over $32 million, Kentucky over $46 million, and Colorado over $51 million. Arizona estimates potential costs of $65 million and the need for 150 additional staff. Some states have reported even higher projected costs, though specific breakdowns were not always available.
Arkansas previously implemented a Medicaid work requirement in 2018-2019, but it was ultimately halted by a federal court after thousands lost coverage. The Arkansas Department of Human Services suggests existing vendor contracts may cover some of the new technology changes, minimizing the financial impact. Nebraska plans to launch its work requirement in May 2026, seven months ahead of the federal deadline, but has not yet disclosed associated costs.
Georgia is currently the only state with an active Medicaid work requirement, operating under a special federal waiver. However, the Georgia Pathways to Coverage program has incurred over $54 million in administrative costs from 2021 through early 2025 – exceeding the value of medical assistance provided during that period, according to the U.S. Government Accountability Office. The majority of these costs are attributed to technology changes within its eligibility and enrollment system.
Analysts caution that the experiences of Georgia and Arkansas highlight potential risks. Joan Alker, executive director of the Center for Children and Families at Georgetown University, warned that “a huge amount of funding is going to go to vendors to construct these complicated red-tape systems that prevent people who need it from getting health care.”
