Part IV of a Series: Bridging Data Gaps
Under the 2025 Act, formerly the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, federal law now requires certain adults enrolled in the Medicaid program to demonstrate compliance with work and community engagement requirements.[1] Beginning January 1, 2027, the federal government will no longer provide states with matching funds (currently 90%) for any adults who do not comply with federal rules.
The Congressional Budget Office (CBO) estimates that Section 71119 will reduce federal spending by $325.6 billion over the next 10 years. However, due to the “multiplier affect” and the state share of spending, the economic impact on states and families could reach nearly $1 trillion.
New Law Requires More Information
Approximately 14 million adults will have to be evaluated to determine whether the new work and community engagement requirements apply to them. Most of these individuals will be required to demonstrate that they worked or participated in community engagement activities for at least 80 hours per month.
Over time, states have invested billions of dollars in a variety of Eligibility and Enrollment (E&E) automated systems that have reduced the time for making a Medicaid eligibility determination from weeks to days.
According to the Centers for Medicare & Medicaid Services (CMS), over two-thirds of applications on behalf of children and adults who qualify under the Modified Adjusted Gross Income (MAGI) eligibility groups were processed within one week, and more than half (54%) were processed in under 24 hours.[2]
Today, individuals can apply for benefits online without setting foot into a county eligibility office. They need only to provide basic, easily verifiable information, such as proof of age, Social Security numbers for applicants, address, income, and family size. Although the applicant attests to the accuracy of the information under penalty of law, the person must still provide proof, such as pay stubs.
States will soon be required to obtain and verify additional pieces of information from applicants, reversing the trend of recent years. The new law also requires that eligibility redeterminations be conducted at least every six months, doubling the workload on state eligibility staff.
Limitations of Data Matching
The law requires states to confirm that an individual has met the work and engagement requirements through ex parte verifications “without requiring, where possible, the applicable individual to submit additional information.”
States shall “deem” an individual to have demonstrated compliance if the individual is under the age of 19, is entitled to Medicare, or is incarcerated. This “deemed group” can be identified through data matching, but it is a very small group of people. Nineteen-year-olds and Medicare eligibles should not be enrolled through this eligibility category in the first place. Individuals who are incarcerated have their Medicaid benefits suspended except in the case of an inpatient hospital stay.
In most cases, data matching should identify individuals who work 80 hours or more per month for an employer. However, it may be difficult to use data matching for individuals who are self-employed or “gig workers,” as they report income but not necessarily hours.
Data matching will identify Individuals who participate in the Supplemental Nutrition Assistance Program (SNAP) work program with a history of similar requirements to those now facing Medicaid members. According to a study by the American Enterprise Institute (AEI), the number of SNAP Able Bodied Adults Without Dependents (ABAWDs) represents about half of the Medicaid adult group.[3] Thus, states must roughly double their efforts to make work and community engagement successful across the social safety that often serves the same population. Data matching will find some individuals who are enrolled in an educational program at least half-time but will require greater collaboration between Medicaid and state educational institutions, which may be reluctant to share data due to privacy laws.
Data matching can identify parent/caretaker relatives of a dependent child under the age of 14. However, data matching alone will miss millions of adults who are caretakers of disabled individuals, provide community service, or have limitations in activities of daily living due to medical conditions.
Individuals cannot merely claim to have been exempt from participation each month; they must provide proof.
While states begin to design their work and community engagement programs, they should look beyond the horizon. Full-time, full-year employment equals 2080 hours per year. Thus, 80 hours per month (960 hours annually) is properly viewed as a starting point to assist individuals in escaping poverty. In the short term, an individual in treatment for substance use disorder is exempt from participation. But employment is vital to long-term recovery. Unpaid community service counts as participation. However, a person needs a paycheck, employers need workers, and states need taxpayers.
While data matching provides a valuable tool to automatically identify compliance and exemptions, significant gaps remain for self-employed individuals, caregivers, and those engaged in unpaid community service. This requires states to supplement data systems with robust outreach and individualized verification efforts to avoid disenrolling eligible adults.
Law Requires State Verification
Individuals will be required to provide additional information beyond what is required today, but the states must verify such information in order to demonstrate compliance. Verification of monthly participation hours must occur before determining or redetermining eligibility.
The new law requires not only information but proof. Reliance on self-attestation followed by an audit of a sample population does not meet the conditions imposed upon the states.
The threat of losing the federal match rate of 90% for the cost of a person’s coverage should incentivize states to make additional investments in community connections (workforce training centers, post-secondary educational institutions, faith-based organizations, etc.) that can verify participation and exceptions. The return on investment will be substantial.
As a result, states must proactively enhance verification processes and community partnerships to ensure compliance, protect federal funding, and effectively support Medicaid members.
Moving Past the Fork in the Road
No existing database will provide all the information necessary to determine eligibility for all 14 million adults who potentially face the loss of their health care coverage. With federal matching dollars at risk every month, states will need to invest in a well-planned and targeted campaign to engage individuals where they live, work, and serve. Community partnerships that track, seek, and find their unemployed and underemployed neighbors will be vital to these efforts.
Poverty is linked to poor health outcomes and even premature death. The states with the lowest per capita and per household incomes also rank worst among the states regarding health indicators. To break the cycle of poverty and poor health, states will need to open new doors. Moreover, the states must not merely wait for people to enter; states should engage community partners to go out into the neighborhoods and countrysides to meet people where they are.
Responsibility and Accountability
While the law is now in effect, states have choices regarding implementation. The consequences are enormous. Governors and other elected and unelected officials will be on the frontlines to face their critics for what they did or failed to do. State and local leadership will need to have data and documentation of their efforts to provide these Medicaid adults with opportunity after opportunity to join the pathway to success.
HORNE Insights:
Navigating Medicaid Work Requirements
HORNE helps states bridge data gaps and meet new Medicaid work and community engagement rules with advanced verification, integrated data solutions, and strategic community partnerships.
We support scalable, compliant programs that protect federal funding while promoting economic empowerment and healthier communities.
