Medicaid – Cuts & Changes – The Big Ugly Bill – Part III

Work Requirements/Community Engagement. Exceptions. Exemptions. Hardship exemption. Compliance. Non-compliance. Definitions. Verifications. Please Share Everywhere!

Welcome to Part III of the Changes and Cuts to Medicaid that were enacted on July 4, 2025, but will trickle in over the next 4-5 years. The real impacts will not really be felt by anyone until after the Midterms in 2026 in the hopes that the “R’s” will get re-elected before anyone finds out exactly what they did. Well, I am here to tell you what they did and when each part of it is going to begin.

Part III covers Work Requirements/Community Engagement; Exceptions to work requirements; Optional exceptions for short-term hardship; options for frequency of compliance verification; What happens if you are non-compliant; States matching funds for the non-compliant; how the State has to report to you; Who is an applicable individual; Specified excluded individuals/exempt from work requirements; what are acceptable educational programs; redistributive provider taxes; and demonstration projects funding.

There is a lot of information here and I have listed all the referenced documents in the Research section at the end. There are summaries of each change at the beginning of each section. If you want to get into the details, you can read those if provided, or look at the Research section for the original documents.

If it feels overwhelming or if it is too much information or you start to go on overload, walk away, come back later. Read only what interests you and/or what applies to you, skip the rest.

Photo by ljk on Freeimages.com

Redistributive Provider Tax

There is a section on what constitutes a redistributive provider tax, which may impact how States are able to fund their Medicaid programs. If you are interested in this topic, please read that section of the Big Ugly Bill. https://www.congress.gov/bill/119th-congress/house-bill/1/text

Demonstration Projects Cannot Add To The Medicaid Budget

The HHS Secretary has to approve any demonstration projects that are a “try out” or “pilot” for potential new programs or policies meant to improve medical care. Any approved projects must be budget neutral and not take away any money from existing Medicaid funding. From what I can see, this section will stifle innovation and improvements by boxing States in to restrictive rules and limited to no funding. HHS will be given a budget of $5 million dollars to enforce this rule, which I assume is all administrative since any pilot projects or demonstration projects meant to improve Medicaid will not receive any government funding.

Work Requirements For Medicaid Recipients – Community Engagement

Beginning March 1, 2027 (after the Midterms) – yes, they call this “Community Engagement” – Anyone enrolled in Medicaid will be subject to the following requirements and responsible for all timely reporting of these activities to maintain their coverage month-to-month.

“``(A) The individual works not less than 80 hours.

``(B) The individual completes not less than 80 hours of

community service.

``(C) The individual participates in a work program for not

less than 80 hours.

``(D) The individual is enrolled in an educational program

at least half-time.

``(E) The individual engages in any combination of the

activities described in subparagraphs (A) through (D), for a

total of not less than 80 hours.

``(F) The individual has a monthly income that is not less

than the applicable minimum wage requirement under section 6 of

the Fair Labor Standards Act of 1938, multiplied by 80 hours.

``(G) The individual had an average monthly income over the

preceding 6 months that is not less than the applicable minimum

wage requirement under section 6 of the Fair Labor Standards

Act of 1938 multiplied by 80 hours, and is a seasonal worker,

as described in section 45R(d)(5)(B) of the Internal Revenue

Code of 1986.”

Exceptions to the Work Requirements/Community Engagement

You do not have to comply with the above work requirements if: (but except to provide proof with your application)

1. There is an exclusion in a document that is not well defined under paragraph (9)(A)(ii) – could be a state paragraph, could be the internal revenue code, could be the department of labor. I am unable to find this paragraph reference. This is what AI says: “(9)(a)(ii) typically refers to a specific exception code related to eligibility for individuals enrolled with a Health Home or in outreach programs. This code, along with others like (9)(a)(i), is used within systems like ePACES to indicate certain circumstances affecting a member's Medicaid eligibility.”

2. You are under age of 19

3. You are entitled to, or enrolled for, benefits under Part A of title XVIII (18), or enrolled for benefits under B of title XVIII (18)

4. You are described in any of subclauses (I) through (VII) of subsection (a)(10)(A)(i)

5. You were an inmate of a public institution at any point during the 3-month period ending on the first day of such month.

Optional Exceptions For Short-Term Hardship Events

The State implementation of Medicaid may provide exemptions to the work rule due to short-term hardships if the hardship meets the definition of a ‘short-term hardship.’

What is a short-term hardship in this bill?

1. You receive in-patient hospital services, nursing facility services, services in an intermediate care facility for individuals with intellectual disabilities, inpatient psychiatric hospital services, or other such services of similar acuity (including outpatient care relating to other services specified in this subclause) as the HHS Secretary determines appropriate;

2. If a person resides in a County or similar defined area

a. Where there is an emergency or disaster declared by the President

b. Or, subject to a request from the State to the HHS Secretary where a State has an unemployment rate that is at or above the lesser of 8% or 1.5 times the national employment number

3. OR any person or their dependent has to travel outside of their community for an extended period of time to receive medical services necessary to treat a serious or complex medical condition that they cannot get in their own community.

Options For Frequency of Compliance Verification

States may require that a person verify their work hours/community engagement more frequently than the minimum requirements in the Big Ugly Bill.

The State is supposed to use any ‘reliable’ information that they have access to, like payroll records or payroll payment data, and not require that the individual supply additional verification, if possible.

What Happens If You Are Non-Compliant?

If the State cannot determine if you were compliant with the work requirements or exempt, then they have to do the following:

1. Send out a notice of non-compliance with 30 calendar days from receipt of the notice for that individual to prove that they met the work requirements/community engagement, or that they are exempt from work requirements/community engagement (meaning the individual does not meet the definition of ‘applicable individual’ under that paragraph (9)(A)

2. Continue to provide Medicaid for that 30 days of notification.

3. If non-compliant or cannot prove they are exempt, then State will cancel their Medicaid – but it says they have to make sure they looked to see if you are eligible for any other medical insurance program. They can cancel an application or your actual Medicaid benefits ‘not later than the end of the month following the month in which the 30-calendar-day period ends as long as

a. The State determined if there is any other basis for which the person qualifies for state assistance or another program

b. AND – the individual gets written notice and granted and opportunity to appeal and get a hearing on the decision.

4. The Notice has to include how you can meet compliance requirements, or what you have to do to show that you do not have to meet the work requirements and now the individual can reapply for Medicaid.

States Receiving FMAP Relating to Non-Compliant Individuals

I interpret this to mean that the State will still get its Federal Match if the only reason not to is that applicable individuals are non-compliant.

“A State shall NOT be treated as not providing medical assistance to all individuals described in section 1902(a)(10)(A)(i)(VIII) [(VIII)[13] beginning January 1, 2014, who are under 65 years of age, not pregnant, not entitled to, or enrolled for, benefits under part A of title XVIII, or enrolled for benefits under part B of title XVIII, and are not described in a previous subclause of this clause, and whose income (as determined under subsection (e)(14)) does not exceed 133 percent of the poverty line (as defined in section 2110(c)(5)) applicable to a family of the size involved, subject to subsection (k);]…” or not spending their Medicaid dollars solely on the basis of someone being determined ineligible for Medicaid or for failure to meet the work/community engagement requirements.

There is also another provision that individuals are eligible for “essential coverage” as described in the Internal Revenue Code section 5000A(f)(1)(A)(ii) for a month if that person would have been eligible for a State plan (Medicaid) except that they failed to meet the work/community engagement requirements.

NOTE: It is sickening that they are making this so difficult…

State Reporting To You – the applicable individual

Beginning December 31, 2026 (it can be earlier) and periodically thereafter, the State has to notify you in writing under the title of the requirement to meet the work/community engagement requirements. The notice must include:

1. What makes the person an “applicable individual”

2. How to comply with the requirements

3. What are the exceptions

4. Consequences of non-compliance

5. How to report any changes in status

a. That might exempt person from work/community engagement requirements

b. How person might qualify under the

This notice has to be delivered by regular mail or can be delivered electronically at the discretion and option of the person. Notice can also be delivered via telephone, text, internet website or other electronic means.

Who is an Applicable Individual? paragraph (9)(A)(ii)

Any person who is already not excluded who is eligible to enroll per subsection (a)(10)(A)(i)(VIII) (see above), and can enroll for minimum coverage as described in the Internal Revenue Code of 1986 section 5000A(f)(1)(A) – see research for document.

The person has attained the age of 19 but is under age 65, is NOT pregnant, and is not enrolled in other excluded plans.

Specified Excluded Individuals That Exempt/Meet Work/Community Engagement Requirements

NOTE: The Context around “specified excluded individuals” seems to be in relation to the work requirements/community engagement as it is under that section in the bill – not that these people would be excluded from receiving Medicaid.

Any person who is described in subsection (a)(10)(A)(i)(VIII) (see above), who is also an Indian or an Urban Indian, is a California Indian, has otherwise been determined to be an Indian (see specifics on what constitutes any one of these designated “Indians” in the rules).

A parent, guardian, caretaker relative, or family caregiver (look that up in RAISE Family Caregivers Act - https://www.congress.gov/bill/115th-congress/house-bill/3759/text) of a dependent child 13 years of age and under or a disabled individual.

A Veteran with a disability rated as total under section 1155 of title 38, United States Code - https://www.law.cornell.edu/uscode/text/38/1155

A person who is medically frail or otherwise has special medical needs including someone who is blind or disabled, has a substance abuse disorder, has a disabling mental disorder, has a physical, intellectual, or development disability that significantly impairs their ability to perform 1 or more activities of daily living, or has serious or complex medical conditions. (of course, be prepared to provide proof of any of these conditions.)

A person who is in compliance with the State section 407 – (look these up for your State).

A person who is a member of a household that receives SNAP and is not exempt from a SNAP work requirement.

A person who is participating in a drug addiction or alcohol treatment and rehab program.

A person who is an inmate of a public institution.

A person who is pregnant and entitled to postpartum medical assistance.

Educational Programs That Exempt/Meet Work/Community Engagement Requirements

For persons enrolled in the minimum required amount of educational credits, these are the definitions:

Institute of Higher Education

Career or Technical Education

Must be located within the 50 States or DC

NOTE: The State can request an exemption from implementing any and all of these requirements. I will cover all those details tomorrow.

If you have any questions, please leave a comment and I will do my best to find the answer for you. I am not a lawyer or have any formal legal training, so if you need legal advice, please contact a lawyer of your choosing or the ACLU, Legal aid, or your Attorney General in your State.

Review from Kaiser Family Foundation - Medicaid Provisions

The Medicaid provisions in the House Reconciliation bill would increase the number of people without health insurance by at least 7.8 million in 2034, according to estimates by the Congressional Budget Office. The increased number of people without health insurance stems from multiple provisions that would reduce federal spending on Medicaid by $793 billion over 10 years and reduce Medicaid enrollment by 10.3 million. Some of the provisions that would likely cause significant numbers of people to lose health insurance are described below.

Fewer people would be enrolled in Medicaid through the ACA expansion because:

• People eligible through the expansion would have to meet new work and reporting requirements.

• States would be required to renew eligibility for expansion enrollees at least two times per year and impose new cost sharing requirements.

• Fewer states might offer the ACA expansion than might otherwise be the case because the bill would eliminate an added incentive for states to adopt it.

• Expansion states would also receive lower federal matching rates if they cover immigrants with state-only funds, regardless of immigration status.

Other provisions would affect all enrollees (not just expansion enrollees):

• New requirements added under the Biden administration for states to streamline Medicaid eligibility and enrollment would be delayed until January 1, 2035, which would increase barriers to enroll in and renew Medicaid coverage, especially for older adults and people with disabilities.

• The bill would create new requirements for verifying addresses, cross-checking eligibility and data against other sources, and would reduce retroactive coverage from three months to one month.

• The bill would eliminate the reasonable opportunity period for verification of immigrant status in all states, during which people receive coverage.

https://www.kff.org/policy-watch/how-will-the-2025-budget-reconciliation-affect-the-aca-medicaid-and-the-uninsured-rate/

”Requires states to condition Medicaid eligibility for individuals ages 19-64 applying for coverage or enrolled through the ACA expansion group (or a waiver) on working or participating in qualifying activities for at least 80 hours per month.

• Mandates that states exempt certain adults, including parents of dependent children and those who are medically frail, from the requirements.

• Requires states to verify that individuals applying for coverage meet requirements for 1 or more consecutive months preceding the month of application; and that individuals who are enrolled meet requirements for 1 or more months between the most recent eligibility redeterminations (at least twice per year).

• Specifies that if a person is denied or disenrolled due to work requirements, they are also ineligible for subsidized Marketplace coverage.

• These provisions cannot be waived including under Section 1115 authority.

• Provides $100 million in funding to states for systems development for FY 2026 and an additional $50 to HHS to support implementation (for FY 2026).

Effective Date: Not later than December 31, 2026, or earlier at state option

- Caps the “look-back” for demonstrating community engagement at application to three months.

- Limits exemptions to parents with children ages 13 and under (instead of all parents).

- Specifies seasonal workers meet requirements if average monthly income meets specified standard.

- Requires states to use data matching “where possible” to verify whether an individual meets the requirement or qualifies for an exemption (House bill only requires data matching “where possible” for verifying meeting work requirements).

- Allows the Secretary to exempt states from compliance with the new requirements until no later than December 31, 2028, if the state is demonstrating a good faith effort to comply and submits progress in compliance or other barriers to compliance.

- Increases funding to states for FY 2026 to $200 million and increases HHS implementation funding for FY 2026 to $200 million.”

https://www.kff.org/tracking-the-medicaid-provisions-in-the-2025-budget-bill/

• Requires states to conduct eligibility redeterminations at least every 6 months for Medicaid expansion adults.

Effective Date: For renewals scheduled on or after December 31, 2026

• Same as House-passed bill, except:

- Requires the Secretary to issue guidance within 180 days of enactment.

- Provides $75 million in implementation funding for FY 2026.

https://www.kff.org/tracking-the-medicaid-provisions-in-the-2025-budget-bill/

• Limits retroactive coverage to one month prior to application for coverage for expansion enrollees and two months prior to application for coverage for traditional enrollees.

• Provides $15 million in implementation funding for FY 2026.

Effective Date: January 1, 2027

https://www.kff.org/tracking-the-medicaid-provisions-in-the-2025-budget-bill/

NOTE: Take your time and understand where you are with whatever you have for health care. All the changes to Medicare, Medicaid, CHIP, and even SNAP are going to impact every single American whether you use these programs or not. Our economy depends on the funds that these programs use to also provide medical care and food to all of us, not just people who are signed up for them.

Keep Pounding On Congress! What they did was wrong. The worst of it won’t take effect until after the Mid-terms and the “R’s” are hoping that they can convince people that they will go back and “fix” what they are destroying, or that all of us 90% are “bad” and taking advantage, moochers and spongers off the government – a government who we paid taxes into all our lives and expect a return on our investment. A government the rich and selfish have NOT paid a lot of taxes into and do not need these services.

Part IV continues the Medicaid Changes tomorrow… (I have like 53 pages of the Big Ugly Bill to go to complete the Medicaid review).

Nothing Is Forever Or Permanent

Remember that nothing is permanent. Legislation can be altered or repealed. So while they made changes and cuts to Medicaid, these changes can be restored or made better by Congress, current or future. Keep pounding on Congress at your displeasure at what they have done and how it will impact you or someone in your family, or even someone you may know.

From Michael Popok and Legal AF - “Can Congress Be Sued? You Bet.

Some might wonder: can you sue Congress over a law they passed? Absolutely. Laws—even budget bills—can be struck down as unconstitutional if they infringe on rights enshrined in the Constitution. It’s happened before, and it’ll happen again.” https://substack.com/home/post/p-167919554

Research & Additional Reading:

The Big Ugly Bill - https://www.congress.gov/bill/119th-congress/house-bill/1/text

Medicaid Program; Streamlining the Medicaid, Children's Health Insurance Program, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes - A Rule by the Centers for Medicare & Medicaid Services on 04/02/2024 - https://www.federalregister.gov/documents/2024/04/02/2024-06566/medicaid-program-streamlining-the-medicaid-childrens-health-insurance-program-and-basic-health

The Fair Labor Standards Act Of 1938, As Amended - https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/FairLaborStandAct.pdf

26 U.S. Code § 45R - Employee health insurance expenses of small employers - https://www.law.cornell.edu/uscode/text/26/45R

26 U.S. Code § 5000A - Requirement to maintain minimum essential coverage - https://www.law.cornell.edu/uscode/text/26/5000A

STATE PLANS FOR MEDICAL ASSISTANCE^[6] - https://www.ssa.gov/OP_Home/ssact/title19/1902.htm

RAISE Family Caregivers Act - https://www.congress.gov/bill/115th-congress/house-bill/3759/text)

38 U.S. Code § 1155 - Authority for schedule for rating disabilities - https://www.law.cornell.edu/uscode/text/38/1155

42 U.S.C. 1396p - Liens, adjustments and recoveries, and transfers of assets - https://www.govinfo.gov/app/details/USCODE-2010-title42/USCODE-2010-title42-chap7-subchapXIX-sec1396p

42 U.S. Code § 1396p - Liens, adjustments and recoveries, and transfers of assets - https://www.law.cornell.edu/uscode/text/42/1396p

42 U.S.C. 1396a - State plans for medical assistance - https://www.govinfo.gov/content/pkg/USCODE-2010-title42/pdf/USCODE-2010-title42-chap7-subchapXIX-sec1396a.pdf

TITLE 42—THE PUBLIC HEALTH AND WELFARE - https://www.govinfo.gov/content/pkg/USCODE-2010-title42/pdf/USCODE-2010-title42-chap7-subchapXIX-sec1396a.pdf

STATE PLANS FOR MEDICAL ASSISTANCE^[6] - https://www.ssa.gov/OP_Home/ssact/title19/1902.htm

Federal Medical Assistance Percentage (FMAP) for Medicaid and Multiplier - https://www.kff.org/medicaid/state-indicator/federal-matching-rate-and-multiplier/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

Medicaid and CHIP Cuts in the House-Passed Reconciliation Bill Explained - https://ccf.georgetown.edu/2025/05/27/medicaid-and-chip-cuts-in-the-house-passed-reconciliation-bill-explained/

Summary of Health Provisions in the One Big, Beautiful Bill Act (H.R. 1) - https://www.amcp.org/letters-statements-analysis/summary-health-provisions-one-big-beautiful-bill-act-hr-1

Directed Payments in Medicaid Managed Care - https://www.macpac.gov/wp-content/uploads/2024/10/Directed-Payments-in-Medicaid-Managed-Care.pdf

How Will the One Big Beautiful Bill Act Affect the ACA, Medicaid, and the Uninsured Rate? - https://www.kff.org/policy-watch/how-will-the-2025-budget-reconciliation-affect-the-aca-medicaid-and-the-uninsured-rate/

Trump's spending bill cuts Medicaid: Here's what it's called in your state - https://www.axios.com/2025/07/08/medicaid-cuts-states

Trump bill's health effects won't be felt until after midterms - https://www.axios.com/2025/07/07/medicaid-impacts-tax-bill-delayed

Articles By Bluesmurf! How Our Government Works, Your Rights, Medicare, Social Security, the Big Ugly Bill, and More!

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