Hospitals Scramble Ahead of Jan. 1 Medicaid Work Rules as Four States Sue to Stop Them

Since Republicans wrote Medicaid work requirements into the July 2025 tax-and-spending law, the rules have drawn two rounds of state lawsuits, a partial court loss for the administration, and now a countdown of less than two months to the start date.

The requirements begin in January. Adults covered through the Affordable Care Act's Medicaid expansion must show 80 hours a month of work, volunteering, school or job training to keep their coverage.

Hospitals mobilize

Hospitals are not waiting for Washington to sort it out. Health systems across the country are texting, calling and sending staff and volunteers to reach roughly 19 million patients who could be affected, according to The New York Times.

They are also telling patients what paperwork they will need, including pay stubs and proof of school attendance.

"There's going to be people who fall through the cracks," said Nicole Harper, chief financial officer at Eskenazi Health, a safety-net hospital in Indianapolis. "We're bracing for impact."

The motive is partly financial. Hospitals depend heavily on Medicaid reimbursements, and a stable insured patient base is what keeps those payments flowing.

NPR reported on Nov. 9 that in Nebraska, which moved quickly to put its work rules in place, a cancer patient was told he had lost coverage.

Four states go to court

Attorneys general from Oregon, Minnesota, New Mexico and Washington have asked a federal court to delay implementation. They argue the work requirements exceed the authority of the Centers for Medicare & Medicaid Services and infringe on states' sovereign interests.

Their central claim is that the requirements "transform" Medicaid into essentially a new program. They say earlier court rulings bar CMS from threatening existing Medicaid funds over participation in a substantially altered program.

The states want the court to declare the withholding of federal Medicaid funds unconstitutional. They also seek preliminary and permanent injunctions against funding cuts for states that do not adopt work requirements.

They also cite money. The suit points to administrative compliance costs and to higher uncompensated care costs if more residents end up uninsured.

This is not the first attempt. In June, 25 states and Washington, D.C., sued the Trump administration over the administrative costs of carrying out the rules. A federal judge rejected that bid in July.

The same judge ruled late last month that the "medical frailty" provision, which exempts certain sick people, went beyond what Congress intended. The judge also imposed a six-month stay on enforcing medical frailty determinations. That ruling and the new lawsuit could complicate the timing of the Jan. 1 start.

What supporters say

Many Republicans in Congress have long backed work requirements. They contend the Medicaid system was riddled with fraud and that health insurance should be earned.

The government estimates the requirements will save $317 billion in taxpayer spending over 10 years. The broader law cut nearly $1 trillion from Medicaid over the next decade.

The Congressional Budget Office projects that by 2034, more than 5 million low-income people in 44 states and the District of Columbia will lose Medicaid coverage because of the work rules. Those numbers are the center of the dispute. Supporters see savings and an incentive to work. Hospitals and the plaintiff states see lost coverage and higher costs for providers and state budgets.

Politics after the midterms

Democrats won both chambers in the midterms and are set to take control of Congress on Jan. 3, after the rules begin. House Democrats drafted an 84-page health agenda before the election that includes reversing Medicaid cuts, restoring enhanced ACA subsidies and expanding Medicare.

KFF polling found 59 percent of voters were concerned about healthcare affordability, up from 2024. That included two in five Republican voters. Half of voters preferred Democrats on healthcare.

The enhanced ACA subsidies expired at the end of 2025. Benchmark marketplace premiums rose 26 percent in 2026, and KFF projects another double-digit increase in 2027.

Democrats still cannot override a presidential veto. Larry Levitt, KFF's executive vice president for health policy, said President Donald Trump is likely to veto any bill Democrats pass to restore the subsidies. He said a deal could come in the form of a delay rather than a reversal, or could include Republican priorities such as Health Savings Accounts.

Brian Blase, president of the Paragon Health Institute, argued in a Nov. 5 post on X that the rise in health insurer and hospital stocks the day after the election signals the market expects "more corporate welfare from Washington."

Some health systems are already preparing lobbying efforts to restore the Medicaid cutbacks. Unless they strike a deal with Republicans, a rollback is uncertain.

What comes next

The court has not yet ruled on the four-state request. If it does not act before Jan. 1, states will start enforcing the requirements with the medical frailty piece of the rule under a six-month stay. The patients hospitals are texting today will be the first to find out whether their paperwork was enough.