Three Democratic Senators Press CMS for Tougher Rules on Medicaid IT Contractors as Work Requirement Deadline Nears

Three Democratic senators on the Finance Committee released recommendations today, Oct. 20, calling on the Centers for Medicare & Medicaid Services to impose tougher standards on the contractors that build and run state Medicaid eligibility systems.

Sens. Ron Wyden of Oregon, Elizabeth Warren of Massachusetts and Raphael Warnock of Georgia launched an inquiry a year ago into four companies: Deloitte, General Dynamics Information Technology, Gainwell Technologies and Conduent. Those firms are paid billions in taxpayer dollars to build or operate the systems that decide who gets coverage.

The contractors behind the screens

A handful of states run their own Medicaid eligibility systems. Most hire contractors. KFF Health News found that Deloitte dominates that market.

Prior KFF Health News investigations found Deloitte-run systems have been plagued by errors that can cause eligible people to lose coverage. Malfunctions can cost millions of dollars and take years to fix.

"Administrative errors in this line of work are not like errors in other fields," the senators wrote in their report. "There are life-and-death consequences for sick Americans who seek care only to find that their Medicaid coverage has been terminated."

The senators describe state eligibility systems as "built up, patched, and frankensteined for decades." Many of their recommendations are aimed at CMS.

A compressed timeline

The pressure point is the One Big Beautiful Bill Act. The law created the first federally mandated work requirements in Medicaid's history. Starting next year, adults in more than 40 states must show they are working or doing a similar activity for at least 80 hours a month, unless they qualify for an exemption.

The requirement applies to roughly 21 million people who gained eligibility through the Affordable Care Act expansion. States had about 18 months to remake their data and eligibility systems, expand outreach and track compliance, with minimal federal funding, according to Healthcare Dive.

Wyden, Warren and Warnock argue that new restrictions layered on top of old software will cause large numbers of people to lose coverage improperly. That is a forecast, not a measured outcome. The requirements have not yet taken effect nationally.

Governors want more time

The senators are not the only ones raising alarms. The governors of Oregon, California, Maine, New Mexico and Virginia wrote to HHS asking it to push back the Jan. 1, 2027 compliance date.

Their objection centers on an interim final rule CMS issued in June. States say it gave them far less leeway than the informal federal guidance they had been building around. CMS had not issued official guidelines before then, and most states moved ahead anyway.

The governors, Tina Kotek, Gavin Newsom, Janet Mills, Michelle Lujan Grisham and Abigail Spanberger, wrote that they do not believe states can meet the date "in a manner that adequately protects beneficiaries or gives states the opportunity to build and test the systems necessary for successful implementation."

They argue the rule goes well beyond what the statute spelled out, including stricter rules for how medically frail people prove they cannot work and unexpected changes to state verification systems. "These are not minor or technical adjustments," the letter says. "They fundamentally change the processes and system logic underlying states' implementation plans."

This is Kotek's second attempt. Her office says a May letter asking HHS for more flexibility never got a response from the Trump administration.

Courts and Congress

More than two dozen states are suing the administration over the rule. A judge has allowed it to stay in effect while the case proceeds, so the Jan. 1 deadline stands for now.

Some Republican-led states are enforcing even stricter Medicaid requirements, according to Healthcare Dive.

The senators' recommendations face a steep climb. Republicans control the executive agencies that would have to adopt them, and any legislation would have to pass a Republican-controlled Congress. That could change if Democrats win a Senate majority in November's midterm elections.

The problem the senators describe is bipartisan in its cost. Whoever writes the rules, taxpayers fund contractors whose systems have produced expensive failures that take years to repair. Contractors have been paid for that work through multiple administrations of both parties.

The near-term question is whether HHS answers the governors' request before Jan. 1, 2027, and whether the multistate lawsuit changes the rule before then. If neither happens, states will start verifying work hours for roughly 21 million people on systems the senators call patched together over decades.