CMS Releases Rule Implementing Medicaid Community Engagement Requirement
On June 1, 2026, the Centers for Medicare & Medicaid Services (CMS) issued an interim final rule implementing the Medicaid community engagement requirement established under federal law. Beginning January 1, 2027, states generally must require certain non-pregnant adults ages 19 to 64 enrolled in the Medicaid expansion population or certain Section 1115 demonstration programs to complete at least 80 hours per month of work, education, community service, or other qualifying activities as a condition of Medicaid eligibility. CMS estimates the requirement will apply in 43 states and the District of Columbia.
The rule also establishes several exemptions and state options designed to limit the requirement’s application to certain populations. Exemptions are available for groups including pregnant and postpartum individuals, former foster care youth, American Indians and Alaska Natives, certain caregivers, medically frail individuals, and veterans with total disability ratings. States may also elect to provide short-term hardship exceptions under specific circumstances, including medical treatment, disasters, and high unemployment.
In addition to defining eligibility standards, the rule outlines new operational responsibilities for states. States must verify compliance at application and renewal and may conduct additional checks between renewals. Certain new applicants must satisfy the requirement before applying, while existing beneficiaries must demonstrate compliance between renewals. Individuals who lose coverage due to noncompliance may reapply at any time and be reassessed for eligibility. The rule is effective July 31; CMS will also accept comments on the rule through July 31. For a more detailed review of the rule’s provisions and potential state implementation considerations, see Sellers Dorsey’s full summary of CMS-2454-IFC (CMS, June 1).
States Experience Financial Constraints as Community Engagement Requirements Near Implementation
States may face financial strain as they implement new Medicaid community engagement requirements, even though one of the policy’s goals is to reduce costs. Before January 1, 2027, states are looking at upfront costs to upgrade their technology systems, hire staff, and manage complex eligibility-tracking processes, including verifying exemptions and work status. However, as of May 1, 2026, Nebraska is the first state to implement the requirements ahead of the deadline. In response to a survey from POLITICO, states reported costs ranging from $4M to $30M to implement community engagement requirements. These costs come as many states are already dealing with budget shortfalls or lower revenues compared to previous fiscal years, forcing difficult trade-offs such as cutting services or increasing revenue through new or expanded taxes and fees.
POLITCO references a survey from KFF that found most Medicaid recipients already work, attend school, serve as caregivers, or cannot work due to health conditions, suggesting the new requirements may add administrative costs without significantly increasing employment. CMS released its interim final rule on June 1, 2026, which further details how states must implement and operationalize community engagement requirements (Politico, May 31).
Agencies Finalize No Surprises Act IDR Rule
Federal agencies finalized a rule aimed at improving the Federal Independent Dispute Resolution (IDR) process under the No Surprises Act, which is used to resolve out-of-network payment disputes between providers and payers. The changes are intended to address administrative challenges after the IDR process received more than 5 million disputes since launching in 2022, far exceeding initial expectations and contributing to delays and administrative burden. To reduce costs and limit ineligible disputes, the rule lowers the administrative fee from $115 to $15 per party per dispute, expands flexibility to batch eligible claims while establishing limits on the number of claims included in a single dispute, and requires payers to use standardized claim codes when communicating about out-of-network services.
The rule also establishes the framework for a new IDR Gateway, a centralized platform that will begin rolling out in 2026 and allow users to initiate disputes, track case status, and manage dispute activity in one place. According to the agencies, the changes are intended to reduce administrative burden, improve transparency, lower costs, and support more timely resolution of payment disputes while maintaining protections against surprise medical bills (CMS, May 28).
OMB Releases Proposed Regulation on Federal Grants
On May 28, the Office of Management and Budget (OMB) released proposed regulations that would revamp the existing systems for notices of funding opportunities (NOFOs) and other federal grants. The proposal explicitly cites revisions to § 200.205 to strengthen requirements for agency merit review and establish pre-issuance review processes in alignment with EO 14332. Advocates across sectors worry about the implications this rule could have, as grant determinations may depend more on the current administration’s objectives over scientific need. Additionally, the proposed rule would allow active grants to be terminated at any time, only requiring agencies to provide a brief written rationale. The proposal also comes as Behavioral Health advocates wait on Substance Abuse and Mental Health Services Administration to open about 50 NOFOs for grant applications. The public comment period will end on July 13, 2026 (Inside Health Policy, May 29).
