On Dec. 8, 2025, the Centers for Medicare & Medicaid Services (CMS) released new guidance to help states prepare for new mandatory Medicaid community engagement requirements. The new CMS guidance is based on the Working Families Tax Cut (WFTC) legislation (Public Law 119-21), which was signed into law on July 4, 2025.
Here’s an overview of the guidance recently provided by CMS and other questions related to these Medicaid community engagement requirements:
Mandatory Medicaid Community Engagement Requirements
The core of the guidance requires applicable individuals to demonstrate community engagement as a condition of their Medicaid eligibility. States must implement the requirement by January 1, 2027, although they may implement it earlier.
Applicable Individuals
The requirements apply to individuals residing in one of the 50 states or the District of Columbia who are generally in the Medicaid adult group or enrolled in certain Section 1115 demonstrations that provide minimum essential coverage (MEC).
Community Engagement Definition
To meet the requirement in a given month, an individual must participate in one or more qualifying activities for a total of at least 80 hours:
- Work.
- Community service.
- Participation in a work program.
- Enrollment in an educational program (including higher education or career and technical education) at least half-time.
- Any combination of the above activities.
- Earning a monthly income not less than the applicable federal minimum wage multiplied by 80 hours (currently, $580 per month, based on $7.25 x 80).
- Having an average monthly income over the preceding six months that meets the federal minimum wage threshold, provided the individual is a seasonal worker.
Exclusions and Exceptions
Specific populations are excluded from the definition of an “applicable individual” or are excepted from the monthly community engagement requirement.
- Exclusions (Specified Excluded Individuals) include former foster care children, American Indians or Alaska Natives, parents or caregivers of a dependent child aged 13 or under or of a disabled individual, veterans with a total disability rating, individuals who are medically frail or have special medical needs (including those with disabilities or substance use disorder), individuals compliant with TANF work requirements, participants in drug/alcohol treatment, inmates of a public institution, and pregnant women or women entitled to postpartum medical assistance.
- Exceptions apply to individuals who are under age 19, entitled to or enrolled in Medicare Part A or B benefits, or described in mandatory categorically needy eligibility groups. States also have the option to provide exceptions for “short-term hardship events,” such as receiving certain inpatient services, residing in a federally declared emergency/disaster area, or facing high local unemployment.
Demonstrating and Verifying Compliance
The guidance sets requirements for how states must verify community engagement when a beneficiary applies and renews.
- At Application: States must require applicable individuals to demonstrate engagement for at least one month immediately preceding the month of application, with states having the option to require up to three consecutive months.
- At Renewal: States must require beneficiaries to demonstrate compliance for one or more months (whether consecutive or not, as specified by the state) between renewals. Notably, the guidance explains that renewal frequency for this population will be required once every six months, starting January 1, 2027, as mandated by Section 71107 of the WFTC legislation.
- Use of Reliable Information: States must first attempt to verify compliance using reliable information available to the state (such as payroll data or enrollment data) before requesting additional documentation from the individual.
Procedures for Non-Compliance
If a state cannot establish compliance, it must provide notice and allow the individual 30 calendar days to demonstrate compliance or show that the requirement does not apply. During this period, an enrolled beneficiary must continue to receive medical assistance. Failure to demonstrate compliance may lead to denial of the application or termination of eligibility.
An individual who is otherwise eligible for Medicaid coverage that provides MEC but fails to meet the community engagement requirements is precluded from eligibility for advance payments of the premium tax credit (APTC) and premium tax credits (PTC) used on a Health Insurance Exchange.
What are the guiding principles for policy development?
CMS provided four key principles to guide policy development on community engagement:
- Connect Members to Work and Community.
- State Flexibility to balance benefits with potential costs.
- Promote Alignment with existing statutory and regulatory requirements for programs like SNAP, TANF, IRS, and the Marketplace to streamline business flows and defray operational costs.
- Protect Taxpayers by ensuring verification and determinations are easily auditable.
- Implementation and Financial Resources
What financial support is available?
Federal funding totaling $200 million for fiscal year 2026 is available to states to establish the necessary systems to carry out these requirements. Furthermore, states may be eligible for enhanced federal financial participation (FFP) (90/10 enhanced match for design/development and 75/25 for ongoing operations) for IT system costs by submitting an Advanced Planning Document (APD).
What outreach must states perform?
Before implementation, states must provide outreach notices by mail (and one or more additional formats, such as text or telephone) to applicable individuals, explaining how to comply, the consequences of non-compliance, and the exceptions. The timing of this outreach depends on the state’s chosen compliance review period (1, 2, or 3 months).
Can states use Managed Care Organizations (MCOs) to determine compliance?
States are prohibited from using MCOs, PIHPs, PAHPs, or other related contractors to determine beneficiary compliance with the community engagement requirements.
Are there any exemptions?
The Secretary of HHS has the authority to grant a temporary exemption to states demonstrating a good-faith effort to comply, but any such exemption must expire no later than December 31, 2028.
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