Given that Medicaid is the nation’s largest funder of behavioral health care, the consequences will be especially devastating for people with substance use disorders (SUDs) and formerly incarcerated individuals, two groups heavily reliant on the joint state-federal health plan.
Medicaid isn’t just another insurance program — it’s a lifeline that can make the difference between stability and crisis, life and death. It’s vital to preventing overdose, supporting recovery, promoting successful re-entry and improving public health overall. Our organization’s new report outlines how policymakers can mitigate the potential harm of H.R. 1’s cuts and changes, particularly the new work reporting provisions.
Starting Jan. 1, 2027, adults covered under states’ Medicaid expansion must report at least 80 hours per month of work or community engagement to stay eligible. Experience in states like Arkansas shows the danger: When similar rules were implemented, thousands lost coverage — not because they weren’t working but because confusing, burdensome systems made compliance difficult — and employment rates didn’t improve.
To prevent this, state policymakers and program administrators must act now, focusing on two key areas: maximizing exemptions and minimizing reporting burdens.
H.R. 1 mandates several exemptions, including for individuals who are “medically frail” (a category that includes people with SUDs), those “participating in drug addiction or alcoholic treatment and rehabilitation programs,” and individuals released from incarceration within the past three months. How states interpret these categories will make all the difference.
Despite people in recovery and re-entry often facing stigma, health challenges and barriers to employment, many do work. But even brief disruptions in employment status could now upend their health coverage — and vice versa — derailing their treatment engagement, stability and well-being.
Consider Adrian McGonigal, an Arkansas man with a chronic lung condition who lost Medicaid coverage when the state implemented work requirements in 2018. Though he worked at a chicken processing plant, confusion over reporting led to termination of his coverage. By the time it was restored, he had become so ill he could no longer work. While Adrian didn’t have an SUD, his condition likewise required ongoing care, which without Medicaid was simply unaffordable.
To avoid such outcomes, state Medicaid agencies should interpret exemptions as broadly as possible. To the extent allowed by federal regulations, anyone with a history or potential diagnosis of SUD should qualify as medically frail. Those who have completed treatment programs should also be exempt under the longer-term medically frail category, since recovery doesn’t end upon discharge. States also should not restrict the treatment exemption based on arbitrary limits such as program length or intensity.
States can also reduce harm by simplifying reporting. Streamlined, data-driven systems help both enrollees and administrators. Data matching, the required default approach, should be maximized, while protecting privacy. McGonigal’s coverage loss and the devastating ripple effects, for example, could all have been prevented if Medicaid had utilized data matching to verify his work hours.
Data matching should also be used to exempt enrollees from work requirements. For example, by Medicaid coordinating with correctional systems to document individuals’ health information pre-release, those with SUDs or other chronic conditions could automatically qualify for the long-term medically frail exemption, which is not limited like the three-month post-release exemption.
Fairfax County, Va., offers a strong model. The Sheriff’s Office helps people leaving incarceration obtain Medicaid and ensures that they’re screened for needed health care pre-release. This screening data can seamlessly exempt someone — for instance, if they are receiving medication for an SUD or another chronic condition.
Importantly, H.R. 1 doesn’t require states to verify exemptions. If they choose to, though, they should simplify the process by accepting self-attestations or third-party letters rather than requiring extensive documentation.
Beyond implementing H.R. 1, states can take additional steps to safeguard access to care. Expanding the use of insurance navigators, for example, can help people understand and maintain coverage. Increasing screening for SUD and other chronic conditions in hospitals, schools and jails can identify more individuals eligible for exemptions and connect them to treatment earlier.
State Medicaid agencies and insurance departments should also strengthen enforcement of state and federal parity laws, which require Medicaid and most commercial insurers to provide addiction and mental health-care benefits on par with their other medical coverage. Georgia’s insurance commissioner recently fined commercial insurers $20 million for parity violations, recovering funds for both patients and the state.
Leaders who promised to protect health care for their constituents still have real opportunities to deliver: Members of Congress can work to ensure that the Department of Health and Human Services’ forthcoming H.R. 1 implementation guidance encourages states to reduce reporting burdens and utilize exemptions expansively. State Medicaid agencies can save time and money by streamlining systems now so their offices aren’t overburdened when work requirements take effect in 2027. All of these strategies will protect millions, especially those most at risk.
Deborah Steinberg is a senior health policy attorney at the Legal Action Center (LAC), advocating at both the state and federal levels to increase and improve access to comprehensive and equitable SUD care. Teresa Miller is LAC’s national director of health initiatives, working to ensure that health equity and racial justice lenses are applied to all aspects of the organization’s health policy priorities.
Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
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