Starting in January 2027, millions of lower-income Americans enrolled in Medicaid will face a new requirement that has been presented as a way to reduce government spending and encourage people to work.
But there is another side of the equation that deserves considerably more attention.
How much will states have to spend to administer the new rules? And what happens when people who are eligible for Medicaid lose coverage because they cannot navigate the paperwork required to prove they qualify?
Under the new federal Medicaid community-engagement requirements, certain adults between 19 and 64 will generally have to work, volunteer, participate in qualifying education or training, or otherwise complete 80 hours of qualifying activity each month. States must generally have their systems in place by January 1, 2027.
The Centers for Medicare & Medicaid Services says states will have to verify compliance at application and renewal, with states also having the option of conducting additional checks. If a state cannot verify that someone has met the requirement, the person must receive notice and an opportunity to demonstrate compliance or establish that the requirement does not apply to them.
That is a significant new administrative undertaking.
And administrative undertakings cost money.
Medicaid Is Not an Automatic Benefit
There is an important misconception surrounding Medicaid that often gets lost in arguments about eligibility requirements.
Medicaid is not like signing up for a company softball game. Someone cannot simply check a box saying they are low income and automatically receive government-funded health insurance.
Medicaid already operates under complicated eligibility rules involving income, household circumstances, age, disability, pregnancy, residency, and other factors. Those rules also vary considerably from state to state.
KFF’s January 2026 data illustrates just how restrictive Medicaid eligibility can already be. In non-expansion states, the median income eligibility level for parents is only 40% of the federal poverty level. For a family of three, that amounted to $10,928 a year in 2026.
Texas had an even lower limit. KFF reported that parents in a family of three could qualify based on income only up to 15% of the federal poverty level, or about $4,098 annually. Adults without dependent children generally cannot qualify for Medicaid based solely on low income in most states that have not expanded the program.
In other words, there are already people who are genuinely poor, genuinely struggling, and genuinely unable to afford private health insurance who nevertheless make too much money to qualify for Medicaid.
That is an important starting point for any discussion about new eligibility requirements.
The people applying for assistance are not necessarily people who have never been subjected to eligibility rules. Many have already gone through a system designed to determine whether their income and circumstances qualify them for help.
The Catch-22 of Medicaid
This is where a recent comment from KFF’s Jennifer Tolbert cuts directly to the heart of the problem.
The Associated Press reported on states preparing for the new requirements and the different approaches they are taking toward people who claim they cannot meet the work requirement because of medical conditions.
Tolbert, KFF’s director of state health policy and data, described a situation that is a recurring problem for lower-income households.
“Someone may not be able to work, but they can’t see a doctor because they can’t afford it. So they’re now applying for Medicaid,” Tolbert told the AP. “But Medicaid is saying you need documentation from a provider.”
That is a catch-22.
A person cannot work because of a medical condition. They cannot afford to see a doctor because they do not have health insurance. They apply for Medicaid because they need health coverage to obtain medical care. Then they may be told they need medical documentation before receiving that coverage.
The problem is particularly significant for people who have no regular doctor.
Someone with a well-paying job and good insurance may be able to schedule an appointment, obtain medical records, and submit documentation without much difficulty. For someone living paycheck to paycheck, the process can be considerably harder.
The AP reported that six states are requiring immediate documentation from a health care provider for people seeking an exemption based on medical frailty, rather than initially allowing people to attest to their own condition.
That distinction could have enormous consequences for someone who cannot afford the appointment necessary to prove that they cannot work.
The Paperwork Can Become the Barrier
There is a tendency to think of paperwork as an inconvenience rather than a financial issue.
For lower-income households, paperwork can be a financial issue.
Missing an appointment can mean missing work. Getting to a doctor’s office can require transportation. Obtaining records can require another appointment. A person without a regular doctor may have to establish care before a physician can provide the documentation the state wants.
Even receiving a letter from a government agency does not guarantee that the person receiving it understands what must be done next or has the ability to complete it.
The federal rules recognize that verification will be complicated enough to require states to build systems around it. CMS says states must verify compliance at application and renewal and give people an opportunity to demonstrate compliance if the state cannot initially verify that they have met the requirement.
That creates a new administrative layer between a person and their health insurance.
And every additional layer creates another opportunity for someone to fall through the cracks.
Losing Medicaid Does Not Make Medical Problems Disappear
There is another financial issue that deserves more attention.
If someone loses Medicaid, the medical problem that made them seek coverage does not necessarily disappear.
The person may still need medication. They may still need treatment. They may still have diabetes, cancer, a chronic respiratory condition, a mental health condition, or another illness that requires continuing care.
What changes is who pays.
An uninsured person may delay treatment because they cannot afford it. A manageable medical condition can become more serious when treatment is postponed. Eventually, the person may end up seeking care through a hospital or emergency department.
That does not mean every person who loses Medicaid will end up in an emergency room. Nor does it prove that every dollar saved in Medicaid would reappear somewhere else in the health care system.
But it does mean that eliminating Medicaid coverage is not necessarily the same thing as eliminating the underlying cost of someone’s health care.
The cost can move.
Hospitals and other providers already deal with patients who cannot pay their medical bills. Governments, hospitals, health systems, insurers, and other parts of the health care system can absorb portions of those costs.
So the question should not simply be whether Medicaid spending goes down.
The question should be whether the total cost of caring for these people goes down.
What About Fraud?
There is a legitimate reason for states to verify Medicaid eligibility.
Fraud exists. Government programs need safeguards. Taxpayers should not be paying for benefits received by people who deliberately misrepresent their circumstances.
But there is a difference between preventing fraud and making legitimate people prove their eligibility through increasingly complicated procedures.
The federal government already has a substantial enforcement system devoted to Medicaid fraud. The Department of Health and Human Services Office of Inspector General oversees Medicaid Fraud Control Units operating throughout the country.
The people committing deliberate fraud, however, are not necessarily the same people who struggle to obtain a doctor’s note.
Fraudsters are attempting to get around the rules. If one method of deception becomes more difficult, they can look for another vulnerability.
That is what fraudsters do.
Meanwhile, an honest person with a legitimate medical condition may simply become overwhelmed by the requirements.
There is an important distinction between someone trying to fool the system and someone who cannot successfully navigate it.
A complicated verification process can potentially identify some improper enrollment. It can also make it harder for legitimate beneficiaries to prove that they qualify.
The People Caught in the Middle
This is particularly significant for lower-income households.
For someone with money, an administrative requirement can be an annoyance.
For someone without money, it can become a wall.
A person may not have a primary care physician. They may not have reliable transportation. They may work a schedule that changes from week to week. They may not be able to take unpaid time off to attend an appointment. They may not have enough money to pay for medical care simply to obtain documentation showing why they need Medicaid.
None of those circumstances mean the person is attempting to cheat the system.
They may simply mean the person is poor.
And that brings the issue back to Tolbert’s observation.
Someone who cannot work may need Medicaid precisely because they cannot afford the medical care needed to establish why they cannot work.
Requiring medical documentation in that situation can create a circular problem.
The Real Test Will Be the Bottom Line
There is a legitimate debate over how Medicaid should be administered and how government programs should protect taxpayer money.
Fraud prevention and accurate eligibility determinations are reasonable goals.
But a policy designed to save money should ultimately be evaluated using the entire financial picture.
States will have to pay for technology, workers, verification systems, notices, call centers, and other administrative infrastructure. Georgia’s experience demonstrates that those costs can become substantial.
Then there are the costs that are harder to put into a single budget line.
What happens when an eligible person loses coverage because they could not provide documentation?
What happens when someone delays medical care because they cannot afford to see a doctor?
What happens when a medical condition becomes more expensive to treat because care was delayed?
What happens when someone who lost Medicaid eventually returns to the program after a period without coverage?
And what happens if sophisticated fraudsters continue finding ways around the new requirements while legitimate beneficiaries struggle with them?
Those questions will determine whether the promised savings are real.
The new Medicaid requirements will change who receives coverage and how states administer the program. But the number of people removed from Medicaid should not automatically be treated as the amount of money saved.
The real accounting comes later.
If states spend enormous amounts of money building systems that make it harder for eligible people to maintain coverage, while those same people postpone medical care and fraudsters continue finding ways around the rules, the savings could look very different once all of the costs are added together.
Someone can be too sick to work, unable to afford a doctor, and applying for Medicaid precisely because they need medical care.
Requiring that person to produce medical documentation before receiving the assistance needed to obtain that care is more than a paperwork problem.
It is a financial problem, too.
And it is one that the states will eventually have to pay for.
—Greg Collier
