The One Big Beautiful Bill Act and New Medicaid Work Requirements
By Hannah Vandermeer
The House Spending Bill, also known as the One Big Beautiful Bill Act (“OBBBA”), passed on May 22, 2025, and became law on July 4, 2025. This bills contains several provisions that will affect healthcare, primarily Medicaid and the Affordable Care Act (“ACA”) in the marketplace. An analysis from the Congressional Budget Office (“CBO”) estimates that Medicaid will experience at least $700 billion in cuts which will put many at risk of losing coverage. As Medicaid serves as the financial backbone of many behavioral health centers, these budget cuts could reduce access to behavioral health services for many individuals. Relevant provisions include increased frequency of eligibility determinations, denial of coverage to those with unclear immigration status, and cost-sharing requirements for those just above the poverty line. One of the most notable parts of the bill are the work requirements imposed on the Medicaid expansion population.
Federal Medicaid Work Requirements
Under OBBBA, Medicaid expansion enrollees and applicants must complete 80 hours of “qualifying activities” per month or meet certain exemption criteria. Eligibility status will be verified by states in the month before application and one month between eligibility determinations. For those who cannot show compliance within 30 days or show that they are exempt, enrollment will be discontinued, or applications will be denied.
Qualifying activities include:
- Work
- Community service
- Education
The CBO estimates that these work requirements will account for the largest share of federal Medicaid savings out of any provision included in OBBBA. Further, the addition of work may result in a substantial increase in uninsured individuals. Over the next ten years, OBBBA’s work requirements are anticipated to reduce medical spending by $344 billion, while the total Medicaid cuts in the bill amount to $793 billion. These estimated savings would largely come from coverage losses.
Although coverage losses will likely occur, the federal government provides for multiple exemptions under the bill, some specifically applicable to the behavioral health field. For example, those who are “medically frail” are exempt. Individuals who are blind or disabled, have physical, intellectual, or developmental disabilities, individuals with substance use disorder (“SUD”) or a “disabling” mental disorder, and those with “serious or complex” medical conditions may qualify for the medically frail exemption. Further, individuals participating in a SUD program are also exempt. Other OBBBA exemptions include:
- Parents and caretakers of dependent children or disable individuals
- Individuals who are pregnant or receiving postpartum coverage
- Foster youth/former foster youth under age 26
- Meeting SNAP/TANF work requirements
- American Indians and Alaska Natives
- Disabled veterans
- Individuals incarcerated or released from incarceration within 90 days
- Individuals entitled to Medicare part A/enrolled in Medicare part B
State Medicaid Work Requirements
State Medicaid eligibility rules are also likely to change, with many states following the federal government’s lead and implementing work requirements. Most states are either enacting direct legislation or attempting to obtain Section 1115 waivers. Section 1115 waivers require federal approval and allow states to pilot new Medicaid programs that can deviate from federal rules.
Typically, state proposed work requirements have a carve-out for those with substance abuse disorders or those participating in treatment programs. Some states explicitly exempt these individuals from work requirements, while others consider participation in SUD programs as activities that qualify as work requirements. A few states, like Arkansas, have no exemptions to Medicaid work requirements.
As legislation passes and waivers go through the federal approval process, it’s important for Medicaid enrollees, applicants, and providers to stay up on top of state Medicaid requirements and exemptions. If you or your business may be affected by these changes, please contact Kessler Collins to assist you in navigating these challenges and protecting your interests.
