States must spend millions for new Medicaid work mandates
JEFFERSON CITY, Mo. — To receive Medicaid health coverage, some adults will soon have to show they are working, volunteering or taking classes. But to gather that proof, many states first will have to spend millions of dollars improving their computer systems.
Across the nation, states face an immense task and high costs to prepare for the Jan. 1 kickoff of new Medicaid eligibility mandates affecting millions of lower-income adults in the government-funded healthcare program.
The first half of a $200-million federal allotment has already begun flowing to states to help implement the new requirements. But the tab for the needed technology improvements and additional staff is likely to exceed $1 billion, according to an Associated Press analysis of budget projections in more than 25 states. That extra cost will be borne by a mixture of federal and state tax dollars.
The task is not as simple as pushing through a software update on your smartphone or personal computer. That’s because each state has its own system for managing Medicaid, often requiring experts to make customized changes.
“Our current eligibility systems are pretty old, and the ability to change them is very, very difficult,” said Toi Wilde, chief information officer for the Missouri Department of Social Services.
As a consequence of states’ new financial burden, some eligible people may lose their healthcare coverage, officials warn.
New requirements affect millions, but not all
The Republican tax and spending law signed last year by President Trump is financed, in part, by sweeping Medicaid changes intended to cut government spending. Two of the most prominent will apply in four-fifths of the states, affecting Medicaid enrollees ages 19 through 64, without young children, whose incomes are above the typical eligibility cutoff.
Those Medicaid participants will have to work or do community service at least 80 hours a month, or enroll at least half-time as a student. They also will face eligibility reviews every six months, instead of annually, meaning they could lose coverage more quickly when their circumstances change.
The two provisions together are projected to save the federal government $388 billion over the next decade, resulting in 6 million fewer people with health insurance, according to the Congressional Budget Office.
But states first must update their online portals used by Medicaid participants, their aging computer systems used by state workers and their methods of verifying information through various databases.
Most will have to turn to private contractors to meet the time crunch. At least 10 companies have agreed to offer discounted services, according to the federal Centers for Medicare and Medicaid Services.
Making those technology upgrades “is going to be a lift. It’s not something straightforward. It’s not easy,” said Jason Reilly, a partner at Guidehouse, a firm that is advising several states on the Medicaid requirements.
Most states don’t currently collect employment or education information about Medicaid participants. So states are looking to tap into outside sources to verify job and school data. But there’s no database of community volunteers.
And states are still waiting on federal rules — not due until June — to define some of the exceptions to the work requirements, such as how to determine who qualifies as “medically frail.”
States face extra pressure to get it right because the federal government will start penalizing states with too many Medicaid payment errors in October 2029.
Congress guaranteed all states a share of the $200 million allotted for Medicaid work and eligibility changes. But states must apply for additional federal money. The federal government covers up to 90% of states’ costs to develop systems for determining Medicaid eligibility, 75% of costs to maintain those systems and half of most other administrative costs.
Missouri won early approval for the 90% federal funding rate. State lawmakers now are fast-tracking a $32-million appropriation needed to solicit bids for vendors to start upgrading technology platforms and improving a chatbot for Medicaid participants. Over the next year, the state’s social services agency expects to need about 120 additional workers — at a cost of $12.5 million — to handle the extra administrative workload.
Other states also project large costs. Maryland expects to spend over $32 million in federal and state funds to implement the Medicaid changes, Kentucky more than $46 million, and Colorado over $51 million. Arizona estimates it could cost $65 million — and require 150 additional staffers — to implement the new federal requirements.
Some states surveyed by the AP reported even higher expected costs, though they didn’t always provide a breakdown for how much is due to new Medicaid mandates and how much pertains to Supplemental Nutrition Assistance Program changes also contained in Trump’s massive law.
Several states, including Arkansas, said they are still working on cost estimates for the Medicaid changes. Arkansas instituted a Medicaid work requirement in 2018-19, and thousands of people were dropped from the rolls before a federal court ended it. Many of the technology changes required by the new federal mandates could be covered under an existing vendor contract and have “a minimal financial impact on our Medicaid budget,” the Arkansas Department of Human Services said in an email.
Nebraska has said it plans to launch Medicaid work requirements in May, seven months ahead of the federal deadline. But the state has not detailed any associated costs and did not respond to inquiries from the AP.
Georgia’s work requirement prompts concerns
Georgia is currently the only state requiring some Medicaid recipients to work, after receiving special federal approval several years ago to expand coverage to some adults not otherwise eligible.
The Georgia Pathways to Coverage program racked up more than $54 million of administrative costs from 2021 through the first part of 2025 — twice the amount of medical assistance paid out over that same period, according to the U.S. Government Accountability Office. Almost all of those costs came from technology changes to its eligibility and enrollment system.
Some Medicaid analysts point to Georgia’s costs and Arkansas’ enrollment losses as reasons for caution as work requirements roll out in other states.
“A huge amount of funding is going to go to vendors to construct these complicated red-tape systems that prevent people who need it from getting healthcare,” said Joan Alker, executive director of the Center for Children and Families at Georgetown University.
“In my view, that is a big, big risk.”
Lieb writes for the Associated Press.
