B. Working Families Tax Cut Legislation

Public Law 119-21 , which CMS refers to as the Working Families Tax Cut (WFTC) legislation, was signed into law by President Donald J. Trump on July 4, 2025. This landmark legislation includes significant changes in Medicaid and the Children's Health Insurance Program (CHIP) affecting eligibility, program operations, and oversight capabilities. It also establishes new accountability measures for Medicaid and CHIP. Among other changes to Medicaid, section 71119(a) of the WFTC legislation added section 1902(xx) of the Act to establish a community engagement requirement for certain adults applying for or enrolled in Medicaid. This requirement has the potential to empower Medicaid beneficiaries through employment, education, or volunteer service so they can escape isolation and dependency, build confidence, and achieve self-sufficiency and independence. Isolation and loneliness have become an epidemic in the United States, affecting even able-bodied adults who can engage with their communities through work and other activities. [ 6 7 8 9 ] One study found that lacking social connection is as harmful as smoking 15 cigarettes per day. [ 10 ]

Moreover, employment has been shown to be an important factor leading to long-term beneficiary health and well-being. Obtaining stable employment provides individuals with reliable income and financial stability, which in turn supports access to safe housing, nutritious food, and other resources necessary for maintaining health. [ 11 12 ] Financial stability can lead to improved living conditions, purchasing healthier foods, and the ability to engage in healthy behaviors. [ 13 14 ] Financial stability has also been linked to reduced chronic conditions, such as cardiovascular risk. [ 15 16 ] Beyond its role in income generation, employment itself has been shown to be an important factor in long- ( printed page 33350) term beneficiary health and well-being. Evidence indicates that obtaining and maintaining stable employment is associated with improved physical and mental health outcomes and greater overall well-being, while unemployment and unstable work are linked to poorer health outcomes. [ 17 18 19 20 ] Evidence from numerous studies show that the link between health and work is intrinsic and bi-directional whereby work is associated with healthier outcomes, and better health is associated with increased employment. Thus, a well-designed community engagement requirement may benefit individuals so that they are not dependent, demoralized, or stuck in situations that hinder their economic, physical, and mental state.

Section 71119(d) of the WFTC legislation directs CMS to publish an IFC no later than June 1, 2026, for the purpose of implementing the community engagement requirement. As directed, this IFC implements section 71119 of the WFTC legislation, including 1902(xx) of the Act.

Demonstrating community engagement as a condition of Medicaid eligibility is not an entirely new policy for the Medicaid program. Under President Trump's 2017 to 2021 presidential term, we approved section 1115 demonstration projects in 13 States [ 21 ] that conditioned Medicaid eligibility, for certain individuals, on compliance with a community engagement requirement. These section 1115 demonstrations were intended to test and evaluate approaches that required work or community engagement as a condition of eligibility, coverage, additional or enhanced benefits, or reduced premiums or cost sharing. The demonstrations aimed to produce improved health and well-being by increasing the number of beneficiaries who were employed or engaged in other activities such as volunteering or education. Due to litigation and the subsequent Administration's withdrawal of approved authority for those States that had previously approved section 1115 demonstration authority to implement their community engagement programs, Georgia and Arkansas were the only two States that launched programs. Georgia is the only State that continues to operate a community engagement program as a condition of Medicaid eligibility for certain adults. This early implementation experience provides insight into operational considerations, indicating that beneficiary awareness, clarity of requirements, and the accessibility of reporting mechanisms, as well as overall administrative complexity, can influence participation and compliance. [ 22 23 24 25 ]

In this IFC, we implement section 1902(xx) of the Act premised on what we learned from the previously approved section 1115 demonstration projects, permitting States to retain flexibility for their programs where possible, balancing the benefits of State flexibility with the potential costs, such as those associated with systems and operations, and promoting alignment with other health and social service programs, such as SNAP, while also adhering to the letter of the law. This IFC also seeks to increase program integrity by requiring State use of data and information that can ensure that State Medicaid eligibility determinations are auditable and that we have the data needed to exercise appropriate oversight of State implementation of the community engagement requirement. To help defray operational costs and streamline operational workflows, this IFC relies and builds upon existing statutory and regulatory requirements when possible, including existing requirements for Medicaid, SNAP, TANF, the Internal Revenue Service (IRS), and Health Insurance Exchanges.

The new requirement at section 1902(xx) of the Act requires individuals to engage in qualifying community engagement activities like work or education. The law also requires disenrollment of noncompliant individuals from Medicaid. This requirement will bring Medicaid in line with other public benefit programs, like SNAP and TANF, which have similar work requirements to support beneficiaries on a path to self-sufficiency. In SNAP and TANF, noncompliance with work requirements has implications for eligibility in those programs. For SNAP, noncompliance can result in ineligibility for time-limited participants after 3 months within a 36-month period. For TANF, noncompliance can result in the reduction or termination of cash benefits. As specified in section 1902(xx) of the Act for Medicaid, noncompliance would result in Medicaid disenrollment from or denial of eligibility for the adult group or section 1115 demonstrations that include applicable individuals; however, the individual can re-apply at any time and will be subject to the procedures for assessing compliance at application.

Consistent with our understanding of the Congress' directive through passage of the WFTC legislation, for able-bodied adults (generally those who enroll in the adult group), Medicaid should be a short-term hand up, not a lifetime handout. Implementing the community engagement requirement, we believe, will assist in prioritizing coverage for Medicaid's most vulnerable populations such as seniors, individuals with disabilities, pregnant women, and children while empowering able-bodied individuals through community engagement. Section 1902(xx) of the Act and this IFC are applicable to all States and the District of Columbia that elect to provide coverage to the adult group under the State plan or to certain individuals covered through certain section 1115 demonstrations as defined in statute and explained in the preamble of this IFC. Section 1902(xx) of the Act and this IFC do not apply to the territories. States that provide Medicaid coverage to applicable individuals as ( printed page 33351) defined in section 1902(xx) of the Act generally must comply with the community engagement requirement no later than January 1, 2027; States may implement the community engagement requirement earlier, provided that certain conditions are met.

This IFC implements the statutory definition of applicable individuals, the statutory term for the Medicaid applicants and beneficiaries who must demonstrate community engagement as a condition of their Medicaid eligibility. With certain exclusions specified in the statute, applicable individuals are those who are eligible for, or enrolled under, the State plan adult group described in section 1902(a)(10)(A)(i)(VIII) of the Act and § 435.119. In addition, applicable individuals are those who are eligible to enroll or are enrolled under a waiver of the State plan authorized under section 1115 of the Act that provides coverage that meets minimum essential coverage (MEC) requirements described in section 5000A(f)(1)(A) of the Internal Revenue Code (the Code) and who have attained the age of 19 and are under 65 years of age, are not pregnant, and not entitled to, or enrolled, for benefits under part A of title XVIII, or enrolled for benefits under part B of title XVIII, and are not otherwise eligible to enroll under such plan.

This IFC specifies the steps States must take when they are unable to verify whether an applicable individual has met the community engagement requirement when applying for Medicaid, as part of a renewal of Medicaid eligibility, and, if elected by the State, during a more frequent verification. This includes providing the individual with a notice of noncompliance and 30 calendar days to demonstrate a satisfactory showing. This IFC specifies that the notice of noncompliance must inform the individual how they may make a satisfactory showing to demonstrate compliance or that the individual should not be subject to the requirement as well as how the individual can reapply for coverage if they are disenrolled.

The IFC also specifies when and how States must verify an applicable individual's compliance with the community engagement requirement and whether an individual meets an exception (that is, will be deemed compliant) or exclusion from the requirement. This includes the use of data sources to verify community engagement activity consistent with section 1902(xx) of the Act and when to request additional information from the individual.

This IFC specifies outreach and notice requirements for States that are integral to implementing the community engagement requirement; how individuals can meet the community engagement requirement, which require that affected individuals work or engage in other educational or community service activities for at least 80 hours a month; how applicants and beneficiaries will be able to demonstrate compliance and how States will verify compliance; and what steps States must take in the event of noncompliance. This IFC also specifies when States will have flexibility in implementing the community engagement requirement.

This IFC addresses additional considerations for States and implications of the community engagement requirement for other existing enrollment pathways, such as presumptive eligibility, as well as eligibility for demonstration projects authorized under section 1115 of the Act. This IFC also specifies the new State data and reporting requirements for monitoring purposes. In addition, this IFC outlines considerations for States that elect to delegate certain functions to their managed care plans as well as implications of the conflict-of-interest requirement for managed care plans and other contractors. Finally, this IFC specifies the situations and steps for a State to request a temporary good faith effort exemption from compliance with timely implementation of the community engagement requirement.