Forty-three states and the District of Columbia must condition Medicaid eligibility on 80 hours of monthly work, school or community service starting January 1, 2027, under the 2025 Working Families Tax Cut law. The same statute that sets that nationwide deadline also lets the Department of Health and Human Services push a single state’s actual start date back by close to two more years. A state that shows it is genuinely trying to comply, rather than ignoring the mandate, can receive a good-faith-effort exemption running no later than December 31, 2028. One federal law, two different calendars.
The Good-Faith Clause Inside Section 1902(xx)(11)
Section 71119 of the Working Families Tax Cut law, Public Law 119-21, added a new subsection (xx) to Section 1902 of the Social Security Act, creating the community engagement mandate along with the exemption that can delay it. Congress did not leave the delay open-ended. The same subsection, at paragraph (11)(C)(i), caps any good-faith exemption at December 31, 2028, regardless of when a state first requests one. Even a state approved on its first possible request still runs into a hard outer boundary written into the statute itself, not left open to agency discretion.
CMS detailed the mechanism in a December 2025 bulletin to state Medicaid directors, later incorporated into the interim final rule that took effect July 31, 2026. Good-faith-effort exemptions, the agency wrote, must expire no later than December 31, 2028, consistent with the statute Congress passed in 2025. The bulletin makes clear the exemption belongs to the state, not to individual enrollees — someone living in a state without an approved exemption faces the January 2027 start date regardless of how prepared that state’s own Medicaid agency happens to be.
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What a State Must Prove Before HHS Grants the Delay
To receive the delay, a state must submit a formal request to the Secretary of Health and Human Services rather than simply notify CMS that it needs more time. The agency reviews what actions the state has already taken toward compliance, what specific barriers have slowed implementation, and whether the state has produced a detailed plan and timeline for reaching full compliance. Approval is not automatic: CMS has said it expects to grant exemptions only to states making meaningful implementation efforts that run into severe or unexpected obstacles, not to states that have simply fallen behind schedule.
An exemption, once granted, is not permanent protection from oversight. The Secretary can terminate a state’s delay early if that state fails to meet quarterly reporting requirements or stops making good-faith progress toward compliance. States must keep documenting their work throughout the exemption period, not only at the point of the original request, and a state that wins a delay in 2027 can still lose it before the December 2028 outer limit if its progress stalls.
That reporting requirement sits alongside a much shorter deadline facing individual Medicaid enrollees in states without an exemption. A state that cannot verify an applicant or beneficiary met the 80-hour requirement must send a notice of noncompliance and give that person 30 calendar days to prove compliance or show an exception applies. Miss that window, and the state must determine whether the individual has any other basis for Medicaid eligibility before denying the application or ending coverage.
Why the 2028 Deadline Splits the Rollout by State Readiness, Not by Resident
The interim final rule carrying these provisions, docketed as CMS-2454-IFC, published in the Federal Register on June 3, 2026 and took effect July 31, 2026, ahead of the January 2027 enforcement date. Its public comment period closed the same day the rule took effect, and CMS received more than 44,000 comments, a volume that signals how contested the community engagement mandate remains even after the agency finalized the timeline.
Part of what separates a ready state from one likely to seek an exemption is money already committed to the rollout. The Working Families Tax Cut law set aside $200 million in fiscal year 2026 for the 50 states and the District of Columbia to build the eligibility systems the requirement demands, split across two funding tracks rather than handed out as a single grant.
Half of that money is distributed equally across all 50 states and the District of Columbia; the other half is distributed based on each state’s share of enrollees expected to be subject to the requirement. A state that has not finished that systems work by late 2026 is exactly the kind of applicant CMS’s good-faith criteria describe.
The practical effect is a rollout that depends on which state a Medicaid enrollee happens to live in, not on the enrollee’s own circumstances. Two people who each work exactly 80 hours a month in neighboring states could face different enforcement start dates for years, because one state’s Medicaid agency requested and received a federal exemption and the other did not. CMS has not published a public list of which states have applied for or received a good-faith exemption.
That gap leaves a question the rule itself does not resolve: whether a rollout that could stretch through the end of 2028 undermines the uniform national standard Congress wrote into the statute, or whether it is simply the cost of giving states enough time to implement the mandate correctly rather than push people off coverage over a missed technical deadline. Either way, the outer limit is fixed. No exemption, however justified, can run past December 31, 2028.
This article was produced with AI assistance and reviewed by The Money Overview editorial team.
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