25 States Sue Trump Administration Over New Medicaid Work-Exemption Rule
On Wednesday, July 1, 2026, 25 states and the District of Columbia sued the Trump administration over a CMS rule that requires Medicaid enrollees to document work exemptions and could cost people coverage.[1]
Plaintiffs named in the lawsuit include California, New York, New Jersey, Pennsylvania, Virginia, North Carolina, Michigan, Minnesota, Colorado and Arizona, along with Washington, D.C., and other states.[1] CMS projections cited in the suit estimate 2.3 million enrollees could lose Medicaid coverage in the rule's first year and that 7% of working or exempt enrollees could lose coverage due to paperwork hurdles.
H.R. 1, a budget fast-track bill signed July 4, 2025, required 44 states and D.C. to condition Medicaid expansion on 80 hours per month of work, volunteering, or school beginning January 1, 2027. CMS issued implementation guidance on December 8, 2025, and in early June 2026 published an interim final rule that requires enrollees to submit new paperwork proving exemptions. That change diverged from the bill's text and from prior state preparations.
The administration says the rule is designed to prevent fraud and ensure accurate eligibility determinations.[1]
As of March 2026, 67.1 million people were enrolled in Medicaid nationwide; the improper payment rate was 6.12% ($37.39 billion) in FY2025, with 77.17% of those improper payments tied to insufficient documentation.
The mainstream summary does not mention that the lawsuit specifically argues that the CMS's new Medicaid work requirements go beyond the law, potentially jeopardizing coverage for those who should be exempt, such as cancer patients who now must prove their illness to retain benefits. This detail highlights the human impact of the rule, which is downplayed in the mainstream account. Additionally, while the summary cites the improper payment rate of 6.12%, it does not contextualize this within the broader trend of increasing improper payments, which rose from 5.09% the previous year, indicating a growing administrative burden that could be exacerbated by the new requirements. The implications of such burdens are significant, as research indicates that similar work and reporting requirements in Arkansas led to substantial coverage losses without improving employment rates, suggesting that the intended goals of the policy may not be met while harming vulnerable populations.[2]
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📊 Relevant Data
As of March 2026, 67.1 million people were enrolled in Medicaid nationwide.
March 2026 Medicaid & CHIP Enrollment Data Highlights — CMS
The Medicaid improper payment rate was 6.12% ($37.39 billion) in FY2025, up from 5.09% ($31.10 billion) in FY2024; 77.17% of these improper payments resulted from insufficient documentation.
📌 Key Facts
- On Wednesday, July 1, 2026, at least 25 states and the District of Columbia filed suit against the Trump administration over a CMS Interim Final Rule on Medicaid work exemptions.
- The rule, issued in early June 2026, requires some enrollees to proactively document exemptions from work, volunteering, or school requirements that begin in January 2027.
- CMS projections cited in the lawsuit estimate 2.3 million enrollees will lose Medicaid coverage in the first year of the rule and that 7% of working or exempt enrollees could lose coverage due to paperwork and documentation hurdles.
- Plaintiff jurisdictions include California, New York, New Jersey, Pennsylvania, Virginia, North Carolina, Michigan, Minnesota, Colorado, Arizona and others, along with Washington, D.C.
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