Medicaid Work Requirements: Implementation Risks for Adults Experiencing Mental Illness and Substance Use Disorders

The One Big Beautiful Bill Act (H.R. 1), signed July 4, 2025, requires states to condition Medicaid eligibility, among the population covered under the Affordable Care Act (ACA) expansion, on participation in 80 hours per month of qualifying work, training, or community engagement activity. The U.S. Department of Health and Human Services was required to publish an interim final rule, exempted from public notice and comment, by June 1, 2026. States must implement the law by January 1, 2027. Several states have started sooner (Nebraska, May 1, 2026; Montana and Arkansas, July 1, 2026) or will start early (Iowa, December 1, 2026). The statute exempts individuals deemed "medically frail," including those with disabling mental or substance use disorders (or both). These are people the law clearly intends to protect yet whose illness characteristics will make performing the administrative filing for such exemptions difficult. This Federal Policy Assessment draws on Arkansas' natural experiment in implementing work requirements, the Georgia Pathways to Coverage program, and states' early implementations of H.R. 1 to identify the medically frail exemption as the central determinant of the law's impact on individuals experiencing psychiatric illness. Four recommendations for federal rulemaking, state implementation, and professional society action are offered.