Kentucky Must Build Medicaid Work Requirements While Beshear Challenges the Federal Rule
State law requires implementation by January 1 and leaves the Cabinet for Health and Family Services unable to seek more time without General Assembly approval.
A federal judge on July 29 refused to pause three parts of the new Medicaid work-requirement regulations challenged by Gov. Andy Beshear and 24 other state and district plaintiffs. Judge Richard Stearns did not decide that the regulations were lawful. He denied temporary relief because the plaintiffs had not shown enough immediate, irreparable harm to justify a preliminary injunction. (Court order)
Kentucky must keep preparing while the case continues. A state law enacted this spring directs the Cabinet for Health and Family Services to begin enforcing the federal requirement by January 1, 2027. The same law prohibits the Cabinet from asking the federal government for an exemption, waiver, or implementation delay unless the Kentucky General Assembly specifically authorizes it. (KRS 205.5371)
Beshear can challenge the federal regulations in court, and the Cabinet must build the eligibility procedures that will apply them. But neither the governor nor the Cabinet can independently seek more time if Kentucky’s technology, staffing or exemption procedures are not ready.
Kentucky law keeps the deadline in place
Congress created the nationwide requirement in 2025 for certain adults covered through the Affordable Care Act’s Medicaid expansion. Depending on their circumstances, affected adults will have to document work, education, job training, community service or sufficient earnings to apply for or keep coverage. Congress set January 1, 2027 as the implementation deadline and gave the Centers for Medicare and Medicaid Services authority to define many of the operational details. (Federal law)
Kentucky lawmakers also made choices about how the requirement will operate here. Under KRS 205.5371, a new applicant must demonstrate qualifying activity during the month before applying. A current Medicaid member must show compliance during three months between eligibility determinations.
Federal regulations allow states to require as little as one month from current members, so Kentucky’s three-month standard came from the General Assembly.
The statute goes further. It bars the Cabinet from seeking any federal delay, including a good-faith implementation exemption, without specific legislative authorization. If Cabinet officials conclude that Kentucky cannot apply the requirement accurately by January 1, only the General Assembly can free them to ask CMS for additional time.
The Department for Medicaid Services has posted a sample outreach notice dated July 1. It tells potentially affected Medicaid expansion members that no action is required yet and that they will receive more information before their 2027 renewals. Kentucky says it will check available records to determine whether a member meets the requirement or qualifies for an exemption, then contact the member when more information is needed. (Kentucky sample notice)
Those record checks will carry much of the policy’s weight. A person may be working, attending school, or living with an exempting medical condition, but Kentucky’s databases still must establish it. A member who receives a noncompliance notice will have 30 days to provide more information before coverage can be terminated, according to the sample letter.
Kentucky’s fiscal analysis anticipates that people will lose coverage. The Department for Medicaid Services estimated reduced enrollment of 4,295 people in fiscal year 2027 and 9,660 in fiscal year 2028. It projected corresponding reductions in Medicaid spending of $62.1 million and $139.6 million. (HB 2 fiscal note)
Most of that reduction would come from federal Medicaid funds rather than Kentucky’s General Fund. The fiscal note attributes $55.9 million of the first-year reduction and $125.6 million of the second-year reduction to federal money. Those funds would no longer pay for health care provided to the people removed from coverage. The note does not disclose enough of the Department for Medicaid Services’ methodology to independently evaluate the enrollment estimates.
The judge left the legal dispute open
The lawsuit does not seek to eliminate the entire work requirement. Kentucky and the other plaintiffs are challenging three decisions CMS made when it issued the implementing regulations.
The first concerns medical frailty. CMS requires a serious medical condition, disability, or other special medical need to significantly impair a person’s ability to comply before the person is excluded from the work requirement. The plaintiffs argue that CMS added a limitation Congress did not authorize.
They also object to CMS’s use of a 12-month look-back period when states review medical claims to identify medically frail members. The plaintiffs contend that the limit may miss permanent or long-term conditions when a member has not recently received treatment that produced a Medicaid claim. Their third challenge concerns CMS’s limits on short-term hardship exceptions during emergencies and disasters. (CMS interim final rule)
Stearns resolved none of those claims in the July 29 order. His ruling began and ended with whether the plaintiffs had demonstrated irreparable harm while the case proceeds. He relied partly on the federal government’s representation that it will reimburse 90 percent of qualifying state costs for designing, developing, and installing the required eligibility technology. The judge also noted that Congress, rather than CMS, established the January deadline.
The court said the denial did not reflect or predict its eventual decision on the legality of the regulations. Stearns identified unresolved questions about the authority Congress delegated to the federal health secretary, whether CMS followed congressional intent, and what evidence supported the agency’s medical judgments. He denied the motion without prejudice, preserving the plaintiffs’ ability to seek emergency relief again under certain circumstances.
Stearns ordered the parties to propose an expedited summary-judgment briefing schedule within seven days. He said the court intends to complete briefing before January 1. If the schedule extends beyond December 31 through no fault of the plaintiffs and the federal government declines to defer implementation, they may renew their request for an injunction. (Scheduling order)
Kentucky has not disclosed what it is building
The court will decide whether CMS exceeded its authority, but it will not settle every question about Kentucky’s implementation. The Department for Medicaid Services still must determine which records it will check, how it will identify exemptions, what documentation members must provide and how disputed cases will be reviewed.
Those decisions will be especially important when employment and health information do not fit neatly into government databases. Hourly work can fluctuate, seasonal income may appear irregular, and a chronic condition may limit someone’s ability to work without producing a recent claim that documents the limitation. Kentucky’s choices will determine how often those cases are resolved through existing records and how often members must prove their eligibility.
The state has not publicly released the model behind its estimate that 4,295 people will lose coverage in the first fiscal year and 9,660 in the second.
The documents reviewed for this article also do not disclose a complete implementation budget, Kentucky’s federal funding request, the contractors modifying eligibility technology, or the detailed medical standards the state will use.
Those records would show what Kentucky is spending, who is being paid and how the Cabinet plans to distinguish between people who fail to meet the requirement and people whose compliance or exemption cannot be verified. They would also show whether the state is prepared to prevent avoidable coverage losses before the January deadline.
Authority is divided, but not evenly. Congress imposed the eligibility requirement, CMS wrote the disputed regulations, and the federal court will decide whether the agency acted lawfully.
The Department for Medicaid Services must implement the requirement, while the General Assembly controls whether the Cabinet may ask for more time.
The Department for Medicaid Services should release its enrollment model, implementation budget, federal funding submission and vendor records. House and Senate leaders should also answer whether they would authorize a delay if the Cabinet reports that Kentucky cannot apply the requirement accurately by January 1.
The next federal court filing will establish the schedule for deciding the legal challenge. The next Kentucky records should reveal what the state is building while it waits.