Medicaid Work Requirements: Implications for MCOs and the Future of Coverage

As Medicaid MCOs navigate an evolving policy landscape, the reemergence of Medicaid work requirements presents both operational challenges and financial implications. Proposed policy changes could significantly impact MCO enrollment, risk adjustment, and care management strategies. With lawmakers considering spending cuts and structural adjustments, MCOs must prepare for potential shifts that could alter member engagement and coverage stability. 

The Push for Medicaid Work Requirements 

One of the most debated proposals resurfacing in 2025 is the implementation of Medicaid work requirements. Proponents argue that requiring enrollees to work or engage in community activities will promote economic self-sufficiency. However, historical evidence indicates that such policies often lead to disenrollment without a corresponding increase in employment, affecting MCOs’ ability to manage population health effectively. 

Impacts on Medicaid-Covered Adults and MCO Enrollment 

A 2023 KFF analysis found that 92% of Medicaid-covered adults enrolled in Medicaid were either working or qualified for exemptions due to caregiving responsibilities, disability, or education. Many Medicaid recipients work in industries with low employer-sponsored insurance rates, such as agriculture and service sectors. The Congressional Budget Office (CBO) has also concluded that work requirements do not significantly increase employment but do reduce Medicaid enrollment. A decline in enrollment could disrupt MCO revenue streams and risk pool stability. 

Administrative Burdens and Coverage Losses 

For individuals who qualify for exemptions, reporting requirements introduce barriers that often result in unintended disenrollment. During the first Trump administration, states that implemented work requirements saw thousands of eligible individuals lose coverage due to bureaucratic hurdles. In Arkansas, over 18,000 people were disenrolled, creating gaps in care coordination and increasing churn rates for MCOs. 

Georgia’s "Pathways" waiver, which ties Medicaid eligibility to employment, has struggled with enrollment. The state projected 25,000 participants in the first year, yet only 6,500 had enrolled by early 2025. To address low participation, Georgia launched a $10.7 million advertising campaign. The waiver, set to expire in September 2025, faces proposed revisions that could impact future enrollment strategies for MCOs. 

Federal and State-Level Policy Considerations 

While past state-level work requirements faced legal challenges or were rescinded, Georgia remains the only state with an active waiver. Other states are exploring similar initiatives in anticipation of federal policy shifts. 

At the federal level, Republican lawmakers have proposed incorporating work requirements into budget reconciliation legislation. A draft of the House budget includes provisions like the Limit, Save, Grow Act (H.R. 2811), which would impose work requirements on "able-bodied adults without dependents." The CBO estimates that this policy would generate $109 billion in federal savings over ten years, primarily by reducing Medicaid enrollment rather than increasing employment. If implemented, MCOs may face significant membership declines, increased churn, and higher administrative costs to comply with new reporting mandates. 

MCO Strategies and Industry Advocacy 

Medicaid MCOs play a critical role in advocating for policies that support stable coverage and sustainable care management. Work requirements pose risks to care continuity, increase administrative costs, and could negatively impact health outcomes. As a result, many industry stakeholders, including health plans and provider groups, have voiced concerns about these policies. 

Key Considerations for MCOs: 

• Member Retention & Risk Pool Stability: Reduced enrollment could alter risk adjustment and reimbursement rates. 

• Administrative Costs: Increased reporting requirements could drive up operational expenses. 

• Provider Network Utilization: Disruptions in coverage could affect care coordination and lead to higher emergency care costs. 

• Advocacy & Policy Engagement: MCOs must engage in legislative discussions to ensure that coverage policies align with value-based care principles. 

Conclusion 

As the Medicaid work requirement debate continues, MCOs must remain proactive in assessing potential impacts on membership, care delivery, and financial sustainability. With policy uncertainty ahead, strategic planning and advocacy will be critical in shaping a regulatory environment that supports both enrollees and managed care organizations. Ensuring stable coverage and continuity of care remains a top priority for the industry as it navigates these potential reforms. 

Sources:  

• Kaiser Family Foundation (2025) Understanding the intersection of Medicaid and work: An update. Available at: https://www.kff.org/medicaid/issue-brief/understanding-the-intersection-of-medicaid-and-work-an-update/. 

• Medicare Rights Center (2025) Medicaid work requirements continue to be a bad idea. Available at: https://www.medicarerights.org/medicare-watch/2025/02/06/medicaid-work-requirements-continue-to-be-a-bad-idea. 

• Associated Press (2025) Medicaid cuts and work requirements in Congress. Available at: https://apnews.com/article/medicaid-cuts-work-requirements-congress-republicans-90ec1119f1d95de067c76f79eec7fa87. 

• ProPublica (2025) Georgia Medicaid work requirement: Pathways to coverage hurdles. Available at: https://www.propublica.org/article/georgia-medicaid-work-requirement-pathways-to-coverage-hurdles. 

• Kaiser Family Foundation (2025) 5 key facts about Medicaid work requirements. Available at: https://www.kff.org/medicaid/issue-brief/5-key-facts-about-medicaid-work-requirements/.