Executive Summary

• The One Big Beautiful Bill Act (OBBBA) has introduced work requirements for Medicaid expansion enrollees, expected to reduce federal spending while decreasing enrollment.
• Evidence from prior implementation of work requirements in Arkansas found no clear increase in employment, though they were short lived and administratively flawed.
• The empirical evidence for work requirements reflects a broader normative debate: whether Medicaid should primarily function as a health coverage program without participation conditions or incorporate expectations of reciprocity among beneficiaries.

Introduction

Reforms to Medicaid made under the One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, have reignited longstanding debates over whether public health insurance for low-income adults should be conditioned on work or work-related activity. The policy’s implementation through a requisite 2026 CMS rule requiring 80 hours per month of employment or education reflects a renewed effort to link eligibility with labor force participation. Within this policy lies a more foundational question: what should Medicaid be? Should the program reinforce reciprocity, or ensure access regardless of employment status? Work requirements have scarcely been tested in a sustained policy environment, and as a result this underlying normative question, as well as the empirical effects of the policy, remain deeply contested.

OBBBA Provision

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act, a sweeping legislative package which introduced key provisions aimed at reducing federal spending on the Medicaid program, including work requirements. On June 1, 2026, CMS issued an interim final rule for these requirements, stating that all affected Medicaid applicants and enrollees must demonstrate 80 hours per month of qualifying employment, participation in certain work-related programs, or be enrolled in an educational program.

RAND analysis projects that the OBBBA will reduce federal Medicaid spending by approximately $724 billion below previous projections over the next decade. The single largest contributor to these savings is the introduction of work requirements, projected to save the federal government $348 billion over the same ten-year period. In the same duration, it is expected that approximately 5.3 million expansion adults will lose Medicaid coverage.

Supporters have made several key points in support of Medicaid work requirements. The basic premise is that government assistance should be temporary and conditional, helping people transition into employment rather than long-term dependence. Simultaneously, taxpayers should expect able-bodied adults receiving public assistance to enter the workforce as a matter of reciprocity. In implementing work requirements, the federal government can thereby reduce spending as more people become employed and fewer require benefits.

Critics oppose Medicaid work requirements because they view Medicaid primarily as an entitlement program, not a mechanism to incentivize employment. They argue that most Medicaid recipients who can work already do, and that the unemployment that does exist is a result of economic or health-related barriers as opposed to an unwillingness to work. Critics also believe that work requirements can create administrative barriers where the need to report work hours and complete paperwork results in individuals losing coverage even if they met the stated work requirements.

Recent History of Work Requirements

The effort to enact work requirements nationwide gained headway in the first Trump administration. In January 2018, CMS under the first Trump administration issued guidance inviting states to apply for waivers to implement Medicaid work requirements. During this period, Arkansas was the only state to fully implement the policy.

Arkansas’ work requirements, implemented in June 2018, required able-bodied adults, ages 30-49, to work or participate in a community activity at least 80 hours per month to maintain Medicaid coverage. The program remained in place until March 2019, when a federal judge ruled that the waivers were unlawful because the Department of Health and Human Services had acted arbitrarily in failing to adequately consider resulting losses of Medicaid coverage. The Supreme Court agreed to hear the appealed case in 2021 but eventually dismissed the case after the Biden administration revoked the Trump-era waivers.

To date, legal challenges have focused primarily on the adequacy of agency reasoning under existing Medicaid statute rather than on a direct prohibition of work requirements. Future litigation is therefore likely to focus on the implementation of these requirements rather than whether the requirements are categorically permissible by law.

Analyzing Arkansas’s 2018 Work Requirement Program

The stated objective of Medicaid work requirements is to increase labor force participation, reduce dependency on the program, and to reduce federal spending in the long term. Yet there is limited empirical evidence for how effective this is, as few states have fully implemented and enforced Medicaid work requirements. Arkansas, which was the first state to fully implement and enforce work requirements, provides the strongest base of evidence for evaluating their effectiveness.

Available research generally finds little evidence that Arkansas’ work requirements had a significant effect on employment. According to a 2020 study published in the New England Journal of Medicine (NEJM), by April 2019, when the policy was put on hold, nearly 18,000 adults had lost coverage – but nearly all losses were reversed in 2019 after the court order. At the same time, residents of Arkansas ages 30-49 were found to have no significant changes in employment, number of hours worked, or community engagement status. This might lead one to believe that work requirements in Arkansas were not effective in increasing employment. However, Arkansas is an imperfect case study for evaluating the policy’s long-term potential.

First, because the program operated for less than a year before being halted by litigation, supporters argue it did not operate long enough to meaningfully affect the labor market. Second, Arkansas relied on an online reporting system that was widely criticized for being confusing and difficult to access, leading to coverage losses among individuals who satisfied the work requirement but failed to complete the necessary documentation to receive coverage. In fact, the same NEJM study found that more than 95 percent of individuals targeted by the policy were already meeting the work requirement or qualified for an exemption — meaning the vast majority of coverage losses were not due to actual noncompliance with the underlying work requirement, but to eligible individuals failing to navigate the reporting system correctly. Taken together, the program’s short duration and administrative shortcomings make it difficult to determine whether Arkansas reflected an inherent ineffectiveness of work requirements policy to increase employment, or a case of bad implementation.

Supporters argue that the OBBBA and the interim final rule address several shortcomings exposed by Arkansas by establishing uniform national standards for eligibility, exemptions, verification procedures, and reporting requirements. This includes $200 million in grants to support state system modernization and administrative capacity, and $600 million to help states update eligibility and enrollment systems. CMS has stated that these provisions are intended to reduce administrative burden and improve implementation.

Of course, Medicaid remains a state-administered program, so national standards and grants do not automatically fix every conceivable administrative complexity, but they go a long way in helping states reduce the burden on eligible beneficiaries. Still, whether these reforms translate into different employment or coverage outcomes is an open question.

What Should Work Requirements Be Designed to Achieve?

RAND projects that the OBBBA’s Medicaid work requirements will drastically reduce federal Medicaid expenditures, primarily through reduced enrollment. Whether the policy will achieve its objective of increasing long-term employment, however, is far less certain, and largely impossible to predict. However, employment outcomes are just one goal of work requirements, not the only goal.

Much of the preceding analysis has implicitly treated increase in labor force participation as the central benchmark for the program’s success. A narrower measure of success focused solely on employment gains overlooks another central rationale for work requirements: ensuring that Medicaid remains targeted toward individuals who meet eligibility requirements and who have the greatest need for assistance. The justification of Medicaid work requirements is that of reciprocity: that able-bodied adults who receive government-funded benefits should work, when reasonably possible. A lower caseload is not inherently evidence of policy failure: when fewer able-bodied adults rely on Medicaid, spending declines, giving federal and state policymakers greater room to direct resources towards other priorities, including people with greater medical needs. If federal spending is to be reined in, policymakers must balance broad coverage goals with ensuring that resources are allocated effectively. Enforcing work requirements can help preserve funding for those with the greatest needs. Critics largely reject that framing: if savings come from people who are already working or already exempt but lose their coverage over red tape, the policy is not effectively measuring reciprocity.

This tension is the key issue at hand in the debate: both sides are not necessarily measuring success in the same way. The debate ultimately hinges on whether Medicaid is viewed as an entitlement to coverage or whether it can also incorporate reasonable expectations that encourage work, independence, and responsible stewardship of public resources.

Conclusion

While the OBBBA’s Medicaid work requirements are projected to generate substantial federal savings and reduce enrollment, the broader goal of increasing employment is uncertain. Evidence from prior implementation in Arkansas is largely inconclusive given the brevity of the policy’s enforcement along with contrasting administrative complexity to CMS’ current vision. Ultimately, the policy’s success depends on what Medicaid is meant to be – an unconditional health insurance safety net or a conditional program where beneficiaries must meet certain expectations to receive coverage.