In a Nutshell: 

• Federal changes to Medicaid coming in 2027 will require states to implement work requirements for a significant portion of program recipients and increase the frequency of their eligibility determinations. 
• These changes are likely to reduce the number of people who receive coverage through Medicaid, although the state can take steps to reduce the number of people who will lose coverage. 
• Devoting resources to better implementation now will give the state a chance to minimize the number of people who fail to qualify for Medicaid due to technical problems with the enrollment application and work requirement verification.  

Introduction 

Last summer, the federal One Big Beautiful Bill Act (OBBBA) was enacted which, among other things, made significant changes to Medicaid. Two changes (more frequent eligibility redeterminations and work requirements for certain enrollees) were designed to reduce the number of Medicaid enrollees as a pathway to reduce federal spending on the program. 

Because Medicaid is a joint federal-state program, states will be responsible for implementing these changes. How a state goes about implementation will determine how its residents experience the change.  

People who will lose access to Medicaid due to changes in federal law fall into two different categories: those who will no longer meet the enrollment criteria; and those who will still meet the criteria, but who will fail to properly demonstrate that they are eligible under the new rules. States will be limited in their ability to do much about the first category of individuals impacted.  However, the number of people impacted in the second category will depend, in large measure, on how states implement the changes.  

Many Michigan residents rely on Medicaid for their health care, and the state’s health care system is built around consistent coverage for the Medicaid-eligible population. Medicaid covers more than two million people in Michigan with total federal and state spending on the program in the state totaling roughly $25 billion per year. Roughly 700,000 of those Medicaid enrollees in the state are covered under what is known as “Medicaid Expansion,” in which the Affordable Care Act extended eligibility to adults aged 19 to 64 with incomes under 133 percent of the federal poverty line who were not previously eligible for some other reason. (For more information about Medicaid spending, coverage, and impact in Michigan, see the Research Council’s June 2025 memo, Federal Medicaid Cuts Will Have Big Consequences in Michigan.) 

Significant declines in Medicaid enrollment resulting from changes to federal law could have major consequences for the health of residents and health care system more broadly. Changes to Medicaid will stack on top of coverage declines due to the expiration of enhanced Affordable Care Act premium tax credits, making a response even more critical.  

As the deadline to implement OBBBA’s Medicaid provisions approaches, the state and its residents need to prepare, as it will require substantial effort to minimize the number of people who will lose coverage starting in 2027. 

Upcoming Changes to Medicaid  

The federal OBBBA made a few key changes to Medicaid that will impact eligibility and enrollment in the program. One change is that able-bodied adults will be subject to “work requirements” to maintain coverage under Medicaid Expansion. Another change is that Medicaid eligibility “redeterminations” must occur more frequently. 

Work Requirements  

Beginning in 2027, able-bodied adults ages 19 to 64 will have to demonstrate that they spend at least 80 hours per month in one or more of the following activities to maintain their eligibility under Medicaid Expansion:  

• Working;  
• Participating in a work program (e.g., job training);  
• Enrolled in an educational program at least half time; or 
• Performing community service activities 

Some exemptions to these work requirements are permitted, including individuals in foster care; Indian health service members; certain caregivers; disabled veterans; those who are deemed medically frail; people who meet work requirements found in other programs; people undergoing substance use disorder treatment; recently incarcerated people; and those who are pregnant or postpartum. Notably, the federal law allows states to adopt a hardship exemption from the work requirements for residents from counties with unemployment rates that exceed eight percent or at least 1.5 times the national average unemployment rate. 

The work requirements also include a “look-back” period, meaning that states must review whether the applicant met the criteria for at least one month prior to their application. Existing enrollees must also demonstrate they met the criteria for at least one month during each six-month eligibility window. 

Redeterminations 

Prior to OBBBA, Medicaid expansion eligibility was determined once every 12 months. Beginning in 2027, states will need to redetermine eligibility for enrollees every six months. This effectively doubles each state’s eligibility workload for this population. 

How Changes Might Impact Enrollment 

Taken together, these changes have the potential to substantially reduce the number of people covered by Medicaid. Some portion of the existing Medicaid population simply will not qualify for the program because they do not meet the new requirements. A survey from 2023 found that about two-thirds of those covered by Medicaid Expansion work 80 hours per month or attend school, but others are likely very close to the threshold and could fall below in a given period. This is especially complicated for the slice of the population that is traditionally enrolled in Medicaid Expansion, as they are, by definition, low wage earners. Hourly positions in retail, the service industry, or similar types of jobs are not guaranteed to produce a consistent flow of hours each week, creating windows of time where a person with a steady job may not have met the 80-hour requirement simply because of the varying labor demands of their employer. 

It is also likely that many people who do meet the requirements or who qualify for one of the work requirement exemptions will fail to successfully demonstrate their eligibility for one reason or another and will lose coverage. People will need to understand the requirements, know how to demonstrate compliance, consistently keep proper records, and respond to requests for more information. Furthermore, people who work multiple, less consistent jobs with irregular hours (e.g., landscaping, house-cleaning) may have a more challenging time documenting their work than ordinary W-2 jobs. These administrative burdens are not insurmountable, but the evidence from previous experience suggests some people who have sufficient hours or should be exempted will lose coverage because of the registration and record-keeping process. 

The change in redetermination frequency also has the potential to reduce enrollment in a couple of ways. First, it will create more opportunities for individuals who should qualify for coverage to fail to qualify because of a paperwork issue, either in general or due to the new work requirements. As noted above, applying for Medicaid and verifying Medicaid eligibility can be complicated and often requires submitting documentation within certain specified windows of time. Doubling the number of times an applicant has to demonstrate eligibility each year increases the number of opportunities for a person to be deemed ineligible due to failures in the application and verification processes. The likelihood of administrative failures on the state’s end is also likely to increase because its verification workload will essentially double as well, reducing the capacity of caseworkers to sort through and address wrongful denials of coverage. Second, more frequent evaluations create the possibility that people will be cycled off Medicaid because they exceeded the income-threshold for the relevant six-month period even if they might not have exceeded the threshold for a full-year. This is especially likely because Medicaid-eligible workers often work jobs with fluctuating hours.  

Zeroing in on estimates of how many people will lose coverage because of these changes is challenging because it depends on how states implement the work requirements. Roughly 700,000 people in Michigan will be subject to work requirements and will either have to show compliance or receive an exemption. That population will have to demonstrate compliance every six months, creating an opportunity to lose coverage twice a year.   

Different attempts to quantify the potential coverage losses in Michigan have landed in different places, ranging from 150,000 to 500,000 current enrollees losing coverage. Part of the uncertainty is related to imperfect estimates of who might qualify for exemptions and exactly how many hours people are working or attending school, but a major source of uncertainty is related to how accurately the requirements can be implemented and how well enrollee information can be verified.  

Attempts to implement Medicaid work requirements in other states and similar requirements for other programs demonstrate coverage losses are likely, but exactly how big the impact will be is uncertain because it will depend on the actual details of implementation. When Michigan was preparing to implement work requirements several years ago (before they were blocked by a federal judge), it was estimated that 80,000 to 180,000 people would lose coverage, but the implementation details this time around will likely be different. Any coverage loss of that scale will have a major impact on the people losing coverage, the broader health care system, and the state budget, but the size of the change will certainly matter. 

What Comes Next for Implementation 

Over the next few months, states will need to get their programs in place and be ready to begin implementing these new federal changes starting in January. The federal government released initial implementation guidance to the states in December 2025, and final regulations are expected very soon. OBBBA does allow states to ask for a one-year delay in the implementation deadline via waiver, but they should not assume such a waiver will be granted by the federal government and should proceed as if the requirements will go into effect in January. 

States have a number of decisions to make ahead of implementation. They need to decide on the length of time to use for the initial and renewal look-back period, as federal law allows for at least one month but up to three months. States also have to decide if and how to define their hardship exemptions and how to define “medical frailty.” Michigan has not formally made all of these decisions, but it appears that every state that favors minimizing disenrollments is trending in the direction of shorter look-back periods and the broadest allowable definitions for exemptions under federal rules. 

The much bigger task is standing up a system to administratively implement the work requirements and redeterminations such that everyone who is eligible stays enrolled. 

Outreach and Public Awareness 

One requirement of the federal OBBBA is that states conduct outreach to Medicaid recipients between June 30 and August 31. The public awareness efforts must include information about compliance with work requirements, an explanation of exemptions, consequences of noncompliance, and reporting instructions. Outreach must be through regular mail and other forms, including telephone, text message, website, and other electronic sources. Outreach must occur at least once every six months following the initial window.  

Michigan needs to capitalize on every possible avenue of outreach and ensure that sufficient funding is available for personnel, direct communication, and advertising that informs the public of the upcoming changes. Not everyone who is at-risk of losing coverage because of work requirements will be able to come into compliance immediately, but state leaders should do everything feasible to minimize the number of people who lose coverage (even temporarily) because they did not know about the new requirements soon enough to act.  

In the same vein, Michigan officials should think about how they can connect the population at-risk of losing coverage with resources that will help them come into compliance. It is not just about making sure the public knows what the requirements are; it is also about helping people connect with jobs, job training, and community service opportunities that will allow them to maintain Medicaid health coverage. 

Data Sources and IT 

The new law requires states to utilize existing data sources to determine eligibility before requesting additional information from applicants. Examples include payroll and income tax returns, Medicaid payment history, post-secondary education enrollment records, and other government program information.  

Michigan not only needs to make use of a wide variety of existing data sources, but it also needs to invest in improving the accuracy of those sources and the ability of residents to access them. Much of the state’s data infrastructure is antiquated and plagued with issues. Making sure that as much verification can happen without having to request records from applicants will go a long way toward minimizing the number of individuals that might lose coverage. Recent data suggests many other states have higher rates of automated Medicaid renewals and faster renewal timelines, suggesting the infrastructure in place for this work is lacking. 

Process for Handling Non-Compliance 

If the verification process fails, federal law requires states to issue a notice of noncompliance via mail and at least one other method. From the date of the notice, applicants have 30 days to show compliance before they lose coverage.  

For this process to work, the state needs to make sure the notice reaches the applicant and that it is easy for them to understand what they need to do to come into compliance. The state also needs to be prepared to resolve compliance issues quickly to prevent disruptions in coverage. It is very easy to imagine this kind of notice being missed, and the state should err on the side of over communicating with people who are initially deemed noncompliant. 

Personnel and Funding 

The success or failure of this effort will likely come down to the state’s capacity to inform and assist new applicants and current recipients subject to redetermination through the compliance process. Not only will the state have to process more information and more frequent applications as a basic matter, but the additional requirements will also create more opportunities for people to fail verification.  

Addressing these issues will require people and money. Some of this process will be automated through IT systems, but along the entire process the state will need more people to facilitate enrollment. Outreach will involve teaching people what they need to do and how to do it. Reviewing compliance will require people to sift through records and documentation, and it will require additional communication to explain what the problem is and how to resolve it. Furthermore, this is an incredibly time-sensitive enterprise. Backlogs will have consequences to applicants, to health systems, and to the state budget. 

Facilitating Change 

While a change in federal law has redefined Medicaid Expansion eligibility, the actual impact of the change will be shaped by how it is implemented because the outcome is contingent on the actual administrative process of making determinations.  

Even those who favor a less expansive social safety net should want the state to implement work requirements as accurately as possible so that the people are Medicaid-eligible under federal law have access to coverage. From the state’s perspective, too, making sure everyone who is eligible gets covered is a prudent financial decision. Given the cost-sharing arrangement in Medicaid, almost all spending on this part of the Medicaid population is federal money. If people lose coverage, they will be less healthy, end up receiving care in emergency rooms, and the costs will fall onto hospitals and health insurers, who will likely pass much of those costs onto the entire population through higher charges and premiums. 

Investing up front in implementation resources has the potential to save the state hundreds of millions of dollars in the long run given how much federal money is at stake. The upcoming FY2027 state budget will have a significant impact on how well the state is able to address these major changes to Medicaid. As the administration and legislative leaders work to finalize the budget in the coming weeks, it would be wise to err on the side of guaranteeing the state has made sufficient investments in personnel and resources for the purpose of complying with the new Medicaid requirements. The Governor and Senate are still reasonably far apart from the House in terms of the number of new employees and funding being proposed for this work. 

States around the country are finding that preparation for implementation is challenging and resource intensive. Michigan is already a state with lagging health indicators despite doing reasonably well in terms of health insurance coverage. A major jump in the size of the uninsured population could be particularly damaging to the state. Some federal money is available for implementation, but the state will have to put up its own resources as well given that even a baseline level of compliance that is not designed to maximize coverage is likely to be costly. 

Conclusion 

Medicaid work requirements and more frequent eligibility determinations are coming in 2027. The changes are likely to reduce the number of people covered by Medicaid in the state due to the underlying eligibility changes and the difficulty people frequently have verifying compliance with these kinds of requirements.  

A decline in Medicaid enrollment in the state that leaves more residents uninsured will have a negative impact on those directly losing health coverage, but it will also be costly for health care providers, insurers, and the state as a whole.  

Michigan can take steps now to prepare for implementation. An implementation process that minimizes coverage losses will be costly for the state, but it is likely that the overall costs to the state would be higher if more people lost Medicaid coverage.