Medicaid Work Rules: Hardship Exemption Could Cover 95 Counties, but States Must Act

As many as 95 U.S. counties could qualify for a temporary hardship exemption from new federal Medicaid work requirements because of high unemployment, according to a KFF Health News analysis released Nov. 2. Using 12-month unemployment averages instead of a single month, the estimate rises to 120 counties.

Qualification in a county would not automatically mean relief. A state would have to seek the exception, and federal officials would have to approve it. Indiana, Iowa, and Missouri do not plan to seek it, according to KFF’s tracker.

The requirements are scheduled to take effect Jan. 1, 2027, in most states. Under the federal CMS rule, most adults ages 19 to 64 covered through Medicaid expansion must show 80 hours a month of work, community service, job training, or school to keep coverage, unless they qualify for an exemption.

The Unemployment Test and the Data Behind It

The 2025 budget law lets states seek a short-term hardship exception for enrollees in counties where unemployment is at least 8% or at least 1.5 times the national rate, whichever is lower.

The Centers for Medicare & Medicaid Services told KFF Health News in an unsigned email that states may submit unemployment data from a “reliable” source, including their own labor departments. CMS has not said what time frame states should use. States may report the most recent month or a three-, six-, or 12-month average.

That choice changes the map. Using July 2026 unemployment rates, which are not adjusted for seasonal swings, 95 counties would qualify. Using 12-month averages, 120 would. Sixty-four counties would likely qualify regardless of which data a state uses.

“Which data is used matters,” said Jennifer Tolbert, deputy director of KFF’s Program on Medicaid and the Uninsured. “I think there’s a lot still unknown.”

CMS declined to tell KFF Health News how long exceptions would last or which states have applied. With the work rules starting in less than two months, enrollees in borderline counties may not know whether they will need to report hours.

States Moving at Different Speeds

At least one exemption is already in place. In July, federal officials approved a temporary exemption for Dawson County, Nebraska, after the closure of a Tyson Foods beef plant in Lexington eliminated about 3,000 jobs, the Nebraska Examiner reported. Nebraska became the first state to enforce the new rules on May 1. State officials estimated that up to 29,000 of the 72,000 Nebraskans enrolled in Medicaid expansion could be affected by the requirements.

California has asked CMS to delay its start date. In September, it also asked to use state unemployment data that it says is more timely than federal data. The state is still awaiting a response, a spokesperson for the California Department of Health Care Services told KFF Health News. Five Democratic-led states have asked the federal government to delay the work requirements, citing too little time to comply before the end of the year.

The exemption has also become part of the election-season debate. In California’s 22nd Congressional District, where roughly 6 in 10 residents are enrolled in Medi-Cal, Republican Rep. David Valadao voted for the 2025 law and has called the work provision “not an unreasonable ask.” His website states, “Based on current numbers, every county in CA-22 would qualify for this exemption.” His Democratic challenger, Randy Villegas, and other Democratic candidates argue that most enrollees already work, are disabled, or are caregivers.

At least 21 Republican incumbents running for reelection voted for the law and represent counties that could qualify for the exception, the KFF Health News analysis found. Miranda Yaver, an assistant professor of health policy and management at the University of Pittsburgh, told KFF Health News that exemptions could weaken accountability for the law. “Voters will just not really see the full reach of the law,” she said.

Nationally, the Urban Institute projects that 3 million to 7 million people could lose coverage under the work requirements, according to a Stateline report on the new rules.

Where Exempt Enrollees Live

Earlier KFF research gives a sense of scale. In May 2026, a KFF analysis estimated that about 1.4 million Medicaid expansion enrollees, or 7.5%, live in qualifying counties in states that planned to adopt the exception or had not yet decided. Nine in 10 of those enrollees live in five states: California, New York, Michigan, New Jersey, and Oregon.

The geography is uneven. An earlier KFF analysis, published in September 2025, found that about 80% of qualifying counties were rural, but more than 80% of the enrollees who could be exempt lived in urban counties.

What Enrollees Should Know

An exemption is not permanent. Dawson County’s exemption, for example, lasts only until the county’s unemployment rate falls below the federal threshold, according to the Nebraska Examiner.

The rule also lets some enrollees self-attest to a medical frailty exemption when a state cannot verify it through existing records, but only through January 2028 and generally once per enrollment period, according to a Holland & Knight summary. CMS issued that interim final rule on June 1, 2026.

Enrollees in high-unemployment areas should not assume they are exempt. They can check their state Medicaid agency’s website, open every notice, and keep their mailing address and phone number up to date. Those who work, volunteer, or attend school can keep pay stubs, schedules, or enrollment records. People who may qualify for other exemptions, such as caregiving or a serious medical condition, can ask their state Medicaid agency what documentation counts.

Key Questions Answered

What is the hardship exemption? It is an optional, short-term exception from Medicaid work rules for enrollees in counties where unemployment is at least 8% or at least 1.5 times the national rate, whichever is lower.

How many counties could qualify? According to KFF Health News, 95 counties would qualify using July 2026 data, or 120 using 12-month averages. Sixty-four would likely qualify either way.

Am I automatically exempt if my county qualifies? No. Your state must apply for the exception, and CMS must approve it.

Which states are not seeking the exemption? Indiana, Iowa, and Missouri, according to KFF’s tracker.

When do the work rules start? Jan. 1, 2027, in most states. Nebraska began enforcing them on May 1, 2026.

What should enrollees do now? Open every Medicaid notice, update contact information, and keep records of work, school, or volunteer hours.

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