Medicaid Program; Community Engagement Requirement for Certain Individuals

Title XIX of the Social Security Act (the Act) authorizes Federal grants to States for Medicaid programs to provide medical assistance to people with limited income and resources. While Medicaid programs are administered by the States, the program is jointly financed by the Federal and State governments. As such, the Centers for Medicare & Medicaid Services (CMS) and State agencies share responsibility for administering and ensuring the overall fiscal and programmatic integrity and effectiveness of the Medicaid program. This joint Federal-State partnership is the cornerstone of Medicaid. Enacted in 1965, Medicaid was created to serve and support vulnerable populations, including: children living in low-income households, caretaker relatives with dependent children, seniors, and individuals with disabilities receiving Supplemental Security Income (SSI). In the 1980s and 1990s, the Medicaid statute was amended to enable coverage of additional services and populations, for example home and community- based services, pregnant women and infants (up to 1 year of age), and higher-income children (aged 6 through 18 under 100 percent of the Federal poverty level). The Patient Protection and Affordable Care Act of 2010, (Pub. L. 111-148, enacted March 23, 2010), as amended by the Health Care and Education Reconciliation Act of 2010

(Pub. L. 111-152, enacted March 30, 2010), together referred to as the Affordable Care Act (ACA), expanded Medicaid eligibility to include non-pregnant adults with income up to 133 percent of the Federal poverty level (also known as the adult group). Each of these coverage expansions not only grew the number of eligible beneficiaries Medicaid serves, but also contributed, along with benefits expansions and rising health costs generally, to increased Medicaid spending. In fiscal year (FY) 2025, approximately 82.4 million individuals were enrolled in Medicaid, roughly 20 million of whom were enrolled in the adult group.\1\ Total State and Federal combined Medicaid spending for FY 2025 was nearly $1 trillion, with approximately $200 billion attributable to adult group expenditures.\2\

\1\ CMS, Fiscal Year 2027; Justification of Estimates for Appropriations Committees. https://www.cms.gov/files/document/fy-2027-justification-estimates-appropriations-committees.pdf.

\2\ Medicaid Budget and Expenditure System (MBES) data source updated with FY2025 data as of the June 2026 IFC publication date. Available at https://data.medicaid.gov/dataset/5b19d1d4-ae43-5fcd-ba14-3cecd99f473f and https://data.medicaid.gov/dataset/00505e90-f8ac-5921-b12f-5e23ba7ffcf3.

Presently, States are not required to provide coverage to the adult group.\3\ States that have elected to provide coverage to the adult group have primarily done so using State plan authority. The adult group consists of low-income individuals (up to 133 percent of the Federal poverty level) who are age 19 to 64, not pregnant, not entitled to or enrolled in Medicare Part A or B, or described in any other mandatory eligibility groups (for example, parent and caretaker relatives, children, or individuals eligible based on their receipt of SSI). Individuals are determined eligible based on income and household size, State residency, and citizenship and immigration status. Unlike other Federal means-tested public assistance programs such as Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF), community engagement or work requirements have not historically been a condition of eligibility in the Medicaid program under title XIX of the Act. However, some States have applied such requirements through a section 1115 demonstration. The community engagement requirement will apply in States that have elected the adult group through the State plan or that have a section 1115 demonstration that covers a similar population to which the requirement applies. To date, 40 States and the District of Columbia have expanded Medicaid \4\ and will be subject to the new community engagement requirement. States that have partially expanded Medicaid through a section 1115 demonstration and additional States that have applicable individuals (defined later in this rule) eligible to enroll or enrolled in a section 1115 demonstration will also be subject to the new community engagement requirement.\5\

\3\ While the ACA established the adult group as a mandatory eligibility group, the U.S. Supreme Court decision, National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012), effectively made coverage of this eligibility group voluntary for States.

\4\ See: CMS, Adult Coverage Expansion (December 1, 2023), available at https://www.medicaid.gov/medicaid/program-information/downloads/medicaid-expansion-state-map.pdf.

\5\ NOTE: This document contains links to non-United States Government websites. We are providing these links because they contain additional information relevant to the topic(s) discussed in this document or that otherwise may be useful to the reader. We cannot attest to the accuracy of information provided on the cited third-party websites or any other linked third-party site. We are providing these links for reference only; linking to a non-United States Government website does not constitute an endorsement by CMS, HHS, or any of their employees of the sponsors or the information and/or any products presented on the website. Also, please be aware that the privacy protections generally provided by United States Government websites do not apply to third-party sites.

Public Law 119-21, which CMS refers to as the Working Families Tax Cut (WFTC) legislation, was signed into law by President Donald J. Trump on July 4, 2025. This landmark legislation includes significant changes in Medicaid and the Children's Health Insurance Program (CHIP) affecting eligibility, program operations, and oversight capabilities. It also establishes new accountability measures for Medicaid and CHIP. Among other changes to Medicaid, section 71119(a) of the WFTC legislation added section 1902(xx) of the Act to establish a community engagement requirement for certain adults applying for or enrolled in Medicaid. This requirement has the potential to empower Medicaid beneficiaries through employment, education, or volunteer service so they can escape isolation and dependency, build confidence, and achieve self-sufficiency and independence. Isolation and loneliness have become an epidemic in the United States, affecting even able-bodied adults who can engage with their communities through work and other activities.6 7 8 9 One study found that lacking social connection is as harmful as smoking 15 cigarettes per day.\10\

\6\ Cigna Corporation. The Loneliness Epidemic Persists: A Post- Pandemic Look at the State of Loneliness among U.S. Adults. 2021. https://newsroom.thecignagroup.com/all-stories?item=446.

\7\ Bruce LD, Wu JS, Lustig SL, Russell DW, Nemecek DA. Loneliness in the United States: A 2018 National Panel Survey of Demographic, Structural, Cognitive, and Behavioral Characteristics. Am J Health Promot. 2019;33(8):1123-1133. doi: 10.1177/ 0890117119856551. Epub 2019 Jun 16. PMID: 31203639; PMCID: PMC7323762.

\8\ Shovestul B, Han J, Germine L, Dodell-Feder D. Risk factors for loneliness: The high relative importance of age versus other factors. PLOS ONE. 2020;15. doi: 10.1371/journal.pone.0229087. PMID: 32045467; PMCID: PMC7012443.

\9\ Buecker S, Mund M, Chwastek S, Sostmann M, Luhmann M. Is loneliness in emerging adults increasing over time? A preregistered cross-temporal meta-analysis and systematic review. Psychological Bulletin. 2021;147(8):787. doi: 10.1037/bul0000332. PMID: 34898234.

\10\ Holt-Lunstad J, Robles TF, Sbarra DA. Advancing social connection as a public health priority in the United States. Am Psychol. 2017;72(6):517-530. doi: 10.1037/amp0000103. PMID: 28880099; PMCID: PMC5598785.

Moreover, employment has been shown to be an important factor leading to long-term beneficiary health and well-being. Obtaining stable employment provides individuals with reliable income and financial stability, which in turn supports access to safe housing, nutritious food, and other resources necessary for maintaining health.11 12 Financial stability can lead to improved living conditions, purchasing healthier foods, and the ability to engage in healthy behaviors.13 14 Financial stability has also been linked to reduced chronic conditions, such as cardiovascular risk.15 16 Beyond its role in income generation, employment itself has been shown to be an important factor in long-

term beneficiary health and well-being. Evidence indicates that obtaining and maintaining stable employment is associated with improved physical and mental health outcomes and greater overall well-being, while unemployment and unstable work are linked to poorer health outcomes.17 18 19 20 Evidence from numerous studies show that the link between health and work is intrinsic and bi-directional whereby work is associated with healthier outcomes, and better health is associated with increased employment. Thus, a well-designed community engagement requirement may benefit individuals so that they are not dependent, demoralized, or stuck in situations that hinder their economic, physical, and mental state.

\11\ Zafar, Q., M.A. Khan, A.Z. Warsi, and L. Iqbal. (2024). “Economic Strain and Recovery Trajectories in Mental Health: The Role of Financial Stability in Mental Health Outcomes.” Review of Applied Management and Social Sciences,7(4): 345-358. https://doi.org/10.47067/ramss.v7i4.385.

\12\ R. Gerdes, T.D. Jackson, R. Roberts, et al. (2026). “Associations Between Employment and Health Outcomes: A Systematic Review of Reviews.” Journal of Occupational Rehabilitation. https://doi.org/10.1007/s10926-025-10357-5.

\13\ R. Chetty, M. Stepner, S. Abraham, et al. (2016) “The association between income and life expectancy in the United States, 2001-2014.” JAMA.315(16):1750-1766. https://doi:10.1001/ jama.2016.4226.

\14\ Schoufour, J., E. A.L. de Jonge, J. C. Kiefte-de Jong, et al. (2018). “Socio-economic indicators and diet quality in an older population” Maturitas, Volume 107: 71-77, ISSN 0378-5122, https://doi.org/10.1016/j.maturitas.2017.10.010.

\15\ Kim, S., B. Lee, M. Park, et al. (2016) “Prevalence of chronic disease and its controlled status according to income level.” Medicine 95(44):p e5286, https://doi.org/10.1097/MD.0000000000005286.

\16\ Brownell, N., Z. Boback, J. Nicholas, et al. (2024). “Trends in Income Inequities in Cardiovascular Health Among US Adults, 1988-2018” American Heart Association Journals. 17(5). https://doi.org/10.1161/CIRCOUTCOMES.123.010111.

\17\ Han,W.-J. (2024). “How longitudinal employment patterns shape health as individuals approach middle adulthood--US NLSY79 cohort.” PLOS ONE, 19(4), e0300245. https://doi.org/10.1371/journal.pone.0300245.

\18\ Virtanen M, Kivim[auml]ki M, Joensuu M, Virtanen P, Elovainio M, Vahtera J. Temporary employment and health: a review. Int J Epidemiol. 2005 Jun;34(3):610-22. doi: 10.1093/ije/dyi024. Epub 2005 Feb 28. PMID: 15737968.

\19\ Kim TJ, von dem Knesebeck O. Perceived job insecurity, unemployment and depressive symptoms: a systematic review and meta- analysis of prospective observational studies. Int Arch Occup Environ Health. 2016 May;89(4):561-73. doi: 10.1007/s00420-015-1107- 1. Epub 2015 Dec 29. PMID: 26715495.

\20\ Gerdes R, Jackson TD, Roberts R, Lytvyak E, Deibert D, Dennett L, Burton AK, Gross DP, Els C, Doroshenko A, Hagtvedt R, Straube S. Associations Between Employment and Health Outcomes: A Systematic Review of Reviews. J Occup Rehabil. 2026 Jan 6. doi: 10.1007/s10926-025-10357-5. Epub ahead of print. PMID: 41493509.

Section 71119(d) of the WFTC legislation directs CMS to publish an IFC no later than June 1, 2026, for the purpose of implementing the community engagement requirement. As directed, this IFC implements section 71119 of the WFTC legislation, including 1902(xx) of the Act.

Demonstrating community engagement as a condition of Medicaid eligibility is not an entirely new policy for the Medicaid program. Under President Trump's 2017 to 2021 presidential term, we approved section 1115 demonstration projects in 13 States \21\ that conditioned Medicaid eligibility, for certain individuals, on compliance with a community engagement requirement. These section 1115 demonstrations were intended to test and evaluate approaches that required work or community engagement as a condition of eligibility, coverage, additional or enhanced benefits, or reduced premiums or cost sharing. The demonstrations aimed to produce improved health and well-being by increasing the number of beneficiaries who were employed or engaged in other activities such as volunteering or education. Due to litigation and the subsequent Administration's withdrawal of approved authority for those States that had previously approved section 1115 demonstration authority to implement their community engagement programs, Georgia and Arkansas were the only two States that launched programs. Georgia is the only State that continues to operate a community engagement program as a condition of Medicaid eligibility for certain adults. This early implementation experience provides insight into operational considerations, indicating that beneficiary awareness, clarity of requirements, and the accessibility of reporting mechanisms, as well as overall administrative complexity, can influence participation and compliance.22 23 24 25

\21\ Arizona, Arkansas, Georgia, Indiana, Kentucky, Maine, Michigan, Nebraska, New Hampshire, Ohio, South Carolina (two 1115 demonstrations), Utah, and Wisconsin.

\22\ Centers for Medicare & Medicaid Services (CMS). (2025, December 8). Requirements for states to establish Medicaid community engagement requirements for certain individuals (CMCS Informational Bulletin: Section 71119 of the Working Families Tax Cut Legislation, P.L. 119-21). https://www.medicaid.gov/federal-policy-guidance/downloads/cib12082025.pdf.

\23\ Medicaid and CHIP Payment and Access Commission (MACPAC). (2026, April 9). Implementing community engagement requirements in Medicaid. https://www.macpac.gov/wp-content/uploads/2026/04/01_April-Slides_Implementing-Community-Engagement-Requirements-in-Medicaid.pdf.

\24\ Centers for Medicare & Medicaid Services (CMS). (2021, March 17). Letter to Arkansas regarding Arkansas Works demonstration. https://www.medicaid.gov/medicaid/section-1115-demonstrations/downloads/ar-works-ca2.pdf.

\25\ Georgia Department of Community Health. (2025, April 28). Georgia section 1115 demonstration waiver extension request. https://www.medicaid.gov/medicaid/section-1115-demonstrations/downloads/ga-pathway-pa-04282025.pdf.

In this IFC, we implement section 1902(xx) of the Act premised on what we learned from the previously approved section 1115 demonstration projects, permitting States to retain flexibility for their programs where possible, balancing the benefits of State flexibility with the potential costs, such as those associated with systems and operations, and promoting alignment with other health and social service programs, such as SNAP, while also adhering to the letter of the law. This IFC also seeks to increase program integrity by requiring State use of data and information that can ensure that State Medicaid eligibility determinations are auditable and that we have the data needed to exercise appropriate oversight of State implementation of the community engagement requirement. To help defray operational costs and streamline operational workflows, this IFC relies and builds upon existing statutory and regulatory requirements when possible, including existing requirements for Medicaid, SNAP, TANF, the Internal Revenue Service (IRS), and Health Insurance Exchanges.

The new requirement at section 1902(xx) of the Act requires individuals to engage in qualifying community engagement activities like work or education. The law also requires disenrollment of noncompliant individuals from Medicaid. This requirement will bring Medicaid in line with other public benefit programs, like SNAP and TANF, which have similar work requirements to support beneficiaries on a path to self-sufficiency. In SNAP and TANF, noncompliance with work requirements has implications for eligibility in those programs. For SNAP, noncompliance can result in ineligibility for time-limited participants after 3 months within a 36-month period. For TANF, noncompliance can result in the reduction or termination of cash benefits. As specified in section 1902(xx) of the Act for Medicaid, noncompliance would result in Medicaid disenrollment from or denial of eligibility for the adult group or section 1115 demonstrations that include applicable individuals; however, the individual can re-apply at any time and will be subject to the procedures for assessing compliance at application.

Consistent with our understanding of the Congress' directive through passage of the WFTC legislation, for able-bodied adults (generally those who enroll in the adult group), Medicaid should be a short-term hand up, not a lifetime handout. Implementing the community engagement requirement, we believe, will assist in prioritizing coverage for Medicaid's most vulnerable populations such as seniors, individuals with disabilities, pregnant women, and children while empowering able-bodied individuals through community engagement. Section 1902(xx) of the Act and this IFC are applicable to all States and the District of Columbia that elect to provide coverage to the adult group under the State plan or to certain individuals covered through certain section 1115 demonstrations as defined in statute and explained in the preamble of this IFC. Section 1902(xx) of the Act and this IFC do not apply to the territories. States that provide Medicaid coverage to applicable individuals as

defined in section 1902(xx) of the Act generally must comply with the community engagement requirement no later than January 1, 2027; States may implement the community engagement requirement earlier, provided that certain conditions are met.

This IFC implements the statutory definition of applicable individuals, the statutory term for the Medicaid applicants and beneficiaries who must demonstrate community engagement as a condition of their Medicaid eligibility. With certain exclusions specified in the statute, applicable individuals are those who are eligible for, or enrolled under, the State plan adult group described in section 1902(a)(10)(A)(i)(VIII) of the Act and Sec. 435.119. In addition, applicable individuals are those who are eligible to enroll or are enrolled under a waiver of the State plan authorized under section 1115 of the Act that provides coverage that meets minimum essential coverage (MEC) requirements described in section 5000A(f)(1)(A) of the Internal Revenue Code (the Code) and who have attained the age of 19 and are under 65 years of age, are not pregnant, and not entitled to, or enrolled, for benefits under part A of title XVIII, or enrolled for benefits under part B of title XVIII, and are not otherwise eligible to enroll under such plan.

This IFC specifies the steps States must take when they are unable to verify whether an applicable individual has met the community engagement requirement when applying for Medicaid, as part of a renewal of Medicaid eligibility, and, if elected by the State, during a more frequent verification. This includes providing the individual with a notice of noncompliance and 30 calendar days to demonstrate a satisfactory showing. This IFC specifies that the notice of noncompliance must inform the individual how they may make a satisfactory showing to demonstrate compliance or that the individual should not be subject to the requirement as well as how the individual can reapply for coverage if they are disenrolled.

The IFC also specifies when and how States must verify an applicable individual's compliance with the community engagement requirement and whether an individual meets an exception (that is, will be deemed compliant) or exclusion from the requirement. This includes the use of data sources to verify community engagement activity consistent with section 1902(xx) of the Act and when to request additional information from the individual.

This IFC specifies outreach and notice requirements for States that are integral to implementing the community engagement requirement; how individuals can meet the community engagement requirement, which require that affected individuals work or engage in other educational or community service activities for at least 80 hours a month; how applicants and beneficiaries will be able to demonstrate compliance and how States will verify compliance; and what steps States must take in the event of noncompliance. This IFC also specifies when States will have flexibility in implementing the community engagement requirement.

This IFC addresses additional considerations for States and implications of the community engagement requirement for other existing enrollment pathways, such as presumptive eligibility, as well as eligibility for demonstration projects authorized under section 1115 of the Act. This IFC also specifies the new State data and reporting requirements for monitoring purposes. In addition, this IFC outlines considerations for States that elect to delegate certain functions to their managed care plans as well as implications of the conflict-of- interest requirement for managed care plans and other contractors. Finally, this IFC specifies the situations and steps for a State to request a temporary good faith effort exemption from compliance with timely implementation of the community engagement requirement.

Through this IFC, we are adding regulations to Subpart F of part 435 to implement amendments made by section 71119 of the WFTC legislation, that require certain adults who apply for Medicaid or who are enrolled in Medicaid to meet the community engagement requirement. Section 71119(b) of the WFTC legislation made a conforming amendment to section 1902(a)(10)(A)(i)(VIII) of the Act, which describes the eligibility requirements for the adult group. We implement this conforming change by amending Sec. 435.119, which implements Medicaid adult group eligibility, to specify that this eligibility group is subject to the community engagement requirement described at Sec. Sec. 435.550 through 435.563. Additionally, we establish a basis and scope for the community engagement requirement for applicable individuals at Sec. 435.550, by citing the authority provided by section 1902(xx) of the Act and specifying that these requirements only apply to Medicaid programs operated by one of the 50 States or the District of Columbia (to the extent that a Medicaid program elects to provide coverage to the adult group under the State plan or to certain individuals through certain section 1115 demonstrations, as described in section II.B. of this IFC). Consistent with the definition of State at section 1902(xx)(9)(C) of the Act, the community engagement requirement does not apply to a U.S. territory, regardless of whether it elects to cover the adult group or has a section 1115 demonstration with applicable individuals. We also make additional revisions to certain regulations that are necessary to implement the community engagement requirement outlined in this IFC. These revisions are described in more detail in section II.A. of this.\26\

\26\ NOTE: This document contains links to non-United States Government websites. We are providing these links because they contain additional information relevant to the topic(s) discussed in this document or that otherwise may be useful to the reader. We cannot attest to the accuracy of information provided on the cited third-party websites or any other linked third-party site. We are providing these links for reference only; linking to a non-United States Government website does not constitute an endorsement by CMS, HHS, or any of their employees of the sponsors or the information and/or any products presented on the website. Also, please be aware that the privacy protections generally provided by United States Government websites do not apply to third-party sites.”

Under section 71119 of the WFTC legislation, Congress has directed us to implement a community engagement requirement and directed that any action taken to implement this requirement not be subject to the provisions of 5 U.S.C. 553. Implementation of the community engagement requirement requires ensuring related regulations reflect current and effective policy. Currently, the regulations do not contain current and effective policies related to application requirements, redeterminations of eligibility during periodic renewals, redeterminations of eligibility in between renewals based on a change in circumstances, and timeliness standards to process eligibility and enrollment actions.

Section 71102 of the WFTC legislation precludes CMS from implementing, administering, or enforcing amendments made by provisions of the final rule titled “Medicaid Program; Streamlining the Medicaid, Children's Health Insurance Program, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes” (89 FR 22780) (hereinafter referred to as the 2024 Eligibility and Enrollment final rule) for Federal regulations specified in section 71102 of the WFTC legislation until after September 30, 2034. This prohibition renders the amendments made by the 2024 Eligibility and Enrollment final rule to the specified regulatory provisions unenforceable prior to October 1, 2034, effectively suspending these provisions during that period (herein referred to as the section 71102 moratorium).

Many of the regulations amended by the 2024 Eligibility and Enrollment final rule that are now subject to the section 71102 moratorium are necessary to implement the community engagement requirement successfully. For example, section 1902(xx) of the Act, as added by section 71119 of the WFTC legislation, requires States to verify, at renewal, that individuals satisfy the community engagement requirement. However, the regulatory provisions governing renewals are among those suspended by the section 71102 moratorium because the moratorium suspends amendments made by the 2024 Eligibility and Enrollment final rule to Sec. 435.916, which establishes requirements for States to conduct periodic renewals of eligibility. As a result, there are currently no enforceable regulations in effect governing renewals of eligibility that CMS could cite in implementing the new community engagement requirement.

Accordingly, it would not be feasible to establish an enforceable community engagement requirement where the implementing regulations would need to rely on suspended eligibility and enrollment policies. In addition to renewal requirements, the section 71102 moratorium also suspends regulatory provisions relating to application requirements, procedures for acting on changes in circumstances that may affect eligibility, and timeliness standards for processing eligibility and enrollment actions. Because current and effective Federal regulations no longer comprehensively address these core eligibility and enrollment processes, CMS would be significantly constrained in its ability to implement section 71119 of the WFTC legislation and enforce provisions of the IFC while the moratorium is in effect.

To implement community engagement while the section 71102 moratorium is in effect, it is therefore necessary to restore, for regulations impacted by the section 71102 moratorium, the previous version of the Code of Federal Regulations (CFR) that was in effect prior to the effective date of the 2024 Eligibility and Enrollment final rule. The restoration of the previous version of the CFR for certain provisions will ensure that the regulations reflect current legal authority and CMS policy to support implementation of community engagement while the section 71102 moratorium is in effect. For the period until October 1, 2034, this IFC restores the following regulations as they existed before the 2024 Eligibility and Enrollment final rule: Sec. Sec. 431.213(d), 431.231(d), 435.907, 435.911(c), 435.912, 435.916, 435.919, 457.340(d)(1), 457.344, and 457.960. We also make a corresponding edit to remove a cross-reference at Sec. 435.1200(e)(1), that would no longer exist, with the revisions to revert to the previous version of the CFR and make conforming changes to affected CHIP regulations, which cross-reference to Medicaid regulations. The changes to these provisions are either necessary to implement the community engagement requirement in this IFC or are conforming changes to the Medicaid and CHIP regulations because of the implications of the revisions to restore the previous version of the CFR. For the period until October 1, 2034, the changes are as follows:

Sec. Sec. 431.213(d) and 431.231(d) concerning whereabouts unknown based on returned mail are revised to reflect the version of the CFR for these paragraphs in effect as of June 2, 2024, as a conforming change to restore regulations that were relocated by the 2024 Eligibility and Enrollment final rule to Sec. 435.919, which is removed as noted in this section.

Sec. 435.907(c)(4) concerning modalities for States to accept non-MAGI (modified adjusted gross income) application forms is removed, which is affected by the section 71102 moratorium.

Sec. 435.907(d)(1) and (2) concerning the minimum time for applicants to respond to requests for information, the provision of a reconsideration period at application, and expansion of the prohibition on in-person interviews, are removed because they are affected by the section 71102 moratorium and replaced with Sec. 435.907(d) of the CFR in effect as of June 2, 2024.

Sec. 435.911(c) is revised to reflect the version of the CFR for this paragraph in effect as of June 2, 2024, to remove cross- references removed in this IFC, which is affected by the section 71102 moratorium.

Sec. Sec. 435.912 concerning timeliness standards and 435.916 concerning redeterminations of eligibility, which are affected by the section 71102 moratorium, are replaced in their entirety with the version of the CFR in effect as of June 2, 2024.

Sec. 435.919 concerning acting on changes in circumstances and updating contact information, which is affected by the section 71102 moratorium, is removed.

Sec. 435.1200(e)(1) is amended to remove the phrase “(regarding regularly-scheduled renewals of eligibility) or Sec. 435.919 (regarding changes in circumstances)” as a conforming change because we remove Sec. 435.919 in this IFC.

Sec. 457.340(d)(1) is revised to reflect the version of the CFR for this paragraph in effect as of June 2, 2024, to conform with revisions to Sec. 435.912.

Sec. 457.344 is removed to conform with revisions to restore the previous version of the CFR for Sec. Sec. 435.912 and 435.916 and the removal of Sec. 435.919.

Sec. 457.960 is revised to conform with changes to reflect the previous version of the CFR because Sec. 457.344 is removed.

In this IFC, we limit revisions to the regulations: (1) to restore the previous version of the CFR for requirements affected by the moratorium, when needed to implement community engagement, and (2) when conforming changes are needed for consistency. At this time, we are not updating the CFR

to restore other regulations \27\ impacted by section 71102 of the WFTC legislation to their versions in effect prior to the 2024 Eligibility and Enrollment final rule and are not amending the policies in the restored regulations because such action falls outside the scope of the Congress's directive under section 71119 of the WFTC legislation. We do not permanently restore the CFR as such action also falls outside the scope of Congress's directive under section 71119 of the WFTC legislation. Because we modify the CFR to restore the regulations which are necessary to implement the community engagement requirement and sunset the provisions on October 1, 2034, we will follow applicable rulemaking procedures to ensure that policies governing Medicaid and CHIP eligibility and enrollment are implemented and effective on October 1, 2034, replacing the policies scheduled to sunset on that date.

\27\ For more information on the section 71102 moratorium and how to interpret regulations that remain impacted, see the November 18, 2025, CMCS Informational Bulletin, “ “Working Families Tax Cut” Legislation, Public Law 119-21: Summary of Medicaid and Children's Health Insurance Program (CHIP) Related Provisions,” available at https://www.medicaid.gov/federal-policy-guidance/downloads/cib11182025.pdf.

Separately, the regulations that we are updating so that they reflect the versions in effect prior to the 2024 Eligibility and Enrollment final rule are referenced throughout this IFC. In accordance with the changes discussed here, the references to the regulations affected by the section 71102 moratorium in the preamble, regulatory impact analysis, collection of information, and cross-referenced in regulatory text should be interpreted as referring to the prior CFR versions implemented in this IFC.

Section 71119(a) of the WFTC legislation amended section 1902 of the Act to add subsection (xx). Section 1902(xx) of the Act requires that “applicable individuals” demonstrate, as a condition of their Medicaid eligibility, “community engagement” (generally, that they work, are enrolled in an educational program, complete community service, participate in a work program, or any combination thereof) for a minimum period of time preceding their Medicaid application and during their Medicaid enrollment. Section 1902(xx)(9)(A)(i) of the Act defines the term “applicable individual” to mean an individual who is not a “specified excluded individual” described in section 1902(xx)(9)(A)(ii) of the Act (as further discussed in section II.E. of this IFC) and who (1) “. . . is eligible to enroll (or is enrolled) under the State plan under” section 1902(a)(10)(A)(i)(VIII) of the Act; or (2) “. . . is otherwise eligible to enroll (or is enrolled) under a waiver of such plan” and meets the criteria of 1902(xx)(9)(A)(i)(II)(aa) and (bb). In this IFC, we establish a new Sec. 435.551 to implement this statutory definition of applicable individual.

For individuals applying for, or enrolled in, coverage under the State plan, only individuals eligible for or enrolled in the adult group under section 1902(a)(10)(A)(i)(VIII) of the Act (implemented at Sec. 435.119 of the regulations) could be applicable individuals. Individuals eligible for or enrolled in any other mandatory or optional State plan eligibility groups are not applicable individuals subject to the community engagement requirement. For example, individuals enrolled under the State plan in the following groups are not applicable individuals: the mandatory group for parents and other caretaker relatives (under section 1931 of the Act and implemented at Sec. 435.110 of the regulations); and the optional group for individuals under age 65 with incomes exceeding 133 percent of the Federal poverty level (FPL) (under section 1902(a)(10)(A)(ii)(XX) of the Act and implemented at Sec. 435.218 of the regulations). This includes individuals eligible for or enrolled in mandatory and optional State plan groups that are modified through a waiver authority under section 1115(a)(1) of the Act, as their underlying eligibility authority is through the State plan.

Regardless of whether a State covers the adult group under the State plan, a person could still be an applicable individual if that person is “otherwise” eligible for or enrolled in Medicaid under certain section 1115 demonstrations. Section 1902(xx)(9)(A)(i)(II) of the Act specifies that an applicable individual includes an individual “who is otherwise eligible to enroll (or is enrolled) under a waiver of such plan that provides coverage that is equivalent to minimum essential coverage [(MEC) \28\]. . .and has attained the age of 19 and is under 65 years of age, is not pregnant, is not entitled to, or enrolled for, benefits under part A of title XVIII, or enrolled for benefits under part B of title XVIII, and is not otherwise eligible to enroll under such plan.” To be an applicable individual in this case, an individual must be (1) eligible for, or enrolled in, coverage that meets MEC requirements under demonstration expenditure authority under section 1115(a)(2) of the Act (and not under the State plan), and (2) at least 19 years of age and under 65 years of age, not pregnant, not entitled to or enrolled for benefits under Medicare part A or part B, and not otherwise eligible to enroll under the State plan. If a State does not cover the adult group under the State plan and does not otherwise provide coverage to a population described in section 1902(xx)(9)(A)(i)(II) of the Act under section 1115(a)(2) expenditure authority, the State will not have any applicable individuals who will be subject to the community engagement requirement. However, States that cover the State plan adult group might also have a section 1115 demonstration population that meets the criteria described above and, therefore, also have applicable individuals under the demonstration.

\28\ MEC is defined in section 1902(xx)(9)(A)(i)(II)(aa) of the Act as follows: “as described in section 5000A(f)(1)(A) of the Internal Revenue Code of 1986 and as determined in accordance with standards prescribed by the Secretary in regulations.” CMS does not read the provision in the statute to in any way change the current process for determining whether Medicaid coverage in section 1115 demonstrations is MEC.

We do not consider section 1915(b) waivers or section 1915(c) waivers to be “a waiver of such plan” for purposes of section 1902(xx)(9)(A)(i)(II) of the Act. This is because sections 1902(xx)(9)(A)(i)(I) and (II) of the Act define groups of individuals who are “eligible to enroll” or are “enrolled” under either the State plan or a waiver of the plan, whereas section 1915(b) and (c) waivers give States the flexibility to waive certain requirements to utilize managed care and long-term care delivery systems for individuals enrolled under the State plan, rather than enabling enrollment in Medicaid coverage for individuals who would not otherwise be eligible to enroll in Medicaid under the State plan.

Similarly, we do not interpret section 1902(xx)(9)(A)(i)(II) of the Act to describe section 1115 demonstrations that provide only section 1115(a)(1) waiver authority or that include section 1115(a)(2) expenditure authority only for specific services (versus eligibility) for groups covered under the State plan. Individuals whose coverage is affected by these kinds of section 1115 demonstrations are eligible to enroll (or are enrolled) in Medicaid through the State plan, not through demonstration expenditure authority. Individuals who are eligible to enroll (or are enrolled) in Medicaid under the State plan would be applicable individuals only if they are eligible for or enrolled in the State plan under section 1902(a)(10)(A)(i)(VIII) of the Act (the adult group).

Due to the complex and often unique nature of section 1115 demonstrations and to support our rulemaking efforts, we are engaged in a systematic review and analysis of approved section 1115(a)(2) expenditure authority in demonstrations that create an eligibility pathway for individuals who are not eligible under the State plan to determine which demonstrations cover individuals who could be subject to the community engagement requirement. Based on our review thus far, many section 1115(a)(2) expenditure authority demonstration populations do not meet the definition of an applicable individual. For example, a number of demonstrations provide coverage only of limited Medicaid benefits, such as only family planning benefits to a group eligible only under section 1115(a)(2) expenditure authority. This coverage does not meet MEC requirements, and thus the community engagement requirement would not apply to individuals applying for or enrolled in coverage under these demonstrations.

In other instances, a demonstration could cover a population under section 1115(a)(2) expenditure authority that is not eligible under the State plan and generally meets the criteria in section 1902(xx)(9)(A)(i)(II) of the Act, but the demonstration also includes an eligibility criterion under which anyone eligible for the demonstration coverage would always be a specified excluded individual, as discussed in section II.E. of this IFC. For example, some section 1115(a)(2) expenditure authority demonstrations create an eligibility pathway for coverage that is equivalent to MEC for a population of individuals between age 19 and 64, who are not pregnant, not entitled to or enrolled for Medicare, and who are not otherwise eligible to enroll in Medicaid under the State plan, but who meet an institutional level of care to receive home and community-based services (HCBS) through the expenditure authority. Any individual in this population would meet the definition of an applicable individual at section 1902(xx)(9)(A)(i)(II) of the Act, except that they would be a specified excluded individual because they would be medically frail or otherwise have special medical needs (under the definition established in this rule at Sec. 435.554(c)(5)). Therefore, individuals in this demonstration population would not be subject to the community engagement requirement.

Additionally, our review identified several demonstrations providing Medicaid eligibility under section 1115(a)(2) expenditure authority to populations generally meeting the definition of an applicable individual in section 1902(xx)(9)(A)(i)(II) of the Act, but in which not all individuals would always meet the criteria of a specified excluded individual or a mandatory exception for certain populations. These demonstration populations could be subject to the community engagement requirement.

As part of our section 1115 demonstration review and approval process, we will evaluate proposals which seek to provide Medicaid eligibility under section 1115(a)(2) expenditure authority to a population not eligible under the State plan to determine if the community engagement requirement might apply to the demonstration population.

Section 1902(xx)(2) of the Act specifies the ways by which an applicable individual may demonstrate community engagement. See section II.B. of this IFC for a discussion of the definition of an “applicable individual.” The Secretary is authorized under section 1902(xx)(2) of the Act to establish criteria for determining whether an applicable individual has demonstrated community engagement. New Sec. 435.552 implements section 1902(xx)(2) of the Act.

Under section 1902(xx)(2) of the Act, an applicable individual demonstrates community engagement for a month if, for such month, the individual:

Works not less than 80 hours;

Completes not less than 80 hours of community service;

Participates in a work program for not less than 80 hours;

Is enrolled in an educational program at least half-time;

Engages in any combination of the aforementioned activities for a total of not less than 80 hours;

Has a monthly income that is not less than the applicable minimum wage requirement under section 6 of the Fair Labor Standards Act of 1938 (Federal minimum wage) multiplied by 80 hours; or

Is a seasonal worker (as described in section 45R(d)(5)(B) of the Code of 1986) and has an average monthly income over the preceding 6 months that is not less than the applicable Federal minimum wage multiplied by 80 hours.

In this section, we describe each of the options for demonstrating community engagement in further detail, first explaining what constitutes work, community service, a work program, and an educational program. To simplify administration, we have endeavored to align our definitions of the activities and income requirements with existing statutory or regulatory requirements in Medicaid and in other benefit programs such as SNAP and the TANF program. Then, we explain what constitutes enrollment status in an educational program and how hours across activities can be combined. We conclude this section by explaining additional ways, as described in the statute, in which an applicable individual can demonstrate community engagement, including by computing monthly income or average monthly income for seasonal workers. We note that the statute requires States to make all of the options for demonstrating community engagement listed in section 1902(xx)(2) of the Act available. States are not permitted to make only a subset of these options available, such as by allowing individuals to demonstrate community engagement through participation in a work program but not by completing community service. Applicable individuals must be allowed to demonstrate community engagement by meeting any one or more of the conditions described at new Sec. 435.552. 1. Work

Under section 1902(xx)(2)(A) of the Act, an applicable individual demonstrates community engagement if the individual works not less than 80 hours in such month. At new Sec. 435.552(b), we define work to mean: work in exchange for money, work in exchange for goods or services (“in-kind” work), and unpaid work other than community service (as defined and discussed below). Applicable individuals can work in one or more ways, separately or combined, to meet the community engagement requirement. Work in exchange for money can include many occupations. However, an individual does not need to be an employee of a company or organization to meet this definition. Section 1902(xx)(2) of the Act does not specify particular work arrangements; rather, it requires that individuals engage in meaningful activity in the community, including working. Many individuals work for themselves by being self-employed due to starting a business, owning a business, or as an independent contractor, and these activities meet the definition of work at Sec. 435.552(b).

In-kind and unpaid work also represent ways in which an individual can engage in meaningful activity in the community. With a broad definition of work, we recognize the reality of the wide array of work arrangements and seek to enable individuals participating

in such arrangements to demonstrate community engagement. There are jobs in various sectors, ranging from domestic service to specialized facility management, where individuals may choose to accept in-kind compensation in the form of non-monetary benefits like housing, meals, or utilities. For example, an individual who performs duties as a property manager or building superintendent may receive compensation in the form of free or reduced rent. Under our definition of work at Sec. 435.552(b), the hours the individual spends performing these duties would count toward meeting the 80-hour requirement.

Unpaid and in-kind work are also a way for individuals to obtain necessary job skills and gain work experience prior to attaining paid employment. Our definition of work, which does not require that an individual receive payment for duties or activities performed for the benefit of another individual or entity, accommodates situations where individuals engage in unpaid work, including, but not limited to, unpaid work as part of a trial period when applying for a job, or unpaid work, such as an internship, to gain experience for a job or industry. In contrast to community service (discussed in section II.C.2. of this IFC), unpaid work can benefit an individual or private entity and does not need to benefit the community. For example, an individual can intern at a private office to gain experience with bookkeeping and records management, but this internship would not be community service.

The unpaid work of a family caregiver as defined at Sec. 435.554(a), who does not qualify as a specified excluded individual, can also qualify as unpaid work under the definition at Sec. 435.552(b). We recognize that not all people who meet the definition of a family caregiver will qualify as a specified excluded individual under section 1902(xx)(9)(A)(ii)(III) of the Act, which this IFC implements at Sec. 435.554. Caregiving hours that are below the 80- hour caregiving threshold in Sec. 435.554(c)(3)(i)(C) and are provided by a family caregiver as defined at Sec. 435.554(a) to a dependent child 13 years of age and under or a disabled individual, with whom he or she does not reside and is not related to, would count toward demonstrating community engagement. For additional details about implementation of the family caregiver definition and the criteria to qualify as a specified excluded individual, see sections II.E.3.d. and h. of this IFC.

Including in-kind and unpaid work in the definition of work generally aligns with the Food and Nutrition Service's (FNS) regulatory definition of working for SNAP at 7 CFR 273.24, which implements the work requirement in title VIII of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Pub. L. 104-193) enacted on August 22, 1996 (PRWORA). Similar to section 1902(xx)(2)(A) of the Act, PRWORA also does not define work. FNS developed the definition to include in-kind and unpaid work.\29\ We are adopting a similar definition for purposes of Medicaid community engagement, in keeping with our principle of aligning with other existing public benefit work requirements to the extent possible.

\29\ FNS's definition of unpaid work states that the unpaid work must be verified under standards established by the State agency. Our definition does not include this verification language because Medicaid has its own specific verification requirements that must be followed for community engagement. Section II.I.6.a. of this IFC includes information about verification requirements for unpaid work.

States will need to verify work hours when determining compliance under Sec. 435.552(a). Additional information about verification is discussed in section II.I.6.a. of this IFC. 2. Community Service

Under section 1902(xx)(2)(B) of the Act, an applicable individual demonstrates community engagement if the individual completes not less than 80 hours of community service in such month. SNAP does not specifically include the term “community service” in its work requirements (SNAP general work requirements are defined in section 6(d)(1) of the Food and Nutrition Act of 2008 and SNAP time limit work requirements, formerly known as the for Able-Bodied Adults without Dependents work requirements, are defined in section 6(o)(2) of such Act). However, TANF defines community service programs at 45 CFR 261.2(h), as structured programs and embedded activities in which individuals perform work for the direct benefit of the community under the auspices of public or nonprofit organizations.\30\ In keeping with our principle of aligning Medicaid community engagement definitions with other benefit programs, we similarly define community service at new Sec. 435.552(b) to mean unpaid work with a structured program that is completed for the direct benefit of the community under the auspices of public or nonprofit organizations (including embedded activities of the program that allow an individual to develop skills necessary to complete community service). While community service under this definition is a type of unpaid work, it counts separately as a qualifying activity and thus is not counted as work.

\30\ While the Administration for Children and Families (ACF) definition of community service program uses the term “work”, ACF states in the preamble of the 2006 Reauthorization of the Temporary Assistance for Needy Families Program Interim final rule with request for comments, that community service programs are an unpaid work activity when discussing documentation requirements for unpaid work activities: “[o]ther unpaid work activities, including work experience, community service programs. . .”. See: Reauthorization of the Temporary Assistance for Needy Families Program, Medicaid Program; Premiums and Cost Sharing 71 FR 37468 (June 29, 2006). https://www.federalregister.gov/d/06-5743.

The TANF definition of community service is more extensive than our definition as it lists examples of fields (such as health, social service, and environmental protection) in which community service activities can be completed. It also includes a supervision requirement. We do not include a list of specific fields in our definition because we do not wish to inadvertently limit States or individuals from seeking community service in emerging fields. For example, technology is a field in which community service could be completed, but it is not included in TANF's definition. In addition, although our definition does not expressly require that qualifying community service activities be supervised, our requirement that community service be completed with a structured program under the auspices of public or nonprofit organizations ensures that the community service activities are monitored and operated with sufficient oversight. This means that an individual cannot complete a community service activity independently of an organization that fits the description in the definition. In addition, in order to meet our requirement that community service must be completed with a structured program, the public or nonprofit organization must provide oversight of the activity and have a process in place to track the community service completed by individuals, including the type of community service activity, dates and hours the community service is completed, and a point of contact who can confirm the hours completed.

Consistent with the TANF definition at 45 CFR 261.2(h), while community service should serve a useful community purpose, we also acknowledge that when completing community service, there can be other activities embedded within the community service work that an individual performs under the auspices

of a public or nonprofit organization. These embedded activities allow an individual to develop necessary skills so that they can complete the community service. Because these activities help an individual complete the community service, we have included them in the definition of community service. For example, such embedded activities could include attending training as part of the community service program, such as attending a computer training class to learn a certain computer skill to provide tech tutoring for seniors. Such training would count towards an individual's community service hours because it is an integral part of the community service that is being provided to the community and it allows the individual to develop the skills needed to complete the community service.

We recognize that community service needs and opportunities vary by State and locality due to different local challenges. States are responsible for determining which activities qualify as community service under the definition at Sec. 435.552(b). In doing so, States will need to assess whether the activity is with a structured program and if the activity directly benefits the community by addressing a community/civic or public need. The activity must also not serve a partisan purpose. For example, community service activities could include volunteering at a food bank, mentoring or tutoring youth, supporting seniors through meal delivery, or cleaning public parks or grounds. Community service activities would not include activities that directly benefit only specific individuals (as opposed to being part of an effort that directly benefits the broader community) or activities that are purely recreational in nature. Examples of activities that do not fall within the definition would include: helping to complete a task for a specific individual that is not performed as part of a wider effort benefiting the broader community (for example, helping a friend move or helping an individual with yard work, versus providing assistance with moving or yard work for an organization that provides that assistance broadly to various members in the community), attending a child's parent teacher conference or school events, or joining a community recreational club (for example, dance or sports club). Campaigning or volunteering for a partisan political candidate or committee would also be excluded activities.

Under the definition at Sec. 435.552(b), community service must be completed with a structured program under the auspices of public or nonprofit organizations. However, a State must not restrict community service to activities with an organization described in section 501(c)(3) of the Code as tax exempt. Such a narrow interpretation of organizations in which community service can be completed ignores the reality that there are various community organizations that operate structured programs which provide services to benefit the community, but which may not be a 501(c)(3) organization, such as local government agencies, religious nonprofits (such as non-denominational ministries), and smaller social service providers.

We also note that the statute at section 1902(xx)(2)(B) of the Act does not require individuals to volunteer for community service. Whether community service is completed voluntarily or because of a mandate, such as court-ordered community service, the community service still benefits the community. Thus, we believe it is appropriate to use community service activities completed to fulfill a court order or other mandate as countable hours towards meeting the Medicaid community engagement requirement.

States will need to establish processes to verify an individual's community service activities and hours. Additional information about verification is discussed in section II.I.6.b. of this IFC. 3. Work Program

Under section 1902(xx)(2)(C) of the Act, an applicable individual demonstrates community engagement if the individual participates in a work program for not less than 80 hours in such month. Section 1902(xx)(9)(D) of the Act defines work program to have the meaning given such term in section 6(o)(1) of the Food and Nutrition Act of 2008. Section 6(o)(1) in turn defines work program as: (1) a program under title I of the Workforce Innovation and Opportunity Act (WIOA); (2) a program under section 236 of the Trade Act of 1974; (3) a program of employment and training operated or supervised by a State or political subdivision of a State that meets standards approved by the Governor of the State, including an employment and training program under subsection (d)(4) of section 6 of the Food and Nutrition Act of 2008, other than a supervised job search program or job search training program; (4) a program of employment and training for veterans operated by the U.S. Department of Labor or the U.S. Department of Veterans Affairs (VA), and approved by the Secretary of the U.S. Department of Agriculture (USDA); and (5) a workforce partnership under subsection (d)(4)(N) of section 6 of the Food and Nutrition Act of 2008. We incorporate this definition into our regulation at Sec. 435.552(b) with one modification as described further in this section. We separately note that programs outside of these aforementioned work programs, such as those operated by health providers that do not qualify under the part of the definition related to programs operated or supervised by a State, are not included in this definition. Also, while some States partner with managed care plans to provide a range of supported employment services to individuals receiving home and community-based services under section 1915(c) waivers or as part of section 1915(i) State plan services, these Medicaid-covered employment services are different from work programs as defined at Sec. 435.552(b) and do not independently satisfy the work program community engagement requirement. However, as discussed in section II.M. of this IFC, managed care plans can provide valuable services to help their enrollees meet community engagement obligations, such as referring managed care enrollees to qualified work programs.

We note that the definition at section 6(o)(1) of the Food and Nutrition Act of 2008 includes a program of employment and training operated or supervised by a State or political subdivision of a State that meets standards approved by the Governor of the State, including a program under subsection (d)(4) of the Food and Nutrition Act of 2008 (SNAP Employment and Training (E&T) program), other than a supervised job search program or job search training program. However, limited supervised job search and job search training activities are allowable SNAP E&T program components for the purposes of fulfilling the time limit requirements. To align with SNAP regulations at 7 CFR 273.24(a)(3)(iii), we will permit a program of employment and training that meets the definition of work program under Sec. 435.552(b) to include supervised job search or job search training as a subsidiary activity, as long as the job search activity is less than half of the required hours. We recognize that there are employment and training programs that may require or include some job search activity, such as resume writing or mock interviews. However, we want to make sure that the supervised job search or job search activity is not the primary component of the employment and training program because we believe that the focus

should be on obtaining skills to enable long-term self-sufficiency.\31\

\31\ Wroblewska K, Steigelman C, J, et al. (2022). “The Use of Supervised Job Search, Job Search Training, and Integrated Job Search in SNAP E&T: Three Cases Studies.” U.S. Department of Agriculture, Food and Nutrition Service. Prepared by Insight Policy Research, Inc. https://fns-prod.azureedge.us/sites/default/files/resource-files/SNAPETJobSearch.pdf.

Also, we have received questions regarding whether job search activities that are conducted to receive unemployment insurance will count toward meeting the community engagement requirement. If the unemployment insurance job search activities are conducted in a manner that is consistent with the requirements of the work program, then they will count towards meeting the community engagement requirement. We encourage States to work with their State workforce agencies to establish data sharing and align job search activities and requirements.

We recognize the work programs under section 1902(xx)(9)(D) of the Act include SNAP E&T programs, as provided under subsection (d)(4) of section 6 of the Food and Nutrition Act of 2008 and implementing regulations at 7 CFR 273.24(3)(iii) and 273.7(d) and (e). Since the work program requirements that we are adopting here align with those in SNAP under section 6 of the Food and Nutrition Act of 2008, the same operational requirements for States' SNAP E&T programs would apply for purposes of the Medicaid community engagement requirement, such as SNAP State agencies being responsible for referring eligible SNAP participants to SNAP E&T services and submitting an annual SNAP E&T plan to FNS.

We are not requiring States to establish new work programs but are also not prohibiting States from doing so. We also do not have the authority to change oversight or operational requirements for existing work programs meeting the definition at 1902(xx)(9)(D). States must, however, provide information about work programs that meet these requirements as part of the outreach sent to certain individuals about how to comply with the community engagement requirement that is required under section 1902(xx)(8)(A)(i) of the Act and as discussed in section II.L. of this IFC.

States will need to verify work program activities and hours. Information about verification is discussed in section II.I.6.c. of this IFC. 4. Educational Program

Under section 1902(xx)(2)(D) of the Act, an applicable individual demonstrates community engagement if the individual is enrolled in an educational program at least half-time. We discuss what it means to be enrolled “at least half-time” in section II.C.5. of this IFC. Section 1902(xx)(9)(B) of the Act defines the term educational program to include: (1) an institution of higher education as defined in section 101 of the Higher Education Act of 1965; and (2) a program of career and technical education as defined in section 3 of the Carl D. Perkins Career and Technical Education Act of 2006. We incorporate these definitions into our regulation at Sec. 435.552(b).

We also note that the definition of “educational program” at section 1902(xx)(9)(B) of the Act is not exclusive, and we believe additional educational activities such as high school and high school equivalency programs should count toward demonstrating community engagement. Although section 3(5) of the Carl D. Perkins Career and Technical Education Act of 2006 includes public secondary school programs, that law's definition of career and technical education (the definition to which section 1902(xx)(9)(B)(ii) cross-references) includes only secondary education programs that provide technical skills proficiency. While there are some specialized secondary schools (high schools) that meet this definition, many high schools do not specialize in career and technical education. We recognize that even though only persons aged 19 or older can be applicable individuals, some applicable individuals may be enrolled in a high school or high school program that does not provide technical skills proficiency. For example, an individual's graduation from high school might be delayed for various reasons, including starting school late, repeating a grade, or returning to school after having to take a break. Additionally, we recognize that applicable individuals will likely include individuals who are age 19 or older and are studying to obtain a high school equivalency certificate through a General Educational Development (GED) program or other high school equivalency program. Completing high school or earning a high school equivalency certificate is commonly a prerequisite for employment and higher education and supports Medicaid beneficiaries in achieving self-sufficiency. Moreover, in TANF, satisfactory attendance at secondary school or in a course of study leading to a certificate of general equivalence is included in the definition of work activities at 45 CFR 261.2(l).

Thus, in defining an educational program, we adopt at Sec. 435.552(b) the definitions from section 1902(xx)(9)(B) of the Act: an institution of higher education as defined in section 101 of the Higher Education Act, or a program of career and technical education as defined in section 3(5) of the Carl D. Perkins Career and Technical Education Act of 2006. We are also including two additional types of educational activity. First, we include in our definition of educational program a high school as defined in title VIII of the Elementary and Secondary Education Act (20 U.S.C. 7801et seq.). The definition of high school at 20 U.S.C. 7801(28) is a secondary school \32\ that grants a diploma, as defined by the State and includes, at least, grade 12. Second, we include in our definition of educational program a State-approved program of study leading to a certificate of high school equivalence for an applicable individual who has not received a high school diploma. We have included a State-approved program in this definition (such as a GED program offered at a community college) because we understand that there are various ways to prepare for the high school equivalency test. However, independent study and self-paced online preparation outside of a State-approved program do not provide sufficient structure to qualify as an activity for the purposes of community engagement. In addition, if the program is not in-person, the State-approved program must be able to monitor and document the program hours. These oversight methods will help with counting hours for this activity if the individual is enrolled less than half-time, and the program does not use credit hours. Information about counting hours when an individual is enrolled less than half-time is discussed further in section II.C.6. of this IFC.

\32\ A secondary school is further defined at 20 U.S.C. 7801(45) as a nonprofit institutional day or residential school, including a public secondary charter school, that provides secondary education, as determined under State law, except that the term does not include any education beyond grade 12.

Under section 1902(xx)(2)(D) of the Act, an applicable individual demonstrates community engagement if the individual is enrolled in an educational program at least half-time. New Sec. 435.552(b) defines educational program. At new Sec. 435.552(c), we specify how “at least half-time” enrollment is determined.

We considered whether the State or the relevant educational institution should determine a student's enrollment status (that is, whether the student is enrolled at least half-time). The U.S. Department of Education's (ED) definition of half-time status defers to the institution to make its own determination as to whether an enrolled student is carrying a half-time academic workload (see definition of “half-time student” in 34 CFR 668.2(b)). Additionally, in SNAP regulations related to student eligibility, the institution of higher education determines enrollment status (see 7 CFR 273.5(b)(10) specifying the enrollment status of a single parent “as determined by the institution”). For consistency with existing standards in SNAP and those of ED, we provide at Sec. 435.552(c) that the State shall use the enrollment status determined by the school or institution (that is, full-time, half-time, less than half-time). This standard applies to all educational programs under new Sec. 435.552(b). We believe that the school or institution is best able to determine enrollment status because whether an individual is enrolled full-time, half-time, or less than half-time is generally dependent on the type of school and the curriculum. In addition, a student's enrollment status determined by the institution is reported to the National Student Clearinghouse, which is a data source that States can use to verify student enrollment (see section II.I.6.d. of this IFC for additional information).

For consistency with SNAP regulations related to students, we are adopting enrollment status requirements similar to those at 7 CFR 273.5(c). These requirements address when student enrollment starts and ends and provide standards to follow during school recess. These standards are necessary because there are periods when school may not be in session due to scheduled breaks (for example, winter and summer recess), and due to the short duration of the scheduled breaks, an individual might not be able to complete another community engagement activity. For example, if a student is enrolled in an institution of higher education full-time and the institution has a 1-month winter break, it is not reasonable to condition Medicaid eligibility on the individual applying, interviewing, starting a job, and working for not less than 80 hours in that 1-month period before going back to school. Thus, at new Sec. 435.552(c)(1), the enrollment status of an applicable individual begins on the first day of the school term.

At new Sec. 435.552(c)(2), the enrollment will continue through normal periods of attendance, vacation and recess. The determination of enrollment status during vacation and recess shall be based on the student's status just prior to the school break. Per Sec. 435.552(c)(3), the enrollment status ends at the end of the month that the student is expelled, withdraws, completes the school term and is not registered for the next school term (excluding optional terms such as winter or summer sessions), or graduates (unless the student is enrolled in another educational program). For example, a full-time high school student graduates from high school on May 15 and has enrolled full-time in a community college, and the community college term starts on August 21. The individual applies for Medicaid on July 1 in a State that has a 1-month review period (as described in section II.H.2. of this IFC) for community engagement at application. The State determines that the individual is otherwise eligible in the adult group and is an applicable individual subject to the community engagement requirement. Because the individual is enrolled in community college with a start date of August 21, the individual has applied for Medicaid during a school recess period (school break). The enrollment status will be based on the individual's enrollment status prior to the school break. Prior to the school break, the individual was enrolled full-time as a high school student, so the individual has met the community engagement requirement.

For information about verifying enrollment in an educational program, please see section II.I.6.d. of this IFC. 6. Enrollment in an Educational Program Less Than Half-Time

Under section 1902(xx)(2)(D) of the Act, an applicable individual demonstrates community engagement if the individual is enrolled in an educational program at least half-time. As noted in section II.C.4. of this IFC, new Sec. 435.552(b) explains the meaning of educational program, and Sec. 435.552(c) describes that full-time, half-time, or less than half-time enrollment is to be determined by the institution or school. However, consistent with section 1902(xx)(2)(E) of the Act, education hours accrued by an individual enrolled in an educational program less than half-time may be combined with hours performed for other community engagement activities to count towards demonstrating community engagement. Next, we discuss how educational program hours should be counted when an individual is enrolled less than half-time.

As stated in new Sec. 435.552(d), when a school determines that an applicable individual is enrolled less than half-time in an educational program that uses credit hours, then 1 credit hour counts as 3 education hours per week during the individual's enrollment. For example, 1 credit hour equals 1 hour of instruction, and we expect students to spend 2 hours on out-of-class work for a total of 3 hours of time spent in the educational program for the week. To calculate the time spent in the educational program for a 1 credit hour course during a 1-month period, this would be 3 hours a week multiplied by 4.33 weeks (in a month) \33\ for a total of 12.99 hours in a month. This new standard is based on the Carnegie Unit, which defines 1 unit of credit as equal to 3 hours of student work per week (1 hour of lecture plus 2 hours of homework).\34\ The Carnegie Unit is used in the credit hour definition at 34 CFR 600.2. As noted in ED guidance provided to institutions and accrediting agencies regarding the credit hour, “A credit hour for Federal purposes is an institutionally established equivalency that reasonably approximates some minimum amount of student work reflective of the amount of work expected in a Carnegie unit: key phrases being “institutionally established,” “equivalency,” “reasonably approximates,” and “minimum amount.” \35\ Under the definitions at 34 CFR 600.2, a credit hour must reasonably approximate not less than 1 hour of classroom or direct faculty instruction and a minimum of 2 hours of out-of-class student work each week, or at least an equivalent amount of work for other academic activities as established by the institution.\36\

\33\ On average, there are 4.33 weeks in a month. This is calculated by dividing the total number of weeks in a year (52), by the total number of months (12).

\34\ Adler KM (2020). “Determining Carnegie Units: Student Engagement in Online Courses without a Residential Equivalent.” Online Journal of Distance Learning Administration, 23(1). https://ojdla.com/articles/determining-carnegie-units-student-engagement-in-online-courses-without-a-residential-equivalent.

\35\ United States Department of Education, Office of Postsecondary Education, “Guidance to Institutions and Accrediting Agencies Regarding a Credit Hour as Defined in the Final Regulations Published on October 29, 2010,” (March 18, 2011). https://fsapartners.ed.gov/sites/default/files/attachments/dpcletters/GEN1106.pdf.

\36\ The regulation further provides that this is for “approximately fifteen weeks for one semester or trimester hour of credit, or 10 to 12 weeks for one quarter hour of credit, or the equivalent amount of work over a different period of time.”

We decided upon this credit hour standard because it allows for consistency across schools and programs and provides a straightforward way to account for instructional time and student work. This standard is also

consistent with the ED standards described here. For example, ED provides standards that institutions can use to determine full-time and half-time student status for purposes of participation in financial assistance programs. The following ED standards are illustrative. The full-time student standard for a program that measures progress in credit hours is 12 semester hours for an academic term (see full-time student definition at 34 CFR 668.2(b)). A half-time student should have a workload, as determined by the institution, that amounts to half of the workload of the applicable minimum requirement of a full-time student (see half-time student definition at 34 CFR 668.2(b)). This means that, as determined by the institution, 6 semester hours for an academic term could be sufficient for half-time enrollment, and would suffice to demonstrate community engagement under Sec. 435.552(a)(4).

However, if an individual's institution determines that 6 credit/ semester hours is insufficient for half-time enrollment, a State would use our standard to convert that 6 credit/semester hours to monthly hours of educational activity. Under our standard, 6 credit hours converts to 77.94 hours of monthly activity for community engagement (6 credit hours x 3 x 4.33 = 77.94), which is close to, but slightly less than, the 80 hours of activity needed to demonstrate community engagement for a month. This would be an appropriate outcome for a student with a less than half-time course load. We therefore believe that our standard is reasonable and is a fair measurement of time spent on instruction and independent study hours. This standard applies to all educational programs that use credit hours included in the definition at Sec. 435.552(b). We considered adopting a different standard for high school and high school equivalency programs. However, we believe doing so would introduce additional administrative complexity without meaningful benefits for States or individuals. High school and high school equivalency students are developing academic skills for independent learning, and counting the hours they need to do so towards their community engagement hours is consistent with the purpose of the community engagement requirement.

To summarize the standard introduced in this IFC, in cases where the educational institution considers 6 credit/semester hours or fewer to be less than half-time enrollment, multiplying the number of credit hours by 3 to provide the weekly number of hours of educational activity, and then by 4.33 to determine an average monthly number produces the following: [GRAPHIC] [TIFF OMITTED] TR03JN26.019

For educational programs that do not use credit hours, if an individual is enrolled less than half-time, then the hours spent attending class and participating in educational activities will count towards meeting the requirement. For example, 1 hour of instruction will count as 1 hour of activity, 2 hours of hands-on training will count as 2 hours of activity, 3 hours of lab work will count as 3 hours of activity, 4 hours of clinical activity will count as 4 hours of activity, and so forth. We believe that this standard will primarily apply to educational programs that train individuals for industry certifications and require individuals to learn and practice technical skills, such as welding, phlebotomy, cosmetology, and precision machining. We decided upon this standard because these types of educational programs generally require a specific number of training hours for certification, so the time spent training is an appropriate way to count the educational program hours. Also, SNAP and TANF use similar standards under their respective work requirements.\37\ SNAP's time limit work requirements specify at 7 CFR 273.24(a)(1) that fulfilling the work requirement can mean participating in and complying with the requirements of a work program for 20 hours per week. A work program at 7 CFR 273.24(a)(3) includes an employment and training program under 7 CFR 273.7(e), which includes allowable educational program activities such as courses or programs of study. According to 7 CFR 273.7(e)(4)(i), the time spent in an employment and training program component is determined by the State agency. States can specify participation hours in their FNS SNAP E&T State Plan, for example specifying for an educational component that participants engage in a 5-day training, for 4 hours per day.\38\

\37\ Under SNAP or TANF, individuals receiving benefits may be enrolled in educational programs that use credit hours but still have their time counted based on hours in class or participation. As explained above, we developed the credit hour standard for educational programs that use credit hours to account more fully for the educational process typical in such programs.

\38\ This example is from California's FNS SNAP E&T State Plan submission for FY26.

TANF's definitions at 45 CFR 261.2(i) through (l) include hours spent participating in vocational educational training, job skills training directly related to employment, education directly related to employment, and satisfactory attendance at a secondary school or course of study leading to a certificate of general equivalence. For TANF, States submit a Work Verification Plan detailing how they verify and document work participation hours and activities. TANF's Work Verification Plan Guide \39\ also includes examples of work activity descriptions that would be approved for each countable work activity. For example, for vocational educational training, the

Work Verification Plan Guide specifies that “Actual hours spent in class as well as time spent performing clinical requirements, lab work or other ancillary activities required for approved vocational educational training programs are considered to be a part of the primary activity for which it is required and is countable.” \40\

\39\ Office of Management and Budget (OMB) #0970-0338, “Work Verification Plan Guide,” expires 10/31/2026. Available at: https://acf.gov/sites/default/files/documents/ofa/Work-verification-plan-guidance-valid-thru-2026-10.pdf.

\40\ Ibid.

To be clear, when individuals are enrolled less than half-time in an educational program that uses credit hours, States should apply the credit hour standard. However, if the educational program does not use credit hours, then the hours spent attending class and participating in educational activities count towards meeting community engagement. We considered having States convert attendance and participation into credit hours so that there would only be one way to count hours for less than half-time enrollment. However, this would be more burdensome for States, with little meaningful difference for individuals. We welcome comments on any other reasonable approaches. 7. Combination of Activities

Under section 1902(xx)(2)(E) of the Act, an applicable individual demonstrates community engagement if the individual engages in any combination of work, community service, participation in a work program, and enrollment in an educational program less than half-time. The combined hours for the activities must be a total of not less than 80 hours for such month.

As specified at new Sec. 435.552(e)(1), a State would only need to combine an individual's educational program hours with hours spent performing other activities if the individual is enrolled in the educational program less than half-time. If the applicable individual were enrolled in an educational program at least half-time, then that individual would already have demonstrated community engagement as specified at Sec. 435.552(a)(4). At new Sec. 435.552(e)(2), we specify that the hours for work, community service, and participating in a work program must be determined separately and based on the time spent performing those activities in such month. As specified at new Sec. 435.552(e)(3), States must calculate the hours for less than half-time enrollment in an educational program as described in Sec. 435.552(d).

New Sec. 435.552(e)(4) specifies that once the State determines an individual's hours for work, completing community service, participating in a work program, and less than half-time enrollment in an educational program in such month, the State must add these hours together to obtain the total hours for all activities. The combined time for all activities must be a total of not less than 80 hours for an applicable individual to meet the community engagement requirement as described at Sec. 435.552(e). However, the State might not need to determine an applicable individual's total number of hours for all types of community engagement activity if the applicable individual demonstrates they met the 80-hour requirement through any combination of activities. For example, consider an applicable individual who is enrolled in community college for 4 credit hours, which converts to 51.96 hours of activity, works for pay for 30 hours, and participates in community service. Because the individual's education and work activity totals 81.96 hours for the month, in the interest of efficiency, we encourage a State to conclude that the individual has met their community engagement requirement for the month and not consider the individual's community service activity, as it is not necessary to meet the community engagement requirement. 8. Monthly Income and Average Monthly Income for Seasonal Workers

Under section 1902(xx)(2)(F) of the Act, an applicable individual demonstrates community engagement for a month if “the individual has a monthly income that is not less than the applicable minimum wage requirement under section 6 of the Fair Labor Standards Act of 1938 (FLSA), multiplied by 80 hours.” We implement this provision at new Sec. 435.552(f)(1). In 2026, the Federal minimum wage is $7.25 per hour,\41\ which multiplied by 80 equals $580. We interpret the “applicable” minimum wage to mean the Federal minimum wage under section 6 of the FLSA (29 U.S.C. 206(a)(1)(C)) that is in effect at the time a State applies the monthly income threshold to assess compliance with the community engagement requirement in case of future amendments to section 6 of the FLSA. As discussed further below, we do not use alternative minimum wage amounts in the FLSA for the purpose of identifying the monthly income threshold for demonstrating compliance with the community engagement requirement. Under section 3(m) of the FLSA,\42\ employers may pay certain “tipped employee[s]” a lower wage, provided the wage plus earned tips is at least equal to the minimum wage under section 6 of such Act. This provision is outside of section 6 of the FLSA, and thus States may not use a tipped wage (regardless of the industry or type of work) to identify the income threshold for demonstrating community engagement based on monthly income.

\41\ 29 U.S.C. 206(a)(1)(C).

\42\ 29 U.S.C. 203(m).

Another lower wage that is in section 6(g) of the FLSA is a minimum wage of $4.25 per hour for individuals under age 20 who are in their first 90 consecutive calendar days of employment, which could be relevant to a 19-year-old applicable individual. However, to the extent that employers avail themselves of this lower introductory wage, we believe it would be extremely difficult in practice for a State Medicaid agency to identify to whom this lower wage requirement would apply and to adjust the monthly income threshold only for those individuals. Moreover, this lower introductory wage is temporary--for only the first 90 calendar days of employment--making it even less likely that a State will encounter an affected individual at the point of evaluating compliance with community engagement. Therefore, for simplicity of administration of this provision, we interpret the Federal minimum wage to be the single, general minimum wage at section 6(a)(1)(C) of the FLSA for all applicable individuals. In addition, as discussed in section II.I.6. of this IFC, States must first attempt to verify community engagement on an ex parte basis, including hours worked, regardless of the existence of a lower introductory wage in a State.

We further recognize that individual States may have a generally applicable State minimum wage that is higher than the Federal minimum wage (or in limited circumstances lower or no minimum wage). Because section 1902(xx)(2)(F) of the Act references only section 6 of the FLSA (that is, the Federal minimum wage) and does not provide for the use of alternative State minimum wages, States may not use such State-specific minimum wages in place of the applicable Federal minimum wage to calculate the monthly income threshold for individuals to demonstrate compliance with community engagement under Sec. 435.552(f)(1).

Under section 1902(xx)(2)(G) of the Act, an applicable individual demonstrates compliance with community engagement for a month if the individual is a seasonal worker as described in section 45R(d)(5)(B) of the Code and has an average monthly income over the preceding 6 months that is not less than the applicable

Federal minimum wage requirement under section 6 of the FLSA multiplied by 80 hours. Section 45R(d)(5)(B) of the Code defines a seasonal worker as a worker who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including workers whose “employment pertains to or is of the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year” (29 CFR 500.20(s)(1)) and retail workers employed exclusively during holiday seasons. We implement these provisions at new Sec. 435.552(g)(1) and (2). As with monthly income under Sec. 435.552(f), States must use the Federal minimum wage in making this calculation.

The statute at section 1902(xx)(2)(F) and (G) of the Act refers to an individual's “monthly income” and “average monthly income,” but does not further define how States should calculate monthly income for these purposes. For the calculation of an applicable individual's monthly income under new Sec. 435.552(f) and average monthly income under new Sec. 435.552(g), we define “monthly income” to be the same as the individual's household income used for financial eligibility for Medicaid. Most applicable individuals are eligible for or enrolled in the adult group under Sec. 435.119, which is a group that has an income standard based on MAGI using the MAGI-based methodologies at Sec. 435.603. Similarly, most section 1115 demonstrations that have applicable individuals (as discussed in section II.B. of this IFC) have an income standard based on MAGI and use MAGI-based methodologies for the relevant demonstration population.

We considered using different interpretations of “monthly income” for the calculation. For example, we considered counting only earned income because it could align with the other work-related ways to demonstrate compliance. However, using only earned income for this purpose would be inconsistent with how “income” is defined elsewhere in the Medicaid statute. Specifically, section 1902(e)(14)(A) of the Act dictates that “[n]otwithstanding. . .any other provision of this title, except as provided in subparagraph (D), for purposes of determining income eligibility for medical assistance under the State plan or under any waiver of such plan and for any other purpose applicable under the plan or waiver for which a determination of income is required . . . , a State shall use the modified adjusted gross income of an individual and, in the case of an individual in a family greater than one, the household income of such family.” (Emphasis added.) Section 1902(e)(14)(D) of the Act, which lists the exceptions to the mandatory use of MAGI-based household income, does not include an exception relating to the determination of income for applicable individuals for the purposes of assessing community engagement. Additionally, neither section 1902(xx) of the Act nor section 71119 of the WFTC legislation specifies that section 1902(xx) supersedes section 1902(e)(14) of the Act, nor does section 1902(xx) of the Act contain its own definition of “monthly income” or mandate that a particular methodology be used to calculate “monthly income.” Nothing in section 1902(xx) of the Act or section 71119 of the WFTC legislation suggests that section 1902(e)(14) of the Act should not apply when determining income for purposes of section 1902(xx).

Under new Sec. 435.552(f)(2) and (g)(3), we establish that States must use the MAGI-based methodologies at Sec. 435.603 when making income determinations for demonstrating community engagement. A contrary reading of the statute would require that States, after determining an individual income-eligible for the adult group, apply a separate and distinct income determination for such individuals in evaluating their demonstration of community engagement. There is no indication in section 1902(xx)(2) of the Act or elsewhere that the MAGI-based income provisions of section 1902(e)(14)(A) of the Act should not apply to the calculations under section 1902(xx)(2)(F) and (G) of the Act. Therefore, under Sec. 435.552, we are interpreting section 1902(xx)(2)(F) and (G) of the Act in a manner that is consistent with section 1902(e)(14) of the Act. We specify that States must use the individual's MAGI-based income as defined at Sec. 435.603 in assessing an individual's monthly income for the purpose of determining if an individual demonstrates community engagement under Sec. 435.552(f) or (g).

The use of MAGI-based methodologies is required under Sec. 435.552(f) and (g) for all applicable individuals, including those whose eligibility or enrollment is under a section 1115 demonstration rather than the State plan. Even if a State does not have an income test or uses a non-MAGI methodology for determining financial eligibility for a population of applicable individuals eligible only under section 1115 demonstration authority, we nevertheless require States to use MAGI-based methodologies for the purpose of determining income under Sec. 435.552(f) and (g). We believe that establishing a uniform methodology is necessary for the consistent and fair treatment of all applicable individuals across States, regardless of whether they are eligible for or enrolled in the State plan or a section 1115 demonstration. We recognize that requiring the use of MAGI-based methodologies for section 1115 demonstration populations that do not use such methodologies for underlying financial eligibility could present an administrative burden for affected States. However, sections 1902(xx)(2)(F) and (G) of the Act require income counting, and we believe any additional State burden from using MAGI-based methodologies in these situations is outweighed by the benefits of requiring consistent methodologies within and across States, rather than creating different methodologies to count income for the community engagement requirement for each of the implicated section 1115 demonstrations.

Thus, States must use the individual's MAGI-based income, as defined under Sec. 435.603(e), for their MAGI-based household as defined under Sec. 435.603(d) and (f), for purposes of Sec. 435.552(f) and (g). The countable income under Sec. 435.603(e) generally includes earned income as well as countable unearned income, meaning that States must take into account all of this income for purposes of Sec. 435.552(f) and (g). Under Sec. 435.603(d) and (f), household income is the total income of everyone in the individual's household. Although sections 1902(xx)(2)(F) and (G) of the Act refer to the income of “the individual,” all Medicaid applicants and beneficiaries have their eligibility determined on an individual basis, and, under Sec. 435.603(d), States must determine individuals' Medicaid financial eligibility using household income, which includes the income of every individual included in the individual's household.

Finally, under Sec. 435.603(h), Medicaid financial eligibility is generally based on the current month at the point when eligibility for Medicaid is being determined, with certain options available to States (including the use of a reasonably predictable changes methodology under Sec. 435.603(h)(3), as discussed further in this IFC). For the purposes of demonstrating community engagement under Sec. 435.552(f) and (g), we decided to apply the requirement to use “current monthly household income and family size” in Sec. 435.603(h) to the month that the State is evaluating for the purpose of community engagement, rather than to the month of application or renewal. That is, States generally

must evaluate the monthly income for the month or months of the review period, as defined in section II.H. of this IFC, to determine whether an applicable individual is demonstrating community engagement in that month. We believe this is the most appropriate and logical application of the income counting methodology for States to use for the community engagement requirement. We implement this requirement at Sec. 435.552(f)(2) and (g)(2).

As a general example, if the State conducts financial eligibility for an applicant and determines that the individual appears to be an applicable individual eligible for the State plan adult group and has a monthly household MAGI-based income of $650 (which is verified through information available to the State) in the required number of months of the review period, as defined in section II.H. of this IFC, then the State would use the verified $650 income, which is greater than $580 (applicable Federal minimum wage multiplied by 80), to determine that the individual demonstrated community engagement under Sec. 435.552(f).

In addition, our intent is for States to use data sources and programming logic readily available to them rather than create new methodologies and systems specific to community engagement. We believe it will be more efficient for States to implement calculations based on existing methodologies, rather than applying one income methodology for determining financial eligibility and a different methodology to determine monthly or average monthly income as a condition of eligibility under community engagement.

We have received questions regarding States' options when averaging seasonal workers' monthly income under section 1902(xx)(2)(G) of the Act. States have an existing option to use a “reasonably predictable changes” methodology when using MAGI-based methodologies to determine household income, which, as discussed earlier in this section of this IFC, is the income used for demonstrating compliance under Sec. 435.552(f) and (g). Specifically, Sec. 435.603(h)(3) permits States to adopt (through a State plan election) a reasonable method to account for reasonably predictable increases or decreases (or both) in future income to determine monthly income. This option can help make income determinations for applicants and beneficiaries more accurate over a period of time and is particularly useful for averaging seasonal worker income over a period of up to 12 months. A reasonably predictable changes methodology takes predictable future changes into account by including a prorated portion of reasonably predictable future income in the individual's monthly income to smooth out predictable fluctuations in income.

For example, suppose an individual in a State with a 12-month reasonably predictable changes in income methodology expects to have steady monthly income of $500 and expects (based on the previous year) to have $400 per month in additional countable income in the months of October through December, for a total of $1,200 of additional countable income. Suppose further that the State is determining monthly income for August for the purpose of the community engagement requirement. The State prorates the total seasonal income to equal $100 ($1,200/12 = $100) in additional monthly income for August (and in each of the 12 months). The monthly income is determined to be $600 ($500 steady income plus $100 prorated seasonal income). Note that because the State uses a 12-month methodology, this calculation would be the same in any month of the year. Thus, while the prorated amount is based on expected future income, the methodology is used to determine the monthly income for each month in that 12-month period, including the month(s) of the review period (as defined in section II.H. of this IFC) the State is assessing to determine community engagement compliance. Such a reasonably predictable changes methodology, in States that elect it, is an integral part of their MAGI-based methodologies, and therefore States must use their reasonably predictable changes methodology to determine monthly income when an individual has fluctuating income that is subject to the State's methodology.

For the purpose of the community engagement requirement, States with a MAGI-based reasonably predictable changes methodology for seasonal workers include a prorated portion of reasonably predictable future income in monthly income added to stable or non-fluctuating income (if any), and this total average monthly income will effectively be the monthly income used to assess community engagement under section 1902(xx)(2)(G) of the Act. As another example, consider an individual who is employed from April through September, earning $1,500 per month, and unemployed with no income for the remaining 6 months of the year. If the individual applies for Medicaid in December, and the State has elected reasonably predictable increases and decreases in income over 12 months, the State will use the prorated MAGI-based monthly income to determine financial eligibility and also to determine compliance with the community engagement requirement. In this case, the individual's calculated monthly income is $750 ($1,500 multiplied by 6, then divided by 12) in December for financial eligibility and $750 in November (or in the months of the relevant review period, as defined in section II.H. of this IFC) for demonstrating community engagement. The average monthly income over the previous 6 months would also be $750. Alternatively, if the individual applies in July when earning income, and the other facts were the same (including that the State takes into consideration reasonably predictable future decreases in income), the outcome would still be a calculated monthly income of $750 for financial eligibility and for demonstrating community engagement using average monthly income.

Most States currently elect the option to use a reasonable method to account for reasonably predictable changes, and among those States, most elect both reasonably predictable increases and decreases in future income. Some States only account for reasonably predictable future decreases. Because accounting only for reasonably predictable future decreases generally decreases countable household income, it may result in some seasonal workers not reaching the $580 per month (Federal minimum wage multiplied by 80) threshold under section 1902(xx)(2)(G) of the Act. We further note that a MAGI-based reasonably predictable changes methodology applies broadly to all MAGI-based eligibility determinations, including for the adult group and applicable section 1115 demonstrations, and must be used consistently and in the same manner for financial eligibility and for compliance with the community engagement requirement for applicable individuals.

If a State does not use a reasonably predictable changes methodology, then for the purpose of demonstrating community engagement for seasonal workers, the State would use the individual's average income over the preceding 6 months, as provided at section 1902(xx)(2)(G) of the Act. The “preceding 6 months” verified by the State would be the 6 months preceding a month of the review period for which the State is assessing compliance with the community engagement requirement. Consider the facts of the previous example, except that the State does not elect a reasonably predictable changes methodology, and the State requires an applicable individual to demonstrate community engagement for

1 month at application. The seasonal worker applies in July and is an applicable individual, so the relevant review period to demonstrate community engagement is the month of June. The State will average the income from December through May to determine if the individual demonstrates community engagement in June, the month before application. In this case, the individual has 2 months of seasonal employment, which averaged over 6 months equals $500 (2 months at $1,500 per month, then divided by 6). Because $500 is below $580, this individual is not considered to be demonstrating community engagement in June based on the 6-month average monthly income for seasonal workers. This outcome contrasts with the prior example using an income counting methodology that accounts for reasonably predictable changes.

Similarly, at renewal, the State will average the income for the 6 months preceding the month being assessed for compliance. Thus, if a seasonal worker who is an applicable individual has a review period that spans from July through December, the average income from January to June is used to assess compliance in July, from February to July to assess compliance in August, from March to August to assess compliance in September, etc. The State will continue assessing each month in the review period until the State either verifies compliance for the required number of months (including verifying if the applicable individual demonstrated community engagement on a different basis, that is, through an activity or combination of activities, or is deemed to have demonstrated community engagement because of an exception) or has assessed all the months in the review period.

We have also received several questions regarding situations in which an individual's monthly income falls short of the amount required to meet the community engagement requirement under the monthly or average monthly income criteria. For example, we have been asked whether, if the State verifies $380 in monthly income for the individual (which is short of the $580/month requirements at Sec. 435.552(f) and (g) assuming a minimum wage of $7.25/hour), the State could use that income towards meeting an individual's community engagement requirement. Section 1902(xx)(2) of the Act does not address this scenario but does provide the Secretary with the authority to establish criteria for determining whether an applicable individual meets the conditions for demonstrating community engagement. Section 1902(xx)(2)(A) of the Act includes work as a community engagement activity. Consistent with our statutory authority to establish the criteria for demonstrating community engagement, at new Sec. 435.552(e)(2)(i) and (ii) we permit income to be used as a proxy for calculating work hours because many income verification data sources, such as quarterly wage data, include individual earned income and thus can be used to derive the number of hours worked under Sec. 435.552(a)(1). If the individual's verified income is below the Federal minimum wage multiplied by 80 hours, and if the State does not have information regarding the number of hours worked, then it would be reasonable for States to have the option to use income to calculate a number of hours worked by dividing the income for the month by the applicable Federal minimum wage. Thus, if the State verifies $380 in monthly income, then using the current Federal minimum wage of $7.25, the individual can be credited with having worked 52 hours for the month ($380 divided by $7.25). The individual would then need to participate in an additional 28 hours (80-52 = 28) of community engagement activities to meet the requirement for the month.

We recognize that States will be using the individual's MAGI-based income for their MAGI-based household when converting monthly income to hours worked. While we are providing States with the option to use income to determine hours worked, this option must only be used when the monthly income is less than the applicable Federal minimum wage multiplied by 80 hours and the State does not have information regarding the number of hours worked. In these circumstances, the State must use a reasonable method to allocate hours, between members of the household. Providing States flexibility to convert monthly income to hours worked for purposes of calculating an applicable individual's work hours is reasonable because the concept underlying the monthly income and average monthly income criteria at sections 1902(xx)(2)(F) and (G) of the Act is that monthly income can be a proxy for hours worked. We do not see a basis for prohibiting States from using a similar methodology to determine hours worked if an individual has monthly income below the amount that equates to 80 hours at minimum wage, the State has no documentation regarding number of hours worked and uses a reasonable methodology to allocate hours, as necessary. Additionally, some States already use monthly income to determine self- employment work hours when verifying compliance with SNAP work requirements. We reiterate that when this proxy approach results in the work hours calculated as less than 80, those hours would then have to be combined with hours from another activity to meet the community engagement requirement.

Please see section II.I.6.f. of this IFC for information about verification of the monthly income and average monthly income requirements.

Section 1902(xx)(3)(A) of the Act establishes mandatory exceptions from demonstrating community engagement via the pathways described in Sec. 435.552(a) (see section II.C. of this IFC for more information regarding demonstrating compliance) for certain applicable individuals. States must deem an applicable individual compliant for a month if the individual meets the mandatory exception criteria (which are further described in this section of this IFC). New Sec. 435.553 implements and interprets the mandatory exceptions in section 1902(xx)(3)(A) of the Act.

New Sec. 435.553(a) implements section 1902(xx)(3)(A)(i) of the Act, which establishes mandatory exceptions for applicable individuals if, for part or all of a month, the individual was: (1) under the age of 19; (2) entitled to, or enrolled for benefits under Medicare part A, or enrolled for benefits under Medicare part B; (3) described in any of the mandatory eligibility groups in section 1902(a)(10)(A)(i)(I) through (VII) of the Act; or (4) a specified excluded individual as defined in section 1902(xx)(9)(A)(ii) of the Act (see section II.E. of this IFC for an explanation of specified excluded individuals, and section II.F. of this IFC for a discussion of the similarities and differences between mandatory exceptions and specified excluded individuals). States must determine whether an applicable individual met exception criteria for part or all of a relevant month. We interpret the statutory references to “a month” and “such month” to refer to any month in the State's review period (described further in section II.H. of this IFC). This could be a month during the State's review period when determining eligibility at application, a month during an individual's eligibility period at renewal, and, at State option, a month during the relevant alternative review period during which the State elects to conduct more frequent verifications of

community engagement compliance (as described in section II.H. of this IFC).

Because compliance with community engagement is assessed for a time period that predates an individual's application or renewal date (as described in more detail in section II.H.1 of this IFC), the mandatory exceptions provide protections, for example, for beneficiaries who were previously excluded from the requirement to demonstrate community engagement but whose exclusion ends, or who were enrolled in another eligibility group and, following a redetermination, transition to an eligibility group consisting of applicable individuals. These exceptions can allow such beneficiaries time to understand their rights and responsibilities and demonstrate compliance with community engagement as it was not a condition of their Medicaid eligibility previously.

For example, a beneficiary enrolled in the adult group has been excluded from the community engagement requirement because they have a dependent child who is age 13, but their child turns 14 during the individual's eligibility period. During the beneficiary's renewal, the State determines the individual is now an applicable individual subject to the community engagement requirement. The State requires beneficiaries to demonstrate 1 month of community engagement activity at renewal. Because the beneficiary was a specified excluded individual as a result of having a dependent child under the age of 14 for part or all of at least 1 month during the review period, which aligns with the eligibility period in this scenario, they meet the mandatory exception criteria for at least 1 month during the review period (see section II.H.3. of this IFC) and thus are deemed compliant with community engagement during the review period at renewal. Their eligibility would be renewed with proper notice of the determination consistent with Sec. 435.917(b)(1); this notice would be accompanied by the outreach notice content described at new Sec. 435.561(c) which includes information on how to comply with the requirement to demonstrate community engagement and the consequences of noncompliance, consistent with Sec. 435.561(b) (described in section II.L. of this IFC). Going forward, the individual would be subject to the community engagement requirement.

New Sec. 435.553(b) implements section 1902(xx)(3)(A)(ii) of the Act, which establishes an exception for incarcerated individuals.\43\ Under the exception, an applicable individual is deemed compliant with community engagement for a month if “at any point during the 3-month period ending on the first day of such month, the individual was an inmate of a public institution.” Unlike the other mandatory exceptions, which require the State to deem an applicable individual as demonstrating community engagement in a month if the individual meets the exception in that month, the exception for individuals who were previously inmates of a public institution applies to a 3-month period prior to the month in which the State reviews the individual for compliance with community engagement. We believe that the 3-month timeframe for this exception reflects the significance of the transition from a public institution to a community setting. This policy aligns with Congress' recent efforts to support individuals in attaining self-sufficiency during the transition period following incarceration.\44\ In addition to this mandatory exception, inmates of a public institution are defined as “specified excluded individuals” at section 1902(xx)(9)(A)(ii)(VIII) of the Act, discussed further in section II.E.8. of this IFC.

\43\ For purposes of this discussion, “incarcerated” has the same meaning as “inmate of a public institution” as defined at Sec. 435.1010.

\44\ Section 1902(a)(84)(A), as amended by Division G, Title I, Section 205 of the CAA, 2024 requires States to suspend rather than terminate Medicaid eligibility during periods of incarceration for all Medicaid-eligible individuals; Section 1002 of the SUPPORT Act directed the Secretary of HHS to develop guidance on how section 1115 demonstrations can be used to support incarcerated individuals transitioning to the community.

When a State assesses whether it can deem compliance with community engagement for a month for someone who was previously incarcerated, it will need to determine when an individual's incarceration ended in relation to the month(s) for which the State is determining compliance. For example, an individual was an inmate of a public institution and was released on March 15. The individual applies for Medicaid on June 1 in a State that has a 1-month review period for community engagement at application (see section II.H.1. of this IFC for further discussion of the review period). The State determines the individual is eligible in the adult group and is an applicable individual, so must assess whether the individual met or is deemed to have met the community engagement requirement in May (the month prior to the month of application). To apply the exception for incarcerated individuals, the State would assess whether the individual was an inmate at any point in the 3-month period prior to May 1. Accordingly, the State would determine whether the individual was an inmate in February, March, or April. Because the individual was an inmate in March, the State would deem the individual to have met the community engagement requirement and would enroll the individual in the adult group.

We note that an applicable individual can be deemed compliant only for the month(s) in which the individual meets the mandatory exception criteria. States that require applicable individuals to demonstrate compliance with community engagement for more than 1 month during the review period will need to verify that an applicable individual is excepted, demonstrates community engagement, or meets a combination of these community engagement criteria for the total number of months specified by the State in the review period.