Nebraska First to Adopt Medicaid Work Rules, Imperils Coverage

Nebraska became the first state to enforce Medicaid work requirements today under a new federal mandate, a move expected to strip coverage from more than 25,000 residents while drawing criticism that the state rushed a rollout it isn’t ready to manage.

The requirements apply to able-bodied adults with limited exemptions for caretakers, the medically frail, and certain protected communities. The state is moving eight months ahead of a January 2027 deadline and before Washington has released implementation guidance.

In a March KFF survey, 29 states said that deadline alone was too narrow a window to manage the overhaul. Nebraska Gov. Jim Pillen defended the early timeline, in a statement last December, arguing that work “provides purpose” and helps residents become productive community members.

Republicans’ sweeping 2025 tax and spending law slashed over $900 billion in Medicaid funding while requiring states to create work requirements in exchange for coverage. The change could cost over 14 million people their health coverage by 2034. Montana and Iowa are also moving to implement requirements ahead of the Jan. 1 deadline, while Arkansas is planning a “soft implementation” this year, but won’t disenroll people until the official start date.

Operational concerns leading up to Nebraska’s launch are significant. The state has failed to do the hiring, outreach and other on-the-ground work to grapple with the roll out, said Allie Gardner, senior policy analyst on the health policy team at the Center on Budget and Policy Priorities.

“They’re definitely rushing to implement the requirements,” she said. “This is a massive operational and systems lift for the state. It’s going to require a lot of additional burden on workers not only to implement the requirements and process those, but also call center staff are going to get a lot more questions as people try to navigate this.”

Other health policy analysts and Republican lawmakers have touted work requirements as a useful lever to stem the rapid upswing in government spending on the 75 million-member entitlement program.

“People look at the work requirements issue as though it only imposes obligations on Medicaid recipients,” said Michael F. Cannon, director of health policy studies at the Cato institute. “But the existing approach, with no work requirements imposes obligations on taxpayers. And we never talk about those.”

Meanwhile, Nebraska says it’s ready. It’s worked closely with the Trump administration through onsite reviews, ongoing policy coordination, and formal readiness demonstrations, said Jeff Powell, spokesperson for the state’s office of Health and Human Services.

“Nebraska’s implementation reflects a deliberate, phased approach focused on protecting eligible members,” he said in a written statement. “Staff received targeted training on the new policies, workflows, and verification standards.”

‘Breaking Point’

Nebraska and other early adopters must show they’ve mastered revisions to an already complex system. They must implement changes such as redetermining whether someone covered in Medicaid expansion is eligible for coverage every six months rather than annually.

Additionally, the Trump administration sent letters to states claiming they had to recertify their providers.

Meeting the Jan. 1 deadline is hard enough, said Joan Alker, executive director at Georgetown’s Center for Children and Families.

“States that are going with the mandatory deadline of January 1st, I think are already in trouble,” she said, because the federal government has yet to release regulations, which is expected for June 1.

“This is likely to be a poor rollout of a failing policy to begin with,” Alker said.

Another early adopter state, Montana, is nevertheless slated to implement its work requirements in July.

A lot of states are “getting towards a breaking point,” Alker said. “They’re already experiencing cuts. They’re understaffed. And it’s just one thing after another.”

Curbing Costs

In 2025, Medicaid saw its most expensive year on record, reaching $971.4 billion across all states and territories, a 6.9 percent increase from the previous year.

Changes enacted under last year’s tax and spending bill are projected to curb this trend significantly, with the Congressional Budget Office estimating that the federal government could save $911 billion in reduced Medicaid payments over 10 years.

Around $326 billion of those savings could come in the form of reduced enrollment brought on by work requirements. Although some policy experts have worried that the disenrollments could bite states financially in the form of increased costs of caring for the uninsured, Cannon said those fears are overblown.

“We forever hear people say that if you spend money on X, it will save money overall because spending on Y will fall by an even greater amount, said Cannon. “That turns out to almost never be true.”

Coverage Losses Loom

Arkansas launched a work requirement program predating the federal obligation that was only in operation for nine months. More than 18,000 lost coverage due largely to onerous and confusing reporting requirements.

Early findings from Arkansas indicated “the reporting requirements were associated with losses in Medicaid coverage, an increase in the percentage of adults who were uninsured, and no significant change in employment,” said Amaya Diana, policy analyst with KFF’s Program on Medicaid and the Uninsured.

Georgia has an active work requirement that predates the federal mandate. There, application hurdles have kept enrollment numbers relatively low.

These efforts have proven “disastrous” for implementation and administrative costs, said Anthony Wright, executive director at Families USA, a health policy nonprofit.

Arkansas and Georgia “showed us the direction that this will go, and now we’re doing that for the entire country, with Nebraska and Montana going first,” Wright said.

In Nebraska’s case, CBPP’s Gardner said fallout from Nebraska’s adoption won’t be immediate. The initial “big coverage losses” for people already enrolled in Medicaid will largely happen in August due to the timeline for renewals. Federal data on coverage may also not come for months.

The first signs of trouble in Nebraska will come when pharmacists see a patient realize they can’t renew their prescription because they lost their Medicaid coverage, Gardner said.