The Medical Frailty Rule is Illegal and Irrational; the Consequences for Medicare are Profound

It is axiomatic that federal rules must be legal. To this end, the Supreme Court has built a two-pronged test of legal rulemaking. First, a rule must accurately reflect the statute it aims to implement. In deciding whether a rule is legal, federal courts must independently determine, without deferring to agency judgment, whether its rule represents the single best reading of the law. The Court has specifically demanded independent judicial review for rules that implement federal health insurance programs, given their major economic and political implications.

Second, a rule cannot be arbitrary or capricious, meaning that it must be based on reasoned decision making. The rulemaking agency must rely on the administrative record, not on improper factors, such as political preferences. Nor may it misrepresent the evidence, ignore important aspects of the problem, or pursue its own preferences rather than the evidence.

No rule in recent memory fails this two-part test more spectacularly than the interim final rule issued by the Centers for Medicare and Medicaid Services (CMS) that implements the Medicaid “community engagement” provisions of H.R. 1, the One Big Beautiful Bill Act (OBBA). This new requirement conditions eligibility for Medicaid for adults whose eligibility is tied to the Affordable Care Act Medicaid expansion on being able to prove 80 hours per month spent on work, acceptable volunteer or educational activities, or some combination thereof. Furthermore, they will need to prove their continuing eligibility every six months rather than annually, as previously was the case; the reporting burdens are thus immense. Certain exclusions and exceptions apply, but the requirement will affect a large proportion of the nearly 20 million adults made eligible by the ACA expansion. The requirement affects adults living in ACA expansion states, and public notices about the new requirements are already beginning to flow.

Congress specified implementation via an interim final rule rather than giving states and the public the normal opportunity to comment on a proposed rule, effectively foreclosing the opportunity for public comments to result in alterations of the rule before it goes into full effect early in 2027. While CMS has received over 44,000 public comments, the agency has no obligation to respond to comments and revise the rule. 

For this reason, additional scrutiny now must come from the courts. Twenty-five states and the District of Columbia have sued to block the rule’s unlawful aspects until its legality could be fully examined. The suit initially failed on preliminary procedural grounds; therefore, full judicial scrutiny will happen later this fall; in the meantime, states must move ahead with implementation.

The rule fails on two grounds and poses fundamental dangers to patient and population health. It imposes sweeping legal restrictions, found nowhere in statute, on the law’s all-important definition of who is a “medically frail” adult and thus better protected against coverage denial or interruption. Second, the rule misrepresents, mischaracterizes, and ignores virtually all evidence regarding the consequences of its policy, including evidence showing that work mandates, in fact, fail to produce either higher employment or improved health; the consequences of denying Medicaid to millions of poor working age adults, particularly adults in later middle age who face added health burdens; and the impact of widespread Medicaid loss on other federal health care programs, most notably, Medicare.

Wrong on the Law

H.R. 1’s community engagement provisions apply to the Affordable Care Act (ACA) Medicaid expansion population, known as “applicable individuals.” This population consists of low-income working-age adults whose eligibility is tied to the ACA rather than traditional eligibility rules. As a condition of qualifying for and maintaining Medicaid, applicable individuals must demonstrate every six months that they meet the community engagement test, i.e., 80 hours per month of paid or volunteer work or school attendance.

The law also specifically excludes certain people who otherwise would be classified as applicable individuals; among these excluded groups are people considered medically frail because they have certain qualifying medical conditions, including what the law generally terms “serious or complex” medical conditions. The law further specifies that states must rely on ex parte evidence to establish exclusions; in the case of medically frail people, this means medical claims data and clinical notes.

The medically frail exclusion thus provides a critical guard rail that reflects Medicaid’s key role as an insurer of poor adults with significant health needs; medically frail people can maintain Medicaid even if their monthly work hours fall short of the 80-hour threshold. This safeguard is consistent with evidence showing that fewer than half of low-income adults reporting work limits are unable to work at all; the majority work at least some amount of time. In other words, medical frailty limits work hours “more frequently than it prevents work entirely.”

Despite the clear language of the law, CMS has added an inability-to-work test to the medical frailty definition, meaning that only people who can prove they cannot work at all can qualify as medically frail. In doing so, CMS has gone far beyond the limits of permissible implementation, by adding a completely new eligibility test. To say that the rule is not the best reading of the statute is an understatement. The rule ignores the clear text; it requires states to set up the type of complex employability evaluation system found only in programs such as Social Security Disability Insurance or Supplemental Security Income.

Ignoring the Impact on Other Federal Health Care Programs

The rule contravenes, ignores, or fails to consider the evidence, and is arbitrary and capricious as a result. Particularly striking is the rule’s failure to consider its impact on other federal health care programs. Two examples illustrate the extent of this aspect of regulatory failure. 

Community health centers: The federally administered community health centers program represents the single largest source of comprehensive primary care in the United States. Health centers care for millions of expansion adults, and are a particularly important source of health care for low income adults in later middle age who have begun to exhibit the types of serious, complex, and chronic health problems that characterize this population. Health centers, which in 2025 served nearly 33 million people, are supported through modest grants coupled with third party financing through Medicare, Medicaid, and ACA Marketplace insurance coverage. In 2024, federal health center grants represented 11% of health center revenue; by contrast, Medicaid accounted for 45%. Even as the administration recently heralded its “historic” investment in health centers, it simultaneously failed to address the clinical and financial implications of widespread loss of Medicaid coverage and revenue.

The Medicare impact: But nothing is more astounding than CMS’ failure to consider the Medicare implications of its medical frailty rule. After all, we are talking about a rule issued by the Centers for Medicare and Medicaid Services, charged by Congress with preserving Medicare’s health, at a time when experts are projecting looming insolvency as early as 2033.

A robust body of evidence, derived from readily available federal data underscores the folly of the administration’s actions of pursuing a policy that drives adults out of Medicaid, especially in later middle age, unless they can prove, month in and month out, that they work the requisite 80 hours. Evidence from the federally supported Health and Retirement Study (HRS) documents the cost and health impact on Medicare of previously uninsured adults. These adults enter Medicare in worse health and in need of significantly more health care than adults insured at the time of Medicare enrollment. These adults have used far less physician care and have received strikingly fewer preventive services than insured adults in late middle age. Following Medicare enrollment, they use far more hospital care. Indeed, as Exhibit 1 shows, hospitalization rates soar among previously uninsured adults. The findings suggest that prolonged gaps in coverage among adults, especially those in later middle age, leave substantial health care needs unmet, with that pent-up demand following people into Medicare.

Exhibit 1. Care Use Rises Much More Among Adults Uninsured Before Medicare Enrollment

Ultimately the courts will decide whether the rule’s approach to medical frailty is lawful. Unless it is halted, Congress — and millions of high-need Medicaid beneficiaries — stand to lose the coverage that has enabled a generation of progress in health and health care.

The authors thank the Commonwealth Fund, Liberty Health Alliance, and the RRF Foundation for Aging for their support.

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