When President Donald Trump signed the “One Big Beautiful Bill” in July 2025, it introduced new work requirements for certain Medicaid recipients and exempted people with specified medical conditions. Then, a year later, the administration added an extra test for that exemption: recipients also had to show that it significantly impaired their ability to meet the work requirements.
A coalition of states and state officials sued to challenge that additional test, and a federal judge in Massachusetts has now blocked it. The decision removes a barrier to medical exemptions without undoing the broader work requirements.
Trump Admin’s New Rule
The law ties Medicaid eligibility for certain recipients (broadly including those covered through the Affordable Care Act’s Medicaid expansion) to a “community engagement” requirement. Those subject to it must perform 80 hours of work or community service each month, or enroll at least half-time in an educational program.
Congress excluded several groups from that requirement, including people who are “medically frail or otherwise [have] special medical needs.” This category includes people who are blind or disabled under the statutory definition, have a substance use disorder or disabling mental disorder, or have a serious or complex medical condition. It also includes people with a physical, intellectual or developmental disability that significantly impairs at least one activity of daily living.
The Centers for Medicare & Medicaid Services (CMS) added another hurdle in its June 2026 interim final rule. A person had to fall within one of those categories and demonstrate that their condition “significantly impairs” their ability to comply with the community engagement requirement.
The lawsuit also challenged restrictions on the medical data and personal statements states could use to verify an exemption. The defendants included CMS, Mehmet Oz in his official capacity as its administrator, and the Department of Health and Human Services and its secretary, Robert F. Kennedy Jr.
Judge Rejects Extra Test
In his October 29 decision, U.S. District Judge Richard G. Stearns ruled that CMS’s authority to define medical frailty did not allow it to narrow the groups Congress had explicitly included.
The administration argued that identifying the five categories did not mean every person within them had to qualify. But Stearns found that Congress’s use of the word “including” established a minimum scope of protection that CMS could not narrow through an additional work-related impairment test.
Congress had already imposed a functional limitation where it wanted one, he noted. For certain physical, intellectual or developmental disabilities, the law expressly requires significant impairment of an activity of daily living. It does not separately require every medically frail person to demonstrate an impaired ability to work, study or perform community service.
“Congress clearly knew how to qualify classifications and did so where it wished,” Stearns wrote. He held that CMS’s additional limitation exceeded the agency’s authority and violated the Administrative Procedure Act.
That conclusion made it unnecessary to address the states’ alternative constitutional argument that the rule violated the Spending Clause by failing to give clear notice of the conditions attached to federal Medicaid funding.
What Remains in Place
The ruling strikes down the administration’s narrower definition of “medically frail,” but leaves the work requirements and two verification restrictions intact.
The first limits the claims and encounter data states may use to the 12 months preceding an application. CMS reasoned that older information might not reflect a person’s current condition. This is a limit on the age of verification data, not a categorical ruling that a person whose diagnosis is more than a year old cannot qualify.
The decision also quoted CMS’s clarification that the absence of claims or encounter data, including particular types of claims, cannot itself be used to determine that someone is ineligible for the medical-frailty exemption. That matters where a person has recently received a diagnosis or treatment but the corresponding claims have not yet appeared in the state’s data.
The second provision allows only one self-attestation of medical frailty per continuous period of enrollment. That period can span multiple renewals or eligibility redeterminations, provided the person has not been disenrolled.
Stearns concluded that CMS had supplied an adequate explanation for both restrictions. Reviewing whether an agency acted arbitrarily or capriciously, he explained, does not permit a court to substitute its preferred policy for a reasonably explained agency decision.
“That the States (or even the court) may disagree with the wisdom of the agency’s policies and conclusions, or may have made different choices, is irrelevant,” he wrote.
Upshot for Medicaid Recipients
Stearns ordered the unlawful language set aside and permanently barred its enforcement or implementation, citing both the costly changes states faced to their eligibility-verification systems and the risk that otherwise eligible people could lose coverage they relied on for continuing care.
To give states room to address errors or delays as they revise their systems, the court also granted a six-month stay of enforcement concerning medical-frailty determinations. The January 1, 2027, deadline for implementing the work requirements, however, remains unchanged.
For recipients who meet Congress’s medical criteria, the distinction matters: they still have to establish that they qualify for an exemption. But they won’t have to clear the administration’s extra hurdle of proving that their condition also significantly impairs their ability to meet the work requirements.
