A provision in a sweeping new federal law could shield more than one million Americans from impending Medicaid work requirements if they live in areas with high unemployment. The law, set to take full effect by January 2027, mandates that many able-bodied adult Medicaid recipients in 42 states and Washington, D.C., must work, volunteer, or attend school for at least 80 hours per month to maintain their health coverage.
However, the legislation includes a critical exception that allows states to seek exemptions for residents of counties where jobs are scarce. According to a new analysis by KFF, a health policy research organization, at least 1.4 million people could be protected from losing their health insurance under this rule. The Congressional Budget Office (CBO) has estimated that the work requirements will apply to approximately 18.5 million people, and projects that 5.3 million of them will lose their government health coverage by 2034 as a result. The CBO confirmed that its projections factored in the potential impact of the high-unemployment exemption.
Understanding the Exemption Criteria
The new federal law allows states to request a hardship exemption from the work requirements for individuals residing in counties with specific economic indicators. A county is eligible if its unemployment rate is 8% or higher, or if its unemployment rate is less than 8% but still 1.5 times greater than the national average. This exemption is not automatic; state officials must formally apply for it. If a state’s request is approved, all Medicaid enrollees living in a qualifying county would be exempt from the work rules for a designated period.
The total number of people who could benefit from this provision depends heavily on how the federal administration interprets and implements the law. KFF researchers analyzed two potential scenarios. One interpretation suggests that if counties need to meet the unemployment threshold for just one month out of a 12-month period, as many as 4.6 million Medicaid enrollees across 386 counties could become eligible for an exemption. This would represent nearly a quarter of all individuals subject to the new work rules.
A More Conservative Estimate
A second, more stringent interpretation of the law suggests that exemptions would only apply to counties where the unemployment rate remains elevated over a 12-month average. Under this scenario, the number of beneficiaries drops significantly. KFF’s analysis found that this stricter standard would exempt approximately 1.4 million Medicaid enrollees in 158 counties. This figure represents about 7% of the total population that would otherwise need to meet the work requirements in states that have expanded Medicaid.
Geographic Concentration of Exemptions
The impact of the unemployment exemption is not evenly distributed across the country. According to the KFF analysis based on the 12-month average, about 90% of the 1.4 million Medicaid recipients who could be exempted live in just five states. California would see the largest effect, accounting for 54% of the total, followed by New York with 18%. The remaining states in this group are Michigan (8%), Kentucky (7%), and Ohio (3.2%). In contrast, the analysis found that in 17 states that have expanded Medicaid, no counties currently meet the criteria for the high-unemployment exemption.
The Urban-Rural Divide
An interesting finding from the KFF report highlights a disparity between the types of counties that qualify and where the affected populations reside. While 80% of the counties that meet the high-unemployment criteria are classified as rural, the vast majority of the people who stand to benefit live in urban areas. Approximately 80% of the enrollees who could be shielded from the work requirements live in urban counties within the qualifying states. For rural populations, the impact is most concentrated in seven states, with half of all potentially exempt rural enrollees living in Kentucky and Michigan.
Broader Context of Medicaid Work Rules
The high-unemployment provision is one of several exemptions built into the new law. The legislation also carves out protections for other specific groups, including parents with children under the age of 14, individuals who are pregnant, people with documented disabilities or who are medically frail, those who are incarcerated, and individuals participating in a substance use disorder program. What makes the unemployment provision distinct is its application to entire geographic areas, exempting all Medicaid enrollees within a county’s borders regardless of their individual circumstances.
The work requirements themselves apply only to states that chose to expand their Medicaid programs under the Affordable Care Act or through a special waiver. The mandate requires 80 hours of work, job training, or other qualifying activities per month for adults between the ages of 19 and 64, with some exceptions. States have until 2027 to fully implement these requirements, though they can choose to do so earlier. The changes are part of a broader effort to reshape the social safety net, and their ultimate impact will depend on both federal interpretation and state-level policy decisions in the coming years.
