JEFFERSON CITY, Mo. (AP) — In order to get Medicaid health coverage, some adults will soon have to prove they are working, volunteering or taking classes. But to collect evidence, many states first have to spend millions of dollars improving their computer systems.
Across the country, states face the daunting task and high cost of preparing for new Medicaid eligibility rules that kick off on Jan. 1 and will affect millions of low-income adults in the government-funded health care program.
The first half of a $200 million federal grant has begun flowing to states to help implement the new requirements. But the required technology improvements and additional personnel could cost more than $1 billion, according to an Associated Press analysis of budget forecasts from more than 25 states. This additional cost will be borne by a combination of federal and state taxes.
The task is not as simple as pushing a software update to your smartphone or PC. That’s because each state has its own Medicaid administration system, which often requires experts to make custom changes.
“Our current eligibility systems are pretty archaic and it’s very, very difficult to change them,” said Toi Wilde, chief information officer for the Missouri Department of Social Services.
New Medicaid requirements affect millions, but not everyone
The massive tax cuts Trump signed last year were funded in part by sweeping Medicaid reforms aimed at cutting government spending. Two of the most prominent would apply in four-fifths of states, affecting Medicaid enrollees ages 19 to 64, excluding young children, whose incomes are above typical eligibility thresholds.
These Medicaid participants must work or perform community service at least 80 hours per month, or be enrolled as a student at least half-time. They will also be subject to eligibility reviews every six months instead of annually, meaning they could lose coverage more quickly when circumstances change.
According to the Congressional Budget Office, the two provisions are expected to save the federal government $388 billion over the next 10 years, resulting in 6 million fewer people having health insurance.
But states first must update the online portals used by Medicaid enrollees, aging computer systems used by government workers and ways to verify information through various databases.
Most people will have to turn to private contractors for time-critical situations. At least 10 companies have agreed to offer discounted services, according to the Centers for Medicare and Medicaid Services.
Making these technology upgrades “is going to be a lift. It’s not a simple thing. It’s not going to be easy,” said Jason Reilly, a partner at Guidehouse, a firm that advises several states on Medicaid requirements.
Most states currently do not collect employment or education information on Medicaid participants. As a result, states are looking to leverage outside sources to verify work and school data. But there is no database of community volunteers.
States are still waiting for federal rules, which aren’t due until June, to define some exceptions to work requirements, such as how to determine who qualifies as “medically frail.”
States face additional pressure to correct errors because the federal government will begin penalizing states with too many Medicaid payment errors in October 2029.
States will seek additional federal funds
Congress guaranteed that all states would share in the $200 million allocated for Medicaid work and eligibility changes. But states must apply for additional federal funding. The federal government pays 90 percent of states’ costs to develop the systems used to determine Medicaid eligibility, 75 percent of the costs of maintaining those systems, and half of most other administrative costs.
Missouri received early approval at a 90% federal funding rate. State lawmakers are now fast-tracking $32 million to solicit bids from vendors to begin upgrading technology platforms and improving chatbots for Medicaid enrollees. Next year, the state’s social services agency expects to need approximately 120 additional staff members (at a cost of $12.5 million) to handle the additional administrative workload.
Other states also anticipate high costs. Maryland expects to spend more than $32 million in federal and state funds to implement Medicaid reforms, Kentucky expects to spend more than $46 million, and Colorado will spend more than $51 million. Arizona estimates that implementing the new federal requirements could cost $65 million and require an additional 150 staff.
Some states surveyed by The Associated Press reported even higher expected costs, though they didn’t always detail how much was due to new Medicaid directives and how much was related to changes to the Supplemental Nutrition Assistance Program included in Trump’s big law.
Several states, including Arkansas, say they are still estimating the costs of Medicaid reform. Arkansas instituted a Medicaid work requirement in 2018-2019, and thousands of people were taken off the rolls before a federal court ended the requirement. The Arkansas Department of Human Services said in an email that many of the technology changes required by the new federal regulations can be included in existing provider contracts with “minimal financial impact on our Medicaid budget.”
Nebraska said it plans to launch Medicaid work requirements in May, seven months ahead of the federal deadline. But the state did not detail any related costs and did not respond to an inquiry from The Associated Press.
Georgia work requirements raise concerns
Georgia, the only state currently requiring some Medicaid recipients to work, received special federal approval several years ago to expand coverage to some ineligible adults.
According to the U.S. Government Accountability Office, administrative costs for Georgia’s Coverage Pathway program have exceeded $54 million from 2021 to the first half of 2025, twice the amount paid by Medicaid during the same period. Nearly all of these costs come from technological changes to its eligibility and registration systems.
Some Medicaid analysts point to costs in Georgia and enrollment declines in Arkansas as reasons for caution as other states roll out work requirements.
“A lot of money is going to go to providers to build these complex systems of red tape that prevent people who need it from getting health care,” said Joan Alker, executive director of the Center for Children and Families at Georgetown University. “That, in my opinion, is a very, very big risk.”
