Updates: Interim Rules and House Appropriations
CMS's new Medicaid work requirement rule puts the medically frail exemption into focus as Congress begins shaping FY27 spending priorities.
The long-awaited rule interpreting exceptions for people with substance use disorder and other health conditions was released on June 1. Comments to the interim rule are due by July 31, and states must begin implementing the new “community engagement requirements in HR1 by January 1, 2027. Here, I’ll break down some key aspects of the interim rule.
The rule includes a reference to the “medically frail” definition contained in the original legislation (HR 1). However, one could argue that it goes further than the original statute by stating that the mere presence of a condition, such as a substance use disorder, is insufficient to qualify as an exception to the 80-hour-a-month community engagement (work) requirement.
Under the rule, one must also show that they are unable to meet the community engagement requirements established under the law. (See some examples here.)
The interim rule also states that an individual who is in recovery for 5 or more years generally would not meet the medically frail definition. CMS cites research to support this point. While this may be scientifically grounded, the underlying statute doesn’t make this distinction explicitly.
The rule raises an important legal question in a post-Chevron world in which agency interpretations are no longer afforded the same level of judicial deference.
The rule also places states in the difficult position of determining whether an individual qualifies for the exception to the Medicaid work requirements. The interim rule references the DSM-5 as guidance for states when determining whether an individual meets the “medically frail” definition. However, the DSM-5 won’t help a state determine whether someone can meet the exceptions for community engagement. That determination will require more information about how an individual’s condition affects their ability to comply with the requirement.
For more on the interim rule, register for Legal Action Center’s upcoming webinar.
Fiscal Year 2027 Appropriations
The House released the Labor, Health and Human Services, Education, and Related Agencies Appropriations Bill for FY 2027. The Full Committee markup of the bill will take place June 9 at 11 AM Eastern.
A few takeaways from the appropriations bill:
The bill level funds the State Opioid Response (SOR) grant at $1.6B;
The House retained much of the programs of regional and national significance (PRNS) funding, with a few exceptions and includes an appropriation of $509M, down from FY26.
The bill includes additional language about syringe exchange funding to clarify its intent that the only funding limitation is on the syringe purchase itself, not for the personnel who distribute the syringes.
The National Institute on Drug Abuse (NIDA) and National Institute on Alcohol Abuse and Alcoholism (NIAAA) are both level-funded.
Most notably, the House appropriations bill does not include the FY27 budget request to reorganize HHS. The Committee Report is not yet public so more information to come as the appropriations process continues.
In the FY27 Financial Services and General Government Appropriations Bill, which includes funding for the Office of National Drug Control (ONDCP), the House did not adopt the President’s FY27 budget request to move the High Intensity Drug Trafficking Areas (HIDTA) program and the Drug Free Communities program to DOJ and HHS, respectively.
Concluding Thoughts
The release of the interim rule provides the field with some clarity about the Medicaid community engagement requirements, but it also raises several new ones and will complicate state implementation.
On the appropriations front, Congress has a long way to go in a short period of time to fund the government.
I’ll be tracking the implementation of the community engagement requirements and the FY27 funding process as they move forward. More to come!