By: Andrew Spicer & Kate Honsberger

On June 1, 2026, the Centers for Medicare & Medicaid Services (CMS) released the long-anticipated Interim Final Rule (IFR) on Medicaid Community Engagement Requirements (CER). This IFR constitutes one of the most significant modifications to the Medicaid program since the Affordable Care Act (ACA) and ranks among the most substantial Medicaid regulations in years. The IFR serves as a roadmap for the 43 states that have chosen to expand Medicaid coverage and will be required to implement CER beginning January 1, 2027, or earlier at the state’s discretion. As stakeholders across states, health plans, and partner organizations begin reviewing and planning for implementation of the nearly 400-page rule, Healthsperien is cutting through the complexity to highlight five things you need to know about the rule and what it means for stakeholders across the health care ecosystem.  

Medical Frailty Definition Adds Additional Administrative Hurdle 

CMS interprets the medically frail exclusion beyond what was statutorily required in HR1. To qualify for the medical frailty exclusion, an individual must have a physical, mental, or other behavioral health condition that significantly impairs their ability to comply with the community engagement requirement and fall within one of five categories: 

• Blind or Disabled  
• Substance Use Disorder 
• Disabling Mental Disorder 
• Physical, Intellectual, or Developmental Disability  
• Serious or Complex Medical Condition 

The rule requires that states develop auditable, justifiable lists of diagnoses and conditions to identify potentially medically frail individuals, revise those lists regularly, and maintain processes for individuals whose conditions do not appear on the list. Importantly, no model list of diagnoses is provided in the IFR, meaning that states must construct their own, which will result in differing approaches across states. 

The IFR Leaves Room for Continued Use of Self-Attestation in Some Instances 

The IFR establishes an approach to self-attestation that varies by category and narrows over time. For all categories other than medical frailty, CMS will permit self-attestation before January 1, 2028, when no other reliable information is available to the state. After that date, states must require documentation whenever it is reasonably available. Only when reliable information is not reasonably available may states accept other information sufficient to verify eligibility, with the state defining “sufficiency.” Theoretically, this means a state could still find self-attestation itself to be “sufficient” even after the 2028 deadline. 

For medical frailty, before January 1, 2028, states must first attempt to verify frailty using adjudicated claims from the preceding 12 months and may accept a self-attestation statement only when reliable information is unavailable or not reasonably “compatible”. After January 1, 2028, states may rely on a beneficiary’s self-attestation only once per period of enrollment and must verify frailty status using reliable information or documentation at the individual’s next regularly scheduled redetermination. Importantly, this exemption must be recertified at least every 12 months, meaning there is no option for a long-term medical frailty exemption. Additionally, because adjudicated claims are limited to the preceding 12 months, this approach may not capture longstanding diagnoses or conditions for individuals who have had no recent claims activity related to their conditions. 

CMS Prioritizes Consistency with Existing Medicaid Income Rules 

In addition to working 80 hours per month of qualifying activities, an individual can also demonstrate community engagement if their monthly income equals or exceeds the federal minimum wage multiplied by 80 hours (currently $580 per month at the $7.25 federal minimum wage). Additionally, states must use MAGI-based household income for this calculation, including both earned and countable unearned income, applying the same income methodology used for financial eligibility for Medicaid. 

CMS’s decision to use MAGI-based household income rather than individual earned income for this compliance pathway rests primarily on the statutory requirement that states use MAGI household income for all Medicaid income determinations unless a specific exception applies. In the IFR, CMS concluded that creating a separate income methodology solely for community engagement purposes would create administrative complexity without a statutory basis. CMS acknowledged this means household income rather than individual income determines compliance, but concluded that a uniform methodology for calculating income in Medicaid outweighs the administrative burden of alternative approaches. 

CMS Limits Health Plan Responsibilities While Relying on Their Infrastructure 

As outlined in the rule, states may elect to utilize managed care plans to conduct outreach and education to enrollees, share enrollee data with the state to inform applicability determinations, and refer enrollees to qualifying work programs. However, states may not delegate to managed care plans activities unrelated to the provision of Medicaid-covered services, nor include the costs of community engagement support activities in capitation rate development. If a managed care plan voluntarily elects to provide services that meet the definition of a value-added service, those services may be included in the medical loss ratio (MLR) numerator as incurred claims but may not be counted in capitation rates or as value-added services for rate-setting purposes. 

In states that utilize managed care, successful implementation of community engagement will hinge on a robust MCO-state partnership. For example, data sharing between MCOs and states will be particularly crucial, as plans may possess current information on enrollees’ medical frailty status or drug treatment program participation that states need to render accurate exclusion determinations but may not otherwise have access to in real time. Early coordination between managed care plans and states on data sharing and beneficiary engagement will be essential ahead of required outreach timelines and throughout longer-term program implementation. 

Key Questions About Oversight and Accountability Remain Unanswered 

Notably lacking from the IFR is sufficient detail on how CMS plans to monitor implementation, what data states will be required to report to CMS, and what (if any) of this state reported data will be made public. In the IFR, CMS notes that states will need to submit timely, complete, and accurate data to support federal monitoring of community engagement implementation, but does not provide specifics on the mechanics of data collection or reporting. The recent Medicaid and CHIP Payment and Access Commission (MACPAC) report to Congress includes a recommendation that CMS develop a transparent plan for monitoring and evaluating community engagement requirements. However, to ensure program effectiveness, additional guardrails around reporting burden and ongoing performance monitoring will be needed.  

Concluding Thoughts  

The next six months are set to be defined by administrative complexity and quick timelines for state Medicaid agencies, health plans, and partners as they collectively implement community engagement. On top of CER, stakeholders must also understand the intersections between the new guidance on 1115 budget neutrality methodology, reductions in state directed payments and provider taxes, six-month redeterminations, provider revalidations, audits of every state’s Medicaid Fraud Control Unit (MFCU), and the increased focus on fraud, waste, and abuse. Healthsperien is tracking it all. Reach out to learn how our policy tracking and analysis can help your team stay ahead of the next six months.