Trump’s Medicaid work mandates are meant to save money. But first states will have to spend millions

States Face Billion-Dollar Tech Hurdle to Implement New Medicaid Work Requirements

JEFFERSON CITY, Mo. — States across America are scrambling to overhaul outdated computer systems as they prepare to enforce new Medicaid work requirements set to begin January 1. The technological challenge comes with a staggering price tag expected to exceed $1 billion, according to an Associated Press analysis of budget projections from more than 25 states.

The federal government has already begun distributing the first half of a $200 million allotment to help states implement these changes, but this amount falls far short of the total anticipated costs, which will ultimately be covered by a combination of federal and state taxpayer funds.

“Our current eligibility systems are pretty old, and the ability to change them is very, very difficult,” explained Toi Wilde, chief information officer for the Missouri Department of Social Services, highlighting a common challenge faced by state agencies nationwide.

The new requirements, part of last year’s tax-cut legislation signed by former President Trump, will significantly alter how Medicaid operates in approximately 80 percent of states. Adults aged 19 to 64 without young children and with incomes above typical eligibility thresholds will need to work or volunteer at least 80 hours monthly, or enroll as at least half-time students to maintain coverage.

Additionally, these recipients will face eligibility reviews every six months instead of annually, potentially resulting in faster coverage losses when circumstances change. The Congressional Budget Office projects these provisions will save the federal government $388 billion over the next decade while leaving 6 million fewer people with health insurance.

Before implementation, states must upgrade multiple technology systems: online portals used by Medicaid participants, aging computer systems used by state workers, and methods for verifying information through various databases. Meeting the January deadline will require most states to contract with private vendors, with at least ten companies already agreeing to offer discounted services, according to the federal Centers for Medicare and Medicaid Services.

Jason Reilly, a partner at Guidehouse, a firm advising several states on the Medicaid requirements, noted the complexity of the task. “Making those technology upgrades is going to be a lift. It’s not something straightforward. It’s not easy.”

The challenge is compounded by the fact that most states don’t currently collect employment or education information about Medicaid participants. While states are exploring external sources to verify job and school data, there’s no existing database to track community volunteer work. States also await federal rules, due in June, that will define exceptions to work requirements, such as who qualifies as “medically frail.”

Adding urgency to the situation, the federal government will begin penalizing states with excessive Medicaid payment errors in October 2029.

While Congress guaranteed all states a portion of the $200 million allocated for these changes, states must apply for additional federal money. The federal government covers up to 90% of costs to develop Medicaid eligibility systems, 75% of maintenance costs, and half of most other administrative expenses.

Missouri, which won early approval for the 90% federal funding rate, is fast-tracking a $32 million appropriation for vendor bids to upgrade technology and improve a chatbot for Medicaid participants. The state also anticipates needing about 120 additional workers at a cost of $12.5 million to handle the increased administrative workload.

Other states project similarly significant expenses: Maryland expects to spend over $32 million, Kentucky more than $46 million, and Colorado over $51 million in combined federal and state funds. Arizona estimates implementation could cost $65 million and require 150 additional staff.

Georgia, currently the only state requiring some Medicaid recipients to work under a special federal waiver, provides a cautionary tale. Its Pathways to Coverage program has accumulated more than $54 million in administrative costs from 2021 through early 2025 – twice the amount of medical assistance paid out during that period, according to the U.S. Government Accountability Office. Almost all those expenses came from technology changes to eligibility and enrollment systems.

Critics point to Georgia’s costs and Arkansas’ previous experience with work requirements – which resulted in thousands losing coverage before a federal court intervened – as reasons for concern.

“A huge amount of funding is going to go to vendors to construct these complicated red-tape systems that prevent people who need it from getting health care,” warned Joan Alker, executive director of the Center for Children and Families at Georgetown University. “In my view, that is a big, big risk.”