The Work Requirement Exemption for SUD Treatment Exists on Paper. That's the Problem.

Daily Pulse — May 30, 2026

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The HR1 budget reconciliation bill moving through Congress includes Medicaid work requirements that would take effect in Arizona beginning January 2027. The requirement: 80 hours per month of documented employment, job training, education, or community service, or an approved exemption. One of those approved exemptions is participation in a substance use disorder treatment program. This is the part the bill’s supporters cite when addiction advocates raise concerns.

Here is the part they don’t cite.

AHCCCS — Arizona’s Medicaid program — estimates that up to 400,000 Arizonans with SUD could lose coverage under the work requirements despite the exemption. The gap is not in the law’s text. It is in the navigation system required to claim exemption status. A person in active addiction who is currently enrolled in an outpatient treatment program can document that fact. That documentation requires: knowing the exemption exists, knowing how to apply for it, maintaining consistent contact with a treatment provider who can verify enrollment, submitting paperwork within AHCCCS’s 90-day documentation window, and repeating that process every six months under the bill’s semi-annual redetermination requirements.

The people most at risk of losing coverage are the ones whose illness most impairs their ability to complete that process. A person in stable, long-term recovery with a case manager and consistent housing has a reasonable shot at navigating the exemption. A person in active use who is housing-unstable and cycling between treatment and relapse — which is the normal course of SUD, not an exception — is likely to miss a deadline, lose a form, or simply not know the requirement exists until their coverage has lapsed.

KFF Health News estimated this week that 1.8 to 2.4 million people with SUD nationally would lose Medicaid coverage in year one of work requirements. Arizona’s 87,000-person subset of that estimate is based on AHCCCS administrative data. The AHCCCS briefing on HR1 impacts, posted to the agency’s website this month, notes that SUD treatment participation is a qualifying exemption — and acknowledges in the same document that administrative barriers to claiming exemptions have historically been the primary driver of coverage loss in work requirement experiments.

The only state that has actually run a Medicaid work requirement — Arkansas, from 2018 to 2019, before a federal court struck it down — saw 18,000 people lose coverage within the first six months. An NEJM analysis of the Arkansas data found that the reduction in coverage did not produce any measurable increase in employment. The work requirement reduced health insurance. It did not increase work.

Arizona’s 97 percent AHCCCS facility acceptance rate is one of the strongest arguments in the state’s favor as a place to launch a treatment navigation platform. That infrastructure depends on the coverage that funds it. If 400,000 Arizonans with SUD lose AHCCCS coverage beginning in January, the facilities that accept AHCCCS become materially less useful to the population that needs them most.

The January 2027 effective date is 7 months away. The exemption documentation system for SUD treatment has not yet been designed.

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For Arizona Medicaid and treatment coverage guidance, see the Rize Recovery find-help guide. For policy coverage, see our policy and funding archive.