Eighty Hours a Month. Prove It or Lose Medicaid. For People With Addiction, the Exemption That Looks Like a Solution Isn't.

In April 2018, when Arkansas became the first state in the country to enforce Medicaid work requirements, state officials were confident they had designed the exemptions correctly. People with disabilities, those caring for young children, pregnant women, and people enrolled in substance use treatment would all be protected. The state built an online portal. It sent letters. It held a press conference. Within eight months, 18,000 people had lost their health insurance — not because they were ineligible, but because they couldn’t navigate the system designed to protect them. A federal judge reviewing the case found that the documentation burden was so demanding, and the portal so inaccessible to vulnerable populations, that the exemption that looked like a solution had functioned as a barrier. The Supreme Court ultimately halted the program.

On May 1, 2026 — eight years and one landmark piece of legislation later — Nebraska became the first state to begin enforcing the new federal Medicaid work requirements that President Trump signed into law on July 4, 2025, as part of HR 1, the “One Big Beautiful Bill Act.” Montana starts July 1. Iowa begins December 1. Every other state faces a hard deadline of December 31, 2026.

On June 2, the Centers for Medicare & Medicaid Services issued final implementation guidance — the last major regulatory document before states have to go live. The guidance clarifies the substance use disorder exemption. It defines qualifying programs. It sets an outreach window.

And it leaves unresolved the central problem that sank Arkansas eight years ago: for people in active addiction, or people newly in recovery, or people who have co-occurring cognitive or psychiatric symptoms from years of substance use, the paperwork requirements may be functionally impossible to complete. The exemption exists on paper. Whether it exists in practice will be decided over the next six months, one missed form at a time.

The mechanics of the SUD exemption — and where they break down

The law’s SUD treatment exemption is written to look generous. Individuals “actively participating in a qualifying substance use disorder treatment program” are exempt from the 80-hour monthly work requirement. The programs must meet federal SNAP-related requirements and be operated by nonprofit organizations or public community mental health centers. Participation in drug or alcohol treatment, rehabilitation, or recovery counts as a qualifying activity.

Read it quickly and it sounds like a reasonable carve-out. People getting help are protected. People too sick to work are protected.

Read it carefully, and the gaps appear.

First: the exemption covers people in treatment. Not people who need treatment but haven’t accessed it yet. According to KFF’s analysis, Medicaid covers approximately one-fifth of all adults with substance use disorders in the United States — roughly the same proportion that SAMHSA’s National Survey on Drug Use and Health consistently reports as the treatment-to-need ratio. But of those 48.5 million Americans with a SUD, only about 15% are receiving any treatment. The overwhelming majority — the people most in need of health insurance to access care — have no treatment enrollment to document.

Second: the exemption requires active, ongoing enrollment. It’s not a one-time check. The law mandates verification at application, at renewal, and every six months in between. Someone who moves from inpatient to outpatient care, or who has a relapse that disrupts their treatment schedule, must re-document. The documentation burden is continuous.

Third, and most critically: the law does not define what counts as a “disabling” mental disorder that would trigger the separate mental health exemption. States have wide latitude to draw that line. For the millions of people on Medicaid who have a substance use disorder alongside depression, anxiety, PTSD, or other co-occurring conditions — and the research consistently shows that co-occurrence is the norm, not the exception — whether their condition qualifies for the mental health exemption may depend entirely on which state they happen to live in, and which contractor that state hired to administer the program.

Third, and most critically: the law does not define what counts as a “disabling” mental disorder that would trigger the separate mental health exemption.

What Arkansas already proved

KFF’s analysis of the Arkansas implementation is the most useful piece of empirical evidence we have about what happens when work requirements meet vulnerable populations.

When Arkansas’s system went live, the state attempted to use data matching — cross-referencing Medicaid rolls against employment records, college enrollment databases, and disability rolls — to automatically identify people who were compliant without requiring them to actively report. The system identified about two-thirds of eligible enrollees through this passive match. The other third had to actively report their compliance through an online portal.

Among those required to actively report: approximately 70% did not obtain exemptions or document their hours. Eighteen thousand lost coverage.

The state attributed this to non-compliance. Federal judges and independent researchers attributed it to documentation barriers: limited internet access, a portal that was difficult to navigate on mobile devices, language barriers, and — critically — the cognitive and psychiatric symptoms that characterize the populations Medicaid was designed to serve. KFF’s analysis notes directly that “behavioral health symptoms — including concentration difficulties, planning challenges, and anxiety — substantially complicate self-reporting and documentation processes.” This is not a fringe observation. It is the ordinary pharmacology and neuroscience of what substance use disorders and untreated mental health conditions do to executive function.

The cognitive argument, stated plainly

Here is what the medical literature says about the population being asked to navigate a biannual documentation portal:

Chronic alcohol use disorders cause deficits in working memory, attention, and executive function that persist well into early recovery. The NIAAA’s published literature describes significant impairment in frontal lobe functioning — precisely the cognitive systems required for planning, sequencing steps, and completing forms. Methamphetamine use causes cortical thinning and dopaminergic dysregulation that produce measurable deficits in decision-making and impulse control. Benzodiazepine dependence produces cognitive symptoms that some patients describe as lasting months or years after cessation. Opioid use disorder frequently co-occurs with major depression, anxiety, and PTSD — all of which impair the documentation-completing, deadline-meeting, portal-navigating functions that the law requires.

The work requirement’s logic — that exemptions protect people who truly can’t work — assumes that those people will be able to identify themselves as exempt and successfully apply for that status on a recurring six-month cycle. For a significant subset of the population with substance use disorders, that assumption is physiologically and psychologically unsound.

This is not an argument for eliminating work requirements. It is an argument for a very specific, very practical question that every state implementing these rules must answer before December 31: What happens to the person who is in active use, has not yet enrolled in treatment, and cannot navigate the exemption portal? Does she lose insurance? And if she loses insurance, what then happens to her path to treatment?

The states moving fastest

Nebraska is the live experiment. The state began enforcing May 1, 2026 — six weeks ahead of the national pattern — and state officials have described the rollout as “administratively smooth.” What that means in practice will take months of data to understand. The state’s Medicaid enrollment trends from May and June will be among the most watched numbers in behavioral health policy circles this fall.

Montana starts July 1. According to KFF’s early implementation analysis, state officials have indicated they plan to lean heavily on passive data matching and will prioritize community outreach before imposing terminations. This is closer to what independent researchers have recommended: do the data matching first, use outreach to catch people who fall through, and treat active termination as a last resort rather than a default.

Iowa, which doesn’t begin until December 1, has more runway. What it does with that runway — whether it builds a robust outreach infrastructure for its SUD population, or whether it publishes the portal and waits — will largely determine whether Iowa looks like early-reporting Arkansas or like a state that actually read the Arkansas data before it ran the same experiment.

For every other state: the June 30 to August 31 outreach window CMS mandated in the final guidance is the most consequential period. That’s the window when states are required to contact enrollees, explain the new requirements, and help them identify their exemption status. In practice, reaching people in active addiction — who may not have stable housing, may not check mail regularly, and may not respond to form letters from a government agency — requires infrastructure that many states haven’t built.

That’s the window when states are required to contact enrollees, explain the new requirements, and help them identify their exemption status.

What this means for Arizona, and for treatment access

Arizona hasn’t announced early implementation. AHCCCS — the state’s Medicaid agency — spent $582 million on SUD treatment services in State Fiscal Year 2025 alone, serving primarily adults between 25 and 44. The vast majority of that treatment was funded through Medicaid. The work requirement doesn’t affect the treatment funding directly. It affects eligibility for the insurance coverage that pays for the treatment.

Put differently: if AHCCCS’s SUD treatment dollars are Medicaid-funded, and Medicaid coverage is what pays for people to access that treatment, then a sustained reduction in Medicaid enrollment among people with SUDs doesn’t just affect them as individuals. It affects the entire Arizona treatment infrastructure — the clinics, the case managers, the peer support specialists, the residential programs — whose revenue depends on those covered lives.

The strategy doc that guides our work at Rize identifies Arizona’s $1.2 billion in opioid settlement funds as a unique entry point, and positions the platform as a navigation layer for a fragmented recovery ecosystem. Work requirements may be about to make that ecosystem significantly more fragmented. The people who most need a guide through the system may be about to lose the insurance that would allow them to access it.

The exemption is there. So was the one in Arkansas. The question is whether states build the infrastructure to make it functional — or whether, six months from now, the data looks like 2018 again, with 18,000 people in a state we haven’t named yet learning what the exemption actually cost them.