FAQ: Medicaid Community Engagement Requirements — What New Rules Mean for Patients with a Substance Use Disorder

On June 1, 2026, the Centers for Medicare and Medicaid (CMS) issued an interim final rule (IFR) to implement community engagement/work reporting requirements as a condition of Medicaid eligibility for certain populations in Medicaid expansion states.

See below for answers to some frequently asked questions about these documents.

1. What does this IFR do?

This IFR outlines requirements for certain adults enrolled in Medicaid. The rule explains who must comply, what activities count, who is excluded from the requirement, how states must verify compliance or exclusions, and what happens if an individual is found noncompliant.

2. What does this rule mean for patients who have a substance use disorder?

H.R. 1, passed by Congress in 2025, requires CMS to promulgate rules to implement community engagement/work reporting requirements as a condition of Medicaid eligibility for certain populations. The law exempted people with a SUD and those in active treatment in certain treatment settings from being required to report as a condition of Medicaid eligibility.

3. Ok, so if my patient has been diagnosed with a SUD, they do not need to report their work or community engagement activities?

It depends. The IFR includes individuals with SUD within the medically frail/special medical needs exclusion. CMS defines medically frailty/special medical needs to include individuals whose physical, mental, or behavioral health condition significantly impairs their ability to comply with the community engagement requirement, including individuals with SUD.

Under the rule, having an SUD diagnosis/condition alone is not automatically sufficient. The SUD must “significantly impair” the individual’s ability to comply with the community engagement requirement.

The state must verify both that (1) the individual has a qualifying condition, such as SUD; and that (2) the condition significantly impairs the individual’s ability to comply with the community engagement requirement. The rule permits states to use claims, encounter data, diagnosis information, utilization data, and other reliable information to make this determination. If an individual with a SUD is determined to be medically frail, the state must reverify that status at least every 12 months.

4. How does CMS define "significantly impairs"?

CMS does not establish a specific definition for “significantly impairs.” The rule frames the standard around whether the individual’s condition significantly impairs their ability to comply with the 80-hour-per-month community engagement requirement. The IFR places the burden on states for determining who meets this definition.

5. What about people with SUD who are in active treatment?

The rule excludes from reporting requirements individuals who are participating in an addiction treatment/rehabilitation program. It treats them as specified excluded individuals (not applicable individuals), meaning they are not subject to the community engagement requirement.

However, the exclusion is based on participation in a qualifying treatment/rehabilitation program. States must first try to verify participation using reliable state-available information, such as claims, payment data, encounter data, or other records. If those sources are unavailable or insufficient, the state may request additional information or documentation.

6. What kinds of treatment programs are considered "qualifying?"

7. Does CMS require a minimum number of treatment hours?

No. CMS does not establish a federal minimum number of hours, days, or visits required for participation in a drug or alcohol treatment and rehabilitation program. States may set a minimum time commitment for participation, but the standard must be consistent with appropriate clinical guidelines.

8. Does a person have to be in active SUD treatment to qualify under the medically frail/SUD exclusion?

No. CMS states that the SUD medically frail category is not limited to individuals in active treatment. A person with SUD may be considered under the medically frail/SUD pathway even if they are not currently participating in a treatment program, so long as they meet the rule’s significant-impairment standard.

9. Does the rule define substance use disorder?

CMS does not define SUD in the IFR. The rule states that DSM-5 and ICD-10 may be useful references and notes that it would be reasonable for states to include alcohol use disorder, opioid use disorder, and stimulant use disorder when identifying qualifying SUD types. CMS also notes that this is a list of examples, and not an exhaustive list.

States are also required to develop a list of diseases, diagnoses, disorders, or other health conditions to identify individuals who meet the criteria. The list must be auditable, justifiable, and consistent with the definitions in the regulations. States must revise this list on a regular basis to add or remove diseases, diagnoses, disorders, or health conditions. If an individual does not have a disease, diagnosis, disorder, or health condition on this list, states must have reasonable processes and criteria in place for such individual to request consideration for the exclusion for individuals who are medically frail or otherwise have special medical needs.

However, individuals in “stable recovery” (defined as in recovery for five or more years) are excluded from the SUD medically frail category.

10. What does the rule say about recovery?

The rule explicitly excludes individuals in “stable recovery” from the SUD category within the medically frail/special medical needs exclusion. CMS defines stable recovery as recovery for five or more years. This means that, under the rule, an individual in recovery for five or more years is not included in the SUD medically frail category based on SUD alone.

11. When do the requirements take effect?

The rule is effective July 31, 2026.States must implement the community engagement requirement no later than January 1, 2027. For those already enrolled in Medicaid, who are “applicable individuals,” the state must assess compliance with the community engagement requirement at renewal. The individual must demonstrate, or be deemed to have demonstrated (through an exception), compliance for the required number of months during the applicable review period. For those already enrolled in Medicaid, who are “specified excluded individuals” (e.g., medically frail), the community engagement requirement doesn’t apply.

12. Who is subject to the Medicaid community engagement requirement?

The requirement generally applies to certain adults who are eligible for or enrolled in the Medicaid expansion adult group, as well as certain adults covered through certain section 1115 demonstrations that meet the rule’s criteria.

The rule does not apply to all Medicaid beneficiaries. It does not apply to children, pregnant individuals, Medicare-enrolled individuals, or individuals enrolled in Medicaid eligibility groups outside the populations covered by the rule.

13. How does an applicable individual comply with the community engagement/work requirements?

Applicable Medicaid enrollees can meet the requirements in a month by:

• Working for 80 hrs.;
• Completing 80 hrs. of community service;
• Participating in a work program for 80 hrs.;
• Being enrolled in an educational program at least half-time;
• Completing a combination of qualifying activities totaling at least 80 hrs.;
• Having a monthly income no less than $580/month -OR- an average of $580/mo. over the last 6 months and is a seasonal worker.

14. How often must states assess compliance with the reporting requirements?

A state must require an applicant for Medicaid to show that they met the requirement for at least one but not more than three consecutive months immediately preceding the month they applied for Medicaid

If the person is already enrolled in Medicaid, the state checks for one or more months during the person’s current eligibility period. The length of the lookback period depends on how frequently it verifies compliance. States can decide to permit annual or more frequent verification checks.

Finally, states are required to inform people in plain language the results of the compliance checks.

15. How must states identify compliance with the requirements?

The IFR specifies that states must first use data available to them before asking Medicaid beneficiaries for additional information. This data includes Medicaid eligibility/case records, data from other state or local agencies, federal data sources, payroll data, adjudicated Medicaid claims from the previous 12 months, and encounter data from the previous 12 months.

For each potentially affected person, the state must consider if they are excluded from reporting requirements, and if not, whether they are deemed compliant through an exception. If they are not excluded or deemed compliant through an exception, then the question becomes whether they completed the required community engagement activities. If state data can’t answer those questions, then the state can ask the beneficiary for more information.

16. What happens if someone who is deemed an applicable, non-exempt individual does not meet the reporting requirements?

If the state determines that an applicable individual has not met the community engagement requirement and does not qualify for an exception or exclusion, the individual may be denied eligibility or disenrolled from Medicaid. The rule requires states to provide notice and an opportunity for the individual to demonstrate compliance or show that they should not be subject to the requirement.

17. Are treatment providers required to report patients’ SUD status to Medicaid?

The rule does not create a general requirement that addiction treatment providers routinely report a patient’s SUD status or treatment participation to Medicaid. However, provider or program documentation may be used if the state cannot verify an exclusion through existing data and the individual submits documentation or authorizes someone to submit it on their behalf.

18. What privacy rules apply?

The rule states that verification involving SUD-related information must comply with applicable privacy laws, including Medicaid confidentiality rules, HIPAA, 42 CFR Part 2, and state privacy laws.

19. Can individuals self-attest to an SUD-related exclusion?

The rule allows states to accept certain statements or other information in some circumstances, especially before January 1, 2028. Beginning January 1, 2028, the rule limits reliance on statements alone for medically frail status and requires verification using reliable state data or documentation at renewal.

20. What notices must states provide?

States must provide notices explaining the community engagement requirement, how an individual can demonstrate compliance, how an individual can show that they qualify for an exception or exclusion, what happens if the state finds noncompliance, and how the individual can reapply if disenrolled.

21. Are states required to conduct outreach?

Yes. The rule requires states to conduct outreach to affected populations. Outreach must address the community engagement requirement, qualifying activities, exceptions and exclusions, verification processes, and consequences of noncompliance.

22. Are there hardship exceptions?

Yes. The rule permits short-term hardship exceptions in certain circumstances. These may include circumstances involving institutional services, services of similar acuity, disasters declared under the National Emergencies or Stafford Acts, counties/localities with unfavorable employment circumstances, or extended travel outside the community for medical services. States have flexibility in whether and how to adopt certain hardship exceptions.