JUNE 2026 Medicaid / Medicare Monthly Newsletter

Zillah Glory
Jun 3
7 min read

Mental Health • Substance Use • Social Services

Summary

June 2026 brings two developments that are time-sensitive in ways most behavioral health providers have not yet absorbed.

The first is the CMS Interim Final Rule on Medicaid work requirements, transmitted to the Office of Management and Budget on April 1, 2026, and legally required to be published by June 1.^1,2 Whether CMS meets that statutory deadline or issues it in the days immediately following, the agency has a documented pattern of missing its own regulatory deadlines, and the outreach clock is running regardless.

States with a three-month look-back period must begin notifying affected Medicaid enrollees by July 2026. The rule’s publication will not change the timeline states are already operating under.

The second development is that state FY 2027 budgets are moving from proposals to enacted law, with behavioral health provider rate reductions signed in Colorado and extended in Idaho. Texas budget negotiations remain active at the time of publication. This issue covers both and provides the operational specificity providers need to act now.

The Work Requirements Clock Is Already Running

The One Big Beautiful Bill Act required CMS to publish an Interim Final Rule on Medicaid community engagement requirements by June 1, 2026.³ The rule, formally titled “Establishing State Community Engagement Requirements for Certain Individuals Under Section 1902(xx) of the Social Security Act” and docketed as CMS-2454, was transmitted to the Office of Management and Budget for review on April 1, 2026.¹

As of this publication, the rule had not yet been published in the Federal Register. CMS has missed previous regulatory deadlines under this same law. The six-month redetermination guidance required by December 31, 2025, was not issued until March 2026, and the same pattern may apply here.

What doesn't change, regardless of publication timing, is the state outreach calendar.

States implementing work requirements by January 1, 2027, must send initial outreach notices to affected enrollees by late summer 2026. The exact deadline depends on the look-back period each state selects. States requiring three months of prior compliance must begin outreach no later than July 2026. States requiring two months must begin by August. States requiring one month must begin by September. (4) In states with the maximum look-back period, outreach notices will be sent within weeks of this newsletter reaching your inbox.

The December 2025 informational bulletin, the most detailed federal guidance currently available, established the core operational framework: adults ages 19 to 64 in Medicaid expansion must demonstrate 80 hours per month of qualifying activity: employment, job training, at least half-time education, community service, or a combination.

Verification occurs at application, at each six-month redetermination, and at annual renewal. States must provide 30 days’ notice before terminating coverage for noncompliance.⁴ The Interim Final Rule is expected to add definitional clarity on exemption categories, verification standards, and the role of managed care organizations in the process. Specifically, the statute prohibits MCOs from making compliance determinations, a restriction the rule is expected to operationalize.

The exemption categories are where behavioral health providers need to pay close attention. Individuals with a substance use disorder or a disabling mental disorder are legally exempt from the work requirement. The Interim Final Rule is expected to clarify what documentation a state can require to verify that exemption, and this remains one of the most significant unresolved questions for behavioral health providers.⁵

The American Medical Association has described this as a critical open question, noting that the criteria for “medical frailty” and “disabling mental disorder” have not been operationally defined in a way that state eligibility systems can administer consistently. CMS’s Director of Medicaid and CHIP, Dan Brillman, signaled at the 2026 AMA National Advocacy Conference that the Interim Final Rule will rely heavily on technology and existing data to automate exemption verification rather than placing the documentation burden primarily on enrollees.⁵

How states implement this in practice will vary significantly, and the individuals most at risk of losing coverage are those whose conditions are episodic, undertreated, or not well documented in the data systems that states will query.

Your organization’s clients in Medicaid expansion are about to receive communications from their state Medicaid agency that may be confusing, alarming, or easy to miss. State outreach is required by law, but community-based behavioral health providers are often the most trusted point of contact for those most at risk of administrative disenrollment.

Coverage loss among individuals who meet the legal requirements but fail to navigate the paperwork is well documented in prior state-level implementations, including Arkansas’s 2018 program, which disenrolled 18,000 people before a court halted it.

Establishing an internal protocol now, identifying which clients are in expansion, training case management staff on exemption categories, and building a referral pathway to enrollment assistance are the differences between an organization that prevents unnecessary coverage disruptions and one that responds to them after the fact.

State Budgets Are Signed; The Cuts Are Real

The May issue of this newsletter framed state fiscal pressure as a forward-looking risk, and the June update requires a different frame: several states have enacted FY 2027 budgets that include behavioral health provider rate reductions, now signed into law. These are not proposals, they are effective.

Colorado

Colorado’s governor signed the state’s FY 2027 budget in May 2026, with Medicaid absorbing the largest share of the cuts needed to close a $1 billion deficit.⁶ The enacted budget reduces Medicaid provider rates to 85 percent of Medicare rates across most service categories, with specific reductions for behavioral health, home health, and dental. For behavioral health providers in Colorado operating on Medicaid reimbursement, the rate change takes effect with the new fiscal year. At most Medicaid reimbursement levels, an adjustment to 85 percent of Medicare is an immediate income statement impact for organizations where Medicaid represents the majority of revenue.

Idaho

Idaho extended its 4 percent across-the-board provider rate reduction, originally implemented on September 1, 2025, through FY 2027.⁷ The state Department of Health and Welfare described the original cuts as necessary to address unsustainable healthcare cost growth. The extension signals a structural adjustment rather than a temporary one, and for Idaho behavioral health providers already absorbing a 4 percent reduction for nearly a year, the pressing question is whether additional cuts will follow if state revenues continue to trail projections.

Texas

Texas note: Texas has proposed reimbursement rate reductions for substance use treatment facilities in FY 2027. At the time of this publication, Texas budget negotiations remain ongoing, and the final outcome has not yet been enacted. Providers in Texas operating substance use treatment programs should treat this as an active risk and monitor it through June and July as the legislative session concludes.

The pattern across enacted and proposed state budgets aligns with KFF’s comprehensive Medicaid behavioral health analysis, published in May 2026, which documented that the number of states implementing behavioral health rate increases is declining sharply. In FY 2025, 23 states implemented fee-for-service rate increases for one or more outpatient behavioral health providers. For FY 2026, that number dropped to 14.^7.

A California development deserves attention regardless of geography: the state’s proposed FY 2026-27 budget would make mobile crisis services optional for counties, shifting the full non-federal cost to counties that choose to maintain the service.⁸ Mobile crisis has been one of behavioral health’s most visible expansion commitments over the past four years. When California considers making it optional, other states watching their budgets take note.

HiQuity Insight

The federal-to-state pressure transfer has gone beyond a policy forecast and into an operating condition. The outreach clock on work requirements is running now, and behavioral health rate cuts are signed law in multiple states.

Two questions define organizational readiness at this moment.

First: do you know which of your clients are in Medicaid expansion, and does your case management staff have the information they need to help those clients navigate the exemption process before coverage is at risk?

Second: have you modeled your Medicaid revenue under a scenario that reflects enacted and pending rate reductions in your state? If either answer is uncertain, the window for proactive response is narrowing faster than most organizations realize.

Leadership Action Checklist

Action	Target Date
Identify all clients currently enrolled in Medicaid expansion and assign staff responsibility for monitoring eligibility status through the summer outreach period	June 30, 2026
Train intake and case management staff on work requirement exemption categories for SUD and disabling mental health conditions; build a documentation protocol for supporting exemption claims	July 15, 2026
Run a Medicaid revenue model under a 4–15% rate reduction scenario for each service line; bring results to your board	July 31, 2026
Confirm your state’s work requirement look-back period decision and corresponding outreach start date; build internal calendar accordingly	June 30, 2026
Monitor your state’s FY 2027 budget decisions weekly through June and July; identify which service lines carry rate change exposure	Ongoing

Strategic Support for What Comes Next

HiQuity Solutions partners with behavioral health and social service organizations at the systems level, helping leadership teams build the revenue intelligence, payer strategy, and organizational infrastructure this environment requires.

If your organization has not yet mapped its work requirement exposure or modeled its rate-reduction risk, the window for a proactive response is narrowing. We would welcome the conversation.

CLICK TO SCHEDULE A CALL

References

[1] LeadingAge. (2026, April 3). At OMB: Medicaid Work Requirements Interim Final Rule. https://leadingage.org/at-omb-medicaid-work-requirements-interim-final-rule/

[2] MACPAC. (2025, September). Work and Community Engagement Requirements in Medicaid. https://www.macpac.gov/wp-content/uploads/2025/09/02_September-Slides_Work-and-Community-Engagement-Requiremets-in-Medicaid-1.pdf

[3] KFF. (2025). A Closer Look at the Work Requirement Provisions in the 2025 Federal Budget Reconciliation Law. https://www.kff.org/medicaid/a-closer-look-at-the-work-requirement-provisions-in-the-2025-federal-budget-reconciliation-law/

[4] Center for Health Care Strategies. (2026). A Summary of Federal Medicaid Work Requirements. https://www.chcs.org/resource/a-summary-of-national-medicaid-work-requirements/

[5] AMA. (2026, April 10). Catch up on Medicaid work requirements’ medical frailty exemption. American Medical Association. https://www.ama-assn.org/health-care-advocacy/access-care/catch-medicaid-work-requirements-medical-frailty-exemption

[6] Tann, R. (2026, May 8). Colorado Gov. Jared Polis signs state budget, with Medicaid taking brunt of cuts to close $1 billion gap. Aspen Times. https://www.aspentimes.com/news/colorado-new-budget-cuts-medicaid/

[7] KFF. (2026a). A View of Medicaid Today and a Look Ahead: Balancing Access, Budgets and Upcoming Changes. https://www.kff.org/medicaid/50-state-medicaid-budget-survey-fy-2025-2026/

[8] KFF. (2026b). Medicaid Mental Health and Substance Use: Expansion Trends and the Fiscal Pressure Ahead. https://www.kff.org/medicaid/medicaid-mental-health-and-substance-use-expansion-trends-and-the-fiscal-pressure-ahead/

[9] Center on Budget and Policy Priorities. (2026, May). States Need More Time to Prepare for Medicaid Work Requirement. https://www.cbpp.org/research/health/states-need-more-time-to-prepare-for-medicaid-work-requirement

[10] SHVS. (2025, December 11). CMS Issues Initial Guidance on Work Reporting Requirements. https://shvs.org/cms-issues-initial-guidance-on-work-reporting-requirements/