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

JEFFERSON CITY, MO — To qualify for Medicaid health coverage, some adults will soon have to prove they work, volunteer or take classes. But to get that proof, many states will first have to spend millions of dollars improving their computer systems.

Across the country, states face a daunting task and high costs to prepare for the Jan. 1 kickoff of new Medicaid eligibility mandates affecting millions of low-income adults in the government-funded health care program.

The first half of a $200 million federal allocation has already begun flowing to states to help them implement the new requirements. But the bill for needed technology improvements and additional staff will likely exceed $1 billion, according to an Associated Press analysis of budget projections in more than 25 states. This additional cost will be borne by a mix of federal and state taxpayer dollars.

The task is not as simple as performing a software update on your smartphone or personal computer. That’s because each state has its own Medicaid management system, which often requires experts to make custom changes.

“Our current eligibility systems are quite old and it’s very, very difficult to change them,” said Toi Wilde, chief information officer for the Missouri Department of Human Services.

The sweeping tax cut law signed last year by Trump is financed, in part, by sweeping changes to Medicaid intended to reduce government spending. Two of the largest will apply in four-fifths of the states, affecting Medicaid enrollees aged 19 to 64, without young children, whose income is above the usual eligibility threshold.

These Medicaid participants will be required to work or perform community service at least 80 hours per month, or enroll at least half-time as a student. They will also face eligibility reviews every six months, instead of once a year, meaning they could lose coverage more quickly when their circumstances change.

Together, the two provisions are expected to save the federal government $388 billion over the next decade, which would translate to 6 million fewer people with health insurance, according to the Congressional Budget Office.

But states must first update their online portals used by Medicaid participants, their aging computer systems used by government officials, and their methods of verifying information through various databases.

Most will have to turn to private contractors to meet time constraints. At least 10 companies have agreed to offer discounted services, according to the federal Centers for Medicare and Medicaid Services.

Making these technology upgrades “is going to be a boost. It’s not a simple thing. It’s not easy,” said Jason Reilly, a partner at Guidehouse, a firm that advises several states on Medicaid requirements.

Most states currently do not collect information on the employment or education of Medicaid participants. States therefore seek to tap outside sources to verify employment and school data. But there is no database of community volunteers.

And states are still waiting for federal rules — not expected until June — to outline some of the exceptions to work requirements, such as how to determine who is considered “medically fragile.”

States face added pressure to get it right because the federal government will begin penalizing states with too many Medicaid payment errors in October 2029.

Congress guaranteed all states a share of the $200 million allocated for Medicaid work and eligibility changes. But states must apply for additional federal funds. The federal government covers up to 90 percent of the costs states incur to develop systems for determining Medicaid eligibility, 75 percent of the costs of maintaining those systems, and half of most other administrative costs.

Missouri won early approval of the 90 percent federal funding rate. State lawmakers are now fast-tracking a $32 million appropriation needed to solicit bids from providers to begin upgrading technology platforms and improving a chatbot for Medicaid participants. Over the next year, the state social services agency expects to need about 120 additional workers — at a cost of $12.5 million — to handle the additional administrative workload.

Other states are also projecting significant costs. Maryland plans to spend more than $32 million in federal and state funds to implement the Medicaid changes, Kentucky more than $46 million and Colorado more than $51 million. Arizona estimates that implementing the new federal requirements could cost $65 million — and require 150 additional employees.

Some states surveyed by the AP reported even higher expected costs, although they did not always provide a breakdown of how much was due to new Medicaid mandates and how much was related to Supplemental Nutrition Assistance Program changes also contained in Trump’s big law.

Several states, including Arkansas, said they were still working on cost estimates for the Medicaid changes. Arkansas instituted a Medicaid work requirement in 2018-2019, and thousands of people were taken off the rolls before a federal court ended it. Many of the technology changes required by the new federal mandates could be covered under an existing provider contract and have “minimal financial impact on our Medicaid budget,” the Arkansas Department of Human Services said in an email.

Nebraska announced plans to launch Medicaid work requirements in May, seven months before the federal deadline. But the state did not detail any associated costs and did not respond to AP inquiries.

Georgia is currently the only state that requires some Medicaid recipients to work, after receiving special federal approval several years ago to expand coverage to some adults who would not otherwise be eligible.

The Georgia Pathways to Coverage program accrued more than $54 million in administrative costs from 2021 through the first part of 2025, double the amount of Medical Assistance paid over the same period, according to the U.S. Government Accountability Office. Nearly all of those costs came from technological changes to its eligibility and enrollment system.

Some Medicaid analysts point to Georgia’s costs and Arkansas’ enrollment losses as reasons for caution as work requirements roll out in other states.

“Huge amounts of money will be paid to providers to build these complicated administrative systems that prevent people who need it from getting health care,” said Joan Alker, executive director of the Center for Children and Families at Georgetown University. “In my opinion, this is a very big risk.”