In what disability rights advocates are hailing as a significant legal victory, a federal judge has struck down a controversial regulatory requirement that forced many individuals with disabilities to prove they are entirely unable to work in order to maintain their vital Medicaid coverage.
U.S. District Judge Richard Stearns delivered the ruling late last week, siding with a broad coalition of states that had challenged the Trump administration’s implementation of strict new eligibility standards. The decision directly addresses federal regulations designed to govern who qualifies for exemptions under upcoming, sweeping changes to the country’s healthcare safety net.
Beginning next year, most state Medicaid programs across the nation are mandated to implement so-called "community engagement" requirements. Under these new guidelines, non-exempt beneficiaries will be legally required to demonstrate that they are actively working, volunteering, or participating in an educational or training program for at least 80 hours per month to retain their healthcare coverage. This stringent mandate stems from the broad legislative package passed last year known as the One Big Beautiful Bill Act, a sweeping federal law that enacted nearly $1 trillion in deep cuts to the Medicaid program.
The legislative text of the 2025 law explicitly stipulated that certain vulnerable populations should be completely exempt from these community engagement work requirements. Specifically, Congress carved out protections for individuals deemed "medically frail" or those possessing "special medical needs," including individuals living with physical, intellectual, or developmental disabilities. The core intent of Congress was to protect those whose medical conditions naturally preclude them from maintaining steady employment or standard community participation hours.
However, subsequent regulations put forth by the Centers for Medicare and Medicaid Services (CMS) in June introduced additional, much stricter hurdles to obtaining these statutory exemptions. The federal agency established a secondary threshold, decreeing that individuals must not only possess a qualifying medical condition, but that the condition must also significantly and directly limit their capacity to work.
This extra regulatory barrier triggered immediate alarm among state governments and advocacy organizations alike. In response, a coalition comprising 25 states and Washington, D.C., filed a formal lawsuit against the Trump administration. The plaintiffs argued that the CMS regulations far exceeded the authority granted by Congress, were considerably stricter than intended, and would inevitably result in hundreds of thousands of eligible, vulnerable people losing their essential Medicaid health coverage due to bureaucratic overreach.
Judge Stearns ultimately agreed with the coalition of states, issuing a decisive legal blow to the administration’s restrictive interpretation.
"The portion of the interim final rule imposing a limitation that the individual’s physical, mental, or other behavioral health condition significantly impairs the individual’s ability to comply with the community engagement requirement is beyond the powers of CMS and thus contrary to law," the ruling states.
To enforce his decision, Judge Stearns ordered CMS to formally remove the contested impairment requirement from its regulations. Furthermore, the judge imposed a six-month "stay of enforcement" on administrative decisions regarding who does and does not qualify under the "medically frail" categories. This pause is intended to accommodate any administrative errors, backlogs, or delays that may arise as state and federal agencies scramble to adjust their compliance systems.
Under the terms of Judge Stearns’ decision, beneficiaries will now only need to demonstrate that they neatly fit into one of the five specific "medically frail" categories explicitly outlined by Congress in the underlying legislation, rather than clearing the extra evidentiary hurdle invented by CMS.
Disability advocates immediately praised the court’s intervention, recognizing it as a crucial line of defense for a marginalized population.
"This ruling is a win for disabled people," said Maria Town, president and CEO of the American Association of People with Disabilities. "The court has removed an unnecessary hurdle that would have caused many disabled people who should otherwise be exempt to be at risk of losing their Medicaid coverage."
Despite the celebratory tone surrounding the court’s rejection of the work-impairment test, Town and other prominent leaders in the disability advocacy community were quick to emphasize that major systemic challenges remain. They point out that the overarching threat of the upcoming work mandates has not been eliminated by the court’s decision.
"Make no mistake: this decision does not change the January 1 start date for work requirements," warned Nicole Jorwic, chief program officer at Caring Across Generations. "Millions of people, including disabled people who should be exempt, are still at risk of losing their care because of paperwork and broken eligibility systems."
While the coalition of states and their advocacy allies celebrated the invalidation of the work-impairment rule, not every aspect of Judge Stearns’ ruling went their way. The federal judge notably rejected other claims brought forward in the lawsuit, specifically those challenging the types of rigid documentation required to seek an exemption and the limitations placed on the ability of Medicaid beneficiaries to self-attest that they qualify for the "medically frail" exemption status.
This partial defeat on documentation standards left legal experts and advocacy groups deeply concerned about the practical hurdles beneficiaries will face on the ground.
"We are disappointed by the part of the court’s order leaving in place the part of the rule requiring states to demand documentation where Congress allowed them to accept people’s own attestation that they have a disability meeting the ‘medically frail’ exception," said Jennifer Mathis, deputy director at the Bazelon Center for Mental Health Law. "That part of the rule will lead to loss of coverage for many who shouldn’t lose it. We are hopeful that a different court may invalidate this documentation requirement."
As the legal battles continue to weave through the federal court system, state agencies are left grappling with complex administrative adjustments ahead of the fast-approaching January deadline. The implementation of the One Big Beautiful Bill Act’s community engagement rules represents one of the most significant structural shifts in the history of the Medicaid program, threatening to alter healthcare access for millions of Americans.
When approached for comment regarding the federal judge’s ruling and the ongoing legal challenges, representatives for the Centers for Medicare and Medicaid Services stated that the agency does not comment on pending litigation.
