In what disability rights advocates are hailing as a significant legal victory, a federal judge has struck down a controversial federal requirement that mandated many individuals with disabilities prove they are entirely unable to work in order to maintain their eligibility for Medicaid.
U.S. District Judge Richard Stearns sided with a broad coalition of states in a ruling issued late last week, firmly rejecting a Trump administration plan that sought to impose stringent, narrow standards on who qualifies for statutory exemptions under forthcoming Medicaid work requirements. The decision marks a pivotal moment in the ongoing legal and political battle over the future of the federal-state healthcare program, which provides essential medical coverage to millions of low-income Americans, including people with physical, intellectual, and developmental disabilities.
The dispute stems from major legislative changes enacted as part of a sweeping 2025 federal law commonly referred to as the One Big Beautiful Bill Act. That omnibus legislation introduced nearly $1 trillion in federal Medicaid spending cuts and mandated that, starting next year, most state Medicaid programs must implement strict "community engagement" rules. Under these upcoming guidelines, non-exempt beneficiaries will be required to document that they are actively working, volunteering, or participating in educational programs for at least 80 hours per month to retain their healthcare coverage.
When Congress passed the legislation, lawmakers deliberately included protective provisions stipulating that certain vulnerable populations should be explicitly exempt from these arduous work mandates. Specifically, the law stated that individuals who are deemed "medically frail" or who possess "special medical needs"—including individuals with significant physical, intellectual, or developmental disabilities—should be shielded from the community engagement rules.
However, the regulatory implementation process sparked immediate controversy. In June, the Centers for Medicare and Medicaid Services (CMS) put forth formal regulations that introduced an additional, highly restrictive hurdle for individuals seeking to claim a disability exemption. Under the agency’s interim final rule, the administration declared that individuals must not only possess a recognized qualifying condition, but that the condition itself must also significantly limit their functional capacity to work.
This extra barrier drew swift and widespread condemnation from state governments, advocacy groups, and legal experts who argued that the federal agency was overstepping its authority and effectively rewriting the statute enacted by Congress. Consequently, a coalition of 25 states, alongside Washington, D.C., filed a formal federal lawsuit against the Trump administration. The plaintiffs argued that the CMS regulations were far stricter than Congress had ever intended and would inevitably result in eligible, vulnerable individuals losing critical access to healthcare coverage due to insurmountable bureaucratic red tape.
Judge Stearns agreed with the coalition’s core legal arguments in his comprehensive ruling, delivering a sharp rebuke of the federal agency’s administrative overreach.
"The portion of the 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 explicitly states.
To implement his decision, Judge Stearns ordered CMS to formally remove the restrictive impairment requirement from its guidelines. Furthermore, recognizing the potential for administrative chaos, the judge imposed a six-month "stay of enforcement" on state and federal decisions regarding who does and does not qualify under the "medically frail" categories. This temporary stay is intended to accommodate any operational errors, administrative backlogs, or processing delays that may arise as states adjust their compliance mechanisms.
Under the corrected framework ordered by the court, beneficiaries will only need to demonstrate that they fall within one of the five statutory "medically frail" categories originally specified by Congress, rather than proving an absolute inability to work stemming from their diagnosis.
Disability advocates and organizational leaders across the country reacted to the judicial decision with a mixture of relief and persistent caution.
"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 celebrating the removal of the work-impairment hurdle, Town and other policy experts were quick to emphasize that the legal battle is far from over and that deep structural threats to Medicaid beneficiaries remain on the horizon.
"Make no mistake: this decision does not change the January 1 start date for work requirements," noted 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 court ruled decisively against the administration’s stringent work-impairment test, Judge Stearns did not rule in favor of the state coalition and advocacy groups on every count. The judge rejected other central claims brought in the lawsuit, specifically upholding federal rules regarding the types of documentation states can demand from applicants and limiting the ability of Medicaid beneficiaries to simply self-attest that they meet the criteria for a "medically frail" exemption.
This aspect of the ruling drew sharp criticism from legal advocates who specialize in health law and disability rights, as they believe the strict documentation demands will create a parallel administrative trap for vulnerable beneficiaries.
"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 states prepare for the looming implementation of the community engagement mandates at the beginning of next year, healthcare administrators and advocates are bracing for complex administrative hurdles. When approached for comment regarding the federal court’s decision, representatives for the Centers for Medicare and Medicaid Services stated that the agency does not comment on pending litigation.
