When Administrative Requirements Shape Access: Medicaid Work Requirements and Mental Health Care

Consequences of Medicaid Coverage Loss

Medicaid covers nearly 1 in 3 (29%) nonelderly adults with any mental illness and 1 in 5 adults with SUD, ² making it one of the nation’s largest payers of mental health services. For many adults with mental illness, even brief coverage disruptions can rapidly escalate into psychiatric crises, hospitalization, housing instability, or death and are associated with worsened long-term outcomes, including increased relapse risk, cognitive decline, and treatment resistance. Young people experiencing first-episode psychosis are particularly vulnerable to administrative delays or lapses in coverage as they may experience difficulties quickly navigating exemption processes, which can further delay treatment and worsen long-term prognosis. ⁶ Additional negative impacts of coverage loss include reduced work productivity, increased caregiver burden, and higher health system and societal costs, with untreated mental illness in the United States costing an estimated $280 billion annually. ⁷

Unclear Definition of “Disabling” Mental Disorder

The OBBBA requires states to impose work or community engagement requirements on Medicaid expansion enrollees, with notable exemptions for individuals with a substance use disorder in treatment and those deemed “medically frail,” including individuals with a “disabling mental disorder, a substance use disorder, or a physical, intellectual, or developmental disability.”^1,3 At a minimum, states must verify that an individual complies with the work/community engagement requirements or meets exemption criteria at application and renewal, at least every 6 months, although states can choose to verify compliance more frequently. When a state is unable to verify compliance, it must issue a “notice of noncompliance” after which an individual will have 30 days to demonstrate compliance or exemption. Failure to do so results in Medicaid disenrollment.^3,5

Yet, the OBBBA provides no clear definition of “disabling” mental disorder. ³ It is unclear whether clinicians will be responsible for making this determination, whether states will issue guidance on qualifying diagnoses or criteria, or how frequently exemption documentation would be required, if at all. This ambiguity risks inconsistent application across states and additional administrative burdens on patients and clinicians. ⁵

Medical professional societies should help states by developing interim clinical criteria for “disabling” mental disorders to guide exemption decisions and ensure individuals are provided the longest possible protection from disenrollment. Relevant organizations include psychiatric, psychological, and primary care professional societies, given that these clinicians provide most of the mental health and substance use disorder care in the United States. ⁸ Examples of societies include the American Psychiatric Association, American Association for Community Psychiatry, American Society of Addiction Medicine, American College of Physicians, American Academy of Family Physicians, and the Society of General Internal Medicine. The American Medical Association could further support these efforts through its established role in developing model state legislation on timely health care policy issues.

While implementation would ultimately occur at the state level due to variability in Medicaid programs and policies, the federal government should develop and enforce a minimal standard definition of exemption criteria that states may expand upon. Because mental disorders can become disabling at any time—and because only half of Americans with mental illness receive treatment—the minimum standard exemption criteria should be broad enough to include anyone with mental health symptoms requiring services, regardless of formal diagnosis. ⁴

Exemption Verification Barriers

An additional question that remains unanswered is how states will verify an individual’s work or exemption status. While the law directs states to use available data such as payrolls “where possible” to verify compliance, ³ in practice, many individuals will still be required to self-report work hours or submit documentation demonstrating exemption status. Evidence from Arkansas’s 2018 Medicaid work requirements implementation illustrates the risk of this approach: Data matching identified only about two-thirds of enrollees as meeting work exemption criteria, while the remaining third had to self-report. Among those required to report, roughly 70% failed to do so correctly, leading to over 18,000 people losing coverage.^2,9 These findings demonstrate that coverage loss under work requirements is driven less by ineligibility than by administrative complexity.

Individuals with mental illness, including SUD, are disproportionately likely to struggle with these reporting requirements. Psychiatric symptoms often include impairments in attention, executive functioning, reality testing, and distress tolerance, all of which make navigating complex administrative systems challenging. These difficulties are further compounded by high rates of social vulnerability, including housing instability, limited transportation, and lack of reliable social support, further increasing the risk of procedural disenrollment.

For individuals who are not identified through data matching, states should implement the least burdensome processes possible to verify exemption status. This could include use of a screening questionnaire on the Medicaid application, without the need for additional documentation, as many people with mental illness or SUD may not know or have been given a formal diagnosis. Given the concerns over losing Medicaid because of work requirements, individuals with mental illness/SUD who work and participate in community service should also be deemed compliant to exemption criteria. Additionally, states should exempt people with mental illness and SUD from needing to submit any additional information at eligibility redeterminations, since these are generally lifelong conditions. ⁴

Erosion of Community-Based Care and Crisis Services

In addition to harming individual patients, OBBBA-driven coverage losses would undermine the community-based systems that serve people with mental illness, including SUD. Community health centers (CHCs) are major providers of integrated primary and behavioral health care and rely heavily on Medicaid, which accounts for approximately 42% of CHC revenue. Reductions in Medicaid enrollment would decrease funding for these centers, forcing cuts to programs, staffing, and service capacity. ¹⁰

Beyond individual coverage loss, these policies have broader implications for the behavioral health safety net. Patients with mental illness also rely heavily on crisis services such as the 988 Suicide and Crisis Lifeline, which connects individuals in psychiatric crisis to care rather than to law enforcement. Although 988 is supported through a combination of federal, state, and local funding, ongoing threats to cut SAMHSA grants, combined with Medicaid reductions under the OBBBA, ¹⁰ could pressure states to divert funds away from crisis services to cover other shortfalls, further weakening the mental health safety net.

Call to Action

Medicaid is indispensable for people with mental illness, and the OBBBA’s work requirements threaten the health of this population by introducing administrative barriers that predictably result in coverage loss. States should adopt the broadest possible definition of “disabling” mental disorder, minimize administrative burdens and verification requirements, and rely on data matching rather than self-reporting to determine exemption status. When existing data is insufficient, states should use brief screening questions to identify exempt individuals without requiring additional documentation. Beyond exemption policy, states should strengthen access to care by integrating universal mental health/SUD screening across health and social service settings and expanding funding for crisis services and community-based treatment.^4,10

Without these mitigation strategies, OBBBA’s work requirements will widen existing treatment gaps; destabilize coverage for people with mental illness, including SUD; increase health care system costs; and cause preventable psychiatric crises and deaths. Protecting continuous access to mental health care is not merely a policy choice; it is a commitment to keeping people connected to care before they fall through the cracks.

Authors’ Contributions

R.A.B.: Conceptualization and writing the original draft. T.L.H.: Review, editing, and supervision of the revised article.

Ethical Considerations

There are no human participants in this article, and informed consent is not required.