Attorney General Rayfield Sues Trump Administration over Unlawful Implementation of Medicaid Work Requirements for Medically Frail Individuals

Attorney General Dan Rayfield announced a lawsuit today over the Trump Administration's unlawful implementation of new Medicaid work requirements that would strip healthcare access from thousands of Oregonians and create unreasonable burdens for vulnerable patients.

"When someone is fighting cancer, managing a serious disability or struggling with a chronic illness, the last thing they should have to worry about is jumping through bureaucratic hoops to prove they deserve care," said Attorney General Rayfield. "These new requirements create unnecessary barriers for people who are already sick. History shows what happens next: eligible people lose coverage despite doing nothing wrong."

The new requirements were included in last year's Congressional budget bill (H.R. 1) and are being implemented through rules issued by the U.S. Department of Health and Human Services (HHS) and Centers for Medicare & Medicaid Services (CMS).

Today's multi-state lawsuit - filed by 24 attorneys general and two governors - challenges provisions of an interim final rule published by the agencies on June 3, 2026.

Medicaid is the nation's safety net healthcare program for low-income Americans and is jointly funded by states and the federal government, with the federal government providing at least 50% of the cost of services.

Congress created exemptions from Medicaid's work requirements to ensure that people with serious illnesses and disabilities do not lose coverage or face interruptions in care. Despite months of working with states on implementation, CMS surprised states with the interim final rule, "Community Engagement Requirement for Certain Individuals," which adopts a new interpretation of key terms like "medically frail" and makes it harder for medically vulnerable individuals to be excused from the work requirements.

While the work requirement provision applies beginning January 1, 2027, states must notify Medicaid recipients about these changes by August 31, 2026, and need significant lead time to prepare those communications. They cannot wait for CMS to address the deficiencies through the ongoing rulemaking process. As a result, the attorneys general are seeking to block implementation of the interim final rule's illegal provisions and to have them ultimately struck down. States have already made substantial investments in reliance on the plain language of H.R. 1 and CMS's prior guidance and now face the risk of harsh financial penalties for noncompliance with the interim final rule.

The interim final rule makes other changes that increase administrative burdens, create unnecessary red tape, and put eligible people at risk of losing their health coverage - including those who are already working or qualify for an exemption. The rule disregards substantial evidence that should have been considered, fails to adequately evaluate reasonable alternatives, and does not give states clear or workable guidance. Past Medicaid work requirement programs have shown that added red tape causes eligible people to lose coverage, placing greater strain on state Medicaid programs, safety net providers, and emergency rooms, while increasing costs as more medically frail residents become uninsured.

In today's lawsuit, the coalition alleges that the interim final rule:

• Unlawfully narrows Congress's protections for medically frail Medicaid recipients.
• Violates the Administrative Procedure Act by ignoring substantial evidence that work reporting requirements cause eligible individuals to lose healthcare coverage because of administrative barriers rather than a failure to work.
• Fails to adequately consider the significant harms that will be imposed on states, Medicaid beneficiaries, healthcare providers, and state healthcare systems.
• Unconstitutionally coerces states by imposing new compliance requirements after states had already begun implementing H.R. 1 based on the statute's plain language and CMS's prior guidance.

Joining Attorney General Rayfield in this lawsuit are the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Hawai'i, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Rhode Island, Vermont, Virginia, Washington, Wisconsin and the governors of Kentucky and Pennsylvania.