A New Era for Medicaid: CMS Unveils the Blueprint for Engagement, Integrity, and Sustainability
How the Working Families Tax Cut (WFTC) Legislation Is Reshaping Eligibility, Financing & Community Participation Across States
Key Takeaways
- Centers for Medicare & Medicaid Services (CMS) outlines how states must implement new community engagement requirements for able-bodied, working-age adults.
- The reforms aim to reduce improper enrollment and strengthen Medicaid and CHIP sustainability. The guidance emphasizes state flexibility, program alignment, and auditable accountability.
- Additional eligibility and financing reforms reinforce program integrity and support rural hospitals.
- More CMS guidance and rulemaking will follow.
Why CMS Issued This New Guidance
Federal leaders underscore that the new community engagement rules aim to reinforce the connection between health, work, and long-term well-being.
“Breakthrough Medicaid community engagement tools restore the dignity of work and lift people out of poverty, while supporting the sustainability of Medicaid for the most vulnerable,” — HHS Secretary Robert F. Kennedy, Jr.
“These reforms send a clear message: you have agency, your contributions matter, and we will support you on the path to purpose and prosperity,” — CMS Administrator Dr Mehmet Oz
The reforms also align Medicaid with SNAP and TANF, which have used similar engagement policies for decades.
Four Core Principles Guiding CMS’s Medicaid Reform Strategy
CMS's roadmap for states is structured around four principles that influence policy design, operational planning, and program oversight.
1. Connect Members to Work and Community
States must emphasize the link between health, employment, and community participation. The goal: cultivate positive habits that support long-term success.
2. Expand State Flexibility
States retain latitude to customize implementation while balancing the administrative and technological costs of different options.
3. Promote Alignment Across Federal Benefit Programs
CMS encourages states to align new Medicaid requirements with:
- Existing Medicaid rules
- SNAP
- TANF
- IRS processes
- Marketplace systems
This reduces operational burden and improves data flow.
4. Protect Taxpayers Through Accountability
States must ensure all community engagement decisions and verifications are transparent, traceable, and easily auditable.
Additional Eligibility & Financing Reforms
An accompanying Informational Bulletin issued November 18 outlines other major provisions of the WFTC legislation, including reforms intended to:
- Ensure lawful enrollment
- Reduce improper payments and financing loopholes
- Protect rural hospitals
- Preserve program funding for the most vulnerable populations
These reforms, paired with CMS’s broader priorities, reflect a renewed federal commitment to sustainable Medicaid and CHIP programs.
What Comes Next?
CMS notes that this bulletin is the first of several guidance documents and rulemaking efforts that will support full implementation of the WFTC reforms. Additional updates will clarify operational requirements, define compliance expectations, and assist states in establishing the new community engagement structures.
As states begin planning for 2027—and potentially earlier rollouts—First Report Managed Care will continue to track developments and provide insights into how these transformative changes are reshaping Medicaid’s future.
Reference
CMS issues new state guidance on transformative Medicaid reforms. CMS.gov. Press release. Published December 8, 2025. Accessed December 9, 2025. https://www.cms.gov/newsroom/press-releases/cms-issues-new-state-guidance-transformative-medicaid-reforms
