AG Nessel Sues Trump Administration Over Unlawful Implementation of Medicaid Work Requirements for Medically Frail Individuals

LANSING — As part of a coalition of 24 attorneys general and two governors, Michigan Attorney General Dana Nessel has filed a lawsuit (PDF) over the Trump administration’s unlawful implementation of new Medicaid work requirements included in the One Big Beautiful Bill Act. Specifically, the lawsuit challenges provisions of an interim final rule published by the U.S. Department of Health and Human Services (HHS) and Centers for Medicare & Medicaid Services (CMS) 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. However, the interim final rule, “Community Engagement Requirement for Certain Individuals,” adopted a new interpretation of key terms like “medically frail,” which 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 and develop eligibility systems and processes. States already made substantial investments to ensure compliance with the One Big Beautiful Bill Act and now face the risk of harsh financial penalties if they are unable to comply with the interim final rule. As a result, through the lawsuit, the attorneys general are seeking to block implementation of the interim final rule’s illegal provisions and to have them ultimately struck down.

“Medicaid exists to protect our most vulnerable, but this arbitrary rule would strip healthcare from thousands of Michiganders who would otherwise qualify and who desperately need it,” said Attorney General Nessel. “On top of that, state Medicaid agencies remain in the dark on how to even administer these new requirements, which could cost Michigan millions. Anytime this administration unlawfully acts to block healthcare access, I will not hesitate to protect residents and our state’s budget.”

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 the 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 the One Big Beautiful Bill Act.

In filing this lawsuit, Attorney General Nessel is joined by the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawai‘i, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington, Wisconsin, and the governors of Kentucky and Pennsylvania.

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